MEMORANDUM

To: William Popp, Assembly President

Members, Kenai Borough Assembly

Thru: Dale Bagley, Mayor

From: Jeffrey Sinz, Finance Director

Date: July 6, 2000

Subject: Ordinance 00-32, General Obligation Bond Ballot Proposition

Under the provisions of HB281, which was passed by the AK State Legislature during the 2000 session and recently became law, the borough is eligible to receive reimbursement of 70% of the principle and interest on school capital improvement bonds with a par value of up to $7.429 million. This provides an extraordinary opportunity to address the borough's list of deferred school capital maintenance projects. The KPB School Board has approved a list of school capital maintenance projects and forwarded it to the borough with a request that we proceed with sale of the bonds. The assembly has previously been briefed on this matter along with the general financial benefits. The attached ordinance, if approved, places this issue before borough voters.

The ordinance lists the projects that would be authorized for completion using bond proceeds. The list matches that presented to the assembly on June 6, 2000. All projects come from the borough's prioritized list of projects which is updated jointly by borough and school district personnel annually. Although the maximum amount of debt that could be issued under the proposed ballot proposition is $7,429,000, the total estimated cost of the projects appearing in the ordinance is currently $8,814,000. Asking voters to approve a list of projects that is estimated to cost more than the requested bond proceeds will eliminate the need to go back to them for additional approval should some of the projects be completed for less than the estimated amount. The estimated cost of the projects will continue to be analyzed so that the eventual project appropriations will reflect a higher degree of accuracy than the current estimates.

Based on actual 1999 borough assessed valuations, the estimated amount of property taxes necessary to pay the borough's share of the debt service on property valued at $100,000, is $8.90 per year. This assumes that the debt is issued for a term of 10 years at an effective rate of interest of 5.3%. The operating and maintenance cost estimate associated with the projects is listed in the ordinance as $0. In reality, completion of these projects will reduce the annual operating and maintenance costs associated with the impacted facilities.