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HomeMy WebLinkAbout2011-11-02 PACKET 08.A.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # DATE 11/2/11 PREPARED BY Finance Robin Roland ORIGINATING DEPARTMENT DEPARTMENT HEAD COUNCIL ACTION REQUEST Consider approval of Request for Proposals (RFP) for the issuance of $9.9 million Lease Revenue bonds, Series 2011A STAFF RECOMMENDATION Approve the Request for Proposals (RFP) document for the issuance of $9.9 million Lease Revenue Bonds, Series 2011A and authorize its distribution. BUDGET IMPLICATION BUDGETED AMOUNT ADVISORY COMMISSION ACTION DATE REVIEWED ❑ PLANNING ❑ ❑ PUBLIC SAFETY ❑ ❑ PUBLIC WORKS ❑ ❑ PARKS AND RECREATION ❑ ❑ HUMAN SERVICES /RIGHTS ❑ ❑ ECONOMIC DEV. AUTHORITY ❑ ❑ ❑ SUPPORTING DOCUMENTS ACTUAL AMOUNT APPROVED DENIED ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ® MEMO /LETTER: Roland 10/27/11 ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ® OTHER: Request for Proposals for $9,900,000 Public Project Lease Revenue Bonds, Series 2011A ADMINISTRATORS COMMENTS 1 ity Administrator Date COUNCIL ACTION TAKEN: ❑ APPROVED ❑ DENIED ❑ OTHER HACouncil items \City Council Action Form.doc City of Cottage Grove Finance Department TO: Honorable Mayor and City Council Ryan Schroeder, City Administrator FROM: Robin Roland, Finance Director DATE: October 27, 2011 1- SUBJECT: Consider Request for Proposals (RFP) document for issuance of $9.9 million Public Project Lease Revenue Bonds, series 2011A Introduction /Discussion At the direction of the EDA and the City Council, City staff has worked with representatives of Ehlers to craft the attached document; Request for Proposals for $9,900,000 Public Project Lease Revenue Bonds, Series 2011A. The document outlines the criteria which will be used to evaluate proposals for the debt transaction as well as the expected timetable. A listing of the banks which will receive the RFP is also included. Requested Action Approve the Request for Proposals document for issuance of $9.9 million Public Project Lease Revenue bonds, series 2011A and authorize its distribution. CITY OF COTTAGE GROVE, MINNESOTA AND THE ECONOMIC DEVELOPMENT AUTHORITY OF THE CITY OF COTTAGE GROVE, MINNESOTA October 28, 2011 Request for Proposals for $9,900,000 Public Project Lease Revenue Bonds, Series 2011A Introduction The City of Cottage Grove (the "City ") and the Economic Development Authority of the City of Cottage Grove (the "EDA "), Minnesota are seeking proposals from selected firms to provide tax - exempt ;financing to construct the City's Public Safety and City Hall Facility (the "Facility "). The Facility will consist of a 66,657 square foot Public Safety /City Hall building to be constructed during the 2011 -2012 timeframe on a 6.82 acre site in the area of the City known as the East Ravine. Briggs and Morgan, Bond Counsel for the financing, has determined that the cost of approximately $9,755,800 of the facility can be financed with a Public Project Lease Revenue Bond. We expect the EDA will issue bonds in the approximate amount of $9,900,000 and the bonds will be titled Public Project Lease Revenue Bonds, Series 2011A (the "2011A Bonds "). The 2011A Bonds will be issued by the EDA and will be secured by a Lease Agreement with the City. The City, subject to annual appropriation, will make the annual lease payment to the EDA. The City and EDA are interested in receiving proposals for purchasing the proposed 2011A Bond financing. The City and EDA expects to close on this transaction on or about December 22, 2011. Project Background The existing Cottage Grove City Hall was built in 1968. It was expanded in 1973 and 1985, and remodeled in 1995. The current 24,148 square foot building houses Police, Finance, Administration, Planning and Inspections. An upgrade to the Public Safety /City Hall facilities began appearing within the City Capital Plans in 2001. A Space Needs Study was done in 2006 in anticipation of construction beginning in 2008. The project was postponed when the economy faltered in 2008. In 2010 the City Council directed that the building process be restarted to provide a building that would satisfy the needs of the community into and beyond 2040. A year's work by the City Council, City Staff and Weld Architects resulted in the current plans for the Facility. The project is the first phase of a proposed (future) 22 acre Municipal Campus. Additional information on the Facility can be found at http://www.cottage- rove.or project updates pub safety bldg.htm On September 21, 2011, the City Council approved a Contract with Graham Construction for approximately $13,021,000 to