MEMORANDUM

TO:                Ron Long, Assembly President

Members of the Kenai Peninsula Borough Assembly

THRU:           John J. Williams, Borough Mayor

Craig Chapman, Finance Director

FROM:          Bonnie L. Golden, Grants Manager

COPY:           Dr. Donna Peterson, School Superintendent

DATE:           June 8, 2006

SUBJECT:    Ordinance No. 2006-29: Ballot Proposition for Issuance of General Obligation Bonds in the Amount of $2,588,000 for Educational Capital Projects

Under the provisions of Senate Bill 75, which was passed by the Alaska State Legislature during the 2005 special session and 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 $2.588 million. The bond program allows the borough to go back three years to recoup costs incurred for school capital projects. This provides an extraordinary opportunity for the borough to be reimbursed for funds previously expended. Such reimbursement requires that the qualified voters of the Borough approve the issuance of general obligation bonds for educational capital improvements. The attached ordinance, if approved, places this issue before borough voters in October 2006.

The ordinance lists the four projects that would be authorized for reimbursement or payment using bond proceeds. They are: (1) areawide arsenic remediation, (2) Nikolaevsk School roofing, (2) Soldotna Elementary School window replacement, and (4) McNeil Canyon School roofing. All of these projects were approved by the School Board and were included in the Borough’s 2006 Legislative Priorities. Approval from the Alaska Department of Education and Early Development for funding under the bond reimbursement program is expected prior to August 1, 2006.

Although the maximum amount of debt that could be issued under the proposed ballot proposition is $2,588,000, the total estimated cost of the four projects appearing in the ordinance is currently $2,754,860. All of the projects have been funded with Borough funds, with the exception of the McNeil Canyon School roofing project. This project has not yet been funded. The total estimated cost of this project is $750,000. The bond issue would provide $583,140 for re-roofing McNeil Canyon School. It is anticipated that an additional $166,860 will be needed for project completion. If the voters approve the ballot proposition, the administration will request that funds previously appropriated for other completed school projects be redirected to provide the needed funding to complete this project.

It should be noted that because Borough funds totaling $2,004,860 have previously been appropriated for the Arsenic, Nikolaevsk, and Soldotna projects, with the 70% reimbursement program with these bonds, even with the interest on the bonds, the Borough will save approximately $1,031,959.

Based on 2006 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 $2.01per year. This assumes that the debt is issued for a term of 10 years at a rate of interest of 4.25%. 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.