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CONSTRUCTION FINANCING <br /> <br />Some preliminary research on various bonding options indicates that <br />forming a nonprofit corporation to issue a bond backed by pledges <br />would most likely be cost prohibitive. In addition, the bonds <br />would be taxable making the interest rate 2% to 3% higher than a <br />nontaxable issue. Further, 150% of the annual debt service would <br />need to be pledged, and there would need to be reasonable assurance <br />that the pledges would be paid. There must also be at least one <br />year's debt service in reserve at all times. Even if these <br />conditions were met, it may be difficult to sell the bond because <br />the nonprofit corporation wculd have no assets and no credit <br />worthiness. <br /> <br />The other'options available to the City are a bond referendum and <br />the possibility of an installment contract purchase through the <br />Economic Development Authority. This option would need to be <br />cleared through the Commissioner of Revenue prior to issuing any <br />debt through this statute as there'have been recent changes in this <br />law. To our knowlege, no transactions have taken place since the <br />law change so there is uncertainty as to whether this type of <br />project would be feasible under current regulations. <br /> <br />The main financing source for the construction of a community <br />center will come through the issuance of general obligation bonds <br />which the voters must approve. Private and corporate donations can <br />be accepted to help offset some of the cost, but this is not <br />expected to be a major funding source. Any donations received for <br />the Community Center would likely be used to either reduce the bond <br />issue size or to expand the construction scope. There also may be <br />other financing sources identified in the future. However, at this <br />point the City is not aware of any future sources which could <br />provide major funding to this project. <br /> <br />There are several factors that need to be addressed when <br />considering issuing general obligation bonds. <br /> <br />1. What is the City's available debt limit? <br /> <br />o <br /> <br />What other bonding needs will there be competing with <br />this issue? (City and Other) <br /> <br />3. How much will this issue increase taxes? <br /> <br />4. What level of tax increase will the taxpayers support? <br /> <br />tOO <br /> <br /> <br />