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CR 99-56 Authorizing Sale Of Bonds- Valley Park Condominiums CITY OF March 8, 1999 ~ Council Rpt #99-056 HOPKINS . AUTHORIZE SALE OF BONDS - VALLEY PARK CONDOMINIUMS Pro Dosed Action Staff recommends approval of the following motion: Adopt resolution number 99-018 authorizing the sale of General Obligation Bonds for the Valley Park Housing Improvement Area, With this motion, the bonds will be offered for sale and dated May 1, 1999. Overview The City of Hopkins has the authority to establish housing improvement areas under the Housing Improvement Act (1994 Minnesota Laws, Chapter 587, Article 9, Section 22 through 31) Within a housing improvement area, the City can sell bonds to pay for various improvements to individual housing units and common areas. Those bonds are then repaid through fees imposed on the owners ofthe units. The City has held the necessary public hearings and has authorized the creation of the Valley Park Housing Improvement Area and established the fees. An executed development agreement between the Association and the City requires the City to sell bonds before August 1, 1999, subject to unavoidable delays and the City's ability to issue the Bonds under existing market conditions. e Because market conditions are favorable and the construction financing is needed, it is being recommended that the bonds are sold at this time and dated May 1, 1999, Primary Issues to Consider The financing structure has not changed since the establishment of the fees but it will be modified to account for the prepayments received by March 23, 1999. The debt service payments were calculated at 105% to account for any delinquencies which may be experienced. It is the City's financial advisor's recommendation that we ask for a rating from both Standard and Poor's and Moody's for this issue, in part to judge which of these rating agencies will better serve the City in the future. Staff agrees with this recommendation and the costs of the ratings will be paid for with project revenue. SUDDortiDl~ Information e ._. ._. _'___0_.__.._'_ CITY OF HOPKINS HENNEPIN COUNTY, MINNESOTA . RESOLUTION NO. 99-018 RESOLUTION PROVIDING FOR THE SALE OF $1,575,000 TAXABLE GENERAL OBLIGATION HOUSING IMPROVEMENT AREA BONDS, SERIES 1999A WHEREAS, the City Council of the City of Hopkins, MN, has determined that it is necessary and desirable to issue the Cityts $1,575,000 Taxable General Obligation Housing Improvement Area Bonds, Series 1999A to finance improvements in Housing Improvement Area No.3; and WHEREAS, the City has retained Ehlers & Associates, Inc., in Roseville, Minnesota ("Ehlers It) as its independent financial advisor for the Bonds and is therefore authorized to solicit proposals 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, MN., as follows: Authorization: Findings The City Council hereby authorizes Ehlers to solicit proposals for the sale of the Bonds. Meeting: Proposal Opening. The City Council shall meet at the time and place specified in the Terms of Proposal for the purpose of considering sealed proposals for and awarding the sale of, the Bonds. The City Clerk, or designee, shall open proposals at the time and place specified in such . Terms of Proposal. Terms of Proposal. The terms and conditions of the Bonds and the sale thereof are fully set forth in Bonds Sale Report dated March 16, 1999. Official Statement In connection with the 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, Adopted this 16th day of March, 1999. Charles D. Redepenning, Mayor Attest: Terry Obermaier, City Clerk e -,- , . BOND SALE REPORT $1,575,000 Taxable General Obligation Housing Improvement Area Bonds, Series 1999A . City of Hopkins March 16, 1999 . e I EHLERS LEADERS I N PUBLI~ ,INANCF 1001 East Chicago Avenue, SUite 135 Napervllle, IL 60540 & ASSOCIATFS INC 630,355 6100 fax 630,355,6177 www,ehlers-Inc.com Offices In Rosevllle, MN, Brookfield, WI and Naperviile, IL .. -. " -., ,: ~ 7,;,~'..= ',_ '_, - . , I. '" ,- .. . _,:-' '..,,,;,_'1._ __,_ "->-'.'_,.,,,~., -._'':'-'' _,-~,_";',_,._ ,~7""'" . n.<'. .>, "'_"''':_.~.',_'':~' 0- ,'~:'-'~'l ,~-..., .