CR 03-178 Call of Bond-Meadow Creek Condo....~ _ GyTY Ofi
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December 16, 2003 H o P K ti N s Council Report 03-17$
---- AUTHORIZE CALL OF A SERIAL BOND FOR MEADOW CREEK CONDOMINI[TM
PROJECT AREA ONE
Proposed Action
Staff recommends approval of the following motion: Adopt Resolution No. 03-10$ authorizing the
redemtion 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, 2004.
Overview
The City of Hopkins issued Taxable General Qbligation Housing Improvement bonds, Series 1995 in 1995.
Eight serial bonds issued are callable. The cost of calling one of the callable bonds is $50,000. 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 $3,740. 'The lost earning
potential of using the funds to call the bond is approximately $600. This is a net savings of approximately
$3,100.
Primary 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 years 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 20 i 1. The bond to be called this year has an interest rate of 7.4% and matures
on February 1, 2005. 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 $3, i 00.
The unforeseen firture rate of collection is the risk variable involved with the early redemption of this bond.
The current collection rate for this project is high at 98%. In the event that collections decrease in future
years, there will be a fund balance that comprises 25% of any debt service payment to help offset a bad
collection year. By calling this bond early, the Meadow Creek Association will inherit a greater amount of
funds at the end of the debt service payments, allowing for future improvements to the Meadow Creek
Condominiums.
Staff Recommendation
Finance recommends adapting the resolution redeeming the callable bond described therein.
Supporting Information
• Resolution No. 03-10$
Lori Yager
Finance Director
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,_ CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
RESOLUTION 03-108
RESOLUTION PROVIDING FOR THE CALL OF $50,000 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 $50,000 of callable Taxable General Obligation Housing Improvement
Bonds, Series 1995; and
WHEREAS, the City has identified the bond as CUSIP #439866PA(6) dated issue of September 1,
1995;
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 foil 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
band 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, 2003.
ATTEST:
Terry Obermaier, City Clerk
Eugene Maxwell, Mayor