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<br /> <br /> <br /> <br />CITY COUNCIL COMMUNICATION <br />SUBJECT: TERM SHEET FOR HIGHWAY 42 CORE PROJECT AREA IMPROVEMENTS <br /> <br />DATE: APRIL 23, 2013 PAGE4 OF 6 <br />Interest Rate <br />The agreed interest rate is seven percent simple interest. <br /> <br />A seven percent interest rate is much higher than traditional municipal financing that <br />has the full faith and credit of the issuing entity. This higher interest rate is necessary <br />because the bonds would have a much different risk profile as the bonds are only paid <br />back through the increased tax revenue from the Highway 42 Core Project Area; the <br />bond holders assume the risk of the subarea not generating the tax increment revenue <br />necessary to finance the debt. The bond holders are not guaranteed a payment from <br />any other funding source. <br /> <br />Tax Status <br />These bonds are eligible to be double tax-exempt, bank qualified, and not subject to the <br />Alternative Minimum Tax. <br /> <br />Redemption <br />The bonds may be redeemed after the 5 year anniversary of the bond issuance. Should <br />the subarea meet or exceed property tax estimations used to determine the bond <br />amount, the bonds can be refinanced at a lower rate because the risk profile would <br />change significantly and more traditional financing institutions would be interested in the <br />bonds. <br /> <br />Rating <br />These bonds will have no rating. The risk profile is too great to receive a rating. <br /> <br />Pledged Revenue <br />The bonds will only be paid through the increased property tax revenue from the <br />Highway 42 Core Project Area. The base value is the property values as of January 1, <br />2012 (for taxes collected in 2013) by the Boulder County Assessor’s office. <br /> <br />The revenues are subordinate to the LRC’s other financial obligations. Those <br />obligations include; <br />1) The Intergovernmental Agreement with Boulder County to share back a portion <br />of TIF revenues <br />2) The Intergovernmental Agreement with the City of Louisville for administrative <br />services <br />3) The Intergovernmental Agreement with the City of Louisville for funding of the <br />South Street Gateway Underpass <br /> <br />The revenues from the subarea remaining after these other obligations will be used as <br />principal and interest payments on the bonds. Payments by the LRC to the bondholders <br />are contingent on the availability of TIF revenues. <br /> <br /> <br />18