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VII.1. Sale of 2026A Bonds, to Refund 2023A Temporary Bonds; Bishop CITY OF HOPKINS City Council Report 2026-008 To: Honorable Mayor and Council Members Mike Mornson, City Manager From: Nick Bishop, Finance Director Date: January 6, 2025 Subject: Award the Sale of $6,250,000 General Obligation Refunding Bonds, Series 2026A _____________________________________________________________________ RECOMMENDED ACTION MOTION TO Adopt Resolution No. 2026-002: Awarding the Sale of General Obligation Bonds, Series 2026A, in the original aggregate principal amount of $6,250,000; fixing their form and specification; directing their execution and delivery; and providing for their payment. OVERVIEW The Series 2026A bonds will be a general obligation of the City for which it’s full faith, credit and taxing powers are pledged. The bonds are being issued to refinance $7,335,000 General Obligation Temporary Bonds, Series 2023A. The City will write down a portion of the bonds with $700,000 from the Storm Sewer Fund and $120,000 in prepaid assessments. The 2023A GO Temporary Bonds were originally issued for three purposes: • 2023 street and utility reconstruction project in West Central Avenues funded with general tax levy, special assessments and utility revenues • 2024 mill and overlay projects on 1st St. N and Lot 700 funded from a general tax levy. • Equipment Purchase (Log Truck) funded through general tax levy On December 23, 2025, Standard & Poor’s reaffirmed the City’s AA+ bond rating with a stable outlook. The rating report is attached. At December 1, 2025 Council Meeting the City Council authorized the sale of $6,250,000 General Obligation Refunding bonds. The bond bids will be accepted until 10:00 AM on January 6, 2026 at which time they will be reviewed and the recommendation incorporated into Resolution 2026-002. SUPPORTING INFORMATION • Standard & Poor’s Rating Report • Resolution 2026-002 (will be available at January 6th meeting) Finance Department Research Update: Hopkins, MN Series 2026A GO Refunding Bonds Assigned 'AA+' Rating; Outlook Stable December 23, 2025 Overview •S&P Global Ratings assigned its 'AA+' long-term rating to the City of Hopkins, Minn.'s $6.25 million series 2026A general obligation (GO) refunding bonds. •The outlook is stable. Rationale Security Hopkins' proposed and existing GO debt is secured by the city's full-faith-and-credit pledge and ability to levy unlimited ad valorem property taxes. The city anticipates that the debt service of the 2026A bonds will be partially supported by special assessments and utility revenue, but we rate to its GO pledge. Series 2026A bond proceeds will be used to refund the city’s series 2023A bonds. The city plans to issue approximately $7.5 million in GO bonds for its 2025 and 2026 improvement projects in spring 2026. The debt service is expected to be covered by property tax, utility, and special assessment revenue. In addition, the city may issue $7.5 million in GO bonds for a new road and $5.5 million in GO bonds for a public parking ramp, both within Tax Increment Financing (TIF) District No. 1-6 in 2026. If the debt is incurred, the related debt service is expected to be fully covered by TIF or special assessment revenue. Credit highlights The rating reflects our view of Hopkins’ consistent tax base growth (despite a modest dip in fiscal 2025), robust gross county product and county-level incomes, solid financial performance and healthy reserves in the past few years, supported by prudent financial policies and practices, and relatively rapid debt amortization. These strengths are partially offset by the city’s elevated per- capita debt burden and debt service carrying charge, as well as its below-average local household income levels. Primary Contact Ying Huang San Francisco 1-415-371-5008 ying.huang @spglobal.com Secondary Contact Alison Kaye Chicago 1-312-233-7162 alison.kaye @spglobal.com www.spglobal.com/ratingsdirect December 23, 2025 1 Hopkins is in Hennepin County in the Minneapolis-St. Paul-Bloomington metropolitan statistical area (MSA), which we consider to be broad and diverse. Its proximity to