CR 05-005 Call Bond-Meadow creek
CITY OF
~
December 27, 2004
HOPKINS
Council Report 05-005
AUTHORIZE CALL OF A SERIAL BOND FOR
MEADOW CREEK CONDOMINIUM PROJECT AREA ONE
Proposed Action
Staff recommends approval of the following motion: Adopt Resolution No. 05-002 authorizing the
redemption of callable Taxable General Obligation Housing Improvement Bond, Series 1995, for the
Meadow Creek Condominium project.
Adoption of this motion will result in the bonds being called on February 1,2005.
Overview
The City of Hopkins issued Taxable General Obligation Housing Improvement bonds, Series 1995 in 1995.
Seven serial bonds issued are callable. The cost of calling one of the callable bonds is $55,000. The debt
service fund for these bonds has the capacity to call the bond this year and continue having available funds
for future debt and interest payments. The savings of interest on this bond is $4,125. The lost earning
potential of using the funds to call the bond is approximately $1,300. This is a net savings of approximately
$2,800.
Primarv Issues to Consider
The finance plan for the housing improvement project includes paying the association any excess fees
collected after payment of principal, interest and related costs of the bonds. Currently the city has collected
excess fees to enable one bond to be called early, eliminating one year's interest for this bond. In addition to
this savings, the city will be able to step up the bond payment schedule by one year, having an over all
savings impact of $51 ,000 by 2011. The bond to be called this year has an interest rate of 7.5% and matures
on February 1,2006. By redeeming this bond we are saving the difference between what finance can earn on
the investment of the principal amount ofthe bonds and what the interest rate on the bonds is. Currently,
investments are earning on average 2.5% with long-term investments earning up to 3% interest. As stated
previously, the approximate savings' is $2,800.
The unforeseen future rate of collection is the risk variable involved with the early redemption of this bond.
The current collection rate for this project is high at 98%. In the event that collections decrease in future
years, there will be a fund balance that comprises 25% of any debt service payment to help offset a bad
collection year. By calling this bond early, the Meadow Creek Association will inherit a greater amount of
funds at the end of the debt service payments, allowing for future improvements to the Meadow Creek
Condominiums.
Staff Recommendation
Finance recommends adopting the resolution redeeming the callable bond described therein.
Supportin2 Information
. Resolution No. 05-002
d~'q~k.u--
Christine M Harkess, CPA, CGFM
Finance Director
CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
RESOLUTION 05-002
RESOLUTION PROVIDING FOR THE CALL OF $55,000 TAXABLE GENERAL
OBLIGATION HOUSING IMPROVEMENT BOND, SERIES 1995
WHEREAS, the City Council of the City of Hopkins, Minnesota has determined that it is desirable
to redeem the City's $55,000 of callable Taxable General Obligation Housing Improvement
Bonds, Series 1995; and
WHEREAS, the City has identified the bond as CUSIP #439866PB4 dated issue of September 1,
1995;
NOW, THEREFORE, BE IT RESOLVED by the City Council of Hopkins, Minnesota, as follows:
1. Authorization: The City Council hereby authorizes Bankers Trust to redeem in full the
callable Taxable General Obligation Housing Improvement Bond, Series 1995, dated
September 1, 1995, as described above.
2. Terms of the Bond. The terms and conditions of the Bond allow for the call of the serial
bond described above.
3. Intent. It is the intent of the City of Hopkins to call such bond as it deems appropriate and
desirable.
Adopted by the City Council of the City of Hopkins held this 4th day of January, 2005.
Eugene Maxwell, Mayor
ATTEST:
Terry Obermaier, City Clerk