MOUNT VERNON — Mount Vernon City Council gave a second reading Monday night to legislation that could reimburse the city for upfront expenses related to new municipal buildings.
The legislation is a preparatory step if the city decides to issue bonds to pay for a new justice center, police station, and municipal center. Approving the legislation does not obligate the council to issue bonds or spend money.
“The reimbursement resolution sets out the maximum amount that you could potentially spend on a project,” Michael Ringle of Bricker Graydon explained.
“Once the project is underway, as long as you are within a certain time frame, having adopted that reimbursement resolution, when you actually go to finance the project to get that lump sum of money … the city can pay itself back from those bond proceeds up to the amount that is reimbursable.”
Ringle said the resolutions are analogous to a homeowner with a home equity line of credit. The homeowner spends $10,000 from a bank account to build a deck, and then draws $10,000 on the line of credit.
“It’s allowing you to, when you actually get that loan from the bank, put that $10,000 back into your bank account that you invested before you got the bank loan,” he said.
What is a reimbursement bond?
A reimbursement bond is a tax-exempt bond, the proceeds of which are allocated to prior expenditures originally paid from sources other than bond proceeds.
Example: County A intends to issue $1,000,000 in tax-exempt bonds to finance capital improvements to make the courthouse handicap accessible. The issuer intends to issue the bonds on June 1, 2005. On April 15, 2005, the issuer pays $100,000 for initial project construction expenditures out of its general funds. The bonds are issued on June 1, 2005 and the issuer allocates $100,000 of the proceeds to reimburse its general fund for the prior expenditures.
Source: Internal Revenue Service
The legislation consists of three separate resolutions, one for each municipal building. Separate resolutions enable the city to:
- Tie all costs for a specific project to a particular bond revenue
- Pick and choose which projects to move forward with and at what amount
There will be subsequent legislation if and when the city decides to actually issue bonds for a project.
Refining the costs
The resolutions set out the maximum amount the city would spend on the municipal projects. Current working numbers are:
•$6 million (up to) for the municipal center (Central Ohio Technical College building)
•$25 million (up to) for the new police station on Sychar Road
•$30 million (up to) for the justice center
Safety-Service Director Tanner Salyers emphasized that those numbers do not necessarily mean the city will spend that much.
Regarding the municipal center, he said the design team has identified at most $1.5 million in renovations. That number includes renovating all three floors.
Purchasing the building runs around $4 million.
Salyers said the $25 million for the police station is “likely the most accurate” number because Pizzutti Solutions (as the owner’s representative for the city) and the CMAR (construction manager at risk) are working with the design team to create precise plans.
Currently, the estimated cost is just under $21.5 million. That could fluctuate up or down as the team refines the design.
Justice center: the biggest unknown
The $30 million figure for the justice center is based on court recommendations for square footage, anticipated construction start time, and other factors. The city does not yet have a final design.
“Does that mean that, if you vote yes on this piece of legislation, that you are obligating the city of Mount Vernon to build a $30 million justice center? Absolutely not,” Salyers said.
Ringle said that as the design team refines the design and finalizes a project budget, council members will have a better idea of the bond issuance amount.
“Hopefully, and that’s what the maximum that we have proposed for you this evening, is that it won’t be over that,” he said. “Ideally, it’ll be far under that so that you’ll have not only the capacity to borrow, but then you can reimburse yourself for anything you spend before you borrow that amount.”
(Below is a PDF of the three reimbursement resolutions.)
