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2012-08-30 Work Session Kodiak Island Borough Assembly Work Session Thursday, August 30, 2012, 7:30 p.m., Borough Conference Room Work Sessions are informal meetings of the Assembly where Assembly members review the upcoming regular meeting agenda packet and seek or receive information from staff. Although additional items not listed on the work session agenda are discussed when introduced by the Mayor, Assembly, or staff, no formal action is taken at work sessions and items that require formal Assembly action are placed on regular Assembly meeting agenda. Citizen's comments at work sessions are NOT considered part of the official record. Citizen's comments intended for the "official record" should be made at a regular Assembly meeting. CITIZENS' COMMENTS (Limited to Three Minutes per Speaker) ITEMS FOR DISCUSSION 1. Long Term Care Facility (LTC) — Presentation from Cheryl Brooking, Borough Attorney PACKET REVIEW PUBLIC HEARING - None. UNFINISHED BUSINESS - None. NEW BUSINESS CONTRACTS — None. RESOLUTIONS Resolution No. FY2013 - 08 Accepting the Recommendation of the Planning and Zoning Commission Approving of Certain Borough Land To Be Sold at a Future Land Sale. ORDINANCES FOR INTRODUCTION Ordinance No. FY2013 - 02 Approving a Rezone for Lot 25A, Block 7 Leite Addition from R1- Single Family Residential to R3- Multifamily Residential (P &Z Case 13 -001, Wittenbrader). OTHER ITEMS Declaring a Seat on the Planning and Zoning Commission Vacant. MANAGER'S COMMENTS CLERK'S COMMENTS MAYOR'S COMMENTS ASSEMBLY MEMBERS' COMMENTS ,/ 1; % "\??; KODIAK ISLAND BOROUGH Office of the Manager tom *> Bud Cassidy, Administrative Official/Ac t ngManager MEMORANDUM DATE: August 24, 2012 TO: Mayor and B / rough Assembly FROM: Bud Cassidy ",Ac(ministrative Official/Acting Manager SUBJ: Long Term Care (LTC) Center Discussion Introduction At this Thursday's (August 30, 2012) work session we have scheduled a discussion about the numerous decisions that you will be asked to make should you decide to move forward with the construction of a LTC facility. The Borough Attorney and Bond Council, Cheryl Brooking, will provide an overview of all the issues as well as the timing of decisions that will need to be made by you. Those decisions involve the approval of an ordinance, two resolutions and a contract. The schedule that staff has developed for the project, is aggressive. There is little wiggle room for delay as substantial completion of the LTC is scheduled for January 1, 2014. That means that all construction will occur during the 2013 construction season. Therefore, ALL your decisions must be made in the affirmative to keep the project going. Should you fail any of the items that come before you for a vote the project will be delayed and probably not go forward as scheduled. Our effort for this Thursday's meeting is to bring you a comprehensive picture of the approvals needed for the project. It is also done earlier than normal in an effort to help you better understand the project and the process as well as give you ample time to consider the decisions you will be asked to make. The first of your decisions will be up for a vote at your September 20, 2012 meeting. LTC — Background The Long Term Care Center is proposed to be constructed on the existing hospital campus and adjacent to the hospital facility. It is a 17,747 square foot residential facility with approximately 24 beds. It will replace the existing care center that is presently located within the existing hospital and houses 19 long term care patients. Financing of the facility will primarily be from the sale of $11 -12 million dollars of revenue bonds. The borough has also received over a $1,000,000 in grants to start the planning process and begin preliminary design of the facility. The revenue bonds will be paid back through rents identified in the lease of the facility with Providence. This project is proposed to be an entirely