VII.1. Authorize the Sale of $11,795,000 G.O. Street Reconstruction Bonds, Series 2017A, and Call for Public Hearing Relating to Adoption of a Street Reconstruction Plan; Harkess (CR2017-066)April 18, 2017 City Council Report 2017-066
AUTHORIZE THE SALE OF $11,795,000 G.O. STREET RECONSTRUCTION BONDS,
SERIES 2017A, AND CALL FOR PUBLIC HEARING RELATING TO
ADOPTION OF A STREET RECONSTRUCTION PLAN
Proposed Action
Staff recommends approval of the following motions: (two separate motions)
Adopt Resolution 2017-034 Providing for the Sale of $11,795,000 General Obligation Street
Reconstruction Bonds Series 2017A.
Adopt Resolution 2017-035 Calling a Public Hearing for the Adoption of a Street Reconstruction Plan and
the Issuance of Street Reconstruction Bonds Thereunder.
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 2017 street project we do not have the minimum 20% so
we are proposing that the City utilize its authority under MS Chapter 475.58 to issue GO street
reconstruction bonds which will be repaid by a general tax levy.
In order to utilize this type of financing, the City will prepare a 5-Year Street Reconstruction Plan (SRP)
which will presented at a public hearing where we will solicit comment and feedback from the community.
The resolution calling for that public hearing is part of this report.
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 approximately 70%
of debt levying capacity available.
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
Resolutions No. 2017-034 AND 2017-035
Bond Pre-Sale Report including refunding analysis
______________________________
Christine M. Harkess, CPA, CGFM
Finance Director
Financial Impact: $ 11,795,000 bond issue
Budgeted: Y/N Yes
Source: Bond Funds
Related Documents: None
Resolution No. 2017-034
Council Member _________________ introduced the following resolution and moved its adoption:
Resolution Providing for the Sale of
$11,795,000 General Obligation Street Reconstruction Bonds, Series 2017A
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 $11,795,000 General Obligation Street Reconstruction
Bonds, Series 2017A (the "Bonds"), to finance the 2017 road reconstruction projects and the 8th Avenue
reconstruction project 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 June 20, 2017, 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 18th day of April, 2017.
_____________________________________________
Amy Domeier, City Clerk
497901v2 JAE HP110-97
CITY OF HOPKINS, MINNESOTA
RESOLUTION NO. 2017-035
RESOLUTION CALLING A PUBLIC HEARING RELATING TO
THE ADOPTION OF A STREET RECONSTRUCTION PLAN
AND THE ISSUANCE OF STREET RECONSTRUCTION BONDS
THEREUNDER
Section 1. Background.
1.01. The City of Hopkins, Minnesota (the “City”), is authorized under Minnesota Statutes,
Section 475.58, subdivision 3b (the “Act”), to prepare a plan for reconstruction of streets in the City over
the next five years, including a description of the affected streets and estimated costs (the “Plan”), and to
issue general obligation bonds to finance the cost of street reconstruction activities described in the Plan.
1.02. Under the Act, the City is required to hold a public hearing regarding the Plan and
issuance of the bonds.
1.03. The City Council has determined to prepare a Plan for the City and to issue general
obligation bonds in a principal amount not to exceed $25,000,000 (the “Bonds”) to finance certain street
reconstruction activities in the City.
Section 2. Plan Authorized; Hearing Scheduled.
2.01. The City hereby authorizes its staff and consultants to prepare a Plan for reconstruction of
City streets, or any portion thereof designated by the City Manager, and to place a copy of the Plan on file
with the City Manager by no later than the date of publication of the hearing notice.
2.02. The City Council will hold a public hearing regarding the Plan and issuance of the Bonds
on Tuesday, May 16, 2017, at approximately 7:00 P.M. at City Hall. The City Clerk is authorized and
directed to publish a notice substantially in the form attached hereto as EXHIBIT A in the official
newspaper of the City at least 10 days but not more than 28 days prior to the date of the hearing.
