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CR2002-173-sale of bonds HRA r . G \"\ Y OF - . November 5, 2002 HOPKINS Council Report 02-173 AUTHORIZE SALE OF BONDS FOR THE HOUSING AND REDEVELOPMENT AUTHORITY PUBLIC FACILITY LEASE REVENUE BONDS, G,O. TAX INCREMENT FINANCING BONDS, SERIES 2002A AND G.O. PERMANENT IMPROVEMENT REVOL VING FUND BONDS, SERIES 20028 Proposed Action Staff reconul1cnds approval of the following motion: . Adopt Resolution No. 02-099 authorizing the sale of Housing and Redevelopment Authority Public Facility Lease Revenue Bonds for the Fire and Public Works Facility projects, . Adopt Resolution No. 02-102 for the sale of General Obligation Tax Increment Financing Bonds. Series A, for a portion of improvements to the Excelsior Blvd proiect east of Hwy 169 and . Adopt Resolution No. 02-103 for the sale of General Obligation Permanent Improvement Revolving Fund Bonds. Series B. for a lJortion of the Lot 500/600 improvements and a portion of the 2001 street improvement projects. Adoption of this motion will result in the bonds being offered for sale on November 19,2002, dated December 1.2002. Overview HRA Public Facility Lease Revenue Bonds: The HRA will issue Public Facility Lease Revenue Bonds in the amount of $10,980,000. The proceeds of which will be used to demolish the existing public works storage facility, construct a new publlc works storage facility, new fire station and associated on-site and parking area relocations. The bond is structured to mature within 20 years. . Tax Increment Financing Bonds: The City of Hopkins will issue G.O. Tax Increment Financing Bonds in the amount of $2,490,000. The City has the authority to issue tax increment bonds to pay for specific improvements in a redevelopment tax increment project area. The current County Road Three/Excelsior Blvd improvement project qualifies tor tax increment bond issuance. Permanent Improvement Revolving Fund Bonds: The City of Hopkins will issue PIR fund bonds in the amount of$960.000. The city has the authority to issue Pennanent Improvement Revolving fund bonds to pay for any improvcment of which the cost is to be partially assessed. The assessment of $164,191 for street improvement project No. 98-12 and the assessment of $510,626 for streeet improvement project No. 00-10, exceeds the 20% threshold required for the issuance of bonds. Primary Issues to Consider . The purpose of the bond issues . fmpacts of the bond issues . Details of the bond issue Supportine Information . Resolution No. 02-099, Resolution No. 02-102 and Resolution No. 02-103 . Presale Reports . Sources and Uses of Funds . Proposed Debt Service Schedules '"' I ;' . I~~~ . 'Iz_ .____- \, . yv--- \. 'Lori~Y.(ger I r Financc Director r Primary Issues to Consider . The purpose of the bond issues HRA Public Facility Lease Revenue Bonds: A space needs analysis was conducted in 2000. At that time it was detennincd that the police, fire and public works facilities were all inadequate for their respective needs. To create adequate facilities, the cun-ent fire station is to be remodeled to accommodate the police, a new fire statio11 will be constructed and a new storage facility will be built for public works. One goal of the council was to minimize the tax impact to residents for such a large facility project. This is partially accomplished through the issuance of lease revenue bonds in replace of a referendum bond issue. Another goal of the city council was to utilize existing property owned by the city. The city has accomplished this goal by using the existing public works site. With some modifications and improvements to the current public works site, the city will construct a new fire station and a new public works storage facility on the existing site. Remodeling of the cunent fire station to acconU11odate the police department will occur in 2004. An HRA lease revenue bond will also be issued at that time for the police station remodeling project. The City Council/HRA intend on constructing a new fire station and reconstructing an existing storage facility for public works. The project is within the HRA's redevelopment project area no. 1. The proceeds of the bonds will be used to demolish the