11/18/1992 Meeting - Laserfiche WebLink

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e Responding to a question from Mr. Boles, Mr. Weinman said the difference in tax credits has to do with the allocation from the State. The amount will be less than that received by the Richardson Bridge project. Warren Wong, Administrative Services Director, said that traditionally the City issues G.O. or revenue bonds. He explained that G.O. bonds are full faith in credit and are paid for with property taxes, while revenue bonds are assessment bonds which are paid for by the users. He noted that the City had about $35 million in outstanding bonds. The key issue is the bond rating, an index accepted by bond buyers and financial institutions as to the degree of risk of the bonding venture. The rate has much to do with the interest rate issued on the bond, and takes the following factors into consideration: community's economy, organization's financial position, the debt position, and management. Currently, more emphasis is placed on management with respect to addressing future issues. The problem is a constitutional allocation which says that no governmental entity can lend its credit to a private entity. Mr. Wong said that what is being proposed is conduit financing where the City of Eugene's name is on the bond but the repayment is from the entity that is operating the specific project. Under conduit financing, the City is not technically liable if there is default on the issue. However, there may be a moral obligation to pay and the City's reputation may be tarnished. Mr. Wong said that the City's adopted Financial Management Policies address conduit financing, asking that it not affect the City's credit worthiness or rating-- which indicates an investment-grade bond. He said that apparently no city has ever issued a conduit bond. e Mr. Wong said that experts have strongly recommended investment-grade bonds. Investment-grade bonds involve securing a guarantee on the issue from Housing and Urban Development (HUD), Farmers Home Association (FHA), or a bank. If the bonds are not investment-grade, staff is willing to have the council consider private placement of those bonds, i.e., placement with a sophisticat- ed investor as defined by SCC and the Municipal Securities Rule-making Board (MSRB). Mr. Wong said that the other option is G.O. bonds which put the City in the position of being the guaranteeing agent. He said the developer has examined the various enhancement options and none have been ruled out. Mr. Wong said the council's choice narrows to two options--consistent with adopted financial policies go for an investment-grade instrument which would require credit enhancement, or waiver that and go with a private placement with a sophisti- cated buyer barring resale. The other option is to waiver the council's policy completely and just try to sell it. Staff does not recommend the latter. Addressing a question from Mr. Rutan, Mr. Wong said other options include some kind of guarantee that the City can step in on the debt service if there is default, which would require research by the City Attorney's Office and a bonding attorney. e MINUTES--Eugene City Council November 18, 1992 Page 8 11:30 a.m.