2.03. City staff and consultants are authorized to take all other actions needed to bring the Plan
and issuance of the Bonds before the City Council.
Approved by the City Council of the City of Hopkins, Minnesota this 18th day of April, 2017.
Molly Cummings, Mayor
ATTEST:
Amy Domeier, City Clerk
497901v2 JAE HP110-97 A-1
EXHIBIT A
FORM OF NOTICE OF PUBLIC HEARING
CITY OF HOPKINS
COUNTY OF HENNEPIN
STATE OF MINNESOTA
NOTICE OF PUBLIC HEARING REGARDING A STREET RECONSTRUCTION PLAN AND
THE ISSUANCE OF BONDS THEREUNDER
NOTICE IS HEREBY GIVEN that the City Council of the City of Hopkins, Minnesota (the “City”),
will hold a public hearing on Tuesday, May 16, 2017, at or after 7:00 P.M. in the City Council Chambers at
City Hall, 1010 First Street South in the City, relating to a proposal concerning: (1) the adoption of a
five-year street reconstruction plan (the “Plan”); and (2) the issuance of general obligation street
reconstruction bonds (the “Bonds”) to finance the reconstruction of certain streets in the City, all pursuant to
Minnesota Statutes, Section 475.58, subdivision 3b. The Bonds will be issued in a principal amount not to
exceed $25,000,000. A draft copy of the Plan is on file with the City Clerk and is available for public
inspection at City Hall during regular business hours.
If a petition requesting a vote on the issuance of the Bonds, signed by voters equal to five percent
of the votes cast in the last City general election, is filed with the City Clerk within 30 days after the
public hearing, the City may issue the Bonds only after obtaining approval of a majority of voters voting
on the question at an election.
At the time and place fixed for the public hearing, the City Council will give all persons who
appear at the hearing an opportunity to express their views with respect to the proposal. In addition,
interested persons may direct any questions or file written comments respecting the proposal with the City
Clerk, at or prior to said public hearing.
Dated: April 27, 2017
BY ORDER OF THE CITY COUNCIL OF
THE CITY OF HOPKINS, MINNESOTA
/s/ Amy Domeier
City Clerk
City of Hopkins, Minnesota
April 18, 2017
Pre-Sale Report for
City of Hopkins, Minnesota
$11,795,000 General Obligation Street Reconstruction
Bonds, Series 2017A
Prepared by:
Stacie Kvilvang, CIPMA
Senior Municipal Advisor/Director
And
Jason Aarsvold, CIPMA
Municipal Advisor
And
James Lehnhoff
Municipal Advisor
Presale Report
City of Hopkins, Minnesota
April 18, 2017
Page 1
Executive Summary of Proposed Debt
Proposed Issue: $11,795,000 General Obligation Street Reconstruction Bonds, Series 2017A
Purposes: The proposed 2017A Bond series include two projects:
1. 2017 Road Reconstruction ($8,240,000)
This portion of the Bonds is being issued to pay for the costs of the City’s
2017 road reconstruction project. Debt service will be paid from a tax levy
and special assessments. The City intends to levy a total of $1,453,700 in
special assessments to benefitting property owners, of which $290,740
(20%) is anticipated to be collected in pre-paid assessments (the total
Bond issue was reduced accordingly). The remaining $1,162,960 of
special assessments will be collected in years 2019 to 2033 at a rate of 2%
over the True Interest Costs (TIC) of the Bonds. Annual assessments are
paid on an equal principal basis.
2. 8th Avenue Reconstruction ($3,555,000)
This portion of the Bonds is being issued to pay for the costs to reconstruct
8th Avenue and has been reduced by the $2,780,500 in grants the City has
received for the project. Debt service will be paid from 100% tax levy.
Authority: The Bonds are being issued pursuant to Minnesota Statutes, Chapter 475.58 under
a Street Reconstruction and Overlay Plan (SROP).