existing public works storage facility, construct a new public works storage facility, new fire station and associated on-site and parking area relocations. The City CouncillHRA has held the necessary public hearings and has authorized the creation of the modification of redevelopment project area No.1 and will establish the lease agreement with the city. . Tax Increment Financing Bonds: The City of Hopkins has the authority to issue tax increment bonds to pay for specific improvements in a redevelopment tax increment project area. The current County Road Three/Excelsior Blvd improvement project qualifies for this bond issuance. The project is currently underway and should be completed by 2005. In addition to the bonds being issued the city, county and state will contribute substantially to the project. Permanent Improvement Revolving Fund Bonds: Street improvements are funded through the P.I.R. fund. This fund will havc a negative working capital balance within one year unless we issue bonds to replenish the fund. The last time the city issued improvement bonds was in 1999. The debt levy for improvement bonds will fluctuate annually depending on street projects and funding sources. These particular bonds are to pay help pay for the Lot 500/600 project and the street improvement projects in 2001. The Impacts of the bond issues HRA Public Facility Lease Revenue Bonds: The HRA will issue Public Facility Lease Revenue Bonds in the amount of $10,980,000. The city will sign a lease agreement to pay an amollnt equivalent to the annual principal and interest for the bonds issued for the facility project. The city obtains the lease amount through an annual tax levy. The projected annual tax levy for the facility is approximately $775,000. The utility funds will pay an annual lease for the facility in the amount of $145,000. Total annual debt service principal and interest will be approximately $920,000. The bond is structured to mature within 20 years. e . Tax Increment Financing Bonds: The amount of the G.O. Tax Increment Financing Bond issue will be $2,450,000. The TIF district associated with this project is district 2-11 or (Super Valu). The bonds will be paid from tax increments currently being generated from the project area. Tax increment collections are projected to be $300,000 annually. The principal and interest for the bond issue will be approximately $203,000. The bond is structured to mature within 20 years. In addition to the bonds being issued the city, county and state will contribute substantially to the Excelsior Blvd redevelopment project. Permanent Improvement Revolving Fund Bonds: The amount of the G.O Pemlanent Improvement Revolving Fund Bond issue will be $960,000. The bond issue is needed to replenish the fund balance and to pay for ongoing projects in the P.I.R. fund while assessments and taxes continue to be collected. Based on the current capital improvement plan schedule, the debt service levy for the revolving fund debt will continue to increase annually. The debt levy for improvement bonds in 2003 is preliminarily $] 54,000. This levy along with the assessments collected should be sufficient to pay for the principal and interest of the new bonds. This bond is stmctured to mature within 10 years. Details of the Bond Issue Staff and our financial consultants. Ehlers and Associates, recommend that we ask for a rating from both Standard and Poor's and Moody's for both issues. In addition to the ratings, staff and the city's financial advisor are reconmlending that we purchase insurance on the HRA Lease Revenue bonds. The cost of the insurance is $] 44,500. What the insurance provides to the city is a Aaa bond rating. The Aaa rating on the bonds reduces the city's interest costs ammalIy by about $35,000 and eliminates the requirement of a debt service reserve, which keeps our total bond amount lower. The cost of the ratings and the insurance will be paid for with bond revenues. . . CITY OF HOPKINS . HENNEPIN COUNTY, MINNESOTA RESOLUTION 02-099 RESOLUTION PROVIDING FOR THE SALE OF $10,650,000 HRA PUBLIC FACILITY LEASE REVENUE BONDS WHEREAS, the City Council of the City of Hopkins, Minnesota has detemllned that it is necessary and desirable