Reminderville -- Assuring citizens that the village's 1.5 percent income tax rate would not increase, Council voted 5-0 on March 11 to take out $6.3 million in bonds through Minneapolis-based investment firm Piper Jaffray to build a recreation center at Glenwood Boulevard and Liberty Road.
The bonds will establish a five-year debt structure in which the village will make regular payments to pay off the balance of the 55,000-square-foot center, proposed at about $4.5 million, including $1.23 million in related land purchases.
The bond purchase does not have to go before voters, according to Mayor Sam Alonso.
"We believe the membership from the rec center will pay for it," Councilor Ed Walter said. "If the membership doesn't make the [bond] payments, then we have to take it out of the general fund to make the payments. We're not talking about increasing taxes."
The bond structure approved by Council also includes an agreement to use the village's income tax revenue as collateral to pay off the balance of the bonds if recreation center revenues don't pay off the bonds in the five years.
"The income tax is the clench, or the collateral support," added Councilor Thomas DiCarlo. "The revenue from the center is intended to pay back the bonds. If at any point that revenue is not enough to cover debt service, the income tax acts as collateral support to boost that.
"It's not raising income taxes, it's just looking to the income taxes if the revenue does not suffice."
REGULAR payments by the village will vary, but will average out to about $36,000 a month, including interest, or about $440,000 per year.
Village officials say they hope to see the recreation center, which will feature a running track, a swimming pool and various excercise equipment, open in 2015. A contractor for the project has not yet been chosen after several design and build teams presented to Council in February, a decision Alonso said he hopes to see made as soon as possible.
"I'd like to have it done yesterday," he noted.
Piper Jaffray representatives Ryan Stefan and Michael Prcela spoke to Council on March 11, explaining the benefits of the bond issue, including providing the village with initial funds for construction and startup.
"In effect, this five-year structure mitigates a number of those costs, it gives us the option to go ahead and take this out with permanent long-term financing," Prcela said. "This is really a cost-saving procedure for the village."
"The idea is to take out these notes with a longterm structure, thus rolling that balloon into a longterm bond issue," Stefan added. "It allows the village to take advantage of a short-term rate on the bond."
Council voted 5-1, with DiCarlo dissenting, on Feb. 25 to OK a $1.23 million purchase of 3.1 acres at the Liberty Road-Glenwood plaza from Two Remwar LLC, the plaza's owner.
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