CR 90-175 Harley Hopkins Redevelopment Bond•
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August 15, 199€ o " ` Council Report: 90-L75
HARLEM HOPKINS REDEVELOPMENT REVENUE BOND - TOLD DEVELOPMENT
SERIES 1990
Proposed .Action.
Staff recommends adoption of the following motion: 5e.ubiic hearing
for September a3 to consider resol giving preliminaryand final
approval to taxable revenue bond for construction of school faci1i
on Marley Hopki pnsroperty for September LS.
Approval of this action will allow the public hearing notice to be
published and the meeting scheduled.
Overview.
The Hopkins School District is proposing to demolish the existing
Harley Hopkins building and construct a new school facility" on this
site. Told Development will construct and own the building and have a
leasefpurchase agreement with the School District. Demolition is
proposed to begin in September with construction to start immediately.
thereafter.
Recently representatives of both the School District and Told
Development approached the City concerning . the possibility of issuing
a revenue bond to finance the construction of this project. Because
of statutory constraints, the School District is unable to issue such
a bond themselves. The bond would be a taxable revenue bond in the
amount of approximately $2,500,000.
Part of the process for a revenue bond requires that a public hearing
be held. Staff is proposing that this be scheduled for the September
18 meeting. At that time the applicant would be reauestinj
consideration of resolutions giving preliminary and final approval.
The Zoning and Planning Commission will be considering a Conditional_
Use Permit at their August 28 meeting for this project_
taCt� ssidr.,
o What are the specific of the bond issue?
o What are the implications of such an issue for the City?
o Concerns of staff
o Why can't the School District :issue bonds?
o What is the justification for the City issuing a bond for this
project?
fimmittimantmatim.
o Letter from Kea Zastrow, Hopkins School District.
o /Letter from Kent Richie, Leonard, Street, Deinard
d'aies D. err are, Plann ng &
Economic Deve opment Director
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HARLEY HOPKINS REVENUE BOND
CR: 90-175
Page 2
ADatlYetilla
Based upon the action requested, the City Council has the following
items to consider:
o What are the specific of the bond issue?
The proposed bond issue would be approximately $2 The
proceeds from this sale would be used by Told Development to
facilitate construction of the new building. The bond would be
taxable revenue bond.
o What are the implications of such an issue for the City?
In the past, the City has financed a number of projects with both
taxable and tax exempt revenue bonds.
The purpose of this type .of financing is to provide a lower interest
rate to facilitate development.
Repayment of the bond is strictly from the revenue of the project.
411 The City is under no financial obligation should there be a default.
o Other concerns of the staff as relates to this issue.
It is the understanding of staff that the lease that will be executed
by the School District with Told Development states that the lease is
based upon approval of an annual appropriation for the lease payment
by the State. Staff has a concern that should, for whatever reason
this payment not be approved, the School District rcould terminate
their lease and as a result the project could potentially go into a
default. In response to this concern staff felt that one of the
following will have to occur:
-- Revise lease agreement concerning contingency of State
appropriation for lease payment.
Have School District execute agreement to make lease payment
should State appropriation not be approved.
- Procure an opinion from City legal counsel that State
appropriation contingency in lease does not create a
significant default concern.
The only other major concern that the staff has at this ... ins is the
ability of the applicants legal counsel to prepare all the necessary
documents for the issue. Because final approval is being requested
for September 18, all completed documents in final form will need to
be submitted to the Citys legal counsel for review at least a week
prior to the hearing date.
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HARLEY HOPK C3S REVENUE BOND
CR: 90-175
Page 3
o Why can't the School District issue the bonds?
The building under consideration will be constructed and owned by Told
Development. The School District will lease the building for a
certain period of time and probably acquire the structure after a
certain number of years. Under this arrangement, the School District
is able to get a new facility which better meets their needs and
because it is only initially a lease, are not required to undertake a
referendum. However, because they do not have ownership, they are
unable by State Statute to issue bonds to finance the construction.
Therefore, their only alternative to secure a lower interest rate is
to have a bond issue sold in the name of the City.
o What is the justification for the City issuing a bond for this
project?
In previous discussions, it has been generally agreed that the uses
presently operating at the existing Harley Hopkins building do serve a
public benefit. The School. District has argued that in order to
continue their presence on this site, they need a new facility which
better addresses the needs of these users. The School District is now
stating that in order to facilitate that new construction, tiaay need
to beep development costs down, which can be partially facilitated by
a lower interest rate i.e. taxable revenue bond.
AltionatilMle
The City Council has the following altelmatives regarding this issue:
1. Approve the action as recommended by staff. At this time the
only action being reguested is to set the public hearing date.
The Council will havR an opportunity to discuss this item in
more detail and make a final decision at the time of public
hearing. However, at this time both Told Development and the
School District are requesting comments from the Council on
the concept of this issue= The Legal costs in preparing all
the bond documents for the public hearing are substantial, and .
if it appears the Comncii is strongly opposed to such an
issue, they would like to receive an indication at this time.
2. Deny the action as recommended by staff. Under this scenario
the public hearing will not be scheduled and it will be
assumed that the City Council does not wish to pursue a
r'e'venge bond issue for this project. This action could
potentially eliminate or slow down the redevelopment of t]
Harley' Hopkins site.
HARLEY HOPKINS REVENUE BOND
CR: 90 -275
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3. Continue for further information. The School District wishes:
to occupy the new structure by August 1, 1991. In order to
meet this deadline, demolition and construction will need to
start this year. The developer has a concern that any
continuation, with winter fast approaching, could create a
problem in meeting this deadline.
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AUM1NISTPAT lVE OFFICES
1001 HIGHWAY 7
HOPKINS, MINNESOTA 55343
"i_earnng for tile"
HOPKINS
SCHOOL KENNETH A 1ASTlQW
DISTRICT Dir,;cror of Bus+nos Affairs
4672) G33-g250
August 15, 1990
Jim Kerrigan
City of Hopkins
1410 South 1st St.
Hopkins, NN 55343
Bear Jim:
The Hopkins School District entered into a cevfz!o ;x-:. - ojr? ent
with the City of Hopkins during 1989 to assist the School district
in developing the remainder of the Harley Hopkins property after
selling a portion of the lard to the City. We now = d your
assistance>
From the very beginning, our intent has been to maintain a school
building at the current Harley Hopkins site in order to house a
press? d ch i l d care program that is growing each year > Because
of limited capital resources and the existence of levy authority
to cover the cost of leasing a facility for school purposes, the
School Board soli 1 W .live l op;vent the remainder of the property
and entered an agreement to lease a new facility from thus for the
pct 26 years with the option to pu - chase at various t irr !s during the
agreement period. According to State law, a st §nd rd go error nt
nonappropriation clause must be included with all long tet
agreements starting that if appropriations were not sufficient, the
School Dist !Act could get out of the agreement. We have authority to
levy ar+r*ai¢y for the lease cost and wish to purchase the facifity in
a few years when finances pare i t.
We hope the City r~ecognires the benefit o; rnaintOn ny this schwa[
at the current site rather Wan relocate el ;,c rt. :fl 4.r der to
receive a more favorable and thersby keep the costa down, (w rich wi 9 p
be levied by the School District) we are asking thf- City to
nicIpal bonds necessary to finance this project fur Development.
OW' a s•eece€rt with then Indicates the District or:c;'f'ing the new
facility &oust 1, 19S1.
Your assistance to facilitate this project will be very Ruch appreciated.
course, we are willing to cover all of the costs involved with the
_issuance of these bowls.
incerety,
Zsstr-c