The Bonds will be general obligations of the City for which its full faith, credit
and taxing powers are pledged. Projects that are part of an approved SROP can be
a general obligation without a referendum. However, the Bonds will count toward
the City’s statutory debt limit, which is 3% of estimated market value (EMV). The
City’s EMV is $1,791,172,100 for Pay 2017, and 3% of EMV produces a debt
limit of $53,735,163. The proposed new issue of $11,795,000 plus the City’s
current outstanding debt as of April 11, 2017 of $5,985,000 equals a total debt
amount of $17,780,000. This is well below the $53.7 million statutory debt limit
noted above.
The City intends to hold the required public hearing on the SROP on May 15,
2017. These Bonds are subject to a reverse referendum period of 30 days, which
would expire on June 15, 2017.
Term/Call Feature: The Bonds are being issued for a 16-year term. Principal on the Bonds will be due
on February 1 in the years 2019 through 2033. Interest is payable every six months
beginning February 1, 2018.
The Bonds maturing on and after February 1, 2027 will be subject to prepayment
at the discretion of the City on February 1, 2026 or any date thereafter.
Presale Report
City of Hopkins, Minnesota
April 18, 2017
Page 2
Bank Qualification: Because the City is issuing, or expects to issue, more than $10,000,000 in tax-
exempt obligations during the calendar year, the City will be not able to designate
the Bonds as “bank qualified” obligations.
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 the only viable option available to finance this type of projects
under State law
- This is the most overall cost effective option that still maintains future
flexibility for the repayment of debt
- This coincides with the City’s past practices to finance these types of
projects with this type of debt issue.
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 1.00000% 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.
Presale Report
City of Hopkins, Minnesota
April 18, 2017
Page 3
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.
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 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 reportable 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 obligations/tax credit obligations, 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: We have assumed $290,700 of pre-paid special assessments (20%) and have
assumed that the remaining $1,162,960 of assessments are levied as projected. If
the City receives significantly more of pre-paid assessments above this amount
or does not levy the projected assessments, the City may need to increase the
levy portion of the debt service to make up for the lower interest earnings than
the expected assessment interest rate.
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.
Presale Report
City of Hopkins, Minnesota
April 18, 2017
Page 4
Bond Attorney: Kennedy & Graven, Chartered
Paying Agent: Bond Trust Services Corporation
Rating Agency: Standard & Poor's Global Ratings (S&P)
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
City of Hopkins, Minnesota
April 18, 2017
Page 5
Proposed Debt Issuance Schedule
Pre-Sale Review by City Council and City Council
Calls for Public Hearing on SROP: April 18, 2017
Distribute Official Statement: Week of June 5, 2017
Conference with Rating Agency: Week of June 12, 2017
Public Hearing on SROP: May 15, 2017
Reverse Referendum Period Ends (Within 30 Days
of Public Hearing): June 15, 2017
City Council Meeting to Award Sale of the Bonds: June 20, 2017
Estimated Closing Date: July 13, 2017
Attachments
Sources and Uses of Funds
Proposed Debt Service Schedule
Resolution Authorizing Ehlers to Proceed with Bond Sale
Ehlers Contacts
Municipal Advisors: Stacie Kvilvang (651) 697-8506
Jason Aarsvold (651) 697-8512
James Lehnhoff (651) 697-8552
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.
