10/26/2009 Council Packet - Laserfiche WebLink

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SPECIALCOUNCIL MEETING October 5, 2009 DRAFT 88 the bond for the city's portion and getting full reimbursement after five years, or the 89 county carrying the bond for five years and then the city pays debt service over a several 90 year period after year five, or the city paying debt service throughout the term. Under any 91 of those scenarios, since the county would actually be carrying the debt, it is expected that 92 the city would be charged a fee to the county for that service. When the county indicated 93 that there would be an interest charge for carrying debt service and the city determined 94 the additional risk that would come with that situation, staff asked Springsted to run 95 additional information based on an agreement with the city paying the debt service from 96 day one on the bonds. In putting that additional information together, there was 97 consideration given to when the assessment area for the project will need to see 98 development (and payment of deferred assessments) in order to work. As a result, the 99 projections look at fifteen percent of the land developing within 10 or 11 years, a lower 100 risk than earlier projections. There would still be a fee to the county (for carrying the 101 bonds but not the debt service) and that fee is set at 75 basis points, equating to $2,000 a 102 year initially and escalating to the end of the bonds (as an incentive for the city to pay 103 down the debt early). 104 Community Development Director Grochala, referring to the proposed joint powers 105 agreement (JPA) for the Project, further described the terms of the financing. He 106 reviewed the amount of assessments expected to be received at the front end of the 107 Project and the amount expected to be deferred.. He noted that the city's annual allotment 108 of municipal state aid (MSA) funds would be used as an interim funding source until such 109 time as all deferred assessments are received. Actual construction costs would be put 110 into the JPA when they are determined. The note (representing the debt carried by the 111 county on the city's behalf) could be prepaid to the county at any time. The mandatory 112 redemption says that the city will forward toward the debt any prepayments received. The 113 County public works committee reviewed the JPA language and is comfortable and is 114 awaiting city approval. 115 The council discussed the three items under consideration: the order for improvement, 116 approval of a joint powers agreement and dedication of city property for the project. 117 David Graetzer, owner of Applecrest Orchards, an impacted area property owner who 118 was in audience, noted that the finance plan presented includes 500 basis points to be 119 charged as part of the assessments but staff has only pointed out 405 of those basis points. 120 Mr. Rolek explained that the rate of the bond is yet unknown but state law requires 105% 121 of the debt service to be covered by the city so that is built into the interest rate that will 122 be charged on the assessments. If not used, those funds would be allocated at council 123 discretion. Mr. Graetzer further noted that he is within the impacted area that is covered 124 by the city charter provisions but he was not able to get the majority signatures on a 125 petition against the projects. He still wishes to voice his concern about the unfairness of 126 how this project will be funded. It is a multi jurisdictional project so for 20 plus property 127 owners to pick up the entire city cost is unreasonable. These type of costs could end up 128 driving him from the area due to affordability issues. 129 A council member noted that there could be some savings in the area of construction 130 costs. Staff will see those final costs later in the process when they are asked to put 131 together the final assessment roll. 3 —29—