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HomeMy WebLinkAbout2013-08-14 PACKET 04.K.REQUEST OF CITY COUNCIL ACTION COUNCIL AGENDA MEETING ITEM # DATE 8/14/13 � . PREPARED BY Finance Robin Roland ORIGINATING DEPARTMENT DEPARTMENT HEAD ***************************:�*�:�*�:�*:�************ COUNCIL ACTION REQUEST: Consider resolution calling for the sale of $7.6 million General Obligation Improvement Bonds of 2013A to finance 2013 street improvements (Pavement Management and Hinton Avenue projects). STAFF RECOMMENDATION Adopt resolution calling for the sale of $7.6 million General Obligation Improvement Bonds. BUDGET IMPLICATION: ADVISORY COMMISSION ACTION: