No matter what the city does, there will be costs associated with refinancing the city's theater debt, bond experts told council at a special meeting this evening.

The experts from Richmond based Davenport & Company told the city's political leaders to expect getting less than what was paid for the struggling venue should it be sold. If sold, the city would have to enter into more financial arrangements to pay the remaining debt off.

The good news in the matter, said Davenport Vice President Mitch Brigulio, is that the bonds are performing reasonably well. “The biggest expense is your annual expense to the annual letter of credit renewal.”

The letter of credit with Bank of America is in place to support the variable bond rates, information provided by the company states. The bonds are re-marketed based on Bank of America's letter of credit rating and not the city's or project ratings.

This year the city has paid $230,606 on the letter of credit, which has thus far been renewed three times. When the bond principal, bond interest, bond re-marketing, swap payments and swap receipts are factored in, the city has paid a total of $1,797,211 this year.

Another problem, said Bob High, a first vice president with the company, “Is with the debt you have now. It's pretty low. If the rate goes up so does the amount you have to budget.”

Brigulio said there are many ideas the company can explore for the city. “We have a lot more research to do. We're not sure all the options are viable.”

Said High: “If you're thinking (of selling) you're going to have to pay for refinancing. There are no silver bullets.”

The ideas the company wants to explore are:

Leaving the transaction as currently structured, the problem being, the unknown, Brigulio said.

Unwind the current transaction and refinance with fixed rate bonds, another case with unknowns. Fixed rate bonds are tax exempt but because the goal of the theater is to have shows and pay a producer it has to be taxed.

Explore replacing the bonds with a variable rate direct placed bank loan indexed to 1-month LIBOR — London Interbank Offered Rate. This method eliminates risk and many banks are giving five year terms which ends the letter of credit. At the end of the five years there would have to be renegotiating for another loan or go back to a letter of credit plan.

Explore USDA Rural Development direct loan and loan guaranty programs.

Mayor Emery Doughtie said before adjournment of the meeting council will discuss its next steps.