03-22-2000 Meeting - Laserfiche WebLink

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• Report on Financial Matters March 15, 2000 OVERVIEW i When the concept of a Section 4B'/z Sales Tax was presented to the voters, it was implied the first two projects would be the La Porte Community Library and the completion of Bay Area Boulevard between Fairmont Parkway and Spencer Highway. At our last meeting, we reported that we expected to sell bonds for those projects in February or March of 2000. At this time, we are ready to proceed with the Library project. However, we are not ready to sell the bonds for the Bay Area Boulevard project because we have not received sufficient engineering and other information from the County to determine the timing and costs of the project. It will probably be another year before we are ready to proceed with the Bay Area Boulevard project. FINANCING MECHANISM Also at the previous meeting, we let you know the financing of the projects would probably involve the City issuing debt and the Development Corporation reimbursing the City for its retirement. This method is still the most favorable. The City of La Porte-will issue $3,000,000 in Certificates of Obligation (CO's) at its March 27, 2000 meeting. The CO's will be backed by the Property Tax Base of the City. This is being done for two reasons. First, the City's Tax Base provides a much higher Credit Rating than would be available if the CO's were backed by Sales Tax alone. A higher Credit Rating means a lower interest rate. Second, the City has a large amount of debt capacity available. Since the City will be issuing the debt, the Development Corporation will be asked to reimburse or repay the City for the cost of the debt. We will accomplish this by entering into a Sales and Use Tax Retention Agreement between the two entities. CURRENT AND PROJECTED FINANCIAL STATUS The primary revenue source for the Development Corporation is the Sales Tax. On the next page, you will find a graph that shows the revenues for the first six months of this fiscal year. The following page shows the projection and the actual amounts collected. As you can see, we are within 1 percent of our original projection. The next two pages show two different methods of financing future projects. Both show the current issue of $3 million. Method 1 shows that future projects would be completed with a bond issue of $4 million (Bay Area) in March 2001 and a $5 million issue in March 2002. If these two events transpire, then it would be about 2009 before addition debt could be issued. Method 2 shows the $4 million issue (Bay Area) in March 2001 but after that, projects would be funded from existing cash at a rate of $400,000 per year and then increasing to $500,000 per year in fiscal year 2005-2006. With either method, the Development Corporation should enjoy good financial health. CONCLUSION The Development Corporation has sufficient financial capacity to enter into an agreement to repay the City of La Porte for the $3 million in bonds they sold to build the La Porte Library. 12