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Home My WebLink About2012-01-18 PACKET 04.H.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # DATE 1/18/12 P PREPARED BY Finance Robin Roland ORIGINATING DEPARTMENT DEPARTMENT HEAD COUNCIL ACTION REQUEST Consider calling for the sale of $1,870,000 General Obligation (G.O.) Improvement Bonds to finance the 2010 and 2011 pavement management projects in the City. STAFF RECOMMENDATION Adopt resolution calling for the sale of $1,870,000 G.O. Improvement Bonds 2012A on February 15, 2012. BUDGET IMPLICATION N/A BUDGETED AMOUNT ADVISORY COMMISSION ACTION ❑ PLANNING ❑ PUBLIC SAFETY ❑ PUBLIC WORKS ❑ PARKS AND RECREATION ❑ HUMAN SERVICES /RIGHTS ❑ ECONOMIC DEV. AUTHORITY DATE REVIEWED El El El El El SUPPORTING DOCUMENTS ® MEMO /LETTER: Roland ® RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ❑C OTHER: ((-'E 50,,LC P'- `OtUr N/A ACTUAL AMOUNT APPROVED DENIED ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ ❑ H: \Council 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: January 13, 2012 1 ' SUBJECT: Consider resolution calling for the sale of $1,870,000 G.O. Improvement Bonds of 2012A Introduction Consistent with prior City actions, the 2010 and 2011 Pavement Management projects were completed using city funds on hand. Now that these projects are complete and assessments have been certified, staff is requesting that bonds be sold to reimburse the city's expenditures. Discussion This bond issue will finance the 2010 and 2011 Pavement Management projects. The total project costs were approximately $2.6 million of which $201,258 is paid by city park and area funds. Prepayments of special assessments have been $535,496 and have been used to reduce the size of the bonds needed. The bonds will be repaid over 15 years with special assessments of $1,008,883 and approximately $1.28 million in future property tax levies. These levies are estimated to average $88,000 annually. Staff has included a pre -sale report from Ehlers which includes a timetable for the bond sale as well as other estimates and general information. Requested Action Review the attached Pre -Sale report from Ehlers. Adopt the resolution providing for the sale of $1,870,000 General Obligation Improvement Bonds, Series 2012A. RESOLUTION NO. 12 -xxx Resolution Providing for the Sale of $1,870,000 General Obligation Improvement Bonds, Series 2012A A. WHEREAS, the City Council of the City of Cottage Grove, Minnesota, has heretofore determined that it is necessary and expedient to issue the City's $1,870,000 General Obligation Improvement Bonds, Series 2012A (the 'Bonds "), to finance the 2010 and 2011 pavement management projects in the City; and B. 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 Cottage Grove, 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 February 15, 2012, 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. Council Member introduced the resolution and moved its adoption. 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: Adopted by the City Council of the City of Cottage Grove this 18 day of January, 2012. C Myron Bailey, Mayor ATTEST: Caron Stransky, City Clerk Debt Issuance S ervices 790 - 31071541 r ^ #� $1 r r. • n Impro B onds , r 1 MOVE E . ..:, ♦ M. Shelly Eldridge Financial Advisor Sean Lentz Financial Advisor E H C E • A Minnesota y Phone 651-697-8500 3060 Centre Pointe Drive LEADERS IN miertc FINANCE Offices also in Wisconsin and Illinois fax 651 - 697 -8555 Roseville, MN 5511 3 -11 22 toll free 800- 552 -1171 Debt Issuance Services Executive Summary of Proposed Debt Proposed Issue: $1,870,000 General Obligation Improvement Bonds, Series 2012A Authority: The Bonds are being issued pursuant to Minnesota Statutes, Chapter 475 and 429. The Bonds will be general obligations of the City, for which its full faith, credit and taxing powers are pledged. 