Memorandum

City of Lawrence

Finance Department

TO:

Dave Corliss, City Manager

 

FROM:

 

Ed Mullins, Finance Director

Date:

July 28, 2009

 

RE:

General Obligation Note and Bond Issue

 

 

Background 

The City of Lawrence has a note maturing on October 1, 2009 in the amount of $10,635,000.  The projects funded by the note must be refinanced with either a bond or another note.  In addition, initial or additional funding is required for several projects.  The table below provides a breakdown of the projects by proposed funding source.  The Finance Department typically finances a project with a one year note and then refinances the project with a general obligation bond when the project is complete.  The City Commission is requested to approve Resolution 6858 to authorize the sale of general obligation notes and bonds on September 1, 2009.

 

Projects

The table below lists the projects that are proposed to be financed with notes and bonds.  All of the projects have previously been authorized by resolution, except for the Bowersock and airport water and sewer line projects.  More information on these projects is provided below.  The amount financed includes issuance costs.

 

Notes

Project Description

Amount

Stone Ridge South

$527,256

Fairfield East sanitary sewer

452,250

Fairfield East streets

1,675,533

Carnegie rehabilitation

609,353

Stoneridge North

1,423,272

Overland Drive

1,146,593

Oregon Trail stormwater

741,417

George Williams Way N of 6th

1,740,752

George Williams Way N of Overland

994,273

Stoneridge/Kelly turn lane

32,160

Bauer Farm

462,300

Bowersock Dam

1,407,442

2009 KLINK

226,125

9th and Vermont Traffic Signal

150,750

Airport water line

1,005,000

Airport sewer line

1,005,000

6th & Congressional Traffic Signal

268,395

6th Street ITS

252,129

       Total

$14,120,000

 

 

Bonds

Project Description

Amount

2008 KLINK

$228,045

23rd & Harper intersection

124,196

25th Terrace

1,864,172

19th & Louisiana intersection

506,091

Burroughs Creek ROW

342,575

Delaware Commons sewer

96,651

Delaware Commons streets

88,270

     Total

$3,250,000

 

Bowersock Dam

In addition to the financing provided by the notes, the city plans to utilize $1.1 million in previously issued water and sewer revenue bonds for the project in order to pay for the estimated $2.5 million cost.  It may be possible to refinance the notes with Energy Conservation bonds.  The bonds would have a very low interest rate.  The process to secure is only in its initial stage.  Final guidelines on the financing have not been released but they will include approval of the Federal Energy Regulatory Commission and assistance of the Bowersock Mill and Power Company.  If financing with the Energy Conservation bonds is not obtained, the notes will be refinanced with water and sewer revenue bonds, including the possible reallocation of $985,000 for improvements to water storage tanks from the 2009 revenue bonds.  The City Commission is requested to approve Resolution 6854 authorizing funding of this project with debt.   The resolution was designed to provide the city with maximum flexibility in debt financing this project.

 

Airport water and sewer lines

The city is pursuing the use of Recovery Zone Economic Development bonds for this project.  To obtain the financing, Douglas County would need to allocate a portion of its economic development bond allocation to the City of Lawrence.  In addition, the City Commission would need to designate the area as part of a recovery zone.  Economic Development bonds are taxable but provide a 45 basis point credit in order to reduce the actual interest paid.  In addition, the city is pursuing a grant to pay a portion of the sewer line.

 

 A requirement of Economic Development bonds is that Davis Bacon wage requirements be made part of the construction contract.  Since this will likely increase the construction costs, an analysis will need to be made to determine if this is a financing option the city wants to pursue.  However, it appears prudent to keep this option open at the present time.  The City Commission is requested to approve Resolution 6855 authorizing funding of this project with debt.  In addition, the City Commission is requested to approve Resolution 6856 that establishes the City of Lawrence as a recovery zone based upon recent job losses and assessed valuation reductions.  A recovery zone designation would enable the city to use either Economic Development or Facility bonds anywhere in the city up until December 31, 2010.  The Facility bonds could be used to finance private activity improvements with tax exempt debt.  In addition, since authority for funding this project is Charter Ordinance 27, Resolution 6857 establishing a new debt limit also needs to be approved.

 

Action Requested   The City Commission is requested to approve Resolutions 6854 and 6855 authorizing debt issuance for the Bowersock Dam and the airport water and sewer lines, respectively.  The City Commission is requested to approve Resolution 6857 establishing new debt limits under Charter Ordinance 27.  The City Commission is also requested to approve Resolution 6856 establishing the City of Lawrence as a recovery zone.  In addition, the City Commission is requested to approve Resolution 6858 authorizing the sale of general obligation notes and bonds to finance the projects listed above.