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perhaps because so many lease purchase bonds have been issued and bondholders <br />understand that cities are going to make the annual lease payment each year so debt <br />payments will be made. Lease purchase bonds do, however, require a debt service reserve <br />fund equal to one year of debt service unlike general obligation bonds that do not. <br /> <br />The 1991 lease purchase bonds are being repaid through several different sources including <br />NSP Reserve, Liquor Fund, Government Buildings Reserve, and General Fund transfers. <br />Unfortunately, these sources are not sufficient to fund a second bond issue; a tax levy will be <br />needed to fund most, if not all, of the debt issued for this project. Based on very rough <br />preliminary information, a $5,000,000 project would require an annual tax levy of <br />approximately $470,000 and a $9,000,000 project would require an annual tax levy of <br />approximately $845,000. This equates to an annual tax increase of approximately $45-$50 <br />and $80-$90 respectively on a $125,000 house. The approximate increase for a $1,000,000 <br />commercial/industrial property is $750 to $1,350 respectively. These estimates will be fine <br />tuned later when the type of bond issue and project size have been determined. <br /> <br />In conclusion, there are several financing decisions that need to be made by the Council on <br />this project including the amount of reserves to be used and the type of debt that will be <br />issued. Of course, determining the amount to be financed is probably the major issue. <br />Once these decisions are made, a financing plan will be presented to the Council for <br />consideration. <br /> <br />Action Requested <br /> <br />No action is required at this time. Prior to proceeding with bidding this project, the Council <br />will be asked to approve a financing plan. <br /> <br /> <br />