Memorandum

City of Lawrence

City Manager’s Office

TO:              David L. Corliss, City Manager

CC:               Diane Stoddard, Assistant City Manager

FROM:          Roger Zalneraitis, Economic Development Coordinator/Planner

DATE:           June 16, 2010

RE:               Recovery Zone Facility Bond Reallocation Agreement

Recovery Zone Facility Bonds are tax exempt bonds that can be used for private investment.  Because they are tax exempt, they carry a lower interest rate than traditional bond financing and thus are attractive investment instruments for private firms.  Recovery Zone Bonds are essentially Industrial Revenue Bonds (IRBs)- the governing body that issues them is a conduit for issuing the bonds and the firm for whom the bonds are issued is responsible for all principal and interest payments.

As part of the American Recovery and Reinvestment Act of 2009, Douglas County received an allocation of $11.7 million in Recovery Zone Facility Bonds.  The County and City then received notification from Berry Plastics that they were interested in using these bonds for a distribution center that they wished to build in Lawrence.  The County agreed to allocate these bonds to the City so that Berry could use them for the project.  The City also agreed to issue the bonds for the Berry expansion project in January of this year.

The County has been notified by the state of Kansas that the Recovery Zone Facility Bonds will revert to the State on July 1 unless they are allocated either to a project or to a City within the County.  To retain these bonds for local use, the County would like to formally allocate the Facility Bonds to the City.  In order to do this, a resolution needs to be agreed to by both the City and County stipulating that the City will be allocated the bonds for the purpose of using them toward the distribution center expansion of Berry Plastics.

The attached Reallocation Agreement is based on language used by both Wyandotte and Barton Counties to allocate their Recovery Zone Facility Bonds to sub-jurisdictions.  Approving this agreement simply reaffirms the decisions made by the City and County in late 2009 and early 2010 to make the Facility Bonds available for Berry Plastic’s expansion.  If approved, the County will receive the Reallocation Agreement immediately and consider it for approval as well.

Action Requested

Approve the Reallocation Agreement and forward to the County for their consideration.