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:	February 25, 2011
RE:	Bowersock Bond Issuance

Please add the following item to the City Commission agenda for March 1, 2011:

Adopt on first and second reading, Ordinance No. 8620, authorizing the issuance of Industrial Revenue Bonds for the Bowersock Mills and Power Company hydroelectric project and authorizing the Mayor to sign various related documents.

Background and Discussion:

The Lawrence City Commission took various actions during 2010 to facilitate a complex bond transaction for the Bowersock Mills and Power Company. The City’s Bond Counsel, Gilmore & Bell, has been involved in reviewing all aspects of the transaction in order to protect the City’s interest.

In December 2010, the City issued $15,000,000 of Industrial Revenue Bonds to finance a portion of the Bowersock project. An ordinance approved in December also authorized the City to issue additional series of Industrial Revenue Bonds to finance the remainder of the project, and those additional bonds were expected to be issued in early 2011. Last week, Bowersock and the investment banking firms assisting Bowersock with this transaction were able to secure purchasers for the balance of the Industrial Revenue Bonds authorized in December. As a result of negotiations with the new purchasers, Bowersock is requesting that the City issue $8,720,000 of IRBs that will be designated as Qualified Energy Conservation Bonds and $1,035,000 of taxable IRBs. In addition $14,060,000 of the IRBs issued in December will be remarketed to new purchasers.

The negotiations have also resulted in the need for amendments to the Lease Agreement entered into between the City and Bowersock related to the IRBs, and a supplement to the Tax Compliance Agreement related to the 2010 Bonds. Bond Counsel has prepared a new ordinance for the City Commission to consider, which will facilitate the remarketing of the Series 2010 Bonds and issuance of the Series 2011 Bonds, anticipated for March 10. This ordinance authorizes several additional documents that the previous ordinance did not. Bond Counsel will be on hand at the meeting to answer any questions that the City Commission may have. It appears that this closing will enable Bowersock to begin on their project, a new hydroelectric plant in Lawrence.

As previously noted, there is no financial risk to the City with this transaction. All principal and interest payments are the responsibility of Bowersock.

Requested Action: