Loading...
CR 10-097 Authorize Sale of Bonds.- Ca September 7, 2010 City of llopkitI8 City Council Report 2010-097 AUTHORIZE SALE OF $2,710,000 G.O. IMPROVEMENT BONDS, SERIES 2010A AND $2,680,000 G.O. REFUNDING BONDS, SERIES 2010B Proposed Action Staff recommends approval of the following motion: Adopt Resolution 2010-052 Resolution Providing for the Sale of 2,710,000 G O Improvement Bonds Series 2010A and $2,680,000 G.O. Refunding Bonds, Series 2010B. Adoption of this motion will result in the bonds being offered for sale on October 19, 2010. Overview The City of Hopkins has the authority to issue permanent improvement revolving (PIR) bonds to pay for street improvements within the city. The last PIR bond issue was done in 2007. From 2007 through 2010 the city has undergone over $3.5 million in street improvements which were financed by past bond proceeds, special assessments and fund balance. We need to provide financing for projects scheduled in the city's capital improvement plan. Although special assessments are annually assessed, property owners have 10-15 years to repay those assessments, therefore we are proposing that we sell PIR bonds to finance the city's street improvement program. After evaluation of the PIR Fund cash flow, impact on the tax levy and future needs we are proposing a bond issue of $2.710 million. Due to low interest rates as a result of current market conditions this is an excellent opportunity to sell bonds. In addition to bonding for new money we are recommending the refinancing of the 2003A GO PIR Bonds, 2003A Storm Sewer Revenue Bonds and the 2002A GO Tax Increment Bonds (TIF 2-11) for a total interest savings of $199,000. Primary Issues The bond proceeds will be used to finance street improvements planned for 2011 and beyond. Revenues from special assessments and a tax levy will be used to re -pay the bonds. Due to the maturity of a current bonded debt levy in 2010 the debt tax levy for 2011 will actually be reduced by approximately $10,000. Staff Recommendation Staff recommends approval of this resolution and further recommends, along with the City's financial advisor, that we ask for a rating from Standard & Poors for the issue. The cost of the rating will be paid with bond proceeds. Supporting Information Resolution No. 2010-052 Bond Sale Report Cash Flow Projections Christine M. Harkess, CPA, CGFM Finance Director Iinancial Impact: $ 2,710,000 in bond proceeds-, est $199,000 savings in refunding Budgeted: Y/N No Source: PIR Tax Increment and Storm Sewer Funds Related Documents (CIP, ERP, etc.): _Capital Improvement Plan Notes: Council Member CITY OF HOPKINS Hennepin County, Minnesota RESOLUTION NO. 2010-052 introduced the following resolution and moved its adoption: Resolution Providing for the Sale of $2,710,000 G.O. Improvement Bonds, Series 2010A and $2,680,000 G.O. Refunding Bonds, Series 2010B A. WHEREAS, the City Council of the City of Hopkins, Minnesota, has heretofore determined that it is necessary and expedient to issue the City's $2,710,000 General Obligation Improvement Bonds (the "Bonds"), to finance the 2008, 2009 and 2010 street improvements and the 5ffi Street South Reconstruction Project in the City; and B. WHEREAS, the City Council of the City of Hopkins, Minnesota, has heretofore determined that it is necessary and expedient to issue the City's $2,680,000 General Obligation Refunding Bonds (the "Bonds"), to provide for a current refunding of the $960,000 G.O. PIR Bonds, Series 2002B and the $1,265,000 G.O.. Storm Sewer Revenue Bonds, Series 2003A, and an advanced crossover refunding of the $2,450,000 G.O. Tax Increment Bonds, Series 2002A in the City; and C. 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 the 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 7:30 p.m. on October 19, 2010, for the purpose of considering sealed proposals for and awarding the sale of the Bonds. 3. 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 7`" day of September, 2010. LI -A ATTEST: Gene Maxwell, Mayor Terry Obermaier, City Clerk (Seal) EHLERS LEADERS IN PUBLIC FINANCE Debt Issuance Services .'*,'re -Sale Report fo7r $2,710,000 General Obligation Improvement Bonds, Series 201 OA and $2,680,000 General Obligation Refunding Bonds, Series 2010B MUE=10 \AAqw,ehlers-inc.com Minnesota phone 651-697-9500 3060 Centre Pointe Drive Offices also in Wisconsin and Illinois fax 651-697-8555 Roseville, IVIN 55113-1122 Debt lwuance Services Proposed Issue: $2,710,000 General Obligation Improvement Bonds, Series 2010A, and $2,680,000 General Obligation Refunding Bonds, Series 2010B Purpose: Three purposes are contemplated in the 2010A Bonds: 1. Funding of approximately $290,000 for the 2008 Street Improvement projects. 2. Funding of approximately $1,590,000 for the 2009/2010 Street Improvement projects. 3. Funding of approximately $830,000 for the 5yth Street South Reconstruction projects. Three purposes are contemplated in the 2010B Bonds (the "Prior Bonds"): 1. To provide for a current refunding of the $960,000 G.O. PIR Bonds, Series 2002B, callable in the amount of $325,000, which mature on February 1 in the years 2012 and 2013. 2. To provide for a current refunding of the $1,265,000 G.O. Storm Sewer Revenue Bonds, Series 2003A, callable in the amount of $855,000, which mature on February 1 in the years 2012 through 2023. 3. To provide for an advanced crossover refunding of the $2,450,000 G.O. Tax Increment Bonds, Series 2002A, callable in the amount of $1,490,000, which mature on February 1 in the years 2014 through 2023. Only one crossover refunding of the Prior Bonds is legally allowed. In a crossover refunding, the Bonds are sold in advance of the February 2, 2014, call date of the Prior Bonds. The proceeds of the Bonds are invested in government securities and held in escrow. The money in the escrow is used to pay interest on the Bonds until the call date and to prepay the Prior Bonds at the first opportunity on February 1, 2014. The City continues to make payments on the Prior Bonds until the call date. After the call date, the City begins making payments on the Bonds. In other words, savings will not be experienced until after February 1, 2014. Based on estimated interest rates of 0.5% to 2.85%, the estimated savings as a result of the refunding will be approximately $199,000, after all fees and expenses. This savings expressed in present value terms is around 6.448% of the refunded principal. The minimum savings required by Minnesota state law for an advance refunding is a present value savings of 3.00%. Presale Report September 7, 2010 0 Page 2 NDebt IssuanceServices Authority: The 2010A Bonds are being issued pursuant to Minnesota Statues, Chapter 429. Because the City assessing at least 20% of the project costs, the Bonds can be a general obligation without a referendum and will not count against the City's debt limit. The 2010B Bonds are being issued pursuant to Minnesota Statues, Chapter 469 and 475, 444 and 475, and 469 and 475, respectively. Debt service will be paid with a combination of assessments, storm sewer revenue, tax increment and tax levy. FundingSource(s): For the 2010A Bonds, it is the intent of the City to assess a portion of each project, as outlined below: 1. 2008 Street Improvements will assess $232,404 (approximately 16.35% of the project). 2. 2009 Street Improvements will assess $493,000 (approximately 23.09% of the project) for phase I, and $554,000 (approximately 51.58% of the project) for phase II. 3. 5th Street S. Reconstruction will assess $432,853 (approximately 44.68% of the project). The balance will be paid with a property tax levy to suppose 105% of the debt service beginning with collected in 2011. For the 2010B Bonds, debt service will be paid with a combination of assessments, storm sewer revenue, tax increment and tax levy. Risk Factors: We have minimal pre -paid special assessments. If the City receives a significant amount of pre -paid assessments, it may need to increase the levy portion of the debt service to make up for lower interest earnings than the assessment interest rates. With a crossover refunding, the key risk factor is the call date. Because the Prior Bonds are first callable on February 1, 2014, to refund in 2010, it must be believed that: (i) comparable or better conditions will not occur over the next three years; and (ii) a significant amount of tax increment from TIF District 11 will not be received over the next three years. Arbitrage Monitoring: The IRS is becoming more active in surveying municipal issuers. Therefore, IRS rules regarding the amount of interest that the City may earn on bond proceeds is more of a concern. Because the City is issuing less than $5,000,000 in this calendar year, the proceeds can earn interest without restriction for three years. The City will also need to keep its debt service funds within IRS parameters to avoid penalties on carrying too high of a balance during the life of the issue. 0 Presale Repi -, 0- VA RJO r tDebt IssuanceServices E Pre -paid special assessments may cause the Debt Service Fund to be higher than IRS parameters. Rating: It is anticipated that Standard & Poor's will rate the Bonds an "AA". If the lowest bidder on the Bonds elects to purchase bond insurance, the rating for the issue will be higher than the City's bond rating because this issue will instead carry the rating of the bond insurance company selected by the bidder. Sank Qualification: Because the City is issuing less than $30,000,000 in the calendar year, the City will be able to designate the Bonds as "bank qualified" obligations. Bank qualified status broadens the market for the Bonds, which can result in lower interest rates. Term/Call Feature: The 2010A Bonds are being issued for a 15 -year period. Interest is payable each six months beginning August 1, 2011. Principal on the 2010A Bonds will be due on February 1 in the years 2012 through 2026. The 2010A Bonds maturing February 1, 2019, and thereafter will be subject to prepayment at the discretion of the City on February 1, 2018. The 2010B Bonds are being issued for a 12 -year period. The term of the debt for each refunded issue is not being extended beyond the original term. Interest is payable each six months beginning August 1, 2011. Principal on the 2010B Bonds will be due on February 1 in the years 2012 through 2023. The 2010B Bonds maturing February 1, 2019, and thereafter will be subject to prepayment at the discretion of the City on February 1, 2018. Other We have reviewed all outstanding indebtedness for the City and also found Considerations: a potential refunding opportunity with the $1,630,000 G.O. Tax Increment Financing Bonds, Series 2005A; however, the City has been calling maturities and plans to pre -pay the issue. Under this scenario, the current refunding of the issue does not provide a benefit at this time. We will continue to monitor the market and the call dates for the City and will alert you to any future opportunities. Presale Report September 7, 2010 0 Page 4 �*roposed Debt Issuance Schedule ?Ire -Sale Review by Council: Debt Issuance Services September 7, 2010 October 7, 2010 Week of October 11, 2010 Cy MINE I •SIR I ♦ME •I �11 1 2P Mid -November 2010 Sources and Uses of Funds Proposed Debt Service Schedules Resolution Authorizing Ehlers to Proceed With Bond Sale Financial Advisors: Rebecca Kurtz (651) 697-8516 Dave Callister (651) 697-8553 Bond Analysts: Diana Lockard (651) 697-8534 Debbie Holmes (651) 697-8536 Bond Sale Coordinator: Alicia Aulwes (651) 697-8523 The Official Statement for this financing will be mailed to the Council Members at their home address for review prior to the sale date. Presale Report September 7, 2010 0 Page 5 Debt Issuance rvis y Council Member Resolution No. introduced the following resolution and moved its adoption: Resolution Providing for the Sale of $2,710,000 G.O. Improvement Bonds, Series 2010A and $2,680,000 G.O. Refunding Bonds, Series 2010B A. WHEREAS, the City Council of the City of Hopkins, Minnesota, has heretofore determined that it is necessary and expedient to issue the City's $2,710,000 General Obligation Improvement Bonds (the "Bonds"), to finance the 2008, 2009 and 2010 street improvements and the 5t" Street South Reconstruction Project in the City; and B. WHEREAS, the City Council of the City of Hopkins, Minnesota, has heretofore determined that it is necessary and expedient to issue the City's $2,680,000 General Obligation Refunding Bonds (the "Bonds"), to provide for a current refunding of the $960,000 G.O. PIR Bonds, Series 2002B and the $1,265,000 G.O. Storm Sewer Revenue Bonds, Series 2003A, and an advanced crossover refunding of the $2,450,000 G.O. Tax Increment Bonds, Series 2002A in the City; and C. 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 the 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 7:30 p.m. on October 19, 2010, for the purpose of considering sealed proposals for and awarding the sale of the Bonds. 3. 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 7"' day of September, 2010. ,.�Debt WuanceServices City Clerk P.I.R. FUND (501) 0910212010 Bonds must be sold not later than 18 months after the later of: A - The date the original expenditure is paid OR B - The date the project is placed in service Next bond sale scheduled is for the 2008 and 2009 projects - bonds sold in 2010 Actual Actual Projected Projected Projected Projected Projected Projected 2008 2009 2010 2011 2012 2013 2014 2015 Working Capital Beginning Year 1,123,299 539,866 (31,817) 1,896,686 298,318 1,461,710 280,986 2,397,431 Revenues: Special Assessment Revenues (1) 446,979 395,636 597,895 651,000 711,000 709,000 813,000 882,000 Refunds & Reimbursements 173,634 Interest 21,945 (1,614) (1,273) 85,351 13,424 65,777 12,644 113,878 Transfers In 2,755 Transfers In from MSA Fund Miscellaneous Bond Proceeds 2,700,000 2,500,000 4,000,000 Total Revenues 471,679 567,656 3,296,622 736,351 3,224,424 774,777 4,825,644 995,878 Expenditures: Administrative Fees 3,201 Cc Rd 3 - Phase II C.I.P. Projects 846,792 934,220 259,000 1,091,600 913,000 910,000 1,345,000 1,100,000 C.I.P. Projects - Special Assm 979,000 956,400 878,000 730,000 1,048,700 1,150,000 Transfer to MSA - Excelsior Blvd Project Debt Service Transfers - curr debt 133,219 133,219 58,219 58,219 41,533 0 0 0 Debt Service Transfers - 2007 debt 71,900 71,900 71,900 71,900 71,900 71,900 71,900 71,900 Debt Service Transfers - 2010 debt 156,600 156,600 156,600 156,600 156,600 Debt Service Transfers - 2012 debt 87,000 87,000 87,000 Debt Service Transfers - 2014 debt 80,000 Total Expenditures 1,055,112 1,139,339 1,368,119 2,334,719 2,061,033 1,955,500 2,709,200 2,645,500 Working Capital Year End 539,866 (31,817) 1,896,686 298,318 1,461,710 280,986 2,397,431 747,809 (1) Includes current, delinquent and penalties Total Projects Scheduled (CIP & SA) 846,792 934,220 1,238,000 2,048,000 1,791,000 1,640,000 2,393,700 2,250,000 Bonds must be sold not later than 18 months after the later of: A - The date the original expenditure is paid OR B - The date the project is placed in service Next bond sale scheduled is for the 2008 and 2009 projects - bonds sold in 2010