#11 - Conduit Bonding Discussion

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As most cities have fees and charges associated with conduit debt financing, staff believes Oakdale should consider formalizing our process when considering supporting this financing mechanism for non- profit organizations. As a base model for establishing a policy for Oakdale, the following were general guidelines through our review of conduit debt financing policies from other cities: • Conduit debt is tax-exempt debt issued in the name of the City on behalf of a private entity, but for which the City has no obligation to pay. • Conduit debt can be for low-income housing or capital projects of not-for-profit entities, subject to approval by the City Council. • The City will not issue conduit debt if it jeopardizes the bank-qualified status of existing or planned direct debt. • To be considered for approval, the private entity shall apply to the City, addressed to the City Administrator, who will review the application and the City's bank-qualified status, and place it on a City Council agenda for consideration. • The City will charge fees to the private entity according to the City's Fee Schedule. Staff has highlighted some key issues and terms of the policy, as follows: • $3,000 application flat application fee. • A one-time administrative fee equal to the greater of $10,000 or 0.50% of new bond issue amount. • Any interest rate differential between bank qualified and non-bank qualified bonds would be estimated and paid by the borrower. • Oakdale-based vs non-Oakdale projects (staff strongly supports approving conduit financing for only Oakdale based projects or projects in the vicinity that directly benefit Oakdale) STAFF AND/OR BOARD OR COMMISSION RECOMMENDATION Staff recommends adoption of policy FR-O23 -Conduit Debt. CITY COUNCIL ACTION REQUESTED It is requested that the City Council adopt Policy FR-O23 -Conduit Debt. Attachment Policy FR-O23 -Conduit Debt 2