~. . , o. . ~ __ '._'_'_ .',. . Bond Sale Reporr - 1999A Bonds OVERVI EW This report describes the proposed plan for the City of Hopkins to issue $1,575,000 Taxable General Obligation Housing Improvement Area Bonds, Series 1999A (the "Bonds" or the "Series 1999A Bonds"). This report has been prepared by Ehlers & Associates in consultation with City Staff and bond counsel. This report deals with: . Purpose and components of the bond issue. . Other considerations in issuing bonds. . Market conditions. . Issuing process. PROPOSED FINANCE PLAN . Summary The Bonds are being issued to finance improvements to be undertaken in the City's Housing Improvement Area No.3 (the "Area"). The ordinance establishing the Area was adopted by the City Council on January 5, 1999. On March 2, 1999, the City Council approved an agreement with the Valley Park Condominium Association to provide funds to make the following improvements: Mansard Replacement Replace Patio Doors and Rails Replace Downspouts Upgrade Entries Repair and Paint Stucco Timbers Sidewalk Replacement Rebuild Parking Lots e Construct Trash Buildings Rehabilitate Garages Page I -- ------- Bond Sale Report - 1999A BO/zds . Financing these improvements requires a bond issue in the amount of $1,575,000 and the following sources and uses of funds: SOURCES OF FUNDS USES OF FUNDS Par Amount of Bonds $1,575,000 Project Costs $1,429,650 Up-Front Revenue 0 Costs of Issuance 35,000 Discount 31,500 Capital ized Interest 78,850 Debt SeNice ReseNe 0 Other 0 Total Sources $1,575,000 Total Uses $1,575,000 The amount of the Bonds will be reduced using the revenues collected during the prepayment period. A more complete description of the project can be found in the Plan for Housing Improvement Area NO.3. Fees Revenue to pay debt service on the Bonds will come from the fees imposed upon e housing units in the Area. On January 5, 1999, the City Council adopted the resolution imposing the fees and the statutory period to petition for veto of the fee resolution has lapsed. The fees will be levied in 1999 for initial collection with taxes payable in 2000. The fees will be levied annually through 2019. The City allowed the total fee for each housing unit to be prepaid in full within thirty (30) days of the effective date of the resolution imposing the fees. All units not exercising the ability to prepay will pay fees on an annual basis. The annual fee for each unit represents the payment of the total fee plus interest in equal annual installments over a 20-year period. The rate of interest used to determine the annual fee will be equal to the average interest rate on the Bonds plus an amount needed to produce total fee revenue collected from all units in each year that equals 105% of the average annual debt service on the Bonds. The interest rate on the annual fees will be set based on the results of sale. Structure The payment of principal on the Bonds has been structured to produce relatively constant annual debt service over the life of the Bonds. The repayment of principal is set to lag one year behind the collection of fee revenues. The initial collection of fees occurs in 2000. The first principal payment is due on February 1, 2002. This structure allows for the accumulation of a surplus in the debt e service fund, providing a buffer against delinquencies in fee payments. The preliminary projection of debt service and revenues for the Bonds appears in Attachment 1. Page 2 Bond Sale Report - 1999A Bonds . Terms of Issue The Bonds are issued under the authority of special legislation for the creation of housing improvement areas in the City of Hopkins, Minnesota Laws 1994, Chapter 587, Article 9, Sections 22 through 33. The Bonds are general obligations of the City, backed by its full faith, credit and taxing powers to repayment. Sale Date April 6, 1999 Bonds Dated May I, 1999 First futerest Payment February I, 2000 Subsequent futerest Payments August 1 and February 1 Principal Payments February 1 2002 through 2021 Call Provision Bonds maturing in 2010 through 2021 callable on February 1, 2009 and any . date thereafter. The complete Sale Details for the Bonds are described in Attachment 2. RATING On the City's behalf, we will request that the Bonds be rated by Moody's Investors Service and Standard & Poor's. For the last issue of housing improvement bonds (1997), both agencies assigned comparable ratings of Moody's Ai and S&P A+. We do not anticipate that the 1999A Bonds will affect the City's rating. Since the City has not been rated in two years, the rating process will produce current insights about the strengths and weaknesses of Hopkins as a credit. We will use this information to develop a more extensive rating presentation process in conjunction with the next issuance of bonds in July. OTHER CONSI DERA lIONS Taxable Bonds . futerest on the Series 1999A Bonds will not be exempt from taxation as income. The taxable status of the Bonds will affect the interest rates and other provisions of the issue. Page 3 Bond Sale Report - /999A Bonds . Bank Qualified Bonds As taxable obligations, the City will not designate the Series 1999A Bonds as qualified tax-exempt obligations pursuant to Section 265 of the Internal Revenue Code of 1986. This debt does not count against the $10,000,000 limit on the amount of bank qualified bonds that can be issued by the City in calendar year 1999. Arbitrage Rebate As taxable obligations, the Bonds are not subject to arbitrage rebate and reporting. This