BATH — The City Council could vote next month on tax-exempt bond financing for a planned Hyde School dormitory.
The Planning Board approved the site plan for the 17,000-square-foot Campus Drive building in February. It will replace one built in 1975. Demolition of the existing dorm is planned for June, and construction of the new dorm on the site is expected to be finished next January.
The City Council voted unanimously Wednesday to encourage City Manager Bill Giroux to work with Pierce Atwood attorney Jim Saffian and the Hyde School to create a borrowing resolution for City Council approval at a future meeting.
“The city of Bath would have to take certain steps to authorize the borrowing,” said Saffian, a bond counsel who is representing the Hyde School in the matter. “There’d be a public hearing, notices sent out; there’d be an actual resolution.”
The project is expected to cost about $2.2 million. Hyde School, a nonprofit corporation, wants to finance it with a tax-exempt loan from TD Bank. The school would like the city to serve as a “conduit” issuer, and issue a qualified tax-exempt bond for about $2.2 million to TD Bank, according to a Pierce Atwood document.
“The City is referred to as a ‘conduit’ issuer because the (bond) issued by the City provides the School access (to) the tax-exempt market through the City,” the document explains. “This allows the School to obtain attractive lower-interest debt financing for the dormitory financing.”
Such a bond has to be issued by a local or state government.
The bond would not be a general obligation of the city and would not be paid with city funds. Since it would be a limited obligation revenue bond, the city would not be obligated to repay the bond. The bond would instead be repaid entirely from revenues on behalf of or provided by Hyde.
“State law explicitly imposes this restriction and the City’s authorizing vote and the related Bond documents will clearly state it,” according to Pierce Atwood.
The bond is excluded from Bath’s debt limit, as per Maine law. The Pierce Atwood document noted that other Maine communities have implemented that type of financing, such as a more than $2 million bond in 2007 for Yarmouth-based North Yarmouth Academy.