to issue $10,650,000 ofHRA Public Facility Lease Revenue Bonds, (Public Works and Fire Station Facility), (the "Bonds"), to finance a new fire station and public works facility in the City; and WHEREAS, the City has retained Ehlers & Associates, Inc., in RoseviIIe, Minnesota ("Ehlers") as its independent financial advisor and is therefore authorized to solicit proposals in accordance with Minnesota Statutes, Section 475.60, Suddivision 2(9); NOW, THEREFORE, BE IT RESOLVED by the City Council of Hopkins, Millilesota, 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 7:30pm on November 19,2002, for the purpose of considering sealed proposals for, and awarding the sale of the Bonds. The City Clerk, or designee, shall open proposals at the time and place specified in such TemlS of . Proposal. 3. Official Statement. In COllilection 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. Adopted by the City Council of the City of Hopkins held this 5th day of November, 2002. Eugene Maxwell, Mayor ATTEST: Teny Obermaier, City Clerk . CITY OF HOPKINS . HENNEPIN COUNTY, MINNESOTA RESOLUTION 02-102 RESOLUTION PROVIDING FOR THE SALE OF $2,490,000 GENERAL OBLIGA nON TAX INCREMENT FINANCING BONDS, SERIES 2002A WHEREAS, the City Council of the City of Hopkins, Minnesota has detemlined that it is necessary and desirable to issue $2,490,000 of General Obligation Tax Increment Financing Bonds, Series 2002A, (the "Bonds"), to finance public improvements to Excelsior Boulevard in and adjacent to Tax Increment Financing District No. 11 in the City; and WHEREAS. the City has retained Ehlers & Associates, Inc., in Roseville, Minnesota ("Ehlers") as its independent financial advisor and is therefore authorized to solicit proposals in accordance with Milmesota Statutes, Section 475.60, Suddivision 2(9); NOW, THEREFORE, BE IT RESOLVED by the City Council of Hopkins, Minnesota, as follows: I. 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 7:30pm on November 19,2002, for the purpose of considering sealed proposals for, and awarding the sale of the Bonds. The City Clerk, or designee, shall open proposals at the time and place specified in such Terms of . Proposal. 3. Official Statement. In COllilection 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 011 behalf of the City upon its completion. Adopted by the City Council of the City of Hopkins held this 5th day of November, 2002. Eugene Maxwell, Mayor ATTEST: Terry Obermaier, City Clerk . CITY OF HOPKINS . HENNEPIN COUNTY, MINNESOTA RESOLUTION 02-103 RESOLUTION PROVIDING FOR THE SALE OF $960,000 GENERAL OBLIGATION PERMANENT IMPROVEMENT REVOLVING FUND BONDS, SERIES 2002B WHEREAS, the City Council of the City of Hopkins, Minnesota bas dctennined that it is necessary and desirable to issue $960,000 of General Obligation Permanent Improvement Revolving Fund Bonds, Series 2002B, (the "Bonds"), to finance assessments and City costs related to City Projects No. 98-12 and No. 00-10 in the City; and WHEREAS, the City has retained Ehlers & Associates, Inc., in Roseville, Minnesota ("Ehlers") as its independent financial advisor and is therefore authorized to solicit proposals in accordance with Minnesota Statutes, Section 475.60, Suddivision 2(9); NOW, THEREFORE, BE IT RESOLVED by the City Council ofHoplGns, Minnesota, as follows: I. 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 7:30pm on November 19,2002, for the purpose of considering sealed proposals for, and awarding the sale of the Bonds. The City . Clerk, or designee, shall open proposals at the time and place specified in such Terms of Proposal. 