City Debt Using Taxpayer-Funded Certificates of Obligation – without voter approval
Somehow over the past few years, the Downtown Exchange Project has transitioned from a privately funded effort to a totally Taxpayer-funded project controlled by the City Council and the McGregor Economic Development Corporation [MEDC] using Taxpayer-Funded – Certificates of Obligation [CO Bonds] for financing.
Series 2018A CO – Certificate of Obligation. The Principal issued and outstanding is $2,090,000.00. The required Principal and interested required to pay the outstanding debt is $2,942,245.31. The financial maturity date is 8-15-2038 – [a 30-year loan].
The official started purpose for the loan: design, renovation, and construction of improvements to the land and facilities [Exchange Property] for entertainment, tourist, and public park purposes and events.
We asked the City Manager and the Director of the MEDC for the site selection study that picked the Top Crop Property above all the other location possibilities. Apparently, that process and the documentation does not exist.
We attended the MEDC August 2019 meeting and asked a few questions – for example, what are the real and projected costs up to and including the day the Exchange doors open, and what are the ongoing cost to keep the lights on and the doors open. What are the land costs, as-built construction costs, projected monthly operating costs, projected maintenance costs, other sub-contractor costs, debt service, employee salary wages and benefits, and more? Most important – what is the projected annual revenue? When will the Downtown Exchange be “self-sustaining” and perhaps capable of repaying the Bond Debt Service?
The McGregor City Manager has provided us the [Phase 1] “as-built” documentation for the Downtown Exchange [construction costs]. The City has borrowed $2,090,00.00 to construct the Downtown Exchange. The combined principal and interest is $2,942,245.31 with a maturity date of 8-5-2038 – [a 30-year local taxpayer guaranteed bond].
Apparently, the Chamber of Commerce membership, the City Council, core City businesses, along with other individuals, all insist the Downtown Exchange Community Center is essential to the future of McGregor.
At the August 2019 meeting, we requested the MEDC and the McGregor City Council to stop funding the Downtown Exchange using Certificates of Obligation. We met with the MEDC Director, the McGregor City Manager, and the Mayor to explain the implications of that proposal. [The request is still under consideration as of October 2019].
How will the Downtown Exchange be funded without Certificates of Obligation?
We assume the Downtown Exchange Project [Phase 2] will require even more money to complete the construction and fund the ongoing operational costs? The questions become how will the MEDC calculate the future dollars required and where will that funding come from?