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HomeMy WebLinkAboutResolution No. 2010-31the c v °f KENAI. ALASKA CITY OF KENAI RESOLUTION NO. 2010 -31 Suggested by: Administration A RESOLUTION OF THE CITY OF KENAI, ALASKA, REQUESTING THE KENAI PENINSULA BOROUGH TO ALLOCATE S2,000,000 OF ITS VOLUME CAP OF RECOVERY ZONE FACILITY BONDS TO THE CITY OF KENAI FOR THE ISSUANCE OF REVENUE BONDS TO FUND THE CONSTRUCTION OF A COMMERCIAL BUILDING IN THE CITY. WHEREAS, the American Recovery and Reinvestment Act of 2009 added 1400U -1 through 1.400U -3 to the Internal Revenue Code authorizing state and local governments to issue up to $15 billion in Recovery Zone Facility Bonds "RZFB and, WHEREAS, the Internal Revenue Service has allocated RZFBs among the states and counties and large municipalities; and, WHEREAS, the Internal Revenue Service by Announcement 50 -2009 has allocated $7,315,000 of RZFB volume cap to the Kenai Peninsula Borough (the "Borough and, WHEREAS, the Internal Revenue Service has determined that counties and large municipalities to which RZFB volume cap has been allocated may allocate such volume cap to ultimate beneficiaries in any reasonable manner as they shall determine in good faith in their discretion; and, WHEREAS, the City of Kenai (the "City was declared an Economic Recovery Zone by Resolution No. 2010 -06 on February 3, 2010 in connection with issuance or Recovery Zone Economic Development Bonds for expansion of the Kenai Community Library; and, WHEREAS, the City is requesting the Borough reallocate $2,000,000 of the Borough's RZFB volume cap to the City for the City's conduit revenue bond financing of a commercial building in the City (the "Project and, WHEREAS, it appears that the Project would qualify for financing with RZFBs, and allocation of 52,000,000 of the Borough's RZFB volume cap to the City for that purpose would be in the best interest of the City and its residents. NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, that: SECTION 1. The City requests the Borough to allocate $2,000,000 of the Borough's RZFB volume cap to the City of Kenai for the City's conduit revenue bond financing of the Project. SECTION 2. The City Manager hereby is authorized, empowered and directed to do all acts and things and to execute all documents as may be necessary to carry out and comply with the provisions of this Resolution. Resolution No. 2010 -31 Page 2 of 2 SECTION 3. This Resolution shall become effective upon adoption. PASSED BY THE COUNCIL OF THE CITY OF KENAI, ALASKA, this second day of June 2010. ATTEST: Carol L. Freas, City Clerk Approved by Finance: PAT PORTER, MAYOR the afy KENAI, ALASKA To: Rick Koch, City Manager I From: Terry Eubank, Finance Director Date: May 26, 2010 Re: Recovery Zone Facility Bonds "village with a Past, Ct y with a Future FINANCE DEPARTMENT 210 Fidalgo Avenue, Kenai, Alaska 99611 -7794 Telephone: 907 283 -7535 ext 221 FAX: 907 283 -3014 As part of the American Recovery and Reinvestment Act (ARRA) the Kenai Peninsula Borough has been allocated the right to issue up to $7,315,000 of Recovery Zone Facility Bonds. The entire State of Alaska was allocated $135,000,000. The allocation areas were determined by the internal Revenue Service. As a jurisdiction within the Kenai Peninsula Borough, the Borough can allocate all or a portion of its bond allocation to City. Recovery Zone Economic Facility Bonds allow private entities to borrow at tax exempt rates utilizing conduit debt programs through public entities. Tax exempt borrowing rates are expected to reduce the cost of capital by 1.5% to the private entity. The City has been approached by Pfeffer Development, LLC who has plans to purchase one of WalMart's out lots for construction of retail space. Pfeffer Development, LLC has requested $2,000,000 in conduit financing through the Recovery Zone Facility Bond Program. Issuance of conduit debt by the City will not obligate the City for repayment of the debt at any time. The City simply acts as the vehicle for a borrower to obtain financing at a reduced cost. Traditionally conduit financing has only been available to not- for -profit entities but was expanded under the ARRA legislation to include private entities. Pfeffer Development, LLC has agreed to reimburse the City for all cost associated with the financing including the cost of the City's bond counsel.