VI.3. Authorize the Sale of $4,175,000 G. O. Street Reconstruction Bonds, Series 2015A; HarkessMarch 16, 2015 City Council Report 2015-032
AUTHORIZE THE SALE OF $4,175,000 G.O. STREET
RECONSTRUCTION BONDS, SERIES 2015A
Proposed Action
Staff recommends approval of the following motion: Adopt Resolution 2015-027 Providing for the Sale of
$4,175,000 G.O. Street Reconstruction Bonds, Series 2015A.
Adoption of this motion will result in the bonds being offered for sale on May 5, 2015.
Overview
The City annually issues 429 GO assessment bonds to complete planned street reconstruction projects.
Under the 429 process the City must assess a minimum of 20% of project costs to benefitting property
owners which most years is not an issue. For the 2015 street project we do not have the minimum 20% so
we are proposing that the City utilize its authority under MS Chapter 475.58 3b to issue GO street
reconstruction bonds which will be re-paid by a general tax levy. The bonds have been reduced by the
anticipated $661,000 Federal grant and the $147,000 in special assessments.
In order to utilize this type of financing, in 2014 the City prepared a 5-Year Street Reconstruction Plan
(SRP) which was presented at a public hearing in 2014 where we solicited comment and feedback from the
community. At the conclusion of the public hearing, the Council approved the SRP by unanimous vote.
These bonds are restricted by the amount of net debt the City can issue. The City cannot issue debt in
excess of 3% of the assessor’s market value and the City is well under that limit having over 78% of debt
levying capacity available.
The timeline for this bond project is outlined in the attached memo from Ehlers.
Primary Issues
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. 2015-027
Bond Pre-Sale Report
Financial Impact: $ 4,175,000 bond proceeds
Budgeted: Y/N Yes
______________________________
Source: Bond Funds
Christine M. Harkess, CPA, CGFM
Related Documents: CIP
Finance Director2
Notes:
City of Hopkins, MN
2015-027
Resolution No.
Council Member _________________ introduced the following resolution and moved its adoption:
Resolution Providing for the Sale of
$4,175,000 General Obligation Street Reconstruction Bonds, Series 2015A
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 $4,175,000 General Obligation Street Reconstruction
Bonds, Series 2015A (the "Bonds"), to finance the 2015 Street Reconstruction Projects in the City;
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 May 5, 2015, 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 March , 2015.
Eugene J. Maxwell, Mayor
________________________________________
Amy Domeier, City Clerk
March 16, 2015
Pre-Sale Report for
City of Hopkins, Minnesota
$4,175,000 General Obligation Street
Reconstruction Bonds, Series 2015A
Prepared by:
Stacie Kvilvang
Senior Financial Advisor
And
Jason Aarsvold
Financial Advisor
Executive Summary of Proposed Debt
Proposed Issue: $4,175,000 General Obligation Street Reconstruction Bonds, Series 2015A
Purposes: The proposed issue includes financing for the 2015 road reconstruction
projects. Debt service will be paid from ad valorem property taxes, special
assessments and utility revenue.
The Bonds have been reduced by a $661,000 federal grant the City anticipates
receiving for the project. It is the intent of the City to levy special assessments
in the amount of approximately $147,700 to benefiting property owners.
These assessments will be levied in 2015 for collection in years 2016 through
2030 at a rate of 2% over the True Interest Cost of the proposed Bonds.
Annual assessments are paid on an equal principal and interest basis. The City
anticipates receiving approximately $14,770 (10%) in prepayments on the
special assessments from the project this year and the bond size has been
reduced accordingly as well.
We have assumed capitalized interest through the February 1, 2016 payment in
order to offset any immediate levy requirement. Attached to this report is a
schedule of annual debt service costs and the specific revenues available in
each fiscal year to pay the debt.
Authority:The Bonds are being issued pursuant to Minnesota Statutes, Chapter 475.58 3b
and the required public hearing on the Street Reconstruction Plan was held in
2014 and this project was contemplated under that Plan.