construct the Facility under the "best value" contract process as authorized by MN Statute, Section 471.345, Subd. 3a. III. Structure of Financing Ground Lease: Pursuant to the Ground Lease, the City leases the property on which the Facility will be constructed to the EDA. The Lease Agreement: Pursuant to the Lease Agreement, the EDA leases the Facility back to the City, subject to the City's right to terminate the Lease Agreement at the end of any fiscal year. Lease payments are to be made by the City to the EDA in amounts sufficient to pay the principal and interest on the Bonds when due. IV. Bond Security The 2011A Bonds are not general obligations or indebtedness of the EDA or the City, but are special obligations payable solely from the lease payments made by the City under the Lease Agreement. The payments under the Lease Agreement are such that they are sufficient to pay the principal and interest on the 2011A Bonds as they come due. For a project of this type, a tax levy is typically appropriated on an annual basis by the City Council for the payment of lease payments. Therefore, it is the intent of the City to levy property taxes to support 100% of the debt service beginning with taxes payable in 2012. Pursuant to the Ground Lease, the City leases the property on which the Facility will be constructed to the EDA. Pursuant to the Lease Agreement, the EDA leases the Facility back to the City. The City believes the Facility is an essential function of the City as it will be used for the Police Department and City Hall functions. V. Sources and Uses for the Facility Sources Funds on Hand $5,682,500 Grants 126,000 Bond Proceeds 9,900,000 Total Sources $15,708,500 Uses Construction Contract $13,021,000 Professional Services /Fees /Testing 1,188,220 Furniture /Equi ment/Teehnolo y 814,280 Contingency 575,000 EDA Issue Related Expenses 67,000 Discount Estimate ($8/$1,000) 79,200 Total Uses $15,708,500 VI. Payment Dates and Other Structure Provisions for 2011A Bonds The 2011A Bonds will be dated December 22, 2011 and be for a 20 year term (through 2032). Interest will be payable each six months, commencing August 1, 2012. Principal will be due on February 1 in the years 2013 through 2032. The 2011A Bonds maturing February 1, 2022 and thereafter are assumed to be subject to prepayment at the discretion of the EDA on February 1, 2021 and any date thereafter. The City and EDA will consider other call features, including callable at any time, as well. The principal debt schedule being bid is as follows: Maturity Year Projected Amount 2013 $360,000 2014 400,000 2015 405,000 2016 410,000 2017 420,000 2018 425,000 2019 4 35,000 2020 445,000 2021 455,000 2022 470,000 2023 485,000 2024 500,000 2025 515,000 2026 535,000 2027 550,000 2028 570,000 2029 595,000 2030 615,000 2031 640,000 2032 670,000 Total $9,900,000 If your sizing results in a debt schedule different than $9,900,000, the 2032 maturity should be adjusted accordingly. This debt schedule will be used to calculate the interest cost of each proposal. The intention is to end up with an equal principal and interest debt schedule. As a result, the City/EDA reserves the right to modify the principal amounts due each year of the selected bidder prior to the sale award. Because the EDA and the City are issuing less than $10,000,000, the 2011A Bonds will be designated `Bank Qualified ". The City and EDA will also provide annual full disclosure as part of a Continuing Disclosure Agreement. VII. Risk Factors Non - appropriation: The Lease Agreement will contain an annual non - appropriation clause under which the City has the right to terminate the Lease Agreement at the end of any Fiscal 3 Year if it does not appropriate moneys sufficient to make required payments for the next Fiscal Year under the Lease Agreement. However, the City will represent in the Lease Agreement this it presently intends to continue the Lease Agreement for its entire term. In the event of non- appropriation, the 2011 A Bonds will be payable from proceed the EDA may receive from subleasing or selling the Facility. This may result in revenues substantially Less than the amounts to be received under the Lease Agreement and the proceeds of any such sale or operation may be substantially less than the remaining principal amount on the 2011 A Bonds. Failure of the City to make lease payments under Lease Agreement: The City is legally obligated to make the lease payments under the Lease Agreement unless it exercises its right to annually non - appropriate. In the event the city fails to make the lease payments as required under the Lease Agreement, the EDA has the