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e e (the City Council is not party to that agreement). The trustee appoints the agency as its agent to construct the conference center. The last document is purchase agreement and underwriting agreement (between the City of Eugene, the trustee, the agency, and E. F. Hutton, their underwriter). All parties will be called upon to indicate certain things will happen. Howard Rankin, attorney in Portland and bond counsel, said that this is a series of complicated documents. The explanation by Mr. Kaplan was well stated. Dennis Ciocca, E. F. Hutton, San Francisco, explained interest rates are high and very volatile. Bond issuance is exceptionally difficult. They have there- fore prepared both optimistic and pessimistic appraisals ranging from 9.31-11.34 percent. The affordability of the project ranges on net payments due for the 20-year term estimated at $631,000-$763,000. These payments are feasible based on the income of the agency. These are very high interest rates; however, construction bids are low at this time. They had made a diligent effort to design this issue to allow the City and the ERA to enter into a re-funding if the opportunity arises and interest rates drop in the future. At any time, it would be possible to reissue and use lower interest rates. Mr. Lindberg asked if the debt could be paid off sooner than 20 years. Mr. Ciocca replied that there was a provision that would require penalty for early re-funding of 2.5 percent. Mr. Lindberg asked what a drop in interest rates would make re-funding advisable. Mr. Ciocca's theory was that unless it was possible to make 10-percent savings on debt service it was not feasible. Mr. Lindberg asked if interest rates were a determining factor in the amount of debt service. Mr. Ciocca replied that they were. Three other factors affected it as well. They are the size of the issue, the fees, and the first year's interest that would be paid during the first year of construction and start-up of the facility. Mr. Lindberg asked if the City's ability to pay was a factor if they had to pay the debt service no matter what. Mr. Ciocca said that if the Renewal Agency could not pay, the City would then make the payment. Mr. Ciocca said the City is indeed guaranteeing this debt. Mr. Lindberg asked the effect of the Obie amendment on the obligation of the City in ways other than going into default. Mr. Gleason replied, "None." He doubted its effect as a "safety net." Ms. Smith asked when the construction bids go out. Mr. Tashman replied that they would be received on April 28. Mr. Tashman said that they will be coming back to council to adopt by resolution the documents that will contain the final cost of the conference center and the interest rates on the bond. At that time, staff has arranged for a woman from Portland who is aware of the workings of the bond market to help evaluate bids from the underwriters for council and to evaluate how the bids fit in with the market at that time. Ms. Wooten asked the antiCipated deficit for th~ conf~r~nc~ c~nt~~ which was the conCQrn of Mr. Ob;~. Mr. Tashman said that the hotel agreement was presented in June. Best estimates of deficits are between $25,000 to $30.000 in th~ first five years and then diminishing until th~ tenth year when it was anticipated that there would be an operational surplus. Ms. Wooten asked how the ERA would generate revenues to repay the City and if ~ the development of revenue was contingent on the ERA boundary expansion. MINUTES--Eugene City Council April 8, 1981 Page 16