The Bonds will be general obligations of the City for which its full faith, credit
and taxing powers are pledged.
The Street Reconstruction portion of the Bonds are restricted by the amount of
net debt the City can issue. The City cannot issue debt in excess of 3% of the
assessor’s estimated market value for the city. In the City the 2014 EMV is
$1,462,274,500. Therefore, the total amount of outstanding debt cannot
exceed $43,868,235. As of March 1, 2015 the City had approximately $10
million subject to the legal debt limit (approximately $33 million in capacity
available).
The Bonds are being issued for a 16 year term. Principal on the Bonds will be
Term/Call Feature:
due on February 1 in the years 2017 through 2031. Interest is payable every
six months beginning February 1, 2016.
The Bonds maturing on and after February 1, 2024 will be subject to
prepayment at the discretion of the City on February 1, 2023 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
Presale Report – 2015A Bonds March 16, 2015
City of Hopkins, Minnesota Page 1
interest rates.
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.
Based on our knowledge of your situation, your objectives communicated to
Basis for Recommendation:
us, our advisory relationship as well as characteristics of various municipal
financing options, we are recommending the issuance of General Obligation
Street Reconstruction Bonds as a suitable financing option because this option
is the only viable option available to finance this type of project under State
law and was planned for when the City Council held the public hearing for this
project in 2014.
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 1.20000% 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. 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 – 2015A Bonds March 16, 2015
City of Hopkins, Minnesota Page 2
Review of Existing Debt: We have reviewed all outstanding indebtedness for the City and find that there
are no refunding opportunities at this time.
We will continue to monitor the market and the call dates for theCity’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 Bondsare 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.
Other Service Providers: This debt issuance will require the engagement of other public finance service
providers. This section identifies those other service providers, 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 service providers will be
paid 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 service providers or their role, or if you would like
to use a different service provider for any of the listed services 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 – 2015A Bonds March 16, 2015
City of Hopkins, Minnesota Page 3
Proposed Debt Issuance Schedule
Pre-Sale Review by City Council: March 16, 2015
Distribute Official Statement: April 23, 2015
Conference with Rating Agency: Week of April 27, 2015
City Council Meeting to Award Sale of the Bonds: May 5, 2015
Estimated Closing Date: May 28, 2015
Attachments
Sources and Uses of Funds
Proposed Debt Service Schedule
Resolution Authorizing Ehlers to Proceed With Bond Sale
Ehlers Contacts
Financial Advisors: Stacie Kvilvang (651) 697-8506
Jason Aarsvold (651) 697-8512
Disclosure Coordinator: Wendy Lundberg (651) 697-8540
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 – 2015A Bonds March 16, 2015
City of Hopkins, Minnesota Page 4
_______________
Resolution No.
Council Member _________________ introduced the following resolution and moved its adoption:
Resolution Providing for the Sale of
$4,175,000 General Obligation Street Reconstruction Bonds, Series 2015A
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 $4,175,000 General Obligation Street Reconstruction
Bonds, Series 2015A (the "Bonds"), to finance the 2015 Street Reconstruction Projects in the City;
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 May 5, 2015, 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 March , 2015.
