The Brunswick City Commission will consider today whether to sign an intergovernmental agreement to issue $5 million in bonds to finance the construction of a conference center on Newcastle Street.
The city will consider a resolution adopted Tuesday night by the Brunswick Urban Redevelopment Agency, or URA, under which it would serve as the conduit through which the city would repay the investors who buy the bonds to finance most of the $7.1 million facility. The city already has $2.5 million in special-purpose, local-option sales tax revenue earmarked for the 20,000 square-foot building.
The URA took the best offer, Charlotte-based Sterling National Bank’s proposal to finance the $5 million at 3.76 percent over 20 years.
Douglas Gebhardt, a vice president of the financial firm Davenport & Company, said it was the most attractive of five responses from large financial institutions. The city would repay $360,000 annually, or $7.2 million total, although there could be some savings through some early payments on the bond. The city could also pay back unused funds early with no penalty should the project cost less as a result of engineering or a reduction in its size, Gebhardt said.
The URA had also asked for proposals on a 15-year term, but Gebhardt said that option would result in “a substantial increase in the annual payout.”
The News lodged an open records request with the city Thursday in an attempt to obtain any responses by banks to Davenport. That request was honored minutes before Tuesday’s URA meeting.
As with all bonds issued by a city or county, the matter must go through a validation process in Superior Court. City Attorney Brian Corry said the city would ask a judge to issue a declaratory judgement finding that everything had been handled correctly.
URA Chairman LaRon Bennett asked City Manager Jim Drumm if taking on the debt would be a financial incumbrance for the city.
Drumm said it would not, that the bonds can be repaid with current taxes and fees already in the budget.
“Nothing in this project would require a tax increase,’’ he said.
Gebhardt stressed that certain benchmarks must be met in the coming days and weeks and that any delay could be costly. If the deadlines aren’t met, it would take a least a month before they could again secure financing and it would include a second round of requests for proposals.
Drumm said it would be likely that fewer banks would respond, and Gebhardt said the interest rate could be higher.
The Federal Reserve is expected to raise interest rates in coming days and several more times next year, but Gebhardt said Sterling’s rate is locked in and will not be affected by any of those increases.
After that discussion, Vice Chairman Al Verheyen made a motion to adopt the resolution for the issuance of the bonds and, after Haresh Patel’s second, the panel adopted the motion unanimously.
Mayor Cornell Harvey thanked the URA for the approval.
“Thank you for passing the resolution tonight,’’ Harvey said. “It gives the city the ability to complete the conference center.”
Harvey noted it had been a long time since the facility was first considered. “Eighteen years maybe?’’ he said.
The City Commission and Harvey have endured some harsh and unrelenting criticism for building the center. Studies have shown it will lose money for years.
Harvey apologized for responding negatively to the criticism because he knows the critics are concerned about the city.
“I’m appreciative of their comments. I know they’re looking out for the welfare of the city of Brunswick,’’ he said.
Harvey also told the URA he will appoint someone in January to replace member Al McKinnon whose term has expired.