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Home My WebLink About2008-02-20 PACKET 08.A.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM #� DATE 02-20-08 PREPARED BY: Finance Ron Hedberg ORIGINATING DEPRRTMENT STAFF AUTHOR ��,��.,��...��.,�� COUNCIL ACTION REQUEST: Provide direction on Ice Arena expansion financing options. STAFF RECOMMENDATION: Provide direction on Ice Arena expansion financing options BUDGET IMPLICATION: BUDGETED AMOUNT ADVISORY COMMISSION ACTION: ❑ PLANNING ❑ PUBLIC SAFETY ❑ PUBLIC WORKS ❑ PARKS AND RECREATION ❑ HUMAN SERVICES/RIGHTS ❑ ECONOMIC DEV. AUTHORITY n SUPPORTING DOCUMENTS: i.�_�ra REVIEWED ❑ ❑ ❑ ❑ ❑ ❑ ❑ R� C � 1_1 � I_11 T i r� 1� 1� r � APPROVED ❑ ❑ ❑ ❑ ❑ ❑ ❑ � MEMO/LETTER: ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ �EGAL RECOMMENDATION: ❑ OTHER: ADMINISTRATORS COMMENTS: City Administrator DENIED ❑ ❑ ❑ ❑ ❑ ❑ ❑ a O� Date ��.��,��,��,,��«�,� COUNCIL ACTION TAKEN: ❑ APPROVED ❑ DENIED �OTHER v� �;/o`f;,� City of Cottage Grove MemO Finance and Administrative Services TO: FROM: DATE: RE: Honorable Mayor and City Council Ryan Schroeder, City Administrator Ron Hedberg, Director of Finance & Administrative Services February 13, 2008 Financing Option for Ice Arena Expansion Introduction Staff will be bringing a request to start the bonding process within the next month for the Ice Arena Expansion project. Direction is requested on the financing strategy provided below and on the amounts to be used in structuring the debt. Discussion The Ice Arena expansion project will be financed by the issuance of a Iease revenue bond between the EDA and the City of Cottage Grove. I have received updated estimated interest rates and debt service schedules from Ehiers. The actual interest rates wi�l not be known untii the bonds are bid, but Ehlers feels these rates are representative of what we can expect. The current interest rate environment has fallen approximately one full percent from when the project design started. Estimated total construction costs are currently at $6.8 million and if this total amount is to be bonded it would exceed the original projections that kept the City of Cottage Grove's subsidy (tax levy) at less than $250,000 per year, and would result in estimated annual debt service of approximately $543,000 per year. The original projection based on a project cost of $5.9 million resulted in $528,000 ($544,000 if we were to bond the capitalized interest) in annual debt service. One strategy to lower the bonded amounts and to reduce the annual debt service is to fund the Debt Service with funds on hand, option B below. Because lease revenue bonds require the City to place money into an escrow account for the Debt Service Reserve (DSR), it is recommended that instead of financing this DSR that the City use amounts from the Closed Debt Fund to place into escrow for the life of the bonds. The interest generated on the escrow account would be used each year to lower the annual debt service requirements and would generate approximately $8,000 per year. Another option, option C below, would be to lower the amount to be bonded down to the amount originally anticipated of $6.6 million by redirecting a portion of the amounts levied for playground equipment / park shelter replacement over the past few years. Currently the balance in this fund for 2008 is $400,000 and it would be necessary to use approximately $301,000 from this account to get the bonded amount down to approximately $6.6 million. There would be a nexus beiween the Ice Arena and the Park Shelter Replacement Fund because the recreational nature of the use. It is anticipated that these funds would be Honorable Mayor, City Council, and Ryan Schroeder Ice Arena Expansion Financing Page 2 replaced in the future through the annual park shelter replacement levy funds would reduce the debt service $22,000 further to $480,000 per year. Project Costs Debt Service Reserve Issuance costs Underwriter discount (1.5%) Tota� Costs Amounts Seif Funded Debt Service Reserve Additional Equity required Park Shelter Replacement Fund Amount Bonded Estimated Annual Debt Service Original Project amounts (04/07) $ 5,900,000 551,513 78,861 102,600 6,632,974 6,632,974 528,000 Redirecting these Option A Option B Option C Current Project - Seif Current Project Funding DSR Self Funding & add'I paid Current Project DSR Down S 6,800 $ 6,800,000 $ 6,800,000 555,770 513,498 495,000 81,280 78,450 75,000 112,650 104,100 102,000 7,549,700 7,496,048 7,472,000 - 513,498 39,700 42,550 7,510,000 543, 000 6,940,000 502,000 495,000 42,550 301,450 6,633,000 480,000 As this project financing goes forward it would be prudent to keep cash on hand for contingencies that may occur with any of the lessees involved if they have difficulties in paying the lease amounts. The municipal building fund could provide the balances for these contingencies in the near term. Staff Recommendation Staff is recommending that the Debt Service Reserve be funded with cash from the Closed Debt Fund and would be returned when the bonds are retired. Staff also is seeking direction on the use of other funds to reduce the amounts bonded. Action Requested Council direction is requested on the financing strategy presented or on an option to use for bonding purposes. City of CottaQe Grove Economic Development AuthoritY, MN $6,940,000.00 Ice Arena Lease Revenue Bonds, Series 2008 ($6.8MM ConsUuction Cost - April Sale) DSR Funded with Cash S�urces �& Uses Dated 0510112008 � Delivered OSI01l2008 Sources Of Funds Par Amount of Bonds AdditwnalizqmredLqmtVCOntnbut�on �'FasG�w7rS Totai Sunrms Uses Of Funds Tomll�nderwritei'sDiscuunt U500°o� Fwancial Advisoi I3oi�d Comi+el Tmstez Orieinanon Ranne Aeencv Pee M�scellmieoa Counrv Aud�tor Depesil to Debt $z�v�ce Rv-serve PunA IDSRF� Dziws�t to Proicct Construtnon rimd Rnundm@ Amount f r $bpJ0,00090 556.047.50 $7,J96.U47..i0 tua.too.ou 45.OU0.�0 15 O00 00 S,p00 00 I 1,OU0 00 75U.00 Sp0 00 51?.497 50 6.SOU,000.00 I..'