_____________________________________________
City Clerk
City of Hopkins, Minnesota
$4,175,000 General Obligation Street Reconstruction Bonds, Series 2015A
Assumes Current Market BQ "AA+" Rates + 25 bps
Sources & Uses
Dated 05/28/2015 | Delivered 05/28/2015
Sources Of Funds
Par Amount of Bonds$4,175,000.00
Federal Grant661,000.00
Prepaid Assessments14,770.00
Total Sources $4,850,770.00
Uses Of Funds
Total Underwriter's Discount (1.200%)50,100.00
Costs of Issuance46,000.00
Deposit to Capitalized Interest (CIF) Fund54,941.63
Deposit to Project Construction Fund4,696,539.00
Rounding Amount3,189.37
Total Uses $4,850,770.00
Series 2015A GO Street Re | SINGLE PURPOSE | 2/24/2015 | 8:36 AM
City of Hopkins, Minnesota
$4,175,000 General Obligation Street Reconstruction Bonds, Series 2015A
Assumes Current Market BQ "AA+" Rates + 25 bps
Debt Service Schedule
DatePrincipalCouponInterestTotal P+IFiscal Total
05/28/2015-----
02/01/2016--54,941.6354,941.6354,941.63
08/01/2016--40,697.5040,697.50-
02/01/2017250,000.000.800%40,697.50290,697.50331,395.00
08/01/2017--39,697.5039,697.50-
02/01/2018250,000.001.050%39,697.50289,697.50329,395.00
08/01/2018--38,385.0038,385.00-
02/01/2019255,000.001.200%38,385.00293,385.00331,770.00
08/01/2019--36,855.0036,855.00-
02/01/2020255,000.001.400%36,855.00291,855.00328,710.00
08/01/2020--35,070.0035,070.00-
02/01/2021260,000.001.550%35,070.00295,070.00330,140.00
08/01/2021--33,055.0033,055.00-
02/01/2022265,000.001.700%33,055.00298,055.00331,110.00
08/01/2022--30,802.5030,802.50-
02/01/2023270,000.001.750%30,802.50300,802.50331,605.00
08/01/2023--28,440.0028,440.00-
02/01/2024275,000.002.000%28,440.00303,440.00331,880.00
08/01/2024--25,690.0025,690.00-
02/01/2025280,000.002.150%25,690.00305,690.00331,380.00
08/01/2025--22,680.0022,680.00-
02/01/2026285,000.002.250%22,680.00307,680.00330,360.00
08/01/2026--19,473.7519,473.75-
02/01/2027290,000.002.350%19,473.75309,473.75328,947.50
08/01/2027--16,066.2516,066.25-
02/01/2028300,000.002.400%16,066.25316,066.25332,132.50
08/01/2028--12,466.2512,466.25-
02/01/2029305,000.002.500%12,466.25317,466.25329,932.50
08/01/2029--8,653.758,653.75-
02/01/2030315,000.002.650%8,653.75323,653.75332,307.50
08/01/2030--4,480.004,480.00-
02/01/2031320,000.002.800%4,480.00324,480.00328,960.00
Total$4,175,000.00-$839,966.63$5,014,966.63-
Yield Statistics
Bond Year Dollars$37,668.13
Average Life9.022 Years
Average Coupon2.2299136%
Net Interest Cost (NIC)2.3629173%
True Interest Cost (TIC)2.3617157%
Bond Yield for Arbitrage Purposes2.2111553%
All Inclusive Cost (AIC)2.5021523%
IRS Form 8038
Net Interest Cost2.2299136%
Weighted Average Maturity9.022 Years
Series 2015A GO Street Re | SINGLE PURPOSE | 2/24/2015 | 8:36 AM
City of Hopkins, Minnesota
$4,175,000 General Obligation Street Reconstruction Bonds, Series 2015A
Assumes Current Market BQ "AA+" Rates + 25 bps
Detail Costs Of Issuance
Dated 05/28/2015 | Delivered 05/28/2015
COSTS OF ISSUANCE DETAIL
Financial Advisor$24,000.00
Bond Counsel$10,500.00
Rating Agency Fee (Moody's)$10,500.00
Miscellaneous$1,000.00
TOTAL $46,000.00
