CR 08-108 Authorize Call of a Serial Bond for Meadowcreek Condo Project Area OneNovember 24, 2008
AUTHORIZE CALL OF A SERIAL BOND FOR
MEADOW CREEK CONDOMINIUM PROJECT AREA ONE
Council Report 2008 -108
Proposed Action
Staff recommends approval of the following motion: Adopt Resolution No. 2008 -66 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, 2009.
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 $80,000. 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 net savings of interest on this bond is approximately $9,600.
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. In 2004 the city had collected
excess fees to enable one bond payment to be called early thereby eliminating two interest payments for this
bond issue. In addition to this savings, the city will be able to step up the bond payment schedule by one
year, having an overall savings impact of $51,000 by 2011. The bond to be called this year has an interest
rate of 7.9% and matures on February I, 2010. 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 on average 3.5% with long -term investments earning up to
3% interest. As stated previously, the approximate savings is $9,600.
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.
Supporting Information
• Resolution No. 2008 -066
Christine M Harkess, CPA, CGFM
Finance Director
Financial Impact: $ 51,000 savings overall Budgeted: Y X N Source: Spec Assmnts
Related Documents (CIP, ERP, etc.): Notes:
ATTEST:
CITY OF HOPKINS
HENNEPIN COUNTY, MINNESOTA
RESOLUTION 2008 -066
RESOLUTION PROVIDING FOR THE CALL OF $80,000 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 $80,000 of callable Taxable General Obligation Housing Improvement
Bonds, Series 1995; and
WHEREAS, the City has identified the bond as CUSIP #439866 PF5 (185328622) dated issue of
September I, 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.
Terry Obermaier, City Clerk
(ate
Adopted by the City Council of the City of Hopkins held this day of December 2008.
Eugene Maxwell, Mayor
-.