07-10-1989 EDA MIN - Laserfiche WebLink

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Page 4 Economic Development Authority Minutes July 10. 1989 . Groundbreaking: Commissioner Tra11e recapping the memo. stated that the clinic would be interested in having the Council present at a groundbreaking ceremony. He indicated that he felt that was an appropriate action by the Council. The entire Council concurred that participating in the groundbreaking would be something that they would support. Use of G.O. Bonds: Mr. Fursman presented the EDA with his reasonings behind investigating the use of General Obligation bonds for the financing of the Mork Clinic. Mr. Fursman stated that he has been investigating ways in which the Economic Development Authority can capitalize itself through its ventures. He went on to say that in order to generate money. you have have money. and that there will be a certain amount of risk in every money making venture that there is. Mr. Fursman stated that the City EDA has to decide what an acceptable risk is and what is fair to the community when the City gets involved with this type of project. . Mr. Fursman indicated that he and Lori Johnson made a visit with the City Financial Advisors to investigate rates and finance structure which could be presented to the EDA as a comparison. A graphic display was handed out to the EDA for their review and discussion. The graphic which was given to the Council displayed rate differentials between General Obligation Bonds. Open Market financing. and financing which could be attained locally within the City of Elk River. The best information available at the time indicated that the General Obligation Bond would indeed provide a more attractive financing alternative than local financing. The General Obligation Bond. however. could not compete with Open Market financing outside of Elk River. Commissioner Kropuenske asked if the General Obligation Bond would be included as part of the City's overall debt limit. Lori Johnson indicated that this type of General Obligation Bond would not be part of the City's debt limit provided a Developer Agreement were entered into with Mork Clinic backing the bond with payments from revenue generated by the Clinic. Ms. Johnson also stated that increasing the City's debt may have an impact on the City's credit rating. but she did not know how likely that would be. . A discussion ensued as to the technical procedures the City would be required in order to establish a General Obligation Bond. There was also discussion on the risk associated with using General Obligation Bonds to finance a private business. It was pointed out that if the business fails the City would indeed inherit the financial responsibility of the bonds as well as the property the bonds are supporting. Mr. Fursman indicated that this is no different than the risk associated with a Tax Increment Financing District. If a company fails and no longer pays taxes. the Tax Increment Financing Districts fall back onto the City as it is the City's responsibility to settle the debt on the TIF bonds.