City of Hopkins, Minnesota
$11,795,000 General Obligation Street Reconstruction Bonds, Series 2017A
Issue Summary
Assumes Current Market Non-BQ AA+ Rates plus 25bps
Total Issue Sources And Uses
Dated 07/15/2017 | Delivered 07/15/2017
2017 Road
Reconstruction
8th Avenue
Reconstruction
Issue
Summary
Sources Of Funds
Par Amount of Bonds $8,240,000.00 $3,555,000.00 $11,795,000.00
Prepaid Assessments 290,700.00 -290,700.00
Grants -2,780,500.00 2,780,500.00
Total Sources $8,530,700.00 $6,335,500.00 $14,866,200.00
Uses Of Funds
Total Underwriter's Discount (1.000%)82,400.00 35,550.00 117,950.00
Costs of Issuance 59,381.10 25,618.90 85,000.00
Deposit to Capitalized Interest (CIF) Fund 118,722.92 51,561.61 170,284.53
Deposit to Project Construction Fund 8,265,583.00 6,223,150.00 14,488,733.00
Rounding Amount 4,612.98 (380.51)4,232.47
Total Uses $8,530,700.00 $6,335,500.00 $14,866,200.00
Series 2017A GO Street Re | Issue Summary | 4/12/2017 | 10:53 AM
City of Hopkins, Minnesota
$11,795,000 General Obligation Street Reconstruction Bonds, Series 2017A
Issue Summary
Assumes Current Market Non-BQ AA+ Rates plus 25bps
Debt Service Schedule
Date Principal Coupon Interest Total P+I Fiscal Total
07/15/2017 -----
02/01/2018 --170,284.53 170,284.53 170,284.53
08/01/2018 --156,383.75 156,383.75 -
02/01/2019 700,000.00 1.400%156,383.75 856,383.75 1,012,767.50
08/01/2019 --151,483.75 151,483.75 -
02/01/2020 705,000.00 1.550%151,483.75 856,483.75 1,007,967.50
08/01/2020 --146,020.00 146,020.00 -
02/01/2021 710,000.00 1.800%146,020.00 856,020.00 1,002,040.00
08/01/2021 --139,630.00 139,630.00 -
02/01/2022 720,000.00 2.000%139,630.00 859,630.00 999,260.00
08/01/2022 --132,430.00 132,430.00 -
02/01/2023 730,000.00 2.200%132,430.00 862,430.00 994,860.00
08/01/2023 --124,400.00 124,400.00 -
02/01/2024 740,000.00 2.350%124,400.00 864,400.00 988,800.00
08/01/2024 --115,705.00 115,705.00 -
02/01/2025 755,000.00 2.550%115,705.00 870,705.00 986,410.00
08/01/2025 --106,078.75 106,078.75 -
02/01/2026 775,000.00 2.650%106,078.75 881,078.75 987,157.50
08/01/2026 --95,810.00 95,810.00 -
02/01/2027 790,000.00 2.800%95,810.00 885,810.00 981,620.00
08/01/2027 --84,750.00 84,750.00 -
02/01/2028 805,000.00 2.900%84,750.00 889,750.00 974,500.00
08/01/2028 --73,077.50 73,077.50 -
02/01/2029 825,000.00 3.050%73,077.50 898,077.50 971,155.00
08/01/2029 --60,496.25 60,496.25 -
02/01/2030 850,000.00 3.150%60,496.25 910,496.25 970,992.50
08/01/2030 --47,108.75 47,108.75 -
02/01/2031 875,000.00 3.350%47,108.75 922,108.75 969,217.50
08/01/2031 --32,452.50 32,452.50 -
02/01/2032 895,000.00 3.500%32,452.50 927,452.50 959,905.00
08/01/2032 --16,790.00 16,790.00 -
02/01/2033 920,000.00 3.650%16,790.00 936,790.00 953,580.00
Total $11,795,000.00 -$3,135,517.03 $14,930,517.03 -
Yield Statistics
Bond Year Dollars $105,256.72
Average Life 8.924 Years
Average Coupon 2.9789233%
Net Interest Cost (NIC)3.0909827%
True Interest Cost (TIC)3.0821077%
