City Council Minutes 2014 10 07 - Laserfiche WebLink

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City Council Meeting Minutes October 7, 2014 Page 15 of 27 provides prior to entering into a financial obligation or issuing debt, the LRC must present the information regarding the financial obligation or debt to the City Council. Refinancing the bonds would trigger a City Council review. According to the agreement the LRC shall not commit to bonds or long -term financial obligations unless the majority of the City council has adopted a resolution determining the City's interest in connection with such bonds or other obligations are adequately protected. Council member Lipton stated his understanding the City would not be liable should the bonds fail. He asked if the issuance of bonds would affect the City's debt capacity and whether it would be counted toward the City's debt capacity. Finance Director Watson stated this debt will not impact the City's debt capacity. It will be shown in the financial statements as the LRC is a component unit of the City, but it will not impact the City's debt margin. It will also be shown as an overlapping debt to the community such as a school district debt or a metro district debt. Council member Lipton inquired about the issue of compounding unpaid interest. Economic Development Director DeJong explained while the LRC was evaluating the bonds documents and preparing a term sheet, George K Baum's proformas didhave compounding interest. He explained the bonds would be earning interest until the debt is paid. The term sheet prepared in 2013 used the term simple interest, which is the absence of compounding. The LRC discussed this at their September meeting and decided that compounding interest will be applied. Council member Lipton asked if the compounding of interest was an issue for the LRC or the developer. Economic Development Director DeJong responded it was not an issue. Mayor Muckle explained the LRC was formed to redevelop the Highway 42 Area and make improvements. The money to pay for the bonds will be collected by the taxes paid by the development. He stated this is the most direct way to do in- ground infrastructure and eliminate blight. He stated it is the Council's role to protect the City's interest. He was comfortable the development tax increment will pay off the bonds. Council member Stolzmann asked Public Works Director Kowar if the drainage line budgeted for this year is to serve the core area or is it an upgrade to the City's storm drainage services. Public Works Director Kowar explained it is a part of the City -wide Drainage Master Plan. Currently there is one 60 inch storm sewer. The Master Plan requires two lines and the City's portion would be the second line. He explained the drainage is not specific to the east side of Highway 42. Council member Stolzmann was not supportive of the drainage line contribution and the way it is to be funded. She felt the development or the Urban Renewal should pay for the drainage line. She did not feel the interest should be changed from simple interest to compound interest. She explained with the low risk of developing residential units, she did not believe the interest should be changed. She felt the bond purchasers will