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. Purposes /Funding Sources: The proposed issue includes financing to repay the City's for its 2010 and 2011 Pavement Management Projects. The Bonds will be repaid with special assessments and property taxes as follows: • Special assessments for the 2010 project totaling $297,060 levied in 2010 for collection in 2011 through 2026 at 7% interest. • Special assessments for the 2011 project totaling $297,767 levied in 2011 for collection in 2012 through 2027. • Property taxes levied in 2012 for collection in 2013 through 2027. The City may use other City revenues, such as sewer and water funds, to reduce the annual property tax levy. Term /Call Feature The Bonds are being issued for a 15 year term. Principal on the Bonds will be due on February 1 in the years 2013 through 2027. Interest is payable every six months beginning February 1, 2013. The Bonds maturing February 1, 2022, and thereafter will be subject to prepayment at the discretion of the City on February 1, 2021 or any date thereafter. Bank Qualification Because the City is issuing less than $10,000,000 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. Rating: The City's most recent bond issues were rated AA+ by Standard & Poor's. The City will request a new rating for the Bonds. If the winning bidder on the Bonds elects to purchase bond insurance, the rating for the issue may be higher than the City's bond rating in the event that the bond rating of the insurer is higher than that of the City. Presaie Report January 18, 2012 City of Cottage Grove, Minnesota Page 1 Debt issuance Services Method of Sale /Placement: In order to obtain the lowest interest cost to the City, we will solicit competitive bids for purchase of the Bonds from both local banks in your area and regional underwriters. We have included an allowance for discount bidding equal to 1.0% of the principal amount of the issue. The discount is treated as an interest item and provides the underwriter with all or a portion of its compensation in the transaction. If the Bonds are purchased at a price greater than the minimum bid amount (maximum discount), the unused allowance may be used to lower your borrowing amount. Other Considerations: If significant special assessments are prepaid, the City would be required to appropriate other available funds or levy additional property taxes to pay the debt service. Also, if additional prepayments are received in excess of $100,000, the City will need to monitor the debt service fund for arbitrage purposes. Review of Existing Debt: We have reviewed all outstanding indebtedness for the City and find that there are no refunding opportunities at this time. We will continue to monitor the market and the call dates for the City's outstanding debt and will alert you to any future refunding opportunities. Continuing Disclosure: Because the City has more than $10,000,000 in outstanding debt (including this issue) and this issue is over $1,000,000, the City will be agreeing to provide certain updated Annual Financial Information and its Audited Financial Statement annually as well as providing notices of the occurrence of certain "material events" to the Municipal Securities Rulemaking Board (the "MSRB "), as required by rules of the Securities and Exchange Commission (SEC). The City is already obligated to provide such reports for its existing bonds, and has contracted with Ehlers to prepare and file the reports. Arbitrage Monitoring: Interest on the Bonds is exempt from federal income tax to the extent the City complies with both the arbitrage rebate and yield restriction requirements of the Internal Revenue Code. To comply, the City must either remit profits from investing Bond proceeds at a yield in excess of the Bond yield to the Treasury or satisfy an exception. The City reasonably expects to qualify for the small issue exception to the rebate requirements. However, additional measures must be taken to comply with the yield restriction requirements. Presale Report January 18, 2012 City of Cottage Grove, Minnesota Page 2 Debt Issuance Services Proposed Debt Issuance Schedule Pre -Sale Review by Council: Distribute Official Statement: Conference with Rating Agency: City Council Meeting to Award Sale of the Bonds Estimated Closing Date: Attachments Sources and Uses of Funds Proposed Debt Service Schedule 30 Year Bond Buyer Index Resolution Authorizing Ehlers to Proceed With Bond Sale January 18, 2012 Week of January 30, 2012 Week of February 6, 2012 February 15, 2012 March 13, 2012 Financial Advisors: Shelly Eldridge (651) 697 -8504 Sean Lentz (651) 697 -8509 Bond Analyst: Pia Troy (651) 697 -8556 Bond Sale Coordinator: Alicia Aulwes (651) 697 -8523 Financial Analyst: Alicia Gage (65 t) 697 -8551 The Official Statement for this financing will be mailed to the Council members at their home address or e- mailed for review prior to the sale date. Presale