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CCP 01-22-1990
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CCP 01-22-1990
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<br /> APPENDIX H . <br /> CITY OF MENDOTA HEIGHTS <br /> MEMO <br /> May 5, 1986 <br /> TO: City Hall Committee <br /> FROM: Larry Shaughnessy, Treasurer <br /> SUBJECT: Financing <br /> Through the planning stages of the new city Hall, we <br /> have anticipated financing the new facility through a <br /> lease-type financing which would avoid the necessity of a <br /> referendum on the facility. <br /> In general, we would lease the proposed site to a <br /> master lessee, who then issues bonds in the name of the City . <br /> through a trustee who hold the assigned lease. Under this <br /> method, there is some additional risk to the holders of the <br /> lease certificates, as the lease is only an annual <br /> obligation of the city. <br /> Because of this, the interest rate the city pays is <br /> roughly 1/4 to 3/8 of 1'1; higher than a conventional general <br /> obligation bond issue. 'Also the legal and issue costs are <br /> slighty higher (about 2%). Some of the underwriters also <br /> ask that a lease reserve equal to about 15% of the issue be <br /> included in the financing. While this increases the amount <br /> of financing, it actually saves the city, as the reserve is <br /> invested at a rate higher than the basic issue rate, and the <br /> margin earned is applied against the rental payment <br /> required. In our example, this would save between $3,000 <br /> and $5,000 per year with the reserve fund. <br /> The City has some funds available which could be used <br /> to assist the building project. At least $25,000 of these <br /> funds should be held for equipment needs, and the balance <br /> could be used to offset the required lease payment or reduce <br /> the size of the initial funding need. city funds which <br /> could be committed are as follows: <br /> . <br /> H-1 <br />
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