CR 92-16 Taxable General Obligation
December 18, 1991
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council Report 92-16
TAXABLE GENERAL OBLIGATION REFUNDING BOND SERIES 1992
Proposed Action
staff recommends adoption of the following resolution:
Resolution #92-2 approving the sale of $2.875.000 taxable
general obliqation refundinq bond series 1992 city of .
Hopkins. Minnesota.
Authorizing the city Manager and Mayor to execute the
necessary documents for the approval of this resolution will
allow Evensen Dodge to complete the necessary paper work to
facilitate the sale of this bond.
Overview
In 1990, the City sold a taxable, general obligation
redevelopment bond. RepaYment of this bond was with tax
increments generated within the downtown area. The bond
proceeds were designated for miscellaneous redevelopment
activities.
The city's financial consultant, Evensen Dodge, recently met
with staff to discuss a proposal to refund these bonds. The
purpose of this action would be to take advantage of the
lower interest rates which are presently available. Based
on their analysis, they feel that such action could result
in over $146,000 in interest savings over the life of the
issue.
In order to facilitate a refunding, new bonds need to be
sold in order,to payoff the 1990 bonds. In order to
facilitate this action, all that is required by the city
council is to approve the resolution as is presently being
proposed by staff.
Primary Issues to Consider.
o What are the benefits of this action?
o What are the negatives of this action?
o What are the bond issuance costs?
Supportinq Information
o Refunding analysis from Evensen Dodge, Inc.
o Resolution #92-2
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Jamo/s Kerrigay{
Director of Economic Planning
ANALYSIS
Based on the action recommended by staff, the City Council
has the following issues to consider:
o What are the benefits of the action as recommended
by staff?
The overall benefit of this action will be the interest
savings of approximately $146,000 over the life of the
issue. Of this amount, approximately 75% of these interest
savings will be realized in 1993.
It is estimated that the interest rate for the refunding
bond issue would range from 5.0 to 8.25. The present rate
of the existing bond is 8.9 to 9.375.
o What are the negatives of the action as
recommended by staff?
Realistically, the only negative would be that if the city
did undertake a refunding at this time, and interest rates
became lower, there could have been additional interest
savings over and above what would exist presently. However,
it is the opinion of both Evensen Dodge and staff that if
interest rates do drop any more, it will be so insignificant
that it will have minimal impact on any potential interest
savings which could be realized.
o What are the bond issuance costs?
The issuance cost for the refunding issue will be
approximately $60,000. The interest cost savings of
$146,000 takes into account issuance costs.
ALTERNATIVES
The City Council has the following alternatives regarding
this matter.
1. Approve the actions recommended by staff. This
will allow Evensen Dodge and the City to complete
the necessary paperwork to facilitate the sale of
the refunding bond issue.
2. Continue for further information. Although it is
not.a problem continuing this item, if interest
rates would increase, the potential amount of
interest cost savings could be reduced.
3. Deny the action as recommended by staff. With
this action the City will continue to make
payments on the existing 1990 bonds. The city
Council would have the ability to look at a
refunding at a future date if they so desire.
J/JK12181E