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St. Anthony Public Facilities Funding <br /> EHLE <br /> & ASSOCIATES INC <br /> 0 To: Mike Mornson, St. Anthony Village <br /> From: Jim Prosser&Mark Ruff, Ehlers & Associates <br /> LU Date: May 4,2003 <br /> Subject: Public Facilities Financing Updated Information <br /> You have requested Ehlers update the April 24 memo regarding public facilities <br /> financing to include impact of the decertification of the Kenzie District for 2004. This <br /> decertification could be accomplished since outstanding bond obligations will be paid as <br /> of 2003. <br /> The Public Facilities Task Force is currently preparing a final report regarding the Public <br /> Works and Fire Station Facilities. The final report will include recommendations <br /> regarding facilities need, location, cost and financing method. Ehlers&Associates has <br /> been requested to provide additional information regarding the financing options and <br /> impacts. The purpose of this memo is to provide background information prior to the <br /> scheduled presentation and discussion of the Task Force report. <br /> Financing Options <br /> The two basic financing options for public facilities include voter approved General <br /> Obligation Bonds and Lease Revenue bonds. The primary differences between the bonds <br /> include: <br /> 1) Authorization <br /> 2) Tax burden and basis of debt repayment <br /> 3) Security to bond holders <br /> 4) Interest cost and costs of issuance <br /> Lease Revenue Bonds do not require voter approval. These bonds are similar in that <br /> manner to revenue bonds issued by cities for street and utility construction. Some cities <br /> use revenue bonds for these types of facilities because of their essential nature. The bonds <br /> are issued by the HRA; the HRA then owns and leases the facilities to the City. The lease <br /> payments to the HRA are used to cover the debt service. Because the bonds are not <br /> secured by the full faith and credit of the City, they are sold at a slightly higher interest <br /> rate than General Obligation bonds. Current market conditions indicate that the interest <br /> rate on Lease Revenue bonds would carry an interest rate about .35%higher than General <br /> Obligation bonds. For a project with an estimated cost of$6 million the additional <br /> interest cost would average about $15,000 annually or$300,000 for the 20 year term of <br /> the bonds. <br /> Page I of S <br />