The city of Andover has twice refinanced the remaining debt of the Andover YMCA/Community Center facility since it opened in 2005. It is now exploring a different funding mechanism that it hopes will save the city a few million dollars over the next 20 years.
City Administrator Jim Dickinson said this funding tool is called a recreational facility tax abatement.
Todd Hagen, vice president and senior financial adviser for Ehlers and Associates, estimated the city could save about $3 million over the next 20 years.
The council Dec. 4 will see the bids that come from the bond sale and decide whether to proceed.
Besides saving an estimated $35,000 to $40,000 each year, Dickinson said the city could be eliminating the last two years of debt payments.
There are a couple of different steps the city would have to take.
For starters, it would be abating the city’s portion of the property taxes for properties within three-quarters of a mile of the community center. Dickinson said these property owners would still pay their taxes as they did before.
In addition, the city would issue $17.4 million in general obligation bonds so it can finance the acquisition of the community center from the Andover Economic Development Authority (EDA) by advance refunding the EDA’s existing lease revenue refunding bonds.
The EDA is a separate governing body, but includes all five members of the city council along with two appointed citizens. It has its own taxing authority.
Dickinson said the EDA currently has a 4.4 percent interest rate for the community center bond debt. He is hoping the city can get a 2.62 percent interest rate.
The EDA in 2004 issued $19.58 million in lease revenue bonds to pay for the community center construction debt, according to Dickinson. It refinanced an amount of $10 million in 2006 and $6.865 million in 2007.
Dickinson said lease revenue bonds are riskier for bond market investors. The city always had the option of not appropriating the levy funds to the EDA to pay off the construction debt, although this option has never been considered.
A general obligation bond is a financial guarantee that the city will pay off the debt, even if it means raising taxes to do so. To issue the general obligation bonds, the city and not the EDA must own the community center, Dickinson said.
Dickinson said the city has always pledged to pay off the debt, but this would be a much clearer message to bond investors and thus will result in a better interest rate.
“We’re putting our money where our mouth is,” Dickinson said.
The YMCA currently has a sub-lease with the EDA. Both sides are negotiating so there would only be a lease with the city, according to Dickinson.
The council during prior workshop meetings has been discussing a potential expansion of the community center. The 2013-2017 capital improvement plan for the city that the council approved in October notes that a youth center, additional meeting rooms, office space, library space, hockey training and multi-purpose space could happen in 2013 and 2014.
Dickinson said this recreational facility tax abatement process the city is going through is not connected to these expansion talks. This is just about saving money over the remaining 20 years of debt payments, he said.
Eric Hagen is at [email protected]