09-08-09 FPAC Packet - Laserfiche WebLink

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---AklLEN xiLLs MEMORANDUM DATE: August 31, 2009 TO: Financial Planning and Analysis Committee FROM: Sue Iverson, Finance Director SUBJECT: Policy Discussion — Private Activity Revenue Bond Financing The City of Arden Hills has been approached from time to time to issue conduit debt_ We have worked • on a Post -Issuance Policy, but we currently have no policy or procedures for those requesting the City to issue this type of bonds. Last year, Presbyterian Homes approached the City on issuing conduit bonds and the City issued them and charged a `/2 of 1% as an issuance fee. The City Council suggested that we should look into establishing some type of criteria for these requests. Northwestern College is currently contemplating approaching the City for such a request. Attached is a draft policy that is commonly used by many cities. There are some areas that the committee will need to make recommendations on to the City Council. • Part II, Section 8: Do we want to charge a non-refundable application fee? The draft policy contains a $2,500 fee, which is on the high side. • Part 11, Section 9: What do we want to charge as an administrative fee? The draft used .5% of the bond amount, which is what we charged Presbyterian Homes in 2008. This is on the high side in the metropolitan area. A more typical amount is 1/8%. The only reason we may want to temper the amount is that borrowers can go to another city and ask them to issue on their behalf, even if the facility is in Arden Hills. Arden Hills must still consent to the financing, but a fee that is too high can mean that the City will lose financing altogether, do we care? • Part III, Section 1: Do we want to put limitations on the ability to sell non -rated bonds? This draft requires that if the bonds are not rated, they must be in denominations of at least $100,000 (which ensures that the people who buy them will be sophisticated). In the current Northwestern College proposal, this could create a problem as we expect the buyers they have in mind are just local benefactors or alumni. This draft provides for the council to waive the requirement if it finds a merit in public purpose in doing so. This is a policy decision for the Council, but we need to make a recommendation. Please read the draft policy and be prepared to discuss and make recommendations.