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<br /> <br />ITEM 3. <br /> <br />. <br />I <br /> <br /> <br />r <br /> <br />TO: <br /> <br />MAYOR & CITY COUNCIL <br /> <br />FROM: <br /> <br />LORI JOHNSON, FINANCE DIRECTOR <br /> <br />DATE: <br /> <br />MAY 26, 1993 <br /> <br />SUBJECT: LIBRARY EXPANSION FINANCING <br /> <br />During the Library Annual Report presentation, there was considerable discussion about <br />the Library Expansion Project. I have met with the LibraI)' Board on two occasions to <br />discuss financing the expansion. The Board is now ready to make a presentation to the <br />Council on a financing proposal for the expansion. <br /> <br />At the Library Board meetings, several options for financing the Library Expansion were <br />discussed: General Obligation bonds could be issued if a referendum was approved for the <br />expansion. A lease purchase could be entered in to similar to the agreements for the <br />Public Works building and the Fire Station. Lastly, General Obligation Tax Increment <br />bonds could be issued. Of the options presented, it was agreed that issuing General <br />Obligation Tax Increment Bonds was the preferred financing method because of the lower <br />interest rate on the bonds. <br /> <br />There are several factors in issuing GO Tax Increment bonds of which the Council needs <br />to be aware. First, in order to qualify as Tax Increment bonds, 20 (twenty) percent of the <br />principal and interest of the debt needs to be paid from tax increments. The City Council <br />needs to give approval to the use of tax increment for this purpose. An amendment to Tax <br />Increment Financing districts one and three would need to be approved to authorize the <br />issuance of debt and to pledge increments to service the debt. <br /> <br />The second and more important issue relates to whether the Library Fund's current annual <br />resources could fund the issue. If the project can be completed for $500,000, the actual <br />amount to be financed would be approximately $358,000 after considering available cash <br />and issuance costs. Given this issue size, it is possible to meet the debt service <br />requirement if the annual Landfill Tax and Reserve for Capital Outlay are both dedicated <br />to the repayment and ifboth remain consistent with current levels. See page two of this <br />memo for the current financing assumptions. <br /> <br />Representatives from the Library Board will be present to discuss the expansion project <br />and to request Council authorization to continue work on the expansion. <br /> <br />P.o. Box 490 · 13065 Orono Parkway 0 Elk River, MN 55330 e (612) 441-7420 · Fax: (612) 441-7425 <br />