EDA Meeting Date: April 28, 2025
To: Members of the Economic Development Authority
From: Ben Martig, City Administrator
Title
Update on Debt Financing for New Ice Arena.
Body
Action Requested:
No action. The EDA shall hear an update from city staff regarding the future ice arena financing structure.
Summary Report:
City Administrator Martig will provide an update on the project at the meeting. Attached is the background information and presentations from the prior meeting. I’ve also attached an updated project schedule. There may be information that I provide at the meeting based on bids received.
There have been some additional misconceptions made publicly that the project must require a public vote per City Charter. The following is some additional information related to the legal considerations of City Charter provisions and ability to utilize this debt financing mechanism that does not require a public vote as provided by the City legal bond counsel Jenny Boulton transition partner of Kutak Rock LLP:
1. Charter:
The Charter allows the City to issue obligations without an election if permitted by state law. There are numerous exceptions to the election requirement throughout state law, not all of which are enumerated in MN Stat, Sec 475.58.
2. City Lease:
The City will not issue bonds or any other obligations under the proposed financing structure. Instead, the City will enter into a lease under which it will pay rent for the ice arena. The City is authorized by MN Stat, Sec 465.71 to acquire real and personal property under lease-purchase agreements and to enter into such an agreement with the EDA. MN Stat, Sec 465.71 permits entering into a lease with option to purchase without an election. The lease will allow the City to terminate the lease in any year if the City were to decide not to appropriate funds for rent payments in the annual budget. Because of the right to non-appropriate in any year, the lease is not an “obligation” as defined in MN Stat, Sec 475.51, subd. 3. Because the lease and rent payments aren’t an “obligation”, the election requirement under MN Stat, Sec 475.58, subd. 1 doesn’t apply and the exceptions thereto aren’t relevant.
3. EDA Lease Revenue Bonds
It is proposed that the EDA issue lease revenue bonds under MN Stat, Sec 469.103 which does not impose an election requirement. The bonds will be revenue obligations payable solely from the rent payments under the lease (including funds coming from donors and funding partners like the School District and the City of Dundas). The bonds will not be general obligations of the EDA or the City. MN Stat, Chapter 475 doesn’t apply to the EDA’s revenue bonds because (a) Chapter 475 applies to obligations issued by a “municipality” as defined in MN Stat, Sec 475.51, subd. 2, which does not include economic development authorities, and (b) MN Stat, Chapter 475 is not incorporated by reference into MN Stat, Sec 469.103. However, even if we were to apply MN Stat Chapter 475 to the EDA’s lease revenue bonds, the bonds would not be subject to an election requirement under MN Stat, Sec 475.58 pursuant to the exception MN Stat, Sec 475.58, subd. 1(4) for obligations payable wholly from the income of revenue producing conveniences which, in this case, includes the revenues derived under the lease.
While issuing general obligation bonds pursuant to an election is one option available to finance the proposed ice arena, that is not the only option available. General obligation tax abatement bonds are an alternative available to the City and may be issued without an election as are the EDA lease revenue bond described here. For the reasons described above, EDA lease revenue bonds do not require an election.
Ms. Boulton is not requested to attend the meeting Monday night. However, should members have any questions they’d like in advance in preparation of the meeting including this issue we encourage you, as in all EDA items, to reach out to Economic Development Coordinator Carlson by email or call and will work to get the information. We could possibly get additional information from her prior to the meeting. Additionally, staff has requested Ms. Boulton to attend the May City Council meeting to be able to address this or other legal questions to the City Council.
Alternative Options:
No alternative options at this time.
Financial Impacts:
None at this time.
Tentative Timelines:
See attached tentative timeline.