.00.00 Total l�ses $7,d96.037.50 :0�8E�ALVaseRev i5681 SINGLEPURPOSE I2/�3I2008I92�AM 06it3'OOs sCk3i'tOS (10 Osh'ZOs os cii ros sL'£03'OOS OS wb'105 UU'SLh'IOs OS'i06'OUi os Cog'pns OS�Zbl�kO$ OS Gbn`OOi sL'yi CEOi os corsas OU'SZCLOI '�e;ol �eosij iL'�t£'tCh SL Sbt't9 57; y9h`Jib iiyVb'IL Os CZI'i£P (ls ZCCBL OS"LZ£'bZb Os LZ£'bs 00'i5 f'O�t UU'SS f'Oti ii 314Utt SL XlYSb SL £OR'SOt SL ti08'00 f Si;IL9'004 s� IL9'SO! f� It� $bi Si Ii�Ult SZ ILS bb£ iZ'lLi'Y[I Si I��'3RL $� IC9'Sll 1� 9Z£ ZAi SZ'9Zti Z�t uszss'ost ni ZE�'iz� 00 OL� 6L£ 00'S�L'L01 �+d Iplol sL Sh£ C9 SL RtF'T9 5�99t IL SZ 99Y I L oi LZ�'st Oi'ZZ l'RL Oi'LZL't� ns LzF'ta on ss roa 00 sR I'�C iL S l9' S6 SCSl9'S6 SL k09`OUI SCiOR'OOI SC"IL9'S0I iC lL9's�t i� (fi.'OII sZ li� UI t SZ ILS'b[I SZ tCS`tlI Si; [Z9'Rfl Si IZ)'3( ( SC 9Ct`iZ ( Si 9i,ti�bZl oszc; szi Os'Z£X'SZI uo'otz'azt on szC�oi ;saaa;u� °.b00Ut �6006 L °��OSCt °bUS9'£ °hOSS i ,, .�(r�t�'i °hOUh'i °.bOUt't ".o0(1L t q6W l'£ :�OOU l °b0iS7 ^oast z 9�u5CZ UOditO'J 00 11p0�0Ai no aao sot 00 000'>St OU'000`Otk pp'Opp'p££ 00'000'S [ k 00 ODU' SOt 00 OUO'ioZ 00'OOO�SSi 00'000'03i, 00 OOObL'e 00 000 ooz 00 000'iiZ UO'000'OSC �2dI�UlAd ZZUZ�IO/¢0 tZO�/fu�i iznz��ani ruz ioiro UZOZ/li/Z[ OCUZiLO/01 ocaziioiru 6IOZlI{/ZI 6 t OZ/ IU/OI ti IDLi I OPoO smats�zi sto�noim S IOZi f OPo� LIUZ/Lt�ZI LIOZ/10/Ol LIOZ/!0/hU 9tOZ/lii�l 9 [OG t0/0I 910i/[0/t0 SIOZi[ir;.t SlOi,/[0/OI il0i,l10�4� t[OZ/lL/Zl C[UL/l0/UI t[OUlUPoO t[OZ/1£/LI cm�rin�ui £IOZ!IO�hO �IOUIi/i.t ZIOZ�fO/0I ilOZ/!0/b0 [IOZ/li/Zl I IOZI IOlOI 1 ma i orro UtOZ,'f£'<1 OI OZ/ LO/OI oioz; ioiro eaoaisizi nooziioiui eonzito�ro 900Z/I£/�I sooz� to�o i SOOZi I050 2}p4 z,a �ued ainpat�as a�pnia� �9aQ use� c�1Tm papun3 2ISQ (�[�S Iiady -1soJ ccot3�nz1suoJ V�IV�IB'9�) 800Z 5at.cas 'spttog antta.��g asea� ecta.cy a�I 00'000'Ob6`9$ �y�'.�;iaoq;n� �aawdolaeaQ a[wouo�� anoa� a��uo� 30 ,t;�� WVLZ61 800Z/EtIZ I 3SOdiifld3�`JNIS I 8951 naaasea�yp38�OZ � Citj� of Cottage Grove Economic Development Authority, MN $6,940,000.00 Ice Arena Lease Revenue Bonds, Series 2008 ( �6.8MM Construction Cost - April Sale) DSR Funded with Cash Debt Service Scl�edule Date 10/01/„02? 12/31/202? 04/O112023 10/O1/^_O�i 12/71/20�3 04/OS/''U23 t0/OIi2024 .. 12/31!20'_4 04/Oti2025 IU/UI/20?5 13Bi/'_'0^_S Od/Ol/20?6 i oia uzoze 12�31/2026 oam i izoz� I�'01!?U'7 � o� oiizo�a t^_i?ti?u�a 7btx1 Principal Coupon 4U0.0W.OU 4.t00"o ;15ppp0U JJ50'ti -t?0.000.00 425�'� ;SO.Op000 d?OU'?n a�u,0000u a.aso^� J90,OOU 00 Sfi.940AU0.U0 Yield Statistics 13ond ]'zaz Dollms dvera,c I.rtc Avera�c Coupun Nzt Intzrzst Cost (MC ) Truz Imerest Cost (IICI Bo�d Yizld for Arbrtraec Purposcs AI I Inclusivz Cost 1 AlC 1 IRS Form 8038 Net lnteiesi Cost \4'eiehtcd Avcruec RL+tunlv 4 .150'!� Interest 56.735.75 56.7}SJS aC.54k.75 i3,543J5 in,437.s0 39,93Z50 30,F00.00 a0.�oaon z �, i �s.00 ? l.l?5 00 10 902 SO 10,902.50 $3.217.372.50 Total P+I SC,J-1X75 55o,7;X.75 �}3,�18.75 463 59R.75 39 937.50 dn9,9?'.Sp 30,800 00 1s0,900 UO zi,us.r�o ;91.125.pp 10,90? 4p SOQ90'_ SO 510157,39?.50 Part 2 of 2 Fiscal Total 501.097.�0 505.297 SU $p7,4G6.2$ SOOJ?Z50 soi,9�s.00 50'_.027 50 soo,onz.so $4p.fiiU.fi7 1 I o19 ]'ears 3 e�vv6�2^o 4. i 1905n8^ 4.1254569':6 2.9$51203"-a .y.^_5;26�)7°� 3 9r9952?y6 l I ht9 }'za�s 2008 E�A Lease Rev i56 8 I SWGLE PURPOSE I Z�13/2008 � 9^<] AM