IV.8. Authorize the Sale of $4,490,00 G.O. TIF Refunding Bonds, Series 2015C; Harkess (CR2015-115)October 6, 2015 City Council Report 2015-115
AUTHORIZE THE SALE OF $4,490,000 G.O. TIF
REFUNDING BONDS, SERIES 2015C
Proposed Action
Staff recommends approval of the following motion: Adopt Resolution 2015-076 Providing for the Sale of
$4,490,000 G.O. TIF Refunding Bonds, Series 2015C.
Adoption of this motion will result in the bonds being offered for sale on November 3, 2015.
Overview
The City of Hopkins has the opportunity to refund the 2008 HRA TIF Bonds and realize an estimated
present value savings of $1,230,000. The 2008 HRA TIF Bonds were sold to finance one of the three
buildings in the Cargill development. The savings from refunding the 2008 HRA bonds will reduce total
debt service by an estimated $1.4 million over the next 15 years and as a result additional funds will be
available to the city for development. Debt service will be paid from tax increment revenues generated
from TIF 2-11.
The bond will have a 15 year life, maturing in 2030 and are being issued pursuant to Minnesota Statutes,
Chapter 469 and 475. To obtain the lowest possible interest cost we will solicit competitive bids for the
purchase of the bonds. Because these bonds are Tax Increment Bonds they will not count against the
City’s debt limit.
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. 2015-076
Bond Pre-Sale Report including refunding analysis
______________________________
Christine M. Harkess, CPA, CGFM
Finance Director
Financial Impact: $ 1,230,000 est savings Budgeted: Y/N No
Source: Bond funds
Related Documents (CIP, ERP, etc.): None Notes: ____________________
City of Hopkins, MN
Resolution No. 2015-076
Council Member _________________ introduced the following resolution and moved its adoption:
Resolution Providing for the Sale of
$4,490,000 General Obligation TIF Refunding Bonds, Series 2015C
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 $4,490,000 General Obligation TIF Refunding Bonds,
Series 2015C (the "Bonds"), to provide for a current refinancing of the HRA 2008 HRA Tax
Increment Revenue Bonds in the City; and
B. WHEREAS, the City has retained Ehlers & Associates, Inc., in Roseville, Minnesota ("Ehlers"), as its
independent municipal advisor for the Bonds 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 assist the City for the sale of
the Bonds.
2. Meeting; Proposal Opening. The City Council shall meet at 7:00 p.m. on November 3, 2015, for the
purpose of considering 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 6th day of October, 2015.
_____________________________________________
Eugene J. Maxwell, Mayor
Attest: Amy Domeier, City Clerk
October 6, 2015
Pre-Sale Report for
City of Hopkins, Minnesota
$4,490,000 General Obligation TIF Refunding Bonds,
Series 2015C
Prepared by:
Stacie Kvilvang
Senior Municipal Advisor/Director
And
Jason Aarsvold
Municipal Advisor
Executive Summary of Proposed Debt
Proposed Issue: $4,490,000 General Obligation TIF Refunding Bonds, Series 2015C
Purposes: The proposed issue includes financing for the following purposes:
Refinance 2008 HRA TIF Revenue Bonds
General Obligation Tax Increment Refunding Bonds, Series
2015C. Debt service will be paid from tax increment revenues
generated from TIF District 2-11.
Interest rates on the obligations proposed to be refunded are 3.75%
to 5.65%. The refunding is expected to reduce interest expense by
approximately $1.4 million over the next 15 years. The Net
Present Value Benefit of the refunding is estimated to be $1.230
million, equal to 25.786% of the refunded principal.
Authority:The Bonds are being issued pursuant to Minnesota Statutes, Chapters:
469 & 475
Because the City paying for at least 20% of the project costs with TIF from
District No. 11, the Bonds can be a general obligation without a referendum
and will not count against the City’s debt limit.
The Bonds will be general obligations of the City for which its full faith, credit
and taxing powers are pledged.
The Bonds are being issued for a 15 year term (remaining term). Principal on
Term/Call Feature:
the Bonds will be due on February 1 in the years 2016 through 2030. Interest
is payable every six months beginning February 1, 2016.
The Bonds maturing on and after February 1, 2025 will be subject to
prepayment at the discretion of the City on February 1, 2024 or any date
thereafter.
Because these Bonds were designated BQ when they were originally issued,
Bank Qualification:
the City will be able to deem the Bonds as “bank qualified” obligations. Bank
qualified status broadens the market for the Bonds, which can result in lower
interest rates”
The City’s most recent bond issues were rated AA+ by Standard & Poor’s.
Rating:
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.
Presale ReportOctober 6, 2015
City of Hopkins, Minnesota Page 1
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
bonds as a suitable financing option because:
-The issuance is a viable option available to finance these types of projects
under state law and federal regulations.
