2017 and 2018 Projects and Funding; Harkess/StadlerCITY OF HOPKINS
MEMORANDUM
Date: January 10, 2017
To: Mayor & City Council
From: Christine Harkess, Finance Director
Steve Stadler, Public Works Director
Subject: 2017 and 2018 Projects and Funding
As you know the City has quite a number of projects that cross many departments. Staff met
with Ehlers to discuss the scope of the project, the funding and timing. We are fine tuning the
cost vs funding analysis but will have a report to hand out Tuesday at the work session.
Attached is a memo from Ehlers regarding the projects. It is an exciting time in Hopkins with all
the projects and potential economic growth but it needs to be planned and funded. Staff will be
discussing the projects and funding sources as we begin to plan for these projects.
FINANCE DEPARTMENT
Memo
To: Christine Harkess, Finance Director
From: Stacie Kvilvang and Jason Aarsvold, Ehlers
Date: January 10, 2017
Subject: 2017 and 2018 Bonds – Bank Qualified vs. Non-Bank Qualified
Based upon our discussion, we understand the City plans to issue approximately $14 to $15
million in bonds in 2017 for various street, utility and park improvements. In addition, the
City anticipates issuing approximately $10 million for various street, utility and
improvements to the City’s Ice Arena. The City has ample debt capacity to issue these
bonds in 2017 and 2018, but the 2017 bonds would not be considered “Bank Qualified” or
BQ.
The BQ designation allows commercial banks that may purchase the bonds to benefit from
the tax exemption. This broadens the market for the bonds, which can result in lower
interest rates. In order for the City to issue BQ bonds, it must reasonably expect to issue no
more than $10,000,000 per calendar year. If the City were to issue $14 to $15 million in
2017, the bonds would not be considered BQ.
Based on current market rates, the spread (or difference) between a BQ and non-BQ bond
issue is 40 to 50 basis points (0.40% to 0.50%). This means bonds issued that are not BQ
will pay more interest than those that are BQ. The spread between these rates increases
as the duration of the bond issue increases, as illustrated by the chart below.
At the Council’s January 10th work session, we will overview in more detail the specifics of
the bonding projects over the next two years and quantify the cost differential of the BQ
versus non-BQ bond costs for 2017.
Please contact me 651-697-8506 with any questions.