reimbursable project, meaning that any local costs to construct the facility will be paid hack. SPECIFIC ITEMS TO BE DECIDED As stated the Assembly will be involved in a substantial approval process of this facility. The many items to be decided are discussed below. They are just brief explanations and will be discussed in more detail Thursday and as we bring each item to the Assembly for approval. a. Resolution Approving a Lease of the LTC to Providence The Borough will be entering into a lease with Providence to operate the LTC. The term of the lease will be for 20 years corresponding with the term the bonds, The rental rate is based on repayment of the debt associated with selling the bonds. b. Ordinance Approving an Inter -loan Fund from the Facilities or Hospital Fund Approval of this ordinance will allow a loan from the Facilities or Hospital Fund. This loan will be a temporary construction loan to bridge the need for cash between the beginning of construction and receipt of the first lease payment. It could be that this may not have to be done. Finance Director Short is reviewing the budget to determine if this Ordinance will be coming before you. c. Resolution allowing for the sale bonds /TEFLA public hearing. The sale of 11 -12 million dollars of bonds will finance the construction of the facility. In addition to the approval of a resolution to sell bonds, because of the type of bonds to be sold, the Tax Equity and Fiscal Responsibility Act of 1982 (TEFLA) requires a public hearing to occur before the Borough Assembly. d. Approval of a Contract for a General Contractor /Construction Manager (GC /CM) The assembly will be asked to approve a contract with a construction firm who will work cooperatively with the borough and the architectural firm on the design and constructability of the LTC. By bringing the construction company to the table early in the process, they are able to provide valuable input into the overall cost of construction. Conclusion The Assembly is being asked to make a number of decisions that are critical to constructing and completing this facility by the January 1, 2014 deadline. The success of this project is subject to keeping to a tight time schedule. Also critical in the process, and what could be a show stopper, is Providence's ability to acquire a Certificate of Need for the facility. It is anticipated that a CON will be acquired before the end of the year. 14 /y ID Pats Name Oura,M I Stan 1 F 55 1_ ,JPne �Ju/y _ _- jAugud Se9ta Mr,.__ !October !November December ladua5 1 February - _ IMarcn packs /tleaal'rq SaaYS Thu ,5'2] 810511]529 7/1 INS 171i 171i 8/5012101��' 19/919116 0R3'9/]OiM ryfT92 0/2 111 .:rz_t'1L2 1192 /1121 yJil /¢ 8/ 12 0 121_1213 ?/10 211 719/24 J1103/1l32a - 2LeRadw R uCOtb City 1191 Lard _ _ - - "— axe n 6/8/12 6/8/12 fi2 IZ wee Nlz / L -_ - - -. � 3 WUw n I. dAuon O.pos Wed emn2'I -T 4 --- oadnot subnetlie h Ceti ]approval - EY Tue 72 - TUe 7/3/121 \ A / - "�\ 5 laPe Acnumton 64 sal poses on dscwe 5da8 Tnu E2B112 Wea7/4/12 fi $/ 6U09Q,( �{M1 ✓v�U"'a..sE {l,/c ct. 1 - C .and Siaw S. a roes/ approve' NOMS1 meslrp 1day: Tnu /511 Thu 7 /5 /12/ 0 ` � ( / / / -- ry porous land swap- first nor reading 191days- Thu Fr 7/13/12. Wed B'0/l21 S/ ` /�rn 9 Cry approve leM swap finel 214 ye Th 8/922 Fn 41114/12 • 10 CO/CM &MONIS Dr I& rewew lento attorney/Fir eve /' / e a s y T Tee 6/i212' Wed 82a121 4/10/4 '2 / �p�< --r 1 fi SuW'A mlamaai ro CW6l m I r ew mendme/ - . "_ _ . 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Lee - se a ;mendmau eatwora Iesall Ch LTC I' — " 5days Thu 8/23/12 "Wes829/i2 . Ei 2e Red+ve 100 9Sapnea bpmenl E,ewr9 ' 120 - Mmdl1y12 Fn 125/131 I 0 - 29 L re5manl 1st 0214 10 Ways Pr 9/7/12 Tno 9 /0/121 ��/) G _ . `1 / � 3CICM eve b p la agenda packet "' - 284 days TSu amen? Thu 20/12] 1 a ) 31 o MB Meaung eGNWWI a1; wen %o . ".... w reading F - ... 1ev Mn iRdn3 Mm IrzMi3' 32 Lae amendmenl2nd wing work session 5 days Fn 9/21 /12 TM, 927/12' 1 /3 33 Psbel deadline for Bond Resolution. TFFRAneri,g y Fri 9/21 /12 F 9/21/121 1 ! 