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I Council Meeting Minutes September 10. 1990 Page 6 Council Business, continued Although bonding for the full amount is a possible technique, alternatives were discussed to better satisfy all objectives. An approach which co-mingled the use of reserve funds with bonded debt property taxes provides to further lower property taxes, minimal impact on reserves, lowe~st overall finance costs, and compliance with citizen survey findings. Two ways to use reserves were researched: spend reserves as capital to build the center and thereby lower the need for general obligation bonds to $5,500,000; or use reserves to assist with the bond payment. After examination, spending of the reserves as capital was determined to be the preferred choice. This is because Federal arbitrage regulations limit interest earnings on any funds, such as the Envi ronmenta 1 Reserve, whi ch are pledged for debt reti rement. Thi s interest restri cti on over the next 15-20 years would be a costly and undesirable condition. I Egan said that in order to pledge the bonds, the City would voluntarily lower its interest earnings. It is in the City's best interest to not tie up the total interest earnings. The recommended City payment would be $2,000,000 from the Envi ronmenta 1 Reserves. Use of the portion mi n i mi zes impact on existing general services. Reserves are adequate for such an outlay. The per household costs complys with the citizen survey which showed a 2 to 1 margin favored a community center which costs $53 per year for a $100,000 home. According to the proposal, a $100,000 home would be annually taxed for 15 years at $48 per year. Gunderman expressed concern about the spending of reserves and asked if the center could be funded without a referendum. Egan said, as a Finance Director, the least desirable choice would be to build the center and fund it totally from reserves which are considered precious and non-replaceable assets_ She feels the spending of reserves for a small percentage of the proj ect cost is a very prudent financial choice and by the end of the payback period on the remainder, the City would be at a substantial advantage. Childs said staff and the construction manager will supervise the costs during all construction phases_ I Walt Witzke asked what risks does the City incur if the facility is not used. Benke said that once the City commits to the building it is obligated to own and operate it effectively and efficiently. Motion by Gunderman, seconded by Williams, to WAIVE THE READING AND ADOPT THE RESOLUTION ESTABLISHING THE METHOD OF FINANCE FOR THE CONSTRUCTION OF THE COMMUNITY. 5 Ayes - 0 Nayes, Motion Carried Counei 1 Business Content, Financial, and Referendum Report on Proposed Community Ctr. Report 90-196A Report 90-196B Report 90-196C Resolution 90-076 Resolution 90-077