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e in the next seven years, it appears that even under the worst scenario, a line of credit would be obtained from a bank to be used to lend to Pankow for the construction financing. Because repayment is only at three percent and the City may have to borrow at eight to ten percent, there will be an interest subsidization. The City would take money out of the Bancroft funds to subsidize that interest; however, the agreement is that the Bancroft funds will 'be repaid based on certain things happening with the project. If the land is sold, the Bancroft funds are repaid immediately. Proceeds from the sale of the existing library site would be pledged to repaying the Bancroft funds. Mr. Wooten said she did not necessarily doubt that the Bancroft funds would be made whole over time, nor did she necessarily object to Mr. Wong managing what she called a "financial shell game," but she wondered how much the five to six percent difference in interest would amount to. Mr. Wong said it was approximately $1 million. Mr. Gleason said it could be as much as $1 million, but it is impossible to tell at this point because it is unknown how fast the line of credit will be borrowed down. There will be some cost to the Bancroft fund initially, but Mr. Gleason felt it is clear that the land transaction (which will be put back into the Bancroft fund) will yield more than any of the worst case scenarios in terms of repaying the Bancroft account, regardless of how long it takes to make that repayment. The Bancroft account has enough surplus so it is not being placed in any risk. Mr. Gleason said the real question for the council is whether it minds using money with a return of at least eight percent at some time in the future, without any risk, on the transaction of land. Mr. Gleason agreed with Ms. e Wooten1s assessment that there would be a IIshort-term hole" of approximately $1 million. He disagreed that the long-term replacement could take as long as 30 years or as little as ten years, and said we could have the land money immediately. Mr. Farkas said profits from refinancing could be available in five years for repayment and Mr. Gleason said property tax from the project could start repaying the fund immediately. He said all the reports and analyses that were done had used the $13 million figure, but none of them included short-term financing (the cost of borrowing the money and building the project before taking out long-term financing). He said those reports were unrealistic in not considering the interim need for financing to allow the builder to pay contractors and employees. On the open market, Mr. Gleason said that interim cost would amount to approximately $2.25 million. He added that this need for short-term financing would exist with or without this project if the library were to be built on any site. Ms. Wooten noted that councilors have an obligation to ask the most difficult questions possible in order to obtain all the information about the project for public review. Mayor Obie asked if there was any guarantee that the project would happen once the community takes a "leap of faithll and moves ahead with an agreement with the developer. Mr. Gleason pointed out that builders do not build on their own cash but deal with banks. Bank loans are not available until leases are finalized and e MINUTES--Eugene City Council December 14, 1988 Page 8 .