3 OUCH wmFSn D - 5 4as Fri 921/12 Tnu927/12' 35 GC/CM assembly meeting approval pYd nO bond sate 5dry 0/18/211113 2 Thu 10/4/12136 Flat ad Work See by P82 days 5 ds Wed 922/12 Tue 9/18/12' 37 Pld Apylwnon Approval by oy 882 -. IdaY Wed 9'29/12 Wed 9119 /121 • 38 - 'Supra/ process ler P1 11 date TIN 920 /12 Tnu 10/4 /12 ' - 39 Sle 0aae 110 de for piles 40 _ 21 days M12/13 - Mn 225/13 t0 1NCy4We aMEOVdopment 15425 Tue 226/13 Meong /18/13' 1 My at BOn4 rewWten merit m 8 ssmdy 4 days Mon 924112 Tna927n2� r .— © " .-----71 " - 43 -- 11.1 3 : Bond reedy/02h TEFRAO 8au1 assembly moan 5 diyi Fri 928/12 Thu 10'4 /12 1 read% b d lease emonnem, 5Eays Fn 9/28/12 Thu 10/4/12 44 35 %p coats to Pm/NMC8Ir8m AA • 19 Cats Wed] /11/13 Mon &y121 4 5 Pro1Alvue submit Cerli6rele of Need b approval b State 90 days Tue 8P/12 Mon 11/10/12 W Y CON approved 1 a Tue 12/11/12 T 12/11/12. a�. 47 F' ce10 pepae a dscow M re satelnr 20 days Wed11/12/12 T 1/8/131 Y 40 SeII Ms - 14COW Wed 1/9/13 Mon 1126113 4 9 A 2 GC/CM contract d a y T u e , Pmlect LTC Schedule-120820 Task 1=a� Pro5rees sem 5ummory ■- External Tasks t " seeable I. Dam: Mon 8/23/12 Split • Praise Summary 0-........--c External MYeelone C P20e 1 QUALIFIED 501(c)(3) PRIVATE ACTIVITY BONDS (an over - simplification) The Borough may issue bonds for governmental purposes, either as general obligation bonds (approved by the voters and pledge of full faith and credit of the Borough for repayment) or as revenue bonds (debt service payable solely from the revenue stream of the facility financed by the bonds). If the Borough issues bonds for a facility leased to or used by a non - governmental person, the bonds are likely to be considered private activity bonds. Private activity bonds are generally taxable, because they meet the 10% private business use and the 10% private security or payment tests. However, certain uses of bond proceeds are qualified as being tax - exempt, resulting in qualified tax - exempt private activity bonds. (Section 141) The following attributes apply to qualified 501(c)(3) bonds: - 95% of the net bond proceeds by a 501(c)(3) entity must be spent for the exempt purpose of the borrowing. - Use of bond proceeds by a 501(c)(3) entity in an unrelated trade or business is treated as a nonqualifying use, counting against the 5% threshold. Costs of issuance are included in the 5 %. - Costs of issuance cannot exceed 2% of the proceeds of the bonds. - As a conduit issuer, the Borough can adopt an official intent declaration allowing reimbursement of costs paid within 60 days of the date of the declaration. - The Borough Assembly must hold a public hearing before the bonds can be issued. The notice of the hearing must contain a description of the facility to be financed, the maximum par amount of the bonds to be issued, the initial owner, operator, or manager of the facility, and the address of the facility. Notice must be given to the public at least 14 days prior to the hearing. (Section 147(f)) - The bonds cannot be outstanding for more than 120% of the average reasonably expected economic life of the facilities financed with the bond proceeds. - 501(c)(3) bonds are the only type of private activity bond that may be advance refunded. - There is an exception from arbitrage rebate for two -years for expenditures of bond proceeds for construction. - 501(c)(3) bonds are not subject to the Alternative Minimum Tax (so they often trade at somewhat lower interest rates). - 501(c)(3) bonds are eligible as "bank qualified" bonds, meaning banks who purchase bonds may deduct 80% of the interest expense paid on the funds borrowed to purchase the bonds. (The issuer of bank qualified bonds cannot issue more than $10 million of tax - exempt bonds in a calendar year.) There by be lower costs of issuance and there may be lower interest rates as compared to other tax - exempt bonds. - . 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