Memorandum

City of Lawrence

City Manager’s Office

TO:              David Corliss, City Manager

CC:               Diane Stoddard, Assistant City Manager

FROM:          Roger Zalneraitis, Economic Development Coordinator/Planner

DATE:           December 11^th, 2009

RE:               State Facility Bond Applications

As part of the American Recovery and Reinvestment Act of 2009, the IRS authorized Facility Bonds that allow private corporations to finance projects with tax-exempt interest.  Facility Bonds are like Industrial Revenue Bonds (IRB) in that the local government acts as a conduit financing mechanism.  Also like an IRB, the local government has no responsibility to pay principal or interest on the bonds.

Facility Bonds were issued to local governments throughout the nation based on unemployment rates. In September the State of Kansas asked if local jurisdictions would be able to use their Facility Bonds.  Douglas County, which received an allocation of $11.7 million in Facility Bonds, stated that they could use the bonds and kept their allotment.  Those jurisdictions that declared they did not need their bonds sent their allotment to the State.  The state then contacted local jurisdictions notifying them of a first round of allocation of these bonds (the letter, including the criteria, is attached).  The applications to use these bonds are due on December 15^th.

Over the last week, the City has been made aware that two local firms are interested in applying for the State Facility Bonds.  These firms are Berry Plastics and Bowersock Mill and Power Company.  Bowersock is currently planning an additional power plan facility project on the north side of the Kansas River, and Berry Plastics is close to finalizing a decision on a potential large new warehouse. Berry Plastics has expressed an interest in the Douglas County allocation of Facility Bonds as well, but these bonds would not cover the entire project.  An allocation from the State would cover a portion of the expansion, and Douglas County would make a separate determination on the use of local Facility Bonds for the remainder.

The State application is attached.  The State requires a local government entity to sponsor the application as an indication of future willingness to issue bonds for the projects that receive award.  The State will issue a determination of allocation in late January of 2010.  If either or both projects are awarded, there will be future steps required for authorization of the bonds. 

Requested Action

Staff requests authorization for the City Manager to sign and submit the applications on behalf of Berry Plastics and Bowersock Mill & Power Company, if appropriate.