MEMORANDUM

TO: Pete Sprague, Assembly President

Members, Kenai Peninsula Borough Assembly

THRU: Dale Bagley, Borough Mayor

FROM: Jeffrey Sinz, Finance Director

DATE: June 6, 2003

SUBJECT: Seward Middle School Bond Sale Resolution

The attached resolution authorizes the issuance of $14,700,000 in General Obligation School Bonds through the Alaska Municipal Bond Bank Authority. A majority of borough residents voting in the October 1, 2002 general election approved issuance of up to $14,700,000 in general obligation bonds for capital improvements associated with the Seward Middle School. As described in the proposition, sale of the bonds is conditional upon first establishing the bonds are eligible for at least 60% reimbursement under the State of Alaska school debt reimbursement program. This condition has now been met. The borough received formal notification of debt reimbursement eligibility through a letter dated April 23, 2003 from the Department of Education and Early Development.

The bonds are expected to be sold in late July or August. The resolution authorizes the borough Mayor, Finance Director and Clerk to execute the documents and agreements necessary to complete the sale. The resolution limits the term of the bonds to twenty years and the interest rate to no more than 5%. Based on current interest rates for tax-exempt municipal debt, it is anticipated that the true interest rate of the bonds will be between 4.0 and 4.5%. The actual rate of interest is subject to market conditions that exist on the date of the sale.

A draft of the "loan agreement" referenced in the resolution is attached for your information.

Because of the size of this issue, circumstances may cause us reconsider the method of issuance from a bond bank sale to an independent borough sale. If this occurs, a follow-up resolution will be presented to the assembly to authorize the change. I will keep the assembly informed as we progress through the bond issuance process.