the Twin Cities allows easy access to employment and retail opportunities, which will further improve with the expansion of the Minneapolis light-rail system. Development throughout Hopkins remains strong, including ongoing expansions and redevelopment, as well as steady growth in both multifamily and single-family housing. We view the city's continuous tax base growth, coupled with access to the Twin Cities MSA, as a credit strength. The city has a track record of healthy finances, with recent years’ surpluses due to higher-than- budgeted interest income, as well as increased revenue from licenses, permits, and charges for services. In fiscal 2024, Hopkins realized a planned $1.1 million general fund deficit, mainly driven by a $488,000 transfer to the capital fund for deferred maintenance and a $382,000 one-time expenditure relating to the implementation of Governmental Accounting Standards Board (GASB) No. 101. The reserve drawdown was in line with management’s plan to reduce its general fund balance ratio to be closer to its policy target of 42% of expenditures. For fiscal 2025, the city projects another planned $500,000 reserve drawdown to stay close to its reserve policy target. We view the city’s reserve levels as solid and sufficient to support the rating despite the planned drawdowns. For fiscal years 2026 and 2027, management anticipates balanced budgets and no further reserve drawdowns. Hopkins is backed by a strong management team that has implemented robust policies and practices. The city's debt profile, while elevated, has been historically managed within its budget and with commensurate increases in tax levies. Even given sizable debt service carrying charges and the city’s additional debt plans in the next few years, we expect structural balance will continue, considering the expected self-supporting nature of the potential $13 million additional debt for the road and public parking ramp projects in the new TIF district. The rating reflects our opinion of Hopkins': •Healthy county-level economic metrics and local wealth levels in a Twins Cities suburb, with consistent valuation growth; •Solid financial performance, maintenance of solid reserves, and robust liquidity levels; •Strong financial policies and practices, characterized by quarterly reporting of budget-to- actual results and investment holdings to city council; long-term financial planning and capital plans, updated annually; and formal investment management, debt management, and fund balance policies--the city’s cybersecurity practices align with those of peers; and •Weak debt and liability profile, with sizable debt service carrying charges and an elevated debt burden, partially offset by rapid amortization and manageable other long-term liabilities (pension and other postemployment benefits [OPEB]). •For more information on our institutional framework assessment for Minnesota school districts, see: "Institutional Framework Assessment: Minnesota Local Governments," Sept. 10, 2024. Environmental, social, and governance We view the city's environmental, social, and governance factors as neutral in our credit rating analysis. Outlook www.spglobal.com/ratingsdirect December 23, 2025 2 Hopkins, MN Series 2026A GO Refunding Bonds Assigned 'AA+' Rating; Outlook Stable The stable outlook reflects our expectation that Hopkins will see consistent economic growth and maintain structural balance (when excluding the deliberate reserve drawdown) and healthy reserves over the two-year outlook horizon. Downside scenario We could take a negative rating action if the city's budgetary performance weakens, leading to a sustained reserve drawdown beyond what is expected, or if debt increases beyond current expectations. Upside scenario We could take a positive rating action if the city experiences material improvements in local incomes and market value per capita to levels commensurate with those of 'AAA' peers, and if its debt burden and debt service costs moderate materially, with all other credit factors remaining equal. Hopkins, Minnesota‑‑credit summary Institutional framework (IF)1 Individual credit profile (ICP)2.42 Economy 2.0 Financial performance 3 