-this is the most overall cost effective option that still maintains future
flexibility for the repayment of debt.
Method of Sale/Placement: In order to obtain the lowest interest cost to the City, we will competitively bid
the purchase of the Bonds from local and national underwriters/banks.
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. 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.
Other Considerations: These bonds were originally issued as TIF revenue bonds (non-general
obligation). Over the term of the bonds, the debt service coverage has been
approximately 125%. This means the TIF generated from the project has been
more than adequate to pay debt service on the prior bonds. Based upon
discussions with City staff, it was determined that it made the most financial
sense to the City to refinance them as GO TIF bonds so the City’s HRA would
gain additional funds for projects due to the interest savings.
Presale ReportOctober 6, 2015
City of Hopkins, Minnesota Page 2
Review of Existing Debt: We have reviewed all outstanding indebtedness for the City and find that, the
only other obligations that the City should consider refunding is the 2007 TIF
revenue bonds, which process is scheduled to begin on November 3, 2015 (call
for sale of bonds).
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. Ehlers currently does the arbitrage
calculations for the existing bond issue. You have retained Ehlers to assist you
with compliance with these rules.
Current Refunding:
Risk Factors: 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, 2024. 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 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
Presale ReportOctober 6, 2015
City of Hopkins, Minnesota Page 3
us.
Bond Attorney:
Kennedy & Graven, Chartered
Paying Agent:
Bankers Trust
Rating Agency:
Standard & Poor’s
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 ReportOctober 6, 2015
City of Hopkins, Minnesota Page 4
Proposed Debt Issuance Schedule
Pre-Sale Review by City Council October 6, 2015
Distribute Official Statement: Week of October 19, 2015
Conference with Rating Agency: Week of October 19, 2015
City Council Meeting to Award Sale of the Bonds: November 3, 2015
Estimated Closing Date: November 24, 2015
Redemption Date for Bond December 10, 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: Meghan Lindblom (651) 697-8549
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 ReportOctober 6, 2015
City of Hopkins, Minnesota Page 5
_______________
Resolution No.
Council Member _________________ introduced the following resolution and moved its adoption:
Resolution Providing for the Sale of
$4,490,000 General Obligation TIF Refunding Bonds, Series 2015C
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 $4,490,000 General Obligation TIF Refunding Bonds,
Series 2015C (the "Bonds"), to provide for a current refinancing of the HRA 2008 HRA Tax
Increment Revenue Bonds 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 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 assist the City for the sale of
the Bonds.
2. Meeting; Proposal Opening. The City Council shall meet at 7:00 p.m. on November 3, 2015, for the
purpose of considering 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 6th day of October, 2015.
_____________________________________________
City Clerk
Hopkins HRA, Minnesota
$4,490,000 General ObligationTax Increment Refunding Bonds, Series 2015C
Current Refunding HRA 2008 TIF Bonds
Assuming Current GO BQ "AA+" Market Rates plus 15bps
Sources & Uses
Dated 11/24/2015 | Delivered 11/24/2015
Sources Of Funds
Par Amount of Bonds$4,490,000.00
Transfers from Prior Issue DSR Funds399,973.00
Planned Issuer Equity contribution11,461.31
Total Sources $4,901,434.31
Uses Of Funds
Total Underwriter's Discount (1.000%)44,900.00
Costs of Issuance34,500.00
Deposit to Current Refunding Fund4,820,474.69
Rounding Amount1,559.62
Total Uses $4,901,434.31
Series 2015C GO Ref Bds C | Current Ref 08 HRA Rev Bo | 9/15/2015 | 11:53 AM
Hopkins HRA, Minnesota
$4,490,000 General ObligationTax Increment Refunding Bonds, Series 2015C
Current Refunding HRA 2008 TIF Bonds
