City
of Homer
Memorandum No.
04-42
To:
Mayor
& Council
From:
Walt
Wrede, City Manager
Date:
March
16, 2004
Re: USDA
Funding for New Library
This
memo is intended to provide additional information regarding Resolution
04-31,
authorizing the City of Homer to apply for a low interest loan of up to
$2.2
million from the USDA Community Facilities Loan Program.
As
you will recall, the City Council previously passed Resolution 04-31,
authorizing the City to apply for a USDA Community Facilities Grant
to
cover 15% of allowable project costs for the new library. The total
amount
requested is $980,792. That application will be submitted today.
As
you know, previous discussion of long-term financing for the new
library has
focused on passing a bond measure this fall. When USDA Rural
Development
Manager Michelle Hoffman (Kenai office) learned that we were thinking
of
selling bonds to help pay for the library, she encouraged us to
consider a low
interest USDA loan as an alternative. The interest rate would likely be
comparable to what we would get with bonds, and the loan has the
advantage of
no fees and a 30-year term. (We could go as long as 40 years. We could
also pay
the debt off sooner than 30 years, if we wish.)
As
we investigated further, we learned that combining a grant application
with a
loan application would likely be viewed favorably by the USDA state
office, and
might help us score high enough to win funding through the
national
program to which we are applying. After consulting with Dean Baugh and
Helen
Hill on this matter, I am recommending that we apply for a USDA
Community
Facilities Loan along with the Community Facilities Grant. We will not
be
obligated to close the loan if we change our minds and decide to go
with a bond
measure.
I
have also consulted with Gordon Tans on this matter, to determine if
the City
would need to seek voter approval for a USDA loan. The answer is yes,
since
either a bond sale or loan to be paid back by the City involves
“general
obligation” on the part of local taxpayers.
A
final note: We were pleased that Michelle Hoffman visited Homer last
week to
see the existing library and new library site and meet with City staff
and
library campaign volunteers about the project. She was very impressed
with the
campaign and in fact has recommended that it be presented as a model
economic
development project at the upcoming “Opportunities Forum” sponsored by
the
Kenai Peninsula Economic Development District. The forum is scheduled
for April
16 at Kenai Community College.
RECOMMENDATION: Approve Resolution 04-31
authorizing
the City of Homer to apply for a USDA Community Facilities Loan for up
to $2.2
million.