VII.1. Authorize Sale of $2,350,000 General Obligation Refunding Bonds, Series 2020B; BishopOctober 6, 2020 Council Report 2020-072
AUTHORIZE THE SALE OF $2,350,000 GENERAL
OBLIGATION REFUNDING BONDS, SERIES 2020B
Proposed Action
Staff recommends approval of the following motion Adopt Resolution No. 2020-051 Providing for the
Sale of $2,350,000 General Obligation Refunding Bonds, Series 2020B.
Adoption of this motion will result in 2020B GO Refunding Bonds being offered for sale on November
17, 2020. 2020B Bonds will refund 2012B General Obligation Bonds.
Overview
The City of Hopkins issued 2012B GO Bonds for the purposes of street improvements, water system
improvements, sewer system improvements, storm sewer improvements and equipment purchases. The
debt service is paid from taxes, special assessments and enterprise fund revenues. The refunding is
expected to generate a net present value savings of $63,121.
The City 2012B bonds would be refunded by GO Refunding Bonds, Series 2020B. The 2020B Bonds
will be issued for a term of 8 years, the same as existing terms. The 2020B bonds will be considered bank
qualified, since the original bonds were bank qualified.
Primary Issues to Consider
• Proposed interest savings as a result of refunding the bonds.
Staff Recommendation
Staff recommends adopting the resolution providing for the sale of 2020B GO Refunding Bonds.
Supporting Information
• Resolution No. 2020-051
• Pre-Sale Report
___________________________
Nick Bishop, CPA
Finance Director
Financial Impact: estimated savings of $63,121 over 8 years ____ __ Budgeted: _No_
Source: Enterprise revenue, special assessments & property taxes ______________
Related Documents (CIP, ERP, etc.): __N/A___ ______ Notes: _____
Resolution No. 2020-051
Councilmember _________________ introduced the following resolution and moved its adoption:
Resolution Providing for the Sale of
$2,350,000 General Obligation Refunding Bonds, Series 2020B
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 $2,350,000 General Obligation Refunding Bonds, Series
2020B (the "Bonds"), to finance a current refunding of the City’s General Obligation Bonds, Series
2012B 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 November 17, 2020, 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 6th day of October, 2020.
_____________________________________________
City Clerk
October 6, 2020
Pre-Sale Report for
City of Hopkins, Minnesota
$2,350,000 General Obligation Refunding Bonds,
Series 2020B
Prepared by:
Ehlers
3060 Centre Pointe Drive
Roseville, MN 55113
Advisors:
Stacie Kvilvang, Senior Municipal Advisor
Jason Aarsvold, Senior Municipal Advisor
Keith Dahl, Financial Specialist
BUILDING COMMUNITIES. IT’S WHAT WE DO.
Presale Report
City of Hopkins, Minnesota
October 6, 2020
Page 1
Proposed Issue:
$2,350,000 General Obligation Refunding Bonds, Series 2020B
Purposes:
The proposed issue includes financing for the following purposes:
To refinance the 2012B Bonds
Cur Ref 2012B – Equipment and 2012 Road Reconstruction Projects. Debt service will
be paid from ad valorem property taxes and special assessments against benefitting
property owners.
Interest rates on the obligations proposed to be refunded are 2.0% to 2.2%. The
refunding is expected to reduce debt service expense by approximately $146,000 in
the years 2022 - 2028. The Net Present Value Benefit of the refunding is estimated
to be $63,121, equal to 2.68% of the refunded principal.
This refunding is considered to be a Current Refunding as the obligations being
refunded are either callable (pre-payable) now, or will be within 90 days of the date
of issue of the new Bonds.
Authority:
The Bonds are being issued pursuant to Minnesota Statutes, Chapters:
412 – Equipment Portion
429 – Improvement Portion
444 – Utility Portion
475 – General bonding authority
The Bonds will be general obligations of the City for which its full faith, credit and taxing
powers are pledged.
Term/Call Feature:
The Bonds are being issued for a term of 8 years. Principal on the Bonds will be due on
February 1 in the years 2022 through 2028. Interest is payable every six months beginning
August 1, 2021.
The Bonds will be subject to prepayment at the discretion of the City on February 1, 2027 or
any date thereafter.
EXECUTIVE SUMMARY OF PROPOSED DEBT
Presale Report
City of Hopkins, Minnesota
October 6, 2020
Page 2
Bank Qualification:
“Deemed Designated” Bank Qualified – Because the Bonds currently refund an issue that was
designated bank qualified when issued, the City is able to designate the Bonds as “bank
qualified” obligations. Bank qualified status broadens the market for the Bonds, which can
result in lower interest rates.
Rating:
The City’s most recent bond issues were rated by S&P Global Ratings. The current ratings on
those bonds are “AA+”. 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 viable options available to finance these types 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:
We will solicit competitive bids for the purchase of the Bonds from underwriters and banks.
We will include an allowance for discount bidding in the terms 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 reduce your borrowing amount.