Series 2015A GO Street Re | SINGLE PURPOSE | 2/24/2015 | 8:36 AM
City of Hopkins, Minnesota
$4,175,000 General Obligation Street Reconstruction Bonds, Series 2015A
Assumes Current Market BQ "AA+" Rates + 25 bps
Debt Service Schedule
DatePrincipalCouponInterestTotal P+ICIFNet New D/S105% of TotalAssessmentsLevy/(Surplus)
02/01/2016--54,941.6354,941.63(54,941.63)----
02/01/2017250,000.000.800%81,395.00331,395.00-331,395.00347,964.7512,250.31335,714.44
02/01/2018250,000.001.050%79,395.00329,395.00-329,395.00345,864.7512,250.31333,614.44
02/01/2019255,000.001.200%76,770.00331,770.00-331,770.00348,358.5012,250.32336,108.18
02/01/2020255,000.001.400%73,710.00328,710.00-328,710.00345,145.5012,250.32332,895.18
02/01/2021260,000.001.550%70,140.00330,140.00-330,140.00346,647.0012,250.31334,396.69
02/01/2022265,000.001.700%66,110.00331,110.00-331,110.00347,665.5012,250.30335,415.20
02/01/2023270,000.001.750%61,605.00331,605.00-331,605.00348,185.2512,250.31335,934.94
02/01/2024275,000.002.000%56,880.00331,880.00-331,880.00348,474.0012,250.32336,223.68
02/01/2025280,000.002.150%51,380.00331,380.00-331,380.00347,949.0012,250.31335,698.69
02/01/2026285,000.002.250%45,360.00330,360.00-330,360.00346,878.0012,250.31334,627.69
02/01/2027290,000.002.350%38,947.50328,947.50-328,947.50345,394.8812,250.31333,144.57
02/01/2028300,000.002.400%32,132.50332,132.50-332,132.50348,739.1312,250.31336,488.82
02/01/2029305,000.002.500%24,932.50329,932.50-329,932.50346,429.1312,250.30334,178.83
02/01/2030315,000.002.650%17,307.50332,307.50-332,307.50348,922.8812,250.31336,672.57
02/01/2031320,000.002.800%8,960.00328,960.00-328,960.00345,408.0012,250.31333,157.69
Total$4,175,000.00-$839,966.63$5,014,966.63(54,941.63)$4,960,025.00$5,208,026.25$183,754.66$5,024,271.59
Significant Dates
Dated5/28/2015
First Coupon Date2/01/2016
Yield Statistics
Bond Year Dollars$37,668.13
Average Life9.022 Years
Average Coupon2.2299136%
Net Interest Cost (NIC)2.3629173%
True Interest Cost (TIC)2.3617157%
Bond Yield for Arbitrage Purposes2.2111553%
All Inclusive Cost (AIC)2.5021523%
Series 2015A GO Street Re | SINGLE PURPOSE | 2/24/2015 | 8:36 AM
City of Hopkins, Minnesota
$132,930 General Obligation Street Reconstruction Bonds, Series 2015A
Assessments
2.0% over TIC - Equal P&I
Assessments
DatePrincipalCouponInterestTotal P+I
12/31/20166,467.854.350%5,782.4612,250.31
12/31/20176,749.214.350%5,501.1012,250.31
12/31/20187,042.804.350%5,207.5212,250.32
12/31/20197,349.164.350%4,901.1612,250.32
12/31/20207,668.854.350%4,581.4612,250.31
12/31/20218,002.444.350%4,247.8612,250.30
12/31/20228,350.554.350%3,899.7612,250.31
12/31/20238,713.804.350%3,536.5212,250.32
12/31/20249,092.854.350%3,157.4612,250.31
12/31/20259,488.394.350%2,761.9212,250.31
12/31/20269,901.134.350%2,349.1812,250.31
12/31/202710,331.834.350%1,918.4812,250.31
12/31/202810,781.264.350%1,469.0412,250.30
12/31/202911,250.254.350%1,000.0612,250.31
12/31/203011,739.634.350%510.6812,250.31
Total$132,930.00-$50,824.66$183,754.66
Significant Dates
Filing Date 1/01/2016
First Payment Date 12/31/2016
Series 2015A GO Street Re | SINGLE PURPOSE | 2/24/2015 | 8:35 AM