Report January 18, 2012 City of Cottage Grove, Minnesota Page 3 City of Cottage Grove, Minnesota $1,870,000 General Obligation Improvement Bonds, Series 2012A Issue Summary Total Issue Sources And Uses Dated 03/13120121 Delivered 03113/2012 2010 2011 Pavement Pavement Issue Projects Projects Summary Sources Of Funds Other contributions Total Sources $1,2 98,327.00 51,308,427.00 $2,606,754.00 Uses Of Funds Ser2012 GO Imp Bonds I Issue Summary 1 1192012 1 5:12PM E■■ R_ EEADERS IN PU91.1C FINANCE Total Uses $1,298,327.00 $1,308,427.00 $2,606,754.00. City of Cottage Grove, Minnesota $1,870,000 General Obligation Improvement Bonds, Series 2012A Issue Summary Debt Service Schedule Date Principal Coupon Interest Total P +I Fiscal Total 03/13/2012 - - - - - 02/01/2013 120,000.00 0.500% 27,972.96 147,972.96 147,97196 08/01/2013 - - 15,53395 15,533.75 - 02/01/2014 120,000.00 0650% 15,533.75 135,533.75 151,067.50 08/01/2014 -- 15.143.75 15,143.75 62/07 /2015 _ 120,000,00 0.850% 15,143,75 135,143.75 150,237.50 08/01/2015 - - 14633,75 14,63375 - 02/01/2016 120,000.00 1.050% 14,633.75 134,633.75 149,26750 08/01/2016 - - 14,00375 14,00175 - 02/01/2017 120,00 1150% 14,003 134,00175 148,00750, 08/01/2017 - 13,31175 13,313.75 - 02/012018 120,000.00 1300% 13,31375 133,313.75 146,627.50 08/012018 - - 12,533.75 12,533.75 - 02/0112019 125,00000 1.500% 12,53375 137,533.75 150,067.50 08/01/2019 11,596, 11,59625_ - 02/01/2020 130,000,00 1750% 11,596.25 141,59625 153,19250 08/01/2020 - - 10,458.75 10,45875 - 02/01/2021 130,000.00 1.900% 10,458.75 140,45875 150,917.50 08/01/2021 - - 9,223.75 9,22375 - 02/012022 130,000.00 2050% 9,2 23.75 139,22175 148,447.5 08/012022 - - 7,8912 7,891.25 - 02/012023 135,000.00 2.150% 7,891.25 142,891.25 150,782,50 08/01/2023 - - 6,440.00 6,440.00 - 02/01/2024 140,000.00 2350% 6,440.00 146440.00 152,88(100 08/0_1/2024 4,795.00 4,795.00 02/01/2025 140000.00 _ 2500% 4,795.00 144,795.00 149,590.00 08/01/2025 - - 3,045.00 3,04500 - 02/012026 145,000.00 2.700% 3,045.00 148,045.00 151,090.00 08/01/2026 - - 1,08750 1,087.50 - 02/01/2027 75.000.00 2.900% 108750 _76,087,50 77,17500 Total $1,870,000.00 - $307,372.96 $2,177,372.96 - Yield Statistics Life 2.0730857% Net Interes Cost (NI _ 2_1992084% froe Interest Cost CI7C) 2 1918113 % IRS Form 8038 Net Interest Cost _ _ 2.0730857% Weaghted Average Maturity ______7929 Years, Se, 2012 DO Imp BO,ds I Issue Summary 1 119/20121 5.12 PM EHL.ERS LEAD ER IN PUBLIC f I N ANCE City of Cottage Grove, Minnesota $1,870,000 General Obligation Improvement Bonds, Series 2012A Issue Summary Debt Service Schedule Levy Date Principal Coupon Interest Total P +I 10 of Total Assessments Required 02/012013 120,000.00 0.500% 27,972.96 147,972.96 155371.61 69,727.83 85,643.78 02/01/2014 120,000.00 0650% 31,06750 151,067.50 158,620.88 69,727.82 88,893.06 02/01/2015 120,000.00 0.850% 30,28750 150,287.50 157,801.88 69,727.83 88,074.05 02/01/2016 120,00000 1.050% 29,267,50 149.267.50 156,730.88 69,727.84 87,003.04 02/01/2017 1 1.150% 28,00750 148,0 155,407.88 69,727.83 85,68005 02/01/2018 120,000 00 1.300% i6,62750 146 627.50 153,953.88 69,727 82 84,231 06 02/01/2019 125,000,00 1.500% 25,067.50 150,067.50 157,570.88 69,72283 87,843 05 02/01/2020 130,000.00 1750% 23,192.50 153,19150 MU52.13 69,727.82 91,12431 02/01/2021 130,000.00 1.900% 20,917.50 150,91250 158,463 38 69,72281 88,735.57 02/01/2022 130,000 00 2,050% 18,447,50 148,447 50 155,869 88 69,727 82 86,142 05 02/012023 135,000.00 2.150% 15,782.50 150,782.50 158,321.63 69,72782 88,59181 02/01/2024 140,000.00 2350% 12,880.00 152,880.00 160,524.00 69,727.83 90,796.17 02/01/2025 140,000.00 2.500% 9,590.00 149,590.00 157,069.50 69,727.82 87,341.68 02/01/2026 145,000.00 2.700% 6,090.00 151,090.00 158,644,50 69,727.83 88,916.67 02/01/2027 75,00000 2.900% 2,175.00 77,175.00 _ 81,033.75 3 2,69321 _ 48, 340.54 Total $1,870,000.00 - $307372.96 $2,177,37296 $2,286,241.61 51,008,882.76 57,277,35 Dates Dated 1 2 1 First Cannon Date -- 2/01/2013 Yield Statistics Bond Year Dollars Average i Average Coupon Net Interest Costa True Interest Cost Bond Yield for Arl All Inclusive Cost 2.0519518% 2.451 Ser 201200 Imp Bonds I Issue Summary 1 1/912012 1 5:12 PM E■ i L E R LE RRS�IN PUBLIC FINANCE o z W m 4 2 S p V/ W U Z Z W J q Q li U Z G Z 0 Z W Q W M cv 0 cv 4C N co Y G> a ar ', M v Z.� m C i 9 ` 4 S N ao UM C N 3 E � O N m o N 01 >. 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