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---, City Council Meeting Minutes March 15, 1982 Page 5 industrial revenue bond financing would pose no liability exposure to the City and that it would just allow the purchasers of the bonds to borrow the tax exempt status provided by the City. Mr. Mark Haggerty indicated that the City could receive a cash return for the administrative cost and other fees that might be incurred with the financing of the project. Mr. Mark Haggerty further indicated that time is of essence because at the present time there is a market for tax exempt bonds and that the interest rates could possibly be even less, and further indicated that the economy may be in this phase for approximately two to three months. Mr. Haggerty further indicated that the process would take approximately two months prior to the sale of the bonds for the Tamarack Subdivision. Mr. Jim Casserly of O'Connor and Hannan, bond counsels, introduced Mr. Jim Reyer also of his office, and indicated that he has worked with this type of housing finance in the City of Minneapolis, and further indicated that this type of housing finance issue is the same as an industrial revenue bond and is not a general obligation or assessment project. Mr. Casserly explained that the City basically approves the project by allowing the tax exempt status for bond pur- chases. Mr. Casserly said there is no free lunch since the Internal Revenue Service loses the ability to tax the interest paid. Mr. Casserly indicated that the industrial revenue bond financing would be similar to the project in progress in the City of Coon Rapids. Mayor Hinkle asked if the bonds are issued under the City of Elk River's nam~ and the project defaults, does it affect the City's bond rating. Mr. Haggerty in- dicated that there is 100 percent pool insurance for nonpayment by owners and that chances are very slim that all homeowners would default at the same time. Mr. Haggerty indicated that because of the various levels of insurance and other protection~ housing industrial revenue bonds are considered strong and safe issues. Mr. Casserly indicated that he has not experienced a situation in which a failure of industrial revenue bond had a negative impact on the general obligation rating for the municipality. Mr. Casserly further indicated that the mortgages and property are the security for the industrial revenue bonds where the entire tax base of the City is the security for the general obligation bonds. The City Administrator questioned the 8 million dollar issue and indicated that it was his impression that the state bill approved of one million dollars per 1,000 people in the city. The City Administrator further questioned the amount of cash return the City of Elk River could receive on that small of an issue. Mr. Haggerty explained that on April 25, 1979, the legislature changed the re- quirements regarding the one million dollars per 1,000 population issue and further indicated that the cash return could be approximately one-sixteenth of one percent which, over a period of years could amount to a fair sum of money. The City Administrator further indicated that the City's financial consultants expressed concern that there could be a back lash of questions or a clouded effect on the City's bond rating, should any industrial revenue bonds default. Councilman Engstrom questioned the fact that Carson, developer of the Tamarack project, had a monopoly on the money available for the low interest financing and further questioned whether there could be a process whereby more than one builder or developer could be involved in the project. Mr. Carson indicated that they wanted qualified builders in the project and further indicated that they wanted the project to proceed as Soon as possible but could not quote a price for the lots until all the project costs were known.