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w ! • F <br /> juram>i3r <br /> The Cannon Falls transaction marks the first time a Minnesota city legally <br /> issued its tax- exempt general obligation bonds for a private manufacturing <br /> facility. <br /> We believe that the services of a financial advisor should go far beyond <br /> simply helping you issue bonds. We think the role of an advisor includes <br /> helping you think through alternatives months or years ahead of actual <br /> bonding, and when it is possible or desirable to avoid the issuance of <br /> bonds altogether. <br /> Here are a few specific examples: <br /> Pay -As- You -Go Tax Increment Financing <br /> We believe that pay -as- you -go tax increment financing, where general <br /> obligation bonding is replaced by an annual payment from a city to a <br /> developer, represents a significant improvement in the way tax increment <br /> financing can be accomplished. By avoiding bonded debt and the costs <br /> and complexity involved with it a City can significantly reduce its risks <br /> and expenses. <br /> Several tax increment projects recently completed by Juran & Moody, <br /> utilized pay -as- you -go tax increment. Specific projects include the <br /> Owatonna and Shoreview projects discussed earlier in this Proposal, and <br /> additional projects in the cities of Fosston, Mabnomen, and Waite Park. <br /> It is important to recognize, however, that this financing approach has its <br /> limitations and special concems. First, pay -as- you -go TIF will require the <br /> developer to increase his borrowing to replace the funding formerly <br /> provided by the City. Since the developer borrows at a higher rate than <br /> the City, more tax increments are eaten up in interest costs so fewer <br /> eligible costs can be funded. <br /> Secondly, a developer's banker needs to understand the nature of the <br /> transaction, since what formerly acted like equity to the banker (namely, <br /> your up -front cash subsidy) is being replaced by additional banker debt. <br /> We often approach this problem by involving the banker in the process of <br /> drafting the reimbursement agreement and assigning the reimbursement <br /> payments directly to the bank. An understanding and sensitivity to the <br /> needs of the banker and developer in this area is critical to rnalang pay -as- <br /> you-go TIF a success. <br /> Finally, it is extremely difficult to use pay -as- you -go TIF to finance <br /> public improvements, since the improvements financed cannot be pledged <br /> as collateral for the financing involved. <br /> { <br /> City of Centerville. Minnesota - 15 - <br />