City pledges $25,000 for assisted living facility years ago
No money exchanges hands unless developer defaults on the project
Staff writer
The City of Marion, after much discussion by commissioners Monday, will pledge $25,000 as a debt service reserve fund for the Marion assisted living facility project.
No withdrawal or transfer of actual cash will take place, however, unless the developer, Bob Brooks, defaults on the project, to be financed by industrial revenue bonds.
Brooks, not individual investors in the project, is guaranteeing payment of the bonds. He expects to begin construction in November, after the bonds are "up and ready," he said. The facility should be complete by May 2004.
Bob Gibb of Chapman Securities, the firm that will market the bonds, said the $25,000 pledged by the city would be needed only for legal expenses, if a default were to occur.
He said such a deposit, or pledge, by the city would "help us to market these issues (bonds). It shows the desire, the support, the confidence of the city in the project, Gibb said.
The city could donate the land for the facility, or put up the $25,000. Commissioners chose to do neither, instead pledging, or promising, to come up with the funds in the unlikely event they're needed.
Brooks has already purchased the land for the facility.
Chapman Securities also underwrote Brooks's assisted living project at Hays, Gibb said.
Bonds for the Marion project will be sold throughout Kansas, he said. There are some Marion investors.
City Administrator David Mayfield asked Gibb why the request for this sort of back-up fund was being made at such a late date.
Brooks explained, "We came to this option for building the facility rather late."
Brooks said after deciding on IR bonds for financing, he took investors off the hook by guaranteeing the security of the bonds himself.
Brooks said he has never known banks to impose a personal guarantee requirement as they are doing with the Marion project. They did not make such a requirement with his Hays facility.
It was either his guaranteeing the bonds, or a condition of joint and several liability for the investors, and he did not want to put them out on a limb like that, Brooks said.
Gibb said he expects to have the bonds sold by the end of October and have the money for construction in Brooks's hands.
Mayfield said the $25,000 is not budgeted for this year, of course, since budgets are done during the midsummer months. Also, state aid is down greatly, and there have been costs to Marion because of the "water situation," Mayfield said.
City Commissioner Jim Crofoot said the request for the pledge or for actual cash was a surprise to him, but the city would not technically be on the hook until such time as the funds were needed, and no one thinks the developer is going to default.
The city's pledge is for "up to $25,000" only if a default occurs.
A document will be signed soon reflecting the city's pledge.
Commissioners also held a brief public hearing Monday on the city's application for a $400,000 Community Development Block Grant. The funds will be used to upgrade the city's water system.
Mayor Eloise Mueller read a proclamation signed by Gov. Kathleen Sebelius recognizing the Knights of Columbus' annual Tootsie Roll Campaign. The funds raised go to help mentally retarded people in Kansas.
Dates for this year's drive will be Oct. 10-12 (Friday through Sunday).
Funds raised also help to underwrite the annual Special Olympics Basketball Tourney.
The proclamation makes the period Oct. 10-13 "Helping People With Mental Retardation Days" in Kansas.
Staff research found that two long-ago ordinances vacating Second Street south of Water Street were never recorded, Mayfield said.
The ordinances were passed in 1881 and 1921, but not recorded, so the city needed to pass a new ordinance vacating (closing) that portion of the street. The new ordinance passed, 3-0.
Harvey Sanders, director of public utilities, said curb and gutter installation is proceeding on Kellison Street, between Freeborn and Cedar.
Susan Cooper, director of economic development for the city, said a couple who operate KOTN (Kansas on the Net) will be on the agenda for the commission's next meeting, at 4 p.m. Monday in the city building.
They will tell about their services in creating, maintaining and updating Web sites for various entities. The city is actively seeking to have a Web site created for the city government.
Other site designers may also be present Monday. Cooper said, "We need someone who has the time to maintain and update the site."
Librarian Janet Marler said Marion City Library was having "lots of trouble with out computers and our Internet service."
Warrants for $25,270.63 and payroll in the amount of $23,985.70 were approved for payment.