Premium Pricing:
In some cases, 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 underwriter of the bonds will retain a portion of this reoffering premium as their
compensation (or “discount”) but will pay the remainder of the premium to the City. The
amount of the premium varies, but it is not uncommon to see premiums for new issues in the
Presale Report
City of Hopkins, Minnesota
October 6, 2020
Page 3
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 net premium to reduce the size of
the issue for the project. The resulting adjustments may slightly change the true interest cost
of the issue, either up or down.
The amount of premium can be restricted in the bid specifications. Restrictions on premium
may result in fewer bids, but may also eliminate large adjustments on the day of sale and
unintended impacts with respect to debt service payment. Ehlers will identify appropriate
premium restrictions for the Bonds intended to achieve the City’s objectives for this financing.
Review of Existing Debt:
We have reviewed all outstanding indebtedness for the City and find that the City’s 2013A is a
candidate for refinancing along with anticipated debt to be issued in early 2021.
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 tax-exempt 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 defined in the Tax
Certificate prepared by your Bond Attorney and provided at closing. You have retained Ehlers
to assist you in complying with these rules.
Investment of Bond Proceeds:
To maximize interest earnings we recommend using an SEC registered investment advisor to
assist with the investment of bond proceeds until they are needed to pay project costs. Ehlers
is a registered investment advisor, and can assist the City in developing an appropriate
investment strategy if needed.
Presale Report
City of Hopkins, Minnesota
October 6, 2020
Page 4
Risk Factors:
Special Assessments: If the City receives a significant amount of pre-paid assessments or
does not levy the assessments, it may need to increase the levy portion of the debt service to
make up for lower interest earnings than the expected assessment interest rate.
Current Refunding: The Bonds are being issued to finance a current refunding of prior City
debt obligations. Those prior debt obligations are callable on or after February 1, 2021.The new
Bonds will not be pre-payable until February 1, 2027.
This refunding is being undertaken based in part on an assumption that the City does not
expect to pre-pay off this debt prior to the new call date and that market conditions warrant
the refunding at this time.
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, but the 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.
Bond Counsel: Kennedy & Graven, Chartered
Paying Agent: Bond Trust Services Corporation
Rating Agency: S&P Global Ratings (S&P)
Summary:
The decisions to be made by the City Council are as follows:
Accept or modify the finance assumptions described in this report
Adopt the resolution attached to this report.
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
October 6, 2020
Page 5
Pre-Sale Review by City Council: October 6, 2020
Due Diligence Call to review Official Statement: Week of November 9,
2020
Distribute Official Statement: Week of November 2,
2020
Conference with Rating Agency: Week of November 9,
2020
City Council Meeting to Award Sale of the Bonds: November 17, 2020
Estimated Closing Date: December 3, 2020
Redemption Date for the Obligations Being Refunded: February 1, 2021
Attachments
Estimated Sources and Uses of Funds
Estimated Proposed Debt Service Schedule and Debt Service Comparison
Resolution Authorizing Ehlers to Proceed with Bonds Sale
ONTACTS
Stacie Kvilvang, Senior Municipal Advisor (651) 697-8506
Jason Aarsvold, Senior Municipal Advisor (651) 697-8512
Keith Dahl, Financial Specialist (651) 697-8595
Silvia Johnson, Public Finance Analyst (651) 697-8580
Alicia Gage, Senior Financial Analyst (651) 697-8551
The Preliminary Official Statement for this financing will be sent to the City Council at
their home or email address for review prior to the sale date.