Reserves and liquidity 1 Management 1.35 Debt and liabilities 4.75 Hopkins, Minnesota‑‑key credit metrics Most recent 2024 2023 2022 Economy Real GCP per capita % of U.S. 181 ‑‑ 181 183 County PCPI % of U.S. 136 ‑‑ 136 137 Market value ($000s) 3,130,106 3,016,926 2,839,400 2,661,044 Market value per capita ($) 166,406 160,389 149,852 134,193 Top 10 taxpayers % of taxable value 19.0 19.3 21.1 20.9 County unemployment rate (%) 3.0 2.8 2.2 2.3 Local median household EBI % of U.S. 88 88 90 91 Local per capita EBI % of U.S. 105 105 111 116 Local population 18,810 18,810 18,948 19,830 Financial performance Operating fund revenues ($000s) ‑‑ 18,529 18,335 17,081 Operating fund expenditures ($000s) ‑‑ 19,138 17,831 16,562 Net transfers and other adjustments ($000s) ‑‑ (488) (57) (20) Operating result ($000s) ‑‑ (1,097) 447 499 www.spglobal.com/ratingsdirect December 23, 2025 3 Hopkins, MN Series 2026A GO Refunding Bonds Assigned 'AA+' Rating; Outlook Stable Hopkins, Minnesota‑‑key credit metrics Most recent 2024 2023 2022 Operating result % of revenues ‑‑ (5.9) 2.4 2.9 Operating result three‑year average % ‑‑ (0.2) 4.2 6.0 Reserves and liquidity Available reserves % of operating revenues ‑‑ 44.0 49.8 51.1 Available reserves ($000s) ‑‑ 8,154 9,131 8,720 Debt and liabilities Debt service cost % of revenues ‑‑ 20.6 22.7 24.5 Net direct debt per capita ($) 4,627 4,650 4,774 4,136 Net direct debt ($000s) 87,040 87,460 90,465 82,020 Direct debt 10‑year amortization (%) 76 84 ‑‑ ‑‑ Pension and OPEB cost % of revenues ‑‑ 5.0 4.0 5.0 NPLs per capita ($) ‑‑ 366 488 954 Combined NPLs ($000s) ‑‑ 6,884 9,255 18,909 Financial data may reflect analytical adjustments and are sourced from issuer audit reports or other annual disclosures. Economic data is generally sourced from S&P Global Market Intelligence, the Bureau of Labor Statistics, Claritas, and issuer audits and other disclosures. Local population is sourced from Claritas. Claritas estimates are point in time and not meant to show year‑over‑year trends. GCP‑‑Gross county product. PCPI‑‑Per capita personal income. EBI‑‑Effective buying income. OPEB‑‑Other postemployment benefits. NPLs‑‑Net pension liabilities. Ratings List New Issue Ratings US$6.250 mil GO rfdg bnds ser 2026A due 02/01/2039 Long Term Rating AA+/Stable New Rating Local Government Hopkins, MN Unlimited Tax General Obligation, Water System Revenue, Sewer System Revenue, and Special Assessment Revenue AA+/Stable The ratings appearing below the new issues represent an aggregation of debt issues (ASID) associated with related maturities. The maturities similarly reflect our opinion about the creditworthiness of the U.S. Public Finance obligor's legal pledge for payment of the financial obligation. Nevertheless, these maturities may have different credit ratings than the rating presented next to the ASID depending on whether or not additional legal pledge(s) support the specific maturity's payment obligation, such as credit enhancement, as a result of defeasance, or other factors. Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at https://disclosure.spglobal.com/ratings/en/regulatory/ratings-criteria for further information. A description of each of S&P Global Ratings' rating categories is contained in "S&P Global Ratings Definitions" at https://disclosure.spglobal.com/ratings/en/regulatory/article/-/view/sourceId/504352. Complete ratings information is available to RatingsDirect subscribers at www.capitaliq.com. All ratings referenced herein can be found on S&P Global Ratings' public website at www.spglobal.com/ratings. www.spglobal.com/ratingsdirect December 23, 2025 4 Hopkins, MN Series 2026A GO Refunding Bonds Assigned 'AA+' Rating; Outlook Stable www.spglobal.com/ratingsdirect December 23, 2025 5 Hopkins, MN Series 2026A GO Refunding Bonds Assigned 'AA+' Rating; Outlook Stable STANDARD & POOR’S, S&P and RATINGSDIRECT are registered trademarks of Standard & Poor’s Financial Services LLC. S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, www.spglobal.com/ratings (free of charge), and www.ratingsdirect.com (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. 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