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CR 01-193 Authorize Call Of Serial Bonds In TIF District 1-1 . . . CITY OF ~ December 4,2001 HOPKINS Council Report 01-193 AUTHORIZE CALL OF SERIAL BONDS IN TIF DISTRICT 1-1 Proposed Action Staff recommends approval of the following motion: Adopt Resolution No. 01-091 authorizing the redeemtion of callable General Obligation Redevelopment Refunding Bonds. Series 1993C. in Tax Increment District 1-1. Adoption of this motion will result in the bonds being called on February 1, 2002. Overview The City of Hopkins issued General Obligation Redevelopment Refunding bonds, Series 1993C in 1993. Seven of the serial bonds issued are now callable. The cost of calling four out of the seven callable bonds is $830,000. Tax Increment District 1-1 has the capacity to call these bonds this year and continue operating in a positive cash environment. The savings of interest on these bonds is $123,050. The lost earning potential of using the funds to call the bonds is approximately $78,050. This is a net savings of approximately $45,000. Primarv Issues to Consider The financing of the serial bonds, issued in 1993 from TIP 1-1, was done with the intention of redeeming callable bonds 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 four of the callable bonds and to maintain a healthy balance for future debt service payments. The bonds that are callable have an interest rate of 4.6% and mature on February 1, of each year beginning 2003 thru 2009. By redeeming the first four bonds maturing between 2003 and 2006 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 2% with long-term investments earning up to 4% interest. As stated previously, the approximate savings' is $45,000. The unforeseen cost is the lost opportunity to utilize these funds for pooling in other districts. When the classification rates change and the school district levy changes in 2002, TIP districts will see a decrease in TIP 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 like to accomplish is to decertify TIP district 1-1 earlier than the mandatory decertification date of 2009. By calling these bonds early, we begin the process of accomplishing this goal. If funding shortfalls for other districts becomes an issue we may look at extending TIP district 1-1 to the decertification date of 2009. Staff Recommendation Finance recommends adopting the resolution redeeming the callable bonds described therein. Supportine: Information · ResRlution No. 01- 91 .,.. ! ~ . . . .. . CITY OF HOPKINS HENNEPIN COUNTY, MINNESOTA RESOLUTION 01-091 RESOLUTION PROVIDING FOR THE CALL OF $830,000 GENERAL OBLIGATION REDEVELOPMENT REFUNDING BONDS, SERIES 1993C WHEREAS, the City Council of the City of Hopkins, Minnesota has determined that it is desirable to redeem the City's $830,000 of callable General Obligation Redevelopment Refunding Bonds, Series 1993C; and WHEREAS, the City has identified the bonds as CUSIP #439866MT(8), CUSIP #439866MX(9), CUSIP #439866NA(8) and CUSIP #439866ND(2) dated issue of October 15, 1993; 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 General Obligation Redevelopment Refunding Bonds, Series 1993C, dated October 15, 1993, as described above. 2. Terms of the Bonds. The terms and conditions of the Bonds allow for the call of serial bonds described above. 3. Intent. It is the intent of the City of Hopkins to call such bonds as it deems appropriate and desirable. Adopted by the City Council ofthe City of Hopkins held this 4th day of December, 2001. Eugene Maxwell, Mayor ATTEST: Terry Obermaier, City Clerk