debt does not count against the $5,000,000 cap for the small issuer exemption from arbitrage rebate for the City in calendar year 1999. Global Book Entry The Bonds will be global book entry. As "paper less" bonds, you will avoid the costs of bond printing and annual registrar charges. The Paying Agent will invoice you for the interest semi-annually and on an annual basis for the principal coming due. You will be charged only for paying agentJtransfer agent services provided by the bank. e Continuing Disclosure Regulations of the Securities and Exchange Commission on the continuing disclosure of municipal securities apply to long-term securities with an aggregate principal amount of $1 ,000,000 or more. This issue will be exempt from continuing disclosure. Since aggregate amount of this issue is over $1,000,000 and the City has more than $10,000,000 in total municipal obligations outstanding, you will be obligated to comply with Full Continuing Disclosure requirements for each issue as required by paragraph (b)(5) of Rule 15c2-12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934. You will be required to provide certain financial information and operating data relating to the City annually and to provide notices of the occurrence of certain material events. The specific nature of the Undertaking, as well as the information to be contained in the notices of material events will be set forth in the Continuing Disclosure Certificate that you will enter into at the time of closing for this issue. You are responsible for reporting any of the material events listed below and in the Undertaking. 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; . 3. Unscheduled draws on debt service reserves reflecting financial difficulties; Page 4 BOlld Sale Report ~ 1999A BOllds . 4. Unscheduled draws on credit enhancements reflecting financial difficulties; 5, Substitution of credit of liquidity providers, or their failure to perform; 6. Adverse tax opinions or events affecting the tax-exempt status of the securities; 7. Modification to rights of holders of the Securities; 8. Securities calls; 9. Defeasances; 10. Release, substitution or sale of property securing repayment of the Securities; II. Rating changes; 12. Failure to provide annual financial information as required; and 13. Other material events. MARKET CONDITIONS Current interest rates provide an excellent environment for issuing the Bonds. The Bond Buyer's 20- Year G.O. Index (BBI) has remained around the 5.00% level since late August. Rates in 1998 continued a multi-year downward trend. During the year, the BBI fell to 4.82%, the lowest point in almost 30 years. The graph below shows the trends for e tax-exempt rates in the BBI since 1990. Depending on market conditions, taxable interest rates are typically 1.50% to 2.00% higher than tax-exempt rates for the same issue and credit. Bond Buyer's Index 20-Year G.O. Bonds 8.00% 7.50% 7.00% 6.50% 6.00% 5.50% 5.00% 4.50% 0 ..... N <"l '<t ICl \D ..... co 11I 11I 11I 11I 11I 0\ 11I O'l O'l 11I 11I . O'l O'l O'l 0\ O'l 0\ 11I C'I C'I C'I ,...., ,...., ,...., ,...., ,...., ,...., ,...., ..... ..... ,...., Page 5 Bond Sale Report - 1999A BOllds . ISSUING PROCESS Following is a tentative schedule for the steps in the issuing process. March 16, 1999 City Council adopts resolution calling for the sale of the Bonds. Week of March 22 Distribute Official Statement Week of March 29 Receive bond rating April 6 Bond sale May 3 Bond closing (estimated) . N :\MinnsotaIHOPKINS\98debllPre_1999A wpd . Page 6 PRELIMINARY - For Discussion Only . City of Hopkins ATTACHMENT 1 G.O. Housing Improvement Area Bonds, Series 1999A Year 1 00.0% Fiscal Ending $1,575,000 P&I Fee 0% Year 01-Feb Principal Rate Interest P&I 105% Revenue Balance 1999 2000 0 76,462,50 76,463 76,670 208 2000 2001 0 5,50% 101,950.00 101,950 107,048 151,603 49,861 2001 2002 40,000 5.55% 101,950,00 141,950 149,048 151,603 59,514 2002 2003 45,000 5,60% 99,730,00 144,730 151,967 151,603 66,387 2003 2004 45,000 5,65% 97,210,00 142,210 149,321 151,603 75,780 2004 2005 50,000 5,75% 94,66750 144,668 151,901 151,603 82,71 5 2005 2006 55,000 5-85% 91,792,50 146,793 154,132 151,603 87,526 2006 2007 55,000 5,95% 88,575,00 143,575 150,754 151,603 95,554 2007 2008 60,000 6,05% 85,30250 145,303 152,568 151,603 101,854 2008 2009 65,000 6,15% 81,672,50 146,673 154,006 151,603 106,785 2009 2010 65,000 6,25% 77,675,00 142,675 149,809 151,603 115,713 2010 2011 70,000 6.35% 73,612,50 143,613 150,793 151,603 123,703 2011 2012 75,000 6-45% 69,16750 144,168 151,376 151,603 131,139 2012 2013 80,000 6,55% 64,330.00 144,330 151,547 151,603 138,412 2013 2014 85,000 6,60% 59,090,00 144,090 151,295 151,603 145,925 2014 2015 90,000 6,65% 53,480,00 143,480 150,654 151,603 154,048 2015 2016 100,000 6,70% 47,495,00 147,495 154,870 