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7.0. HRSR 07-23-2001
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7.0. HRSR 07-23-2001
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City Government
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HRSR
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7/23/2001
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City of Item # 7 <br /> Elk -�-� <br /> River <br /> MEMORANDUM <br /> TO: Housing Redevelopment Authority <br /> FROM: Marc Nevinski, Assistant Director of Economic Development <br /> DATE: July 23, 2001 <br /> SUBJECT: Conduit Bonding Policy <br /> Background <br /> Another development tool available to the HRA, in addition to TIF, tax abatement, <br /> and micro loans, is conduit bonding. Essentially, conduit bonding allows a developer <br /> or business to borrow larger sums of money at a lower interest rate. <br /> To utilize such financing, the city first authorizes the issuance of tax-exempt bonds, <br /> • which are sold on the open market. The proceeds are then passed through the city (the <br /> conduit) to the borrower for qualified project costs. Because the bonds are issued by <br /> the city, the interest earned is tax free, which lowers the interest rate on the bonds and <br /> subsequently the borrower's debt service. <br /> The city's role in issuing conduit bonds is minimal. The majority of the work is done <br /> by the bond underwriters, who ensure that the project and the use of funds comply <br /> with the IRS tax code. This eliminates the need for the city to regulate and monitor <br /> the project financing. Additionally, the city bears no risk as it is not the bondholder <br /> and is not responsible for repaying the bonds. <br /> Action Requested <br /> Attached for your review is a draft of a policy for the issuance of conduit bonds. The <br /> policy has undergone legal review and those comments have been incorporated into <br /> the document. No formal action is requested at this time. However, staff requests that <br /> the HRA review and comment on the policy, particularly sections A and B, before the <br /> policy is brought to the Council for review and adoption. <br /> • <br />
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