07-22-1991 Council Minutes - Laserfiche WebLink

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ORONO CITY COUNCIL MEETING HELD JULY 22, 1991 -1 HRA PUBLIC HEARING CONTINUED Hall, where else, other than from taxes, would the revenues come ?" Drude replied, "I am not making any statement about the revenue source, I am stating that the bonds are not General Obligation. The bonds are essentially a revenue bond, and do not have -the General Obligation features." Bernhardson added, "In answer to Norm's question, what is. being considered for funding sources is not only taxes, but interest earned on existing monies, plus some of the principle the City has set aside." Paurus said, "That is not what I understood the Attorney General's Office to say. They indicated that if it is funded in any way by tax income, then a referendum is necessary." John Farnham stated that he too had spoken with the Attorney General's Office and had understood the same thing Mr. Paurus had indicated. He said, "Another issued raised by the Attorney General was something called arbitrage. Does our City Attorney know what that means ?" Barrett indicated that he is familiar with arbitrage. Charlie Kelley said, "If I understand this correctly, the Council appoints itself to the Authority, and the HRA issues the bonds, takes in the money, as a separate legal entity outside the City, and uses the money to purchase the land and /or building. Does the HRA own the building or the land ?" Callahan answered, "That depends on whether we sell them the land or we allow them to build a building on our Land." Kelley said, "Title to the land could be in the name of the City, -and the HRA could have title to the building. The City would make monthly lease payments to the HRA, and the .payment would cover interest and some amortization on the bond. Would the type of bond used in this case carry a higher interest rate than General Obligation bonds ?" Carolyn Drude replied, "It would be fair to say that the mortgage bonds may be 10 to 15 basis points higher than general obligation bonds in a given market. In the case of the City of Orono, it is hard to say, because the City has such a high bond rating." Kelley commented that it appears as though the City is. guaranteeing the bonds even though an HRA is being established. He asked if the HRA is anticipating the placement of a ceiling on the dollar amounts that may be taken out. He also asked if at - 3 -