Council told bond sale for New Prague police facility was voided; council set to redo public hearing June 2 as financing options debated

Bond counsel told the New Prague City Council that last week’s vote approving bond financing for a new police facility is void because the council failed to conduct the required open public hearing properly.

"It's a redo situation," bond counsel Scott Riggs said, explaining that the council must re-notice and reopen the public hearing and repeat the approval process under the capital improvement statute. City staff said notice for a new hearing has been published and the item is scheduled to return on June 2.

The finding leaves the council weighing several financing options while construction contracts are already in place. Council members and staff said the council approved a construction contract with Metcon on April 21 and the city has already spent roughly $580,000 on design and preconstruction work. That exposure, several council members said, increases the urgency of resolving financing but also heightens the political risk if a petition forces a referendum.

"If there was a petition for it, yes," Riggs said when asked whether a petition could force a public vote. Staff later cited 244 signatures from registered voters in New Prague as the threshold that would compel a referendum under the governing statute.

Rebecca Kurtz of financial adviser Ehlers outlined an alternative financing path: a lease‑revenue bond issued by the local EDA. Kurtz said an EDA lease option could remove the referendum risk tied to the capital improvement mechanism and allow the debt to be issued sooner. She estimated the market interest‑rate difference between the originally planned general obligation bond sale and a lease purchase at roughly 0.1 percentage point (the prior bonds were priced around 4.4% versus an estimated 4.5% for a lease purchase), while cautioning that market rates cannot be guaranteed.

Council members asked about the consequences if voters forced a reverse referendum and then rejected the bond. "You have contracts in place and you have to pay for them," counsel said, adding that the city could pursue alternative financing such as the EDA lease; voting down the bond would change how the project is paid for, but would not by itself nullify construction agreements.

City staff told the council that construction activity was not planned to begin before the re‑noticed public hearing; staff nonetheless said Metcon and other parties may already have incurred costs that the city will need to address. To preserve flexibility, the council approved a related reimbursement resolution (see below) so that future bond proceeds could reimburse prior expenditures if the council ultimately uses bond financing.

What the council did: a motion to adopt a reimbursement resolution (see action below) passed by voice vote. There was no final vote tonight on a financing mechanism; members emphasized holding the June 2 public hearing and hearing from residents before proceeding.

Next steps: staff will re-notice and hold the required public hearing on June 2 and return with the financing item. The council may proceed with the capital improvement (CIP) bond, pursue an EDA lease revenue approach or pursue another financing structure depending on the public hearing outcome and market conditions.