Bond Yield for Arbitrage Purposes 2.9505422%
All Inclusive Cost (AIC)3.1780647%
IRS Form 8038
Net Interest Cost 2.9789233%
Weighted Average Maturity 8.924 Years
Series 2017A GO Street Re | Issue Summary | 4/12/2017 | 10:53 AM
City of Hopkins, Minnesota
$11,795,000 General Obligation Street Reconstruction Bonds, Series 2017A
Issue Summary
Assumes Current Market Non-BQ AA+ Rates plus 25bps
Detail Costs Of Issuance
Dated 07/15/2017 | Delivered 07/15/2017
COSTS OF ISSUANCE DETAIL
Municipal Advisor $55,000.00
Bond Counsel $15,000.00
Rating Agency Fee (S&P)$14,000.00
Miscellaneous $1,000.00
TOTAL $85,000.00
Series 2017A GO Street Re | Issue Summary | 4/12/2017 | 10:53 AM
City of Hopkins, Minnesota
$11,795,000 General Obligation Street Reconstruction Bonds, Series 2017A
Issue Summary
Assumes Current Market Non-BQ AA+ Rates plus 25bps
Debt Service Schedule
Date Principal Coupon Interest Total P+I CIF Net New D/S 105% of Total Assessments Levy/(Surplus)
02/01/2018 --170,284.53 170,284.53 (170,284.53)----
02/01/2019 700,000.00 1.400%312,767.50 1,012,767.50 -1,012,767.50 1,063,405.88 136,841.63 926,564.25
02/01/2020 705,000.00 1.550%302,967.50 1,007,967.50 -1,007,967.50 1,058,365.88 132,887.57 925,478.31
02/01/2021 710,000.00 1.800%292,040.00 1,002,040.00 -1,002,040.00 1,052,142.00 128,933.51 923,208.49
02/01/2022 720,000.00 2.000%279,260.00 999,260.00 -999,260.00 1,049,223.00 124,979.43 924,243.57
02/01/2023 730,000.00 2.200%264,860.00 994,860.00 -994,860.00 1,044,603.00 121,025.37 923,577.63
02/01/2024 740,000.00 2.350%248,800.00 988,800.00 -988,800.00 1,038,240.00 117,071.31 921,168.69
02/01/2025 755,000.00 2.550%231,410.00 986,410.00 -986,410.00 1,035,730.50 113,117.25 922,613.25
02/01/2026 775,000.00 2.650%212,157.50 987,157.50 -987,157.50 1,036,515.38 109,163.19 927,352.19
02/01/2027 790,000.00 2.800%191,620.00 981,620.00 -981,620.00 1,030,701.00 105,209.11 925,491.89
02/01/2028 805,000.00 2.900%169,500.00 974,500.00 -974,500.00 1,023,225.00 101,255.05 921,969.95
02/01/2029 825,000.00 3.050%146,155.00 971,155.00 -971,155.00 1,019,712.75 97,300.98 922,411.77
02/01/2030 850,000.00 3.150%120,992.50 970,992.50 -970,992.50 1,019,542.13 93,346.92 926,195.21
02/01/2031 875,000.00 3.350%94,217.50 969,217.50 -969,217.50 1,017,678.38 89,392.86 928,285.52
02/01/2032 895,000.00 3.500%64,905.00 959,905.00 -959,905.00 1,007,900.25 85,438.78 922,461.47
02/01/2033 920,000.00 3.650%33,580.00 953,580.00 -953,580.00 1,001,259.00 81,484.72 919,774.28
Total $11,795,000.00 -$3,135,517.03 $14,930,517.03 (170,284.53)$14,760,232.50 $15,498,244.13 $1,637,447.68 $13,860,796.45
Significant Dates
Dated 7/15/2017
First Coupon Date 2/01/2018
Yield Statistics
Bond Year Dollars $105,256.72
Average Life 8.924 Years
Average Coupon 2.9789233%
Net Interest Cost (NIC)3.0909827%
True Interest Cost (TIC)3.0821077%
Bond Yield for Arbitrage Purposes 2.9505422%
All Inclusive Cost (AIC)3.1780647%
Series 2017A GO Street Re | Issue Summary | 4/12/2017 | 10:53 AM