CR 03-177 Call of Bond in TIF 1-1G1TY p~
December 16, 2003 H O p K I N S Council Report 03-177
AUTIIOItIZE CALL OF A SERIAL BOND IN TIF DISTRICT 1-1
Proposed Action
Staff recommends approval of the following motion: Ado t Resolution No. 43-107 authorizin the
redeemtion of callable General Obligation Redevelopment Refunding Bond, Series 1993C. in Tax
Increment District 1-1.
Adoption of this motion will result in the bonds being called on February 1, 2004.
Overview
The City of Hopkins issued General Obligation Redevelopment Refunding bonds, Series 1993C in 1993.
The two remaining serial bonds issued are callable. The cost of calling one of the bonds is $650,000. Tax
Increment District 1-1 has the capacity to call this bond this year and continue operating in a positive cash
environment. The savings of interest on this bond is $119,600, The lost earning potential of using the funds
to call the bond is approximately $78,000. This is a net savings of approximately $41,600.
Primary Issues to Consider
The financing of the serial bonds, issued in 1993 from TIF 1-l, was done with the intention of redeeming
callable bands early if enough tax increment revenues are generated in the appropriate amount of time. Tax
Increment Financing District 1-1 has the working capital available to redeem one of the callable bonds and to
maintain a healthy balance for future debt service payments. The bond that is callable has an interest rate of
4.6% and matures on February 1, 2008. By redeeming this bond we are saving the difference between what
finance can earn on the investment of the principal amount of the bonds and what the interest rate on the
bonds is. Currently, investments are earning about 1.2% with long term investments earning up to 3%
interest. As stated previously, the approximate savings' is $41,600.
The unforeseen cost is the lost opportunity to utilize these funds for pooling in other districts. When the
classification rates changed and the school district levy changed in 2002, TIF districts experienced a decrease
in TIF revenues. The state is allowing us to pool districts to meet obligations. Finance has analyzed the
other districts and determined that it is unlikely to have funding shortfalls of any significance in the near
future.
A goal the city would Iike to accomplish is to decertify TIF district 1-1 earlier than the mandatory
decertification date of 2009. By calling this band early, we continue the process of accomplishing this goal.
If funding shortfalls far other districts becomes an issue we may look at extending TIF district I-1 to the
decertification date of 2009.
Staff Recommendation
Finance recommends adopting the resolution redeeming the callable bond described therein.
Supporting_Information
• Resolution No. -107
Lori Yager
. Finance Director
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CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
RESOLUTION 03-107
RESOLUTION PROVIDING FOR THE CALL OF $b54,040 GENERAL OBLIGATION
REDEVELOPMENT REFUNDING BOND, SERIES 1993C
WHEREAS, the City Council of the City of Hopkins, Minnesota has determined that it is desirable
to redeem the City's $650,000 of callable General Obligation Redevelopment Refunding Bond,
Series 1993C; and
WHEREAS, the City has identified the bond as CUSIP #439866NK(6) dated issue of October 15,
1993;
NOW, THEREFORE, BE IT RESOLVED by the City Council of Hopkins, Minnesota, as follows:
Authorization; The City Council hereby authorizes Bankers Trust to redeem in full the
callable General Obligation Redevelopment Refunding Bond, Series 1993C, dated October
15, 1993, 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 16th day of December, ?003.
ATTEST:
Terry Oberrnaier, City Clerk
Eugene Maxwell, Mayor
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