CR 2014-098 Authorize the Sale of $6,545,000 G.O. Refunding Bonds, Series 2014BSeptember 16, 2014
Proposed Action
City Council Report 2014-098
AUTHORIZE THE SALE OF $6,545,000 G.O. REFUNDING
BONDS, SERIES 2014B
Staff recommends approval of the following motion: Adopt Resolution 2014-052 Providing for the Sale of
$6,545,000 G.O. Refunding Bonds, Series 2014B.
Adoption of this motion will result in the bonds being offered for sale on October 21, 2014.
Overview
The City of Hopkins has the opportunity to refund the 2007A & B Bonds and realize an estimated present
value savings of $555,000. The 2007 CIP bonds refunded the 2002 HRA Lease Revenue bonds that were
sold to finance the fire station and public works facility projects. The savings from refunding the 2007A
CIP bonds will reduce the required tax levy over the next nine years. The 2007B bonds were sold to
finance street improvements. The savings on the 2007B GO PIR bonds will also go to reduce the required
tax levy.
The bond will have a nine year life, maturing in 2023 which is the original maturity date for the 2007A
bonds and are being issued pursuant to Minnesota Statutes, Chapter 475. To obtain the lowest possible
interest cost we will solicit competitive bids for the purchase of the bonds.
Primary Issues
0 None
Staff Recommendation
Staff recommends approval of the resolution and further recommends, along with the City's financial
advisor, that we ask for a rating from Standard & Poors for the issue. The cost of the rating will be paid
with bond proceeds.
Supporting Information
Resolution No. 2014-052
Bond Pre -Sale Report
Christine M. Harkess, CPA, CGFM
Finance Director
Financial Impact: $ 555,000 est savings Budgeted: Y/N Yes
Source: Bond funds
Related Documents (CIP, ERP, etc.): None Notes:
Council Member
Resolution No. 2014-052
introduced the following resolution and moved its adoption:
Resolution Providing for the Sale of
$6,545,000 General Obligation Refunding Bonds, Series 2014B
A. WHEREAS, the City Council of the City of Hopkins, Minnesota has heretofore determined that it is
necessary and expedient to issue the City's $6,545,000 General Obligation Refunding Bonds, Series
2014B (the "Bonds"), to finance a current refunding of the 2016 to 2023 maturities of the City's
$9,920,000 General Obligation Improvement Bonds, Series 2007A and to finance a current refunding
of the 2016 to 2018 maturities of the City's $1,995,000 General Obligation Improvement Bonds,
Series 200713; and
B. WHEREAS, the City has retained Ehlers & Associates, Inc., in Roseville, Minnesota ("Ehlers"), as its
independent financial advisor for the Bonds and is therefore authorized to solicit proposals in
accordance with Minnesota Statutes, Section 475.60, Subdivision 2(9);
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Hopkins, Minnesota, as
follows:
1. Authorization, Findings. The City Council hereby authorizes Ehlers to solicit proposals for the sale
of the Bonds.
2. Meeting, Proposal Opening. The City Council shall meet at 7:00 p.m. on October 21, 2014, for the
purpose of considering sealed proposals for and awarding the sale of the Bonds.
3. Official Statement. In connection with said sale, the officers or employees of the City are hereby
authorized to cooperate with Ehlers and participate in the preparation of an official statement for the
Bonds and to execute and deliver it on behalf of the City upon its completion.
The motion for the adoption of the foregoing resolution was duly seconded by City Council Member
and, after full discussion thereof and upon a vote being taken thereon, the
following City Council Members voted in favor thereof:
and the following voted against the same:
Whereupon said resolution was declared duly passed and adopted.
Dated this 16th day of September, 2014.
Eugene J. Maxwell, Mayor
Attest: Amy Domeier, City Clerk
�Ilii�llliii EHLERS
LEADERS IN PUBLIC IEINAINCE
September 16, 2014
Pre -Sale Report
City of Hopkins, Minnesota
$6,545,000 General Obligation Refunding Bonds, Series
2014B
"I" olf", I 1"OPIKI.I.M
City.
Prepared by:
Stacie Kvilvang
Senior Financial Advisor
Jason Aarsvold
Financial Advisor
Shelly Eldridge
Senior Financial Advisor
II N 0 0 1.11,0( ,11t. 11 " I I ru, u'nn I
Executive Summary of Proposed Debt
Proposed Issue:
$6,545,000 General Obligation Refunding Bonds, Series 2014B
Purposes:
The proposed issue includes financing for the following purposes:
Refinance the 2007A and 2007B Bonds
• Current Refunding of the City's GO CIP Bonds, Series
2007A. Debt service will be paid from ad valorem property taxes.