Assuming Current GO BQ "AA+" Market Rates plus 15bps
Debt Service Schedule
DatePrincipalCouponInterestTotal P+IFiscal Total
11/24/2015-----
02/01/2016185,000.000.550%16,200.51201,200.51201,200.51
08/01/2016--43,015.0043,015.00-
02/01/2017250,000.000.850%43,015.00293,015.00336,030.00
08/01/2017--41,952.5041,952.50-
02/01/2018250,000.001.050%41,952.50291,952.50333,905.00
08/01/2018--40,640.0040,640.00-
02/01/2019260,000.001.250%40,640.00300,640.00341,280.00
08/01/2019--39,015.0039,015.00-
02/01/2020270,000.001.500%39,015.00309,015.00348,030.00
08/01/2020--36,990.0036,990.00-
02/01/2021280,000.001.650%36,990.00316,990.00353,980.00
08/01/2021--34,680.0034,680.00-
02/01/2022295,000.001.850%34,680.00329,680.00364,360.00
08/01/2022--31,951.2531,951.25-
02/01/2023305,000.001.950%31,951.25336,951.25368,902.50
08/01/2023--28,977.5028,977.50-
02/01/2024315,000.002.050%28,977.50343,977.50372,955.00
08/01/2024--25,748.7525,748.75-
02/01/2025325,000.002.150%25,748.75350,748.75376,497.50
08/01/2025--22,255.0022,255.00-
02/01/2026340,000.002.300%22,255.00362,255.00384,510.00
08/01/2026--18,345.0018,345.00-
02/01/2027355,000.002.400%18,345.00373,345.00391,690.00
08/01/2027--14,085.0014,085.00-
02/01/2028370,000.002.550%14,085.00384,085.00398,170.00
08/01/2028--9,367.509,367.50-
02/01/2029390,000.002.650%9,367.50399,367.50408,735.00
08/01/2029--4,200.004,200.00-
02/01/2030300,000.002.800%4,200.00304,200.00308,400.00
Total$4,490,000.00-$798,645.51$5,288,645.51-
Yield Statistics
Bond Year Dollars$35,210.64
Average Life7.842 Years
Average Coupon2.2681937%
Net Interest Cost (NIC)2.3957120%
True Interest Cost (TIC)2.3959936%
Bond Yield for Arbitrage Purposes2.2527922%
All Inclusive Cost (AIC)2.5074266%
IRS Form 8038
Net Interest Cost2.2681937%
Weighted Average Maturity7.842 Years
Series 2015C GO Ref Bds C | Current Ref 08 HRA Rev Bo | 9/15/2015 | 11:53 AM
Hopkins HRA, Minnesota
$4,490,000 General ObligationTax Increment Refunding Bonds, Series 2015C
Current Refunding HRA 2008 TIF Bonds
Assuming Current GO BQ "AA+" Market Rates plus 15bps
Debt Service Comparison
DateTotal P+INet New D/SOld Net D/SSavings
02/01/2016201,200.51211,102.20296,243.7585,141.55
02/01/2017336,030.00336,030.00430,007.5093,977.50
02/01/2018333,905.00333,905.00431,590.0097,685.00
02/01/2019341,280.00341,280.00437,327.5096,047.50
02/01/2020348,030.00348,030.00442,142.5094,112.50
02/01/2021353,980.00353,980.00451,005.0097,025.00
02/01/2022364,360.00364,360.00458,632.5094,272.50
02/01/2023368,902.50368,902.50464,985.0096,082.50
02/01/2024372,955.00372,955.00469,880.0096,925.00
02/01/2025376,497.50376,497.50473,715.0097,217.50
02/01/2026384,510.00384,510.00480,515.0096,005.00
02/01/2027391,690.00391,690.00485,915.0094,225.00
02/01/2028398,170.00398,170.00494,915.0096,745.00
02/01/2029408,735.00408,735.00502,235.0093,500.00
02/01/2030308,400.00308,400.00397,684.5089,284.50
Total$5,288,645.51$5,298,547.20$6,716,793.25$1,418,246.05
PV Analysis Summary (Net to Net)
Gross PV Debt Service Savings.....................1,520,665.24
Effects of changes in DSR investments.............(291,080.52)
Net PV Cashflow Savings @ 2.253%(Bond Yield).....1,229,584.72
Total Cash contribution...........................(11,461.31)
Contingency or Rounding Amount....................1,559.62
Net Present Value Benefit $1,219,683.03
Net PV Benefit / $6,010,665.24 PV Refunded Debt Service20.292%
Net PV Benefit / $4,730,000 Refunded Principal...25.786%
Net PV Benefit / $4,490,000 Refunding Principal..27.164%
Refunding Bond Information
Refunding Dated Date 11/24/2015
Refunding Delivery Date 11/24/2015
Series 2015C GO Ref Bds C | Current Ref 08 HRA Rev Bo | 9/15/2015 | 11:53 AM
Hopkins HRA, Minnesota
$4,490,000 General ObligationTax Increment Refunding Bonds, Series 2015C
Current Refunding HRA 2008 TIF Bonds
Assuming Current GO BQ "AA+" Market Rates plus 15bps
Detail Costs Of Issuance
Dated 11/24/2015 | Delivered 11/24/2015
COSTS OF ISSUANCE DETAIL
Financial Advisor$19,000.00
Bond Counsel$9,000.00
Rating Agency Fee (S&P)$5,500.00
Miscellaneous$1,000.00
TOTAL $34,500.00
Series 2015C GO Ref Bds C | Current Ref 08 HRA Rev Bo | 9/15/2015 | 11:53 AM