3. Official Statement. In eOlmection 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 thc Bonds and to execute and deliver it on behalf of the City upon its completion. Adopted by the City Council of the City of Hopkins held this 5th day of November, 2002. Eugene Maxwell, Mayor ATTEST: Ten"y Obenllaier, City Clerk . . City of Hopkins Hopkins HRA Pre Sale Report November 5,2002 Proposed Issue: $10,980,000 Public Facility Lease Revenue Bonds (Public Works and Fire Station Facility) Purpose: Pay for costs of demolition of existing public works facility and constmction of a new fire station, public works facility, and associated on-site street and parking area relocation. Description: Lease revenue bonds are sold by the HRA, which will also own the new facilities. The security for the bonds is derived solely from lease payments from the City which are subject to an mmual appropriation tax levy. The bonds will be sold as Aaa insured bonds, which will lower overall costs to the project by 535,000 per year. Without the insurance, the interest rates would be higher and the total bond amount would be higher in order to fund a debt service reserve out of bond proceeds. Term: 20 years with the final payment on February I, 2023. The payment in 2003 is approximately 5550,000 . with an increase for taxes payable in 2004 Discussion Issues: Bonds can be called (pre-paid) on February I, 2013 The bonds are subject to the City's net debt limit, which is 2% of taxable market value. After the sale of these bonds, net debt remaining will be approximately $7M. Only debt supported purely by taxes are subject to net debt. The project costs listed in the attached cash flow is anticipated to earn $70,000 in interest earnings for a total project cost of51O,619,000. Schedule: Pre Sale Review: November 5, 2002 Distribute Official Statement: Week of November 4,2002 Conference with Rating Agencies: Week of November 11, 2002 Bond Sale by HRA and Approval of Lease by City Council: November 19, 2002 Estimated Closing Date: December 12, 2002 Attachments: Sources and Uses of Funds Proposed Debt Service Schedule Resolution authorizing Ehlers to proceed with bond sale . 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II> <11 000000000000000000000 :J C UJ ~~~~~~~~~~~~~~~~~~~~~ ::J UJ I.J En; ~~~~~~~~~~~~~~~~~~~~~ UJ 0 <( 11l i;'C NNNNNNNNNNNNNNNNNNNNN ClJ E ~ s:: "0 ClJ .0 tl. 0"0 UJ .x :I .... c.. UJ c .!!! a. (Jl 0 ~ I: .....0 UJ . 0 0 0 (Jl .... ::I: 0 ;;:; ~ ~"<t~<D~COmO"-NM~~<D~romO..-N 'i: ID > 0 UJ~ ..0 U <11 ODOOOOO~~~~~~~~~~NNN - 0 ~>- 00000000000000000000 D.Q> "D 0 !Xl NNNNNNNNNNNNNNNNNNNN c~ ~ en 0 o (]) ra >. 0 () n~ 0. - ~I- <l.> ..... .... U tt't ~ . City of Hopkins, Minnesota Pre Sale Report November 5,2002 Proposed Issue: $2,4900,000 General Obligation Tax Increment Financing Bonds. Series 2002A Purpose: Fund a portion of the public improvements related to Highway 7 upgrade east of Highway 100. Description: The public improvements will be funded with tax incremcnts from District No. ] 1. Evcn with the potential reduction in increment due to the demolition of the North Annex, debt service coverage from the district is expected to exceed ]25%. Term: 20 years with the final payment on February L 2023. Discussion Issues: Bonds can be called (pre-paid) on February], 20] 3 Schedule: . Pre Sale Review: November 5, 2002 Distribute Official Statement: Week of November 4,2002 Conference with Rating Agencies: Week of November 11, 2002 Bond Sale by City Council and Pledge Agreement ofTIF by HRA: November] 9,2002 Estimated Closing Date: December 12,2002 . N 0 0 ~ . ~ - ~ ~ ~#~~~*~~*#~~~***~**~ ell ~~~~ro~~~~~~~~ro~ro~o~~ OJ ~~NNNNNNNNNNNNNNN~NN ~ ~~~~~~~~~~~~~~~~~~~~ ell > 0 U .... 00000000000000000000 00000000000000000000 "'C "';' 00000000000000000000 ell N 00000000000000000000 - UlL._ ~~~~~~~~~~~~~~~~~~~~ QI - U ~~NNNNNNNNNNNNNNNNNN a. 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Description: City's share of annual debt service will be approximately $60,000 to $65,000 per year beginning with taxes payable in 2003. The assessments for the Lot 500/600 Project were first payable in 2002 over 10 years at 7% interest and the 2001 Street and Utility Project will be payable over tell years beginning in 2003 at 7%. If significant prepayments are received in the next several years, the City's share of debt service may increase due to lower than expected interest income. Term: 10 years with the final payment on February 1, 2013. . Discussion Issues: Bonds can be called (pre-paid) on February 1,2010. Schedule: Pre Sale Review: November 5,2002 Distribute Official Statement: Week of November 4,2002 Conference with Rating Agencies: Week of November 11, 2002 Bond Sale by City Council: November 19, 2002 Estimated Closing Date: December 12, 2002 e . . 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