151,603 158,156 2016 2017 105,000 6.75% 40,795,00 145,795 153,085 151,603 163,964 2017 2018 110,000 6.80% 33,70750 143,708 150,893 151,603 171,859 2018 2019 120,000 6,85% 26,227.50 146,228 153,539 151,603 177,235 2019 2020 125,000 6.90% 18,007,50 143,008 150,158 151,603 185,830 e 2020 2021 135,000 6,95% 9,382.50 144,383 151,602 41 ,448 1,575,000 1,492,28250 3,067,283 ' 3,140,361 3,108,730 Dated: 05/01/99 Discount: 31,500.00 Tolal Fees: 1 ,575,000 Firsllnteresl: 02/01/00 Average Coupon: 6.63642% Prepaid: 0 Bond Years: 22,486.25 NIC: 6.77651% Fees Collected: 1,575,000 Average Lite: 14,27698 Rate: 7.25% Term: 20 . Ehlers & Associates, Inc. 03/10/99 . ATTACHMENT 2 TERMS AND CONDITIONS OF ISSUE $1,575,000 Taxable General Obligation Housing Improvement Area Bonds, Series 1999A DA TE: March 16, 1999 ISSUER: City of Hopkins, Minnesota BOND NAME: $1,575,000 Taxable General Obligation Housing Improvement Area Bonds, Series 1999A BOND ATTORNEY: Steve Bubul (Kennedy & Graven) PURPOSE: Finance improvements in Housing Improvement Area No.3 (Valley Park Condominiums). Sale Date: April 6, 1999 . Est. Closing Date: May 3, 1999 Proposal Opening: 11 :00 a.m., office of Ehlers & Associates, Inc. Proposal A ward: 7:30 p.m., municipal offices. Type of Sale: Independent Financial Advisory Provision. Bonds Dated: May 1, 1999 Maturity: February 1, 2002 - 2021 The City reserves the right to adjust the final principal amount and the principal maturing in each year at the time of sale. Term Bond Option: Yes First Interest: February 1, 2000. Interest will be computed on the basis of a 360-day year of twelve 30-day months and will be . rounded pursuant to rules of the MSRB. . Call Feature: Bonds maturing in the years 2010 through 2021 will be subject to redemption prior to final maturity on February 1, 2009 and on any date thereafter. Minimum Proposal: $1,543,500. Good Faith: $31,500, payable to the Issuer (Cashiers or Certified Good Faith Check or wire transfer of funds to Ehlers Good Faith Escrow or financial surety bond. Record Date: Close of business on the 15th day (whether or not a business day) of the immediately preceding month. CUSIP Numbers: The Issuer will assume no obligation for the assignment or printing of CUSIP numbers on the Bonds or for the correctness of any numbers printed thereon, but will permit such numbers to be printed at the expense of the purchaser, if the purchaser waives any delay in delivery occasioned thereby. Paying Agent: To be named by City. . Registration! Book Entry Only: This offering will be issued as fully registered Bonds and, when issued, will be registered in the name of Cede & Co., as nominee of The Depository Trust Company, New York, New York. Financial Advisor: Ehlers & Associates, Inc. (Rusty Fifielcl1Mark Ruff) # OIS to Purchaser: _ copIes. Rating Requested: Moody's Investors Service and Standard & Poor's. Qualified Tax-Exempt Obligations: These Bonds WILL NOT be designated as qualified tax- exempt obligations. Continuing Disclosure: Full N :\MinnsolaIHOPKINSI9 8debt1Pre_1999A wpd . Resolution No, . Council Member introduced the following resolution and moved its adoption: Resolution Providing for the Sale of $1,575,000 Taxable General Obligation Housing Improvement Area Bonds, Series 1999A WHEREAS, the City Council of the City of Hopkins, Minnesota, has determined that it is necessary and desirable to issue the City's $1,575,000 Taxable General Obligation Housing Improvement Area Bonds, Series 1999A to finance improvements in Housing Improvement Area No.3; and WHEREAS, the City has retained Ehlers & Associates, Inc, in Roseville, Minnesota ("Ehlers"), as its independent financial advisor for the Bonds and is therefore authorized to solicit proposals in accordance with Minnesota Statutes, Section 475.60, Subdivision 2(9); NOW, THEREFORE, BE IT RESOLVED by the City Council of City of Hopkins, Minnesota, as follows: 1. Authorization; Findings. The City Council hereby authorizes Ehlers to solicit proposals for the sale of the Bonds_ 2. Meeting:; Proposal Opening. The City Council shall meet at the time and place specified in the Terms of Proposal for the purpose of considering sealed proposals for, and awarding the sale of the Bonds. The City Clerk, or designee, shall open proposals at the time and place specified in . such Terms of ProposaL Terms of Proposal, The terms and conditions of the Bonds and the sale thereof are fully set forth 3. in Bond Sale Report dated March 16, 1999. 4. 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 Council Member and, after full discussion thereof and upon a vote being taken thereon, the following Council Members voted in favor thereof: and the following voted against the same: Whereupon said resolution was declared duly passed and adopted, Dated this 16th day of March, 1999, City Clerk .