11-08-1989 Joint Council and PC Meeting Packet

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i«mni«ioclatw.inc.RS IN l*U8UC fIRAMCI1[>r 85323 ing: installment purchase contracts , the November 8 FeciUtie. Workshop end e «««^»/ Ih,“cHy options of cash purchase and voted general obligation bonds of the City. onslder the following: B Bonds may be sold by an entity such as « mienl Authority (HRA). or Economic Develo^ent ^ho^^ (EDA^ or V to provide funds for a project s»ich as a municipal buildmg. ine wiy l coMider forming a nca-profit DuUding Authority Minnewta itw “i7 naming the Council end city staff as officers. Another option Sitly from a leasing coiupany which provides the funds for Iho project. rono. iT« tntn a Lease With Option to Purchase agreement which will provide prlechtel »td Intent Ke ablisatlon). The Lease is not a general obligation of the City Out is ” ^rSSL of wtflclMt fund, for debt eewlco. It !»• I It dear to prospective investors that the facility is essential to the Ity and to provide other information which we cen If fflnS pajnlenl and for the price of $1. the municipal building belongs <e mil n uprteral ublifiation and is payable from annual appropriation, it Irtt Mmft"“^S?e^ Induded in oelouletton, of debt per oeplte tors Service bond ratings, for Instart ’ L' C«ntel sJuufi«nm 51^^ Mlnnewo^iS. MN 55402-4100 • 612-339-8291 • FAX 612-339-0854 ' '.f/d '-.rV-* - ■irnw-it&mmh! •>,; ’•> HI, ' •<*■• -‘i ^ mm '-Mmi '0i:'ki4x wi 4..-W'iA.' lii m y -: '■ . 'f §mB^kk4mMmrn0M0^ 'mi■8|fe|:;;:^i^wssfi;e^sa; Pi' ISiij;.-. mym • -N iKiiS mmm l" -1 Hi ik^mm bk mmm pyr&: V..-; m • :’-:5 - -y^v .f2 feaiSl mmmMM .mmMark Bernhardson, City Administrator Orono, Minnesota November 3, 1989 Pago 2Installment purchase contracts were permitted by 1989 Legislature action and are not subject to annuel appropriation. While there is disagreement among finance attorneys on various aspects of this amendment to Minnesota Statutes, Section 486.71. there appears to be some support for the ides that a Housing and Redevelopment Authority or Economic Dovelopmonl Authority may Issue revenue bonds (nftl subject to annuel appropriation) and enter into an installment contract with the City as purchaser. Taxes levied by the City are special levies because there is no non-appropriation clause, according to one scltool of thought.The basic differences between the three borrowing choices outlined are: fiwnAral nhliyatirm boiida pledge the fuU faith. Credit and taxing powers of the City to tholr payment, are ''debt" for debt limit purposes and may be paid from special levies (outside the levy limit). A vote is required. LBBSflL-QnAQCitlg involves the City entering into a lease agreement which contains a non-appropriation clause. In other words, at the end of any calendar year, Uie City could decide not to appropriate funds for the next year. Although it is unlikely the City would actually do this, there is no statutory authority for a City to enter into a lease on any basis but "annual appropriation ”. If lease revenue bonds were issued by an HRA or EDA and tho annual amount of payments entered into Uie City's Foim 280 (levy limits) as special levies may not actually qualify as special levies (depending upon the opinion giver). liMtallmpTit pumlmse financing involves the City entering into an installment purchase agreement with an entity which may be an HRA, EDA, building authority or a company willing to loon funds under such an arrangemenl. At least one legal opinion says (hal this arrangement and its accompanying city levy fur installment payments would qualify as a qiecial levy because of the lack of non-appropriation clause. Wo recommend competitive proposals on bonds, direct leases or installment purchase ccmtracts, tu minimize the iiost to the City, regardless of the financing method used. Sinceroly, EHLEES AND ASSOCIATES. INC. Carolyn Drude Senior Vice President CD:dl 0223b/72 • = : " ‘ ';V mam: ililSgm vmM S'iiJSHS m^ymm KSs i -PH- MMiSmm V - v-V ^ ^ m Jf. X r- • -M \. ' ' * * ■ mmm,kA r ipiipPsmmAm XX:‘‘X- Wy ' wm. mmmm