PALO, Iowa (KCRG) – The Palo City Council will consider issuing a $10 million bond for Xavier Catholic Schools at Tuesday night’s meeting.
Xavier school leaders said the money will be used to help finance its new middle school project through what is known as a private placement of bank-qualified tax-exempt revenue bonds.
The bonds are issued by the municipality and concurrently sold to Hills Bank, which assumes all risk of repayment.
The benefit is that Hills Bank can offer better interest rates. The municipality serves as a “pass-through” or “conduit” by assigning the debt to the bank.
Technical rules require proximity between the municipality and the project, and the municipality must have the capacity to issue tax-exempt debt. Xavier has worked with Palo and the city of Robins on similar financing arrangements.
City Council member Eric Van Kerckhove said the city receives $10,000 for its approval. The municipality has no obligation or risk, and there is zero impact on taxpayers or the city of Palo.
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