right to terminate the Lease Agreement and exclude the City from possession of the Facility. The EDA can attempt to release the Facility to another entity or can attempt to sell it; however, there is no assurance that the EDA will be able to lease or sell any or all of the Facility or that any or all of the Facility could be leased or sold for amounts equal to lease payments required to be made by the City under the Lease Agreement. VIII. Information About the City and the EDA The City's general obligation debt is rated Aal by Moody's Investors Service and AA+ by Standard & Poor's. It has not been determined if the 2011A Bonds will be rated. Please outline your requirement, if any, for a rating or ratings on the 2011A Bonds in your response to this proposal. For more information on the City, please see the Official Statement for the City of Cottage Grove's General Obligation Bonds, Series 2009A, available on EMMA or please request a copy from Ehlers. Attached for additional background is the City's 2010 Financial Report. IX. Other Financing Team Members Shelly Eldridge, Sean Lentz and Steve Apfelbacher of Ehlers & Associates are serving as the financial advisors for this transaction. Mary Ippel, of Briggs and Morgan serves as bond counsel. Briggs and Morgan will provide a legal opinion at closing regarding the tax- exempt status of the obligations, as well as prepare other related legal documents. X. Form and Content of Proposal Proposals must address the following items in the following order. Proposals are limited to 10 pages, exclusive of resumes and any financing schedules prepared. Such information may be included as appendices not to exceed an additional 6 pages. Please do not include extraneous information, such as marketing materials. 4 A. Firm Background and Staffing 1. Provide a general description of the firm and its relationship to any parent company. 2. Identify the key staff responsible for this engagement and their respective roles. Indicate who would serve as the primary contact for the transaction. Brief resumes may be included as an appendix to the proposal. 3. Provide an affirmative statement indicating the firm's ability to meet the City's timeframe for delivery of funds. B. Experience and Perspective 1. Identify similar Long -term lease financings that your firm has implemented for other governmental clients within the last five years. Highlight any that were completed for Minnesota jurisdictions. If the firm has a particular financing product that may be well- suited to this situation, please describe its applicability and key features. C. Financing Plan and Fees 1. Please include a proposed sources and uses and debt service schedule for the Bonds. For purposes of preparing the proposal, please assume the dates outlined previously. There will be no capitalized 'interest needed. Assume the costs of issuance related to financial advisor and bond counsel will be $67,000. Assume that there will be no official statement for the transaction. Please address the following items in your response: i. List all costs to purchase the bonds such as discount /fees /expenses, underwriter's counsel fees, costs for due diligence requirements (such as title insurance), rating, or bond insurance fees in your sources and uses related just to the 2011A Bonds. ii. Provide a statement of the principal amount due each year, the rate or rates (interest rate per maturity and reoffering yields if necessary) and terms proposed by your firm in response to this RFP. Proposals submitted on November 21, 2011 must be a final bid and must be honored through the projected December 22, 2011 closing date. iii. Provide a debt schedule projection with the True Interest Cost (TIC). iv. Describe call dates and any early redemption penalties and/or options. V. Discussion of whether a debt service reserve fund is necessary and, if so, the recommended size of the reserve. vi. Need for external rating (if needed, please assume AA and /or Aa rating). vii. Indicate property / liability insurance requirements of the City / EDA. viii. Internal credit requirements (timing and process, documentation required, etc.) and ability to meet the proposed project schedule. ix. Need for paying agent. X. Identify any other considerations that would prevent the EDA from meeting the timetable below. 2. Clearly list all direct and indirect fees and any other costs related to the financing and indicate when such fees would be payable. 5 D. Conflicts of Interest and Litigation 1. Disclose any potential conflicts of interest your firm might have with respect to this transaction. 