Memorandum

City of Lawrence

City Manager’s Office

TO:	David L. Corliss, City Manager
FROM:	Diane Stoddard, Assistant City Manager
CC:	Cynthia Wagner, Assistant City Manager
Date:	December 21, 2010
RE:	Bowersock Mills and Power Company Industrial Revenue Bond Issuance

Please place the following item on the City Commission agenda for December 21, 2010:

Declare an emergency and approve on first and second reading Ordinance No. 8607 authorizing the issuance of up to $27 million in Industrial Revenue Bonds for Bowersock Mills and Power Company for the purpose of financing a portion of the costs of acquiring, constructing and equipping a new hydroelectric powerhouse and all related facilities and equipment on the north bank of the Kansas River at the Bowersock Dam and repealing Ordinance No. 8599 and Ordinance No. 8604.

Background: 

As the City Commission is aware, the Bowersock Mills and Power Company is planning a new powerhouse facility on the north side of the Kansas River at the location of the dam.  Bowersock has held a number of public meetings concerning this project over the past year or so.  The City of Lawrence has taken several formal steps to assist Bowersock with accessing special bond authority to assist with the financing of this project to date.  However, it is key to point out that with Industrial Revenue Bond financing, the City only serves as a conduit for the financing and assumes no obligation whatsoever regarding the repayment of the bonds for the project.  This type of financing, however, will assist the project with more favorable financing terms than conventional financing. 

The City Commission held a public hearing regarding this issuance at its November 23, 2010 meeting.  There have been several ordinances recently considered by the City Commission to facilitate this transaction.  Recent volatility of the bond market has required the potential restructuring of the transaction and the need to preserve the ability of Bowersock to complete the transaction.  Additionally, the transaction includes three possible bond sources: Recovery Zone Facility Bonds (requires closing deadline of December 31), Qualified Energy Conservation Bonds and taxable bonds. 

Changes with current ordinance:

The current ordinance differs from the ordinance passed on December 14 in the two following ways:

1) adds the ability to issue the Recovery Zone Facility Bonds as either variable or fixed rate bonds

2) adds the ability of Bowersock to issue the Qualified Energy Conservation Bonds and taxable bonds at a different time than the Recovery Zone Facility Bonds. 

Both of these changes continue to preserve maximum flexibility for Bowersock to complete the transaction. 

Action Requested:

Declare an emergency and approve on first and second reading an ordinance authorizing the issuance of industrial revenue bonds for the Bowersock project and repealing the two former ordinances.