PROPOSED DEBT ISSUANCE SCHEDULE
EHLERS’ CONTACTS
City of Hopkins, MN
$2,350,000 General Obligation Refunding Bonds, Series 2020B
Issue Summary - Current Refunding 2012B Only
Assuming Current GO BQ "AA+" Market Rates
Total Issue Sources And Uses
Dated 12/03/2020 | Delivered 12/03/2020
Cur Ref
2012B -
Equip
Cur Ref
2012B - Ice
Resurfacer
Equip
Cur Ref
2012B - Imp
Portion
Cur Ref
2012B -
Water
Portion
Cur Ref
2012B -
Sewer
Portion
Cur Ref
2012B -
Storm
Sewer
Portion
Issue
Summary
Sources Of Funds
Par Amount of Bonds $95,000.00 $20,000.00 $1,615,000.00 $380,000.00 $80,000.00 $160,000.00 $2,350,000.00
Transfers from Prior Issue Debt Service Funds --85,000.00 ---85,000.00
Total Sources $95,000.00 $20,000.00 $1,700,000.00 $380,000.00 $80,000.00 $160,000.00 $2,435,000.00
Uses Of Funds
Total Underwriter's Discount (1.200%)1,140.00 240.00 19,380.00 4,560.00 960.00 1,920.00 28,200.00
Costs of Issuance 2,102.13 442.56 35,736.16 8,408.51 1,770.21 3,540.43 52,000.00
Deposit to Current Refunding Fund 90,000.00 20,000.00 1,645,000.00 365,000.00 80,000.00 150,000.00 2,350,000.00
Rounding Amount 1,757.87 (682.56)(116.16)2,031.49 (2,730.21)4,539.57 4,800.00
Total Uses $95,000.00 $20,000.00 $1,700,000.00 $380,000.00 $80,000.00 $160,000.00 $2,435,000.00
Series 2020B GO Ref CR 20 | Issue Summary | 10/ 1/2020 | 8:56 AM
City of Hopkins, MN
$2,350,000 General Obligation Refunding Bonds, Series 2020B
Issue Summary - Current Refunding 2012B Only
Assuming Current GO BQ "AA+" Market Rates
Debt Service Schedule
Date Principal Coupon Interest Total P+I Fiscal Total
12/03/2020 -----
08/01/2021 --6,217.74 6,217.74 -
02/01/2022 430,000.00 0.200%4,702.50 434,702.50 440,920.24
08/01/2022 --4,272.50 4,272.50 -
02/01/2023 320,000.00 0.250%4,272.50 324,272.50 328,545.00
08/01/2023 --3,872.50 3,872.50 -
02/01/2024 315,000.00 0.250%3,872.50 318,872.50 322,745.00
08/01/2024 --3,478.75 3,478.75 -
02/01/2025 310,000.00 0.350%3,478.75 313,478.75 316,957.50
08/01/2025 --2,936.25 2,936.25 -
02/01/2026 315,000.00 0.450%2,936.25 317,936.25 320,872.50
08/01/2026 --2,227.50 2,227.50 -
02/01/2027 330,000.00 0.600%2,227.50 332,227.50 334,455.00
08/01/2027 --1,237.50 1,237.50 -
02/01/2028 330,000.00 0.750%1,237.50 331,237.50 332,475.00
Total $2,350,000.00 -$46,970.24 $2,396,970.24 -
Yield Statistics
Bond Year Dollars $9,498.61
Average Life 4.042 Years
Average Coupon 0.4944959%
Net Interest Cost (NIC)0.7913814%
True Interest Cost (TIC)0.7966609%
Bond Yield for Arbitrage Purposes 0.4936441%
All Inclusive Cost (AIC)1.3690942%
IRS Form 8038
Net Interest Cost 0.4944959%
Weighted Average Maturity 4.042 Years
Series 2020B GO Ref CR 20 | Issue Summary | 10/ 1/2020 | 8:56 AM
City of Hopkins, MN
$2,350,000 General Obligation Refunding Bonds, Series 2020B
Issue Summary - Current Refunding 2012B Only
Assuming Current GO BQ "AA+" Market Rates
Debt Service Comparison
Date Total P+I Net New D/S Old Net D/S Savings
02/01/2021 -(4,800.00)(85,000.00)(80,200.00)
02/01/2022 440,920.24 440,920.24 458,115.04 17,194.80
02/01/2023 328,545.00 328,545.00 344,915.04 16,370.04
02/01/2024 322,745.00 322,745.00 343,815.04 21,070.04
02/01/2025 316,957.50 316,957.50 342,615.04 25,657.54
02/01/2026 320,872.50 320,872.50 346,315.04 25,442.54
02/01/2027 334,455.00 334,455.00 354,815.04 20,360.04
02/01/2028 332,475.00 332,475.00 352,590.00 20,115.00
Total $2,396,970.24 $2,392,170.24 $2,458,180.24 $66,010.00
PV Analysis Summary (Net to Net)
Gross PV Debt Service Savings.....................143,321.08
Net PV Cashflow Savings @ 0.494%(Bond Yield).....143,321.08
Transfers from Prior Issue Debt Service Fund......(85,000.00)
Contingency or Rounding Amount....................4,800.00
Net Present Value Benefit $63,121.08
Net PV Benefit / $2,493,321.08 PV Refunded Debt Service 2.532%
Net PV Benefit / $2,350,000 Refunded Principal...2.686%
Net PV Benefit / $2,350,000 Refunding Principal..2.686%
Refunding Bond Information
Refunding Dated Date 12/03/2020
Refunding Delivery Date 12/03/2020
Series 2020B GO Ref CR 20 | Issue Summary | 10/ 1/2020 | 8:56 AM
City of Hopkins, MN
$2,350,000 General Obligation Refunding Bonds, Series 2020B
Issue Summary - Current Refunding 2012B Only
Assuming Current GO BQ "AA+" Market Rates
Detail Costs Of Issuance
Dated 12/03/2020 | Delivered 12/03/2020
COSTS OF ISSUANCE DETAIL
Municipal Advisor $28,000.00
Bond Counsel $11,000.00
Rating Agency Fee (S&P)$12,000.00
Miscellaneous $1,000.00
TOTAL $52,000.00
Series 2020B GO Ref CR 20 | Issue Summary | 10/ 1/2020 | 8:56 AM