2. Indicate any litigation or arbitration actions brought against the firm or key personnel identified during the past five years. X11. 2011 Timetable November 2 City Council approves Final RFP November 3 RFP Distributed to Financial Institutions November 21 Proposals due to Ehlers by 2:00 PM November 21 & 22 Evaluation of Responses November 22 EDA/CAy representatives meet to select the firm December 7 EDA/Cit Approve Sale December 22 Estimated Closin XIII. Proposal Submittal and Time Schedule One copy of your proposal is due by 2 PM Central Time on Monday, November 21, 2011 to Shelly Eldridge at Ehlers. Your proposal may either be delivered in hard copy to 3060 Centre Pointe Drive, Roseville, MN 55113 or in PDF form via email to seldridgegehlers- inaeom Questions regarding this request for proposals should be directed to Shelly Eldridge at (651) 697 -8504. Sean Lentz at (651) 697 -8509 will respond to questions if Shelly is not available. In order to be considered for selection, responders must submit a complete response to this RFP. All conditions printed on the RFP form are hereby made a part of the conditions under which the proposal is submitted. The City and its Economic Development Authority reserve the right to reject any and all proposals at its discretion. The City and the EDA will base their selection on the lowest annual debt service cost and the terms required by the responder. It is further understood by the selected firm that the selected firm will only be paid upon successful completion of the financing. 6 'CS,'4 G_ *ill The Board of Commissioners November 21, 2011 Economic Development Authority of the City of Cottage Grove, Minnesota RE: $ Public Project Lease Revenue Bonds, Series 2011A DATED: December 22, 2011 For all or none of the above Bonds, we will pay you $ (not less than 99.2% of the par amount) plus accrued interest to date of delivery for fully registered Bonds bearing interest rates for the maturities on page 3 of the Request for Proposal with the maturity in 2032 adjusted as follows: Delivery is anticipated to be on or about December 22, 2011. This proposal is subject to the City's covenant and agreement to enter into a written undertaking to provide continuing disclosure under Rule 15c2 -12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 as described in the Preliminary Official Statement for this Issue. Account Manager: Account Members: Award will be based on total interest cost and the terms required within your submitted proposal. Further, the EDA can adjust the projected maturities as they deem necessary. The foregoing offer is hereby accepted by and on behalf of the Board of Commissioners of the Economic Development Authority of the City of Cottage Grove, Minnesota, on December 7, 2011. Title: Title: 7 % due 2013 % due 2020 % due 2027 % due 2014 % due 2021 % due 2028 % due 2015 % due 2022 % due 2029 % due 2016 % due 2023 % due 2030 % due 2017 % due 2024 % due 2031 % due 2018 % due 2025 % due 2032 % due 2019 % due 2026 Maturity 2032 Delivery is anticipated to be on or about December 22, 2011. This proposal is subject to the City's covenant and agreement to enter into a written undertaking to provide continuing disclosure under Rule 15c2 -12 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934 as described in the Preliminary Official Statement for this Issue. Account Manager: Account Members: Award will be based on total interest cost and the terms required within your submitted proposal. Further, the EDA can adjust the projected maturities as they deem necessary. The foregoing offer is hereby accepted by and on behalf of the Board of Commissioners of the Economic Development Authority of the City of Cottage Grove, Minnesota, on December 7, 2011. Title: Title: 7 City of Cottage Grove RFP Darrell Silverness Vice President Bremer Bank Woodbury 10040 City Walk Drive Woodbury, MN 55129 Casey Regan President Premier Bank Minnesota 101 East 10 St Hastings, MN 55033 Paul Rebholz Government & Institutional Banking Wells Fargo MAC N9303 -105 608 2" Avenue South, 10 Floor Minneapolis, MN 55402 -1916 Dennis Sonnek Vice President — Public Funds Group Associated Bank 176 Snelling Avenue North St. Paul. MN 55104 Rhonda Mann President Anchor Bank 1030 Hastings Avenue St. Paul Park, MN 55071 R Scott Johnson Vice President Merchants Bank 7200 E Point Douglas Rd S Cottage Grove, MN 55016 Jennifer Vucinovich Vice President (4s �a h �{ Government Banking EP- MN -S9GB 101 E Fifth St, 9 Floor St. Paul, MN 55101 -1860 Matt Harblin, SVP Banc of America Public Capital Corp NY1 -100 -35-01 One Byrant Park, 35th Floor New York, NY 10036 Tel: 646.855.3650 Celt: 646.725.2127 matthew.harblin@baml.com