Interest rates on the obligations proposed to be refunded are 4.25%
to 4.375%. The refunding is expected to reduce interest expense
by approximately $676,600 over the next 9 years. The Net Present
Value Benefit of the refunding is estimated to be approximately
$525,500, equal to 9.116% of the refunded principal.
• Current Refunding of the City's GO Improvement Bonds,
Series 2007B. The issue size has been reduced by approximately
$21,000 from prepaid special assessments. Debt service will be
paid from ad valorem property taxes and special assessments.
Interest rates on the obligations proposed to be refunded are
4.25%. The refunding is expected to reduce interest expense by
approximately $43,890 over the next 4 years. The Net Present
Value Benefit of the refunding is estimated to be approximately
$29,500, equal to 4.374% of the refunded principal.
Both Refundings are considered to be Current Refundings as the
obligations being refunded are either callable (pre -payable) now,
or will be within 90 days of the date of issue of the new Bonds.
Authority:
The Bonds are being issued pursuant to Minnesota Statutes, Chapter(s):
• 475
The Bonds will be general obligations of the City for which its full faith, credit
and taxing powers are pledged.
Term/Call Feature:
The Bonds are being issued for a 9 year term. Principal on the Bonds will be
due on February 1 in the years 2016 through 2023. Interest is payable every
six months beginning August 1, 2015.
The Bonds maturing on and after February 1, 2022 will be subject to
prepayment at the discretion of the City on February 1, 2021 or any date
thereafter.
Bank Qualification:
Because the City is issuing less than $10,000,000 in the calendar year, the City
will be able to designate the Bonds as "bank qualified" obligations. Bank
qualified status broadens the market for the Bonds, which can result in lower
interest rates.
Presale Report September 16, 2014
City of Hopkins, Minnesota Page 1
Rating:
The City's most recent bond issues were rated AA+ by Standard & Poor's.
The City will request a new rating for the Bonds.
If the winning bidder on the Bonds elects to purchase bond insurance, the
rating for the issue may be higher than the City's bond rating in the event that
the bond rating of the insurer is higher than that of the City.
Basis for Recommendation:
Based on our knowledge of your situation, your objectives communicated to
us, our advisory relationship as well as characteristics of various municipal
financing options, we are recommending the issuance of general obligation
bonds as a suitable financing option for the following reasons:
- This is a viable option available to refinance this type of project under
State law.
- This is the most overall cost effective refinancing option for interest
savings.
- This maintains the security and terms of the original debt issue.
Method of Sale/Placement:
In order to obtain the lowest interest cost to the City, we will solicit
competitive bids for purchase of the Bonds from local banks in your area and
regional underwriters.
We have included an allowance for discount bidding equal to 1.00% of the
principal amount of the issue. The discount is treated as an interest item and
provides the underwriter with all or a portion of their compensation in the
transaction.
If the Bonds are purchased at a price greater than the minimum bid amount
(maximum discount), the unused allowance may be used to lower your
borrowing amount.
Premium Bids: Under current market conditions, most investors in municipal
bonds prefer "premium" pricing structures. A premium is achieved when the
coupon for any maturity (the interest rate paid by the issuer) exceeds the yield
to the investor, resulting in a price paid that is greater than the face value of
the bonds. The sum of the amounts paid in excess of face value is considered
"reoffering premium."
The amount of the premium varies, but it is not uncommon to see premiums
for new issues in the range of 2.00% to 10.00% of the face amount of the
issue. This means that an issuer with a $2,000,000 offering may receive bids
that result in proceeds of $2,040,000 to $2,200,000.
For this issue of Bonds we have been directed to use the premium to reduce
the size of the issue for the project. The adjustments may slightly change the
true interest cost of the original bid, either up or down.
You have the choice to limit the amount of premium in the bid
specifications. This may result in fewer bids, but it may also eliminate large
adjustments on the day of sale and other uncertainties.
Presale Report September 16, 2014
City of Hopkins, Minnesota Page 2
Review of Existing Debt:
We have reviewed all outstanding indebtedness for the City and find that,
other than the obligations proposed to be refunded by the Bonds, there are no
other refunding opportunities at this time.
We will continue to monitor the market and the call dates for the City's
outstanding debt and will alert you to any future refunding opportunities.
Continuing Disclosure:
Because the City has more than $10,000,000 in outstanding debt (including
this issue) and this issue is over $1,000,000, the City will be agreeing to
provide certain updated Annual Financial Information and its Audited
Financial Statement annually as well as providing notices of the occurrence of
certain "material events" to the Municipal Securities Rulemaking Board (the
"MSRB"), as required by rules of the Securities and Exchange Commission
(SEC). The City is already obligated to provide such reports for its existing
bonds, and has contracted with Ehlers to prepare and file the reports.
Arbitrage Monitoring:
Because the Bonds are tax-exempt securities/tax credit securities, the City
must ensure compliance with certain Internal Revenue Service (IRS) rules
throughout the life of the issue. These rules apply to all gross proceeds of the
issue, including initial bond proceeds and investment earnings in construction,
escrow, debt service, and any reserve funds. How issuers spend bond
proceeds and how they track interest earnings on funds (arbitrage/yield
restriction compliance) are common subjects of IRS inquiries. Your specific
responsibilities will be detailed in the Tax Certificate prepared by your Bond
Attorney and provided at closing. You have retained Ehlers to assist you with
compliance with these rules.
Risk Factors:
Special Assessments: We have not assumed any pre -paid special assessments
and we have assumed that the remaining assessments are levied as projected.
If the City receives a significant amount of pre -paid assessments or does not
levy the assessments, it may need to increase the levy portion of the debt
service to make up for lower interest earnings than the expected assessment
interest rate.
Current Refunding: The Bonds are being issued for the purpose of current
refunding prior City debt obligations. Those prior debt obligations are
"callable" now and can therefore be paid off within 90 days or less. The new
Bonds will not be pre -payable until February 1, 2021. This refunding is being
undertaken based in part on an assumption that the City does not expect to
have future revenues to pay off this debt and that market conditions warrant
the refinancing at this time.
Other Service Providers
This debt issuance will require the engagement of other public finance service
providers. This section identifies those other professionals, so Ehlers can
coordinate their engagement on your behalf. Where you have previously used
a particular firm to provide a service, we have assumed that you will continue
that relationship. For services you have not previously required, we have
identified a service provider. Fees charged by these professionals will be paid
Presale Report September 16, 2014
City of Hopkins, Minnesota Page 3
from proceeds of the obligation, unless you notify us that you wish to pay
them from other sources. Our pre -sale bond sizing includes a good faith
estimate of these fees, so their final fees may vary. If you have any questions
pertaining to the identified professionals that will be involved in the issuance
process or their role, please contact us.
Bond Attorney: Kennedy & Graven, Chartered
Paying Agent: Bankers Trust Company
Rating Agency: Standard & Poors
This presale report summarizes our understanding of the City's objectives for the structure and terms of this
financing as of this date. As additional facts become known or capital markets conditions change, we may need
to modify the structure and/or terms of this financing to achieve results consistent with the City's objectives.
Presale Report September 16, 2014
City of Hopkins, Minnesota Page 4
Proposed Debt Issuance Schedule
Pre -Sale Review by City Council
September 16, 2014
Distribute Official Statement:
Week of October 9, 2014
Conference with Rating Agency:
Week of October 13, 2014
City Council Meeting to Award Sale of the Bonds:
October 21, 2014
Estimated Closing Date:
November 20, 2014
Redemption Date for 2007A Bonds
February 1, 2015
Redemption Date for 2007B Bonds
February 1, 2015
Attachments
Sources and Uses of Funds
Proposed Debt Service Schedule
Refunding Savings Analysis
Resolution Authorizing Ehlers to Proceed With Bond Sale
Ehlers Contacts
Financial Advisors: Stacie Kvilvang
(651) 697-8506
Jason Aarsvold
(651) 697-8512
Disclosure Coordinator: Pia Troy
(651) 697-8556
Financial Analyst: Alicia Gage
(651) 697-8551
The Official Statement for this financing will be mailed to the City Council at their home address or e-mailed for
review prior to the sale date
Presale Report September 16, 2014
City of Hopkins, Minnesota Page 5
City iMinnesota
$6,545,000 General Obligation Refunding Bonds, Series 2014B
Issue Summary
Assumes Current Market BQ "AA" Rates + 25 bps
Dated 11/20/2014 ( Delivered 11/20/2014
Cur Ref
Cur Ref Series Issue
_ _ 111Ll al
.0.=19-TW111I iOV
Par Amount of Bonds
$5,880,000.00
$665,000.00
$6,545,000.00
Planned Issuer Equity contribution
21,000.00
21,000.00
Total Sources
$5,880,000.00
$686,000.00
$6,566,000.00
Uses Of Funds
Total Underwriter's Discount (1.000%)
58,800.00
6,650.00
65,450.00
Costs of Issuance
52,106.95
5,893.05
58,000.00
Deposit to Current Refunding Fund
5,765,000.00
675,000.00
6,440,000.00
Rounding Amount
4,093.05
(1,543.05)
2,550.00
Total Uses $5,880,000.00 $686,000.00 $6,566,000.00
Series 20146 GO Refunding I Issue Summary 1 9/ 9/2014 1 1:07 PM
EMERS
LEADERS IN PUBLIC FINANCE
City iMinnesota
$6,545,000 General Obligation Refunding Bonds, Series 2014B
Issue Summary
Assumes Current Market BQ "AA" Rates + 25 bps
Date
Principal
Coupon
Interest
Total P+I
Fiscal Total
11/20/2014
-
-
08/01/2015
-
-
66,267.49
66,267.49
02/01/2016
910,000.00
0.650%
47,522.50
957,522.50
1,023,789.99
08/01/2016
-
-
44,565.00
44,565.00
02/01/2017
930,000.00
0.900%44,565.00
974,565.00
1,019,130.00
08/01/2017
-
40,380.00
40,380.00
02/01/2018
945,000.00
1.150%
40,380.00
985,380.00
1,025,760.00
08/01/2018
-
-
34,946.25
34,946.25
-
02/01/2019
725,000.00
1.400%
34,946.25
759,946.25
794,892.50
08/01/2019
-
-
29,871.25
29,871.25
-
02/01/2020
735,000.00
1.650%
29,871.25
764,871.25
794,742.50
08/01/2020
-
-
23,807.50
23,807.50
-
02/01/2021
745,000.00
1.850%
23,807.50
768,807.50
792,615.00
08/01/2021
-
-
16,916.25
16,916.25
-
02/01/2022
770,000.00
2.100%
16,916.25
786,916.25
803,832.50
08/01/2022
-
8,831.25
8,831.25
-
02/01/2023
785,000.00
2.250%
8,831.25
793,831.25
802,662.50
Total
$6,545,000.00
-
$512,424.99
$7,057,424.99
-
Yield Statistics
Bond Year Dollars
$29,610.82
Average Life
4.524 Years
Average Coupon
1.7305330%
Net Interest Cost (NIC)
1.9515670%
True Interest Cost (TIC)
1.9553008%
Bond Yield for Arbitrage
Purposes
1.7218285%
All Inclusive Cost (AIC)
2.1649745%
IRS Form 8038
Net Interest Cost
1.7305330%
Weighted Average Maturity
4.524 Years
Series 2014B GO Refunding I Issue Summary 1 9/ 9/2014 1 1:07 PM
LEADERS IN PUBLIC FINANCE..
City iMinnesota
$6,545,000 General Obligation Refunding Bonds, Series 2014B
Issue Summary
Assumes Current Market BQ "AA" Rates + 25 bps
Net Debt - - Schedule
Date Principal Coupon Interest Total P+I Net New DIS Fiscal Total
11/20/2014
18,450.00
-
02/01/2015
-
-
-
18,450.00
08/01/2015
-
-
66,267.49
66,267.49
66,267.49
-
02/01/2016
910,000.00
0.650%
47,522.50
957,522.50
957,522.50
1,023,789.99
08/01/2016
-
-
44,565.00
44,565.00
44,565.00
02/01/2017
930,000.00
0.900%
44,565.00
974,565.00
974,565.00
1,019,130.00
08/01/2017
-
-
40,380.00
40,380.00
40,380.00
02/01/2018
945,000.00
1.150%
40,380.00
985,380.00
985,380.00
1,025,760.00
08/01/2018
-
-
34,946.25
34,946.25
34,946.25
-
02/01/2019
725,000.00
1.400%
34,946.25
759,946.25
759,946.25
794,892.50
08/01/2019
-
29,871.25
29,871.25
29,871.25
-
02/01/2020
735,000.00
1.650%
29,871.25
764,871.25
764,871.25
794,742.50
08/01/2020
-
-
23,807.50
23,807.50
23,807.50
-
02/01/2021
745,000.00
1.850%
23,807.50
768,807.50
768,807.50
792,615.00
08/01/2021
-
-
16,916.25
16,916.25
16,916.25
-
02/01/2022
770,000.00
2.100%
16,916.25
786,916.25
786,916.25
803,832.50
08/01/2022
-
-
8,831.25
8,831.25
8,831.25
-
02/01/2023
785,000.00
2.250%
8,831.25
793,831.25
793,831.25
802,662.50
Total $6,545,000.00 - $512,424.99 $7,057,424.99 $7,075,874.99
Series 20146 GO Refunding I Issue Summary 1 9/ 9/2014 1 1:07 PM
EHLERS
LEADERS IN PUBLIC FINANCE
City iMinnesota
$6,545,000 General Obligation Refunding Bonds, Series 2014B
Issue Summary
Assumes Current Market BQ "AA" Rates + 25 bps
Bid Information
Par Amount of Bonds $6,545,000.00
Gross Production $6,545,000.00
Total Underwriter's Discount (1.000%) $(65,450.00)
Bid (99.000%) 6,479,550.00
Total Purchase Price
Bond Year Dollars $29,610.82
Average Life 4.524 Years
Average Counon 1.7305330%
Net Interest Cost (NIC) 1.9515670%
True Interest Cost (TIC) 1.9553008%
Series 20148 GO Refunding I Issue Summary 1 9/ 9/2014 1 1:07 PM
LEADERS IN PUBLIC FINANCE:
Type of
Maturity
Maturity
Bond
Coupon
Yield
Value
Price
Dollar Price
02/01/2016
Serial Coupon
0.650%
0.650%
910,000.00
100.000%
910,000.00
02/01/2017
Serial Coupon
0.900%
0.900%
930,000.00
100.000%
930,000.00
02/01/2018
Serial Coupon
1.150%
1.150%
945,000.00
100.000%
945,000.00
02/01/2019
Serial Coupon
1.400%
1.400%
725,000.00
100.000%
725,000.00
02/01/2020
Serial Coupon
1.650%
1.650%
735,000.00
100.000%
735,000.00
02/01/2021
Serial Coupon
1.850%
1.850%
745,000.00
100.000%
745,000.00
02/01/2022
Serial Coupon
2.100%
2.100%
770,000.00
100.000%
770,000.00
02/01/2023
Serial Coupon
2.250%
2.250%
785,000.00
100.000%
785,000.00
Total
-
-
$6,545,000.00
-
$6,545,000.00
Bid Information
Par Amount of Bonds $6,545,000.00
Gross Production $6,545,000.00
Total Underwriter's Discount (1.000%) $(65,450.00)
Bid (99.000%) 6,479,550.00
Total Purchase Price
Bond Year Dollars $29,610.82
Average Life 4.524 Years
Average Counon 1.7305330%
Net Interest Cost (NIC) 1.9515670%
True Interest Cost (TIC) 1.9553008%
Series 20148 GO Refunding I Issue Summary 1 9/ 9/2014 1 1:07 PM
LEADERS IN PUBLIC FINANCE:
City iMinnesota
$6,545,000 General Obligation Refunding Bonds, Series 2014B
Issue Summary
Assumes Current Market BQ "AA" Rates + 25 bps
kate Total 13+1 nlet Rew DIS Old Ret DIS savia�T
02/01/2015
573,511.09
Net PV Cashflow Savings @ 1.722%(Bond Yield).....
18,450.00
Total Cash contribution ...........................
(21,000.00)
Contingency or Rounding Amount ..............
(18,450.00)
02/01/2016
1,023,789.99
Net PV Benefit / $7,118,511.09 PV Refunded Debt Service
1,023,789.99
Net PV Benefit/ $6,440,000 Refunded Principal...
1,111,123.76
Net PV Benefit/ $6,545,000 Refunding Principal..
87,333.77
Refunding Bond Information
02/01/2017
1,019,130.00
1,019,130.00
1,110,636.26
91,506.26
02/01/2018
1,025,760.00
1,025,760.00
1,113,661.26
87,901.26
02/01/2019
794,892.50
794,892.50
864,986.26
70,093.76
02/01/2020
794,742.50
794,742.50
865,236.26
70,493.76
02/01/2021
792,615.00
792,615.00
864,211.26
71,596.26
02/01/2022
803,832.50
803,832.50
871,531.26
67,698.76
02/01/2023
802,662.50
802,662.50
871,531.26
68,868.76
Total $7,057,424.99 $7,075,874.99 $7,672,917.58 $597,042.59
ayffgmi 1 g nz ". gMF1
Gross PV Debt Service Savings .....................
573,511.09
Net PV Cashflow Savings @ 1.722%(Bond Yield).....
573,511.09
Total Cash contribution ...........................
(21,000.00)
Contingency or Rounding Amount ..............
2,550.00
Net Present Value Benefit
$555,061.09
Net PV Benefit / $7,118,511.09 PV Refunded Debt Service
7.797%
Net PV Benefit/ $6,440,000 Refunded Principal...
8.619%
Net PV Benefit/ $6,545,000 Refunding Principal..
8.481%
Refunding Bond Information
Dated Date
Delivery Date
Series 20146 GO Refunding I Issue Summary 1 9/ 9/2014 1 1:07 PM
EHLERS
LEADERS IN PUBLIC FINANCE
11/20/2014
11/20/2014