MEMORANDUM

TO: Pete Sprague, President

Members of the Kenai Peninsula Borough Assembly

THRU: Dale Bagley, Mayor

FROM: Scott Holt, Finance Director

Craig Chapman, Borough Controller

DATE: November 6, 2003

SUBJECT: Resolution 2003-121, A Resolution Of The Kenai Peninsula Borough, Alaska, Authorizing And Providing For The Issuance Of Not To Exceed Forty-Nine Million Nine Hundred Thousand And No/100 Dollars ($49,900,000) In Aggregate Principal Amount Of Central Kenai Peninsula Hospital Service Area ("Service Area") General Obligation Bonds ("Bonds"), To Pay Costs Related To Capital Improvements For The Central Peninsula General Hospital And Related Capital Improvements; Fixing Certain Details Of The Bonds; Providing For The Form And Manner Of Sale Of The Bonds; Pledging The Full Faith And Credit Of The Service Area To The Payment Thereof; Authorizing The Finance Director Or Controller To Negotiate And Execute A Contract For The Purchase And Sale Of The Bonds; And Related Matters.

The attached resolution authorizes the issuance of $49,900,000 in General Obligation Service Area Bonds. A majority of Service Area borough residents voting in the October 7, 2003 general election approved issuance of up to $49,900,000 in general obligation bonds for capital improvements associated with the Central Peninsula Hospital.

The bonds are expected to be sold in late December. The resolution authorizes the Borough Mayor, Finance Director or Acting 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 6%. Based on current interest rates for tax-exempt municipal debt, it is anticipated that the true interest rate of the bonds will be between 4.75% and 5.25%. 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 to 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. The administration will keep the assembly informed as we progress through the bond issuance process.