8. ICESR 11-14-2012 FINANCIALS - Laserfiche WebLink

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• The bonds are subject to net debt, with few exceptions. Below is a calculation of the City's current Net Debt Limit based upon pay 2012 values and debt. Net Debt Limit Assessor's Taxable Market Value 1.792,595,800 Multiply by 3% 0.03 Statutory Debt Limit 53,777,874 Less: Debt Paid Solely from Taxes 23,615,000 Unused Debt Limit 30,162,874 2. EDA lease arrangement under Minnesota Statutes, Section 465.71. If the City determines to proceed under Section 465.71, an election is not required. The City's Economic Development Authority could provide financing through a direct lease arrangement and could issue lease-revenue bonds to the competitive market. In any event, the lease is not a general obligation or indebtedness of the City but a special obligation payable solely from lease payments annually appropriated by the City. This means that the City has the ability to annually levy for lease payments while reserving the right to annually terminate the lease, without penalty. We have discussed this option for the City for the public works facility. Interest rates for an ice arena are expected to be much higher than a public works facility because recreational facilities are not considered to be "essential"by bond buyers. Because of this provision allowing the City to terminate and the lack of essentiality, the City could see interest rates at least 1.00% to 1.50% above a general obligation bond rate. If the City determines to proceed under the lease revenue method, the following points should be noted: • Leases less than $1,000,000 are not subject to net debt limit. • A public hearing may be required for approval. • A debt service reserve and a trustee may be required for the financing, depending upon market conditions. • While the City could legally walk away from a lease, the City's bond rating would decrease significantly in the event of a non-appropriation.