Dinsmore's Mark Franklin Speaks on Paducah, Kentucky Bond Proceeds
Dinsmore public finance partner Mark Franklin was quoted in the Paducah Sun regarding usage of bond proceeds in the Kentucky city.
Bond counsel Mark S. Franklin, a partner with Dinsmore & Shohl LLP, provided a summary at the request of the city’s financial advisor Robert W. Baird & Co., about what bond proceeds could be spent on, “if, for some reason, the aquatic center project was unable to move forward.”
In a May 4 email to Finance Director Jon Perkins, Franklin explained they could be spent on capital expenditures related to a project that’d be declared a “public project,” in an ordinance pursuant to Kentucky Revised Statutes.
“KRS Chapter 66 requires the project to have an estimated life or period of usefulness of one year or more and the project could include real estate, buildings, and personal property, equipment, furnishings, and site improvements, and reconstruction, rehabilitation, renovation, installation, improvement, enlargement and extension of property,” Franklin wrote.
He said funds could not be used to pay the city’s general operating expenses and should not be used to pay principal and interest on other debt.
“Although the city would not be required to provide notice of the bondholders at this time, we would recommend considering whether it would be prudent under the circumstances,” he wrote in the email.
“Some bondholders, if they found out about the change from a source other than the city, may view the change as negative evidence of the city’s current financial condition.”
Franklin wrote that, if this type of circumstance occurred, the city may have questions from its rating agency about reasons for the change, which, depending on answers, could result in “potential rating adjustments.”
He concluded that, “while changing the project is possible, we recommend caution” as “drastic change” could have a negative rating or market implications.
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