Green Isle council agrees to pursue conduit bond for nonprofit refinancing, sets issuer fee at 0.75%

The Green Isle City Council voted to move forward with a conduit bond transaction that would allow Kingsway Ministries LLC, an affiliate of Lutheran Homes, to refinance earlier bonds issued on its behalf.

Dan Burns, an attorney and past bond counsel for the city, told the council conduit bonds let a nonprofit borrow at tax-exempt rates without creating a city repayment obligation. "In a conduit bond transaction, there is no repayment or liability tied to the city," Burns said, explaining the city acts only as a conduit so the borrower can access tax-exempt financing.

Councilmembers pressed Burns on local benefits and risks, including whether issuing the conduit bond in 2026 could affect the city's bank-qualified status. Burns said the federal tax rules include a bank-qualified threshold of $10 million for calendar-year issuances and that total issuance-related fees generally must remain below 2% of par to avoid forcing additional borrower equity at closing.

Council discussed typical issuer fees, which Burns said commonly range from about 0.5% to 1% of the par amount. Council ultimately approved a motion to proceed with the transaction, contingent on a public hearing and city-attorney review, and set the proposed issuer fee at 0.75% (75 basis points) on up to $10 million.

The council recorded unanimous support for the motion. The next procedural steps are to have the city attorney review the documents, publish a public-hearing notice in the Arlington Enterprise at least 10 days before the hearing, and return to council for the hearing and final action. Burns said working-group paperwork aimed for a February 24 or March 10 public hearing so the parties could close the refinance at the end of March if the transaction is ready.

The city will receive an issuer fee if the bond closes; Burns said that fee is typically applied to the general fund and must be under the IRS 2% cost-of-issuance limit when combined with other transaction fees. Council members emphasized they do not currently plan to issue other large city bonds in 2026 that would push the city past the $10 million bank-qualified threshold but acknowledged the status depends on whether improvement project invoices or other needs arise later in the year.

The council did not adopt final bond documents at the meeting. Staff will present the required public-hearing notice, the city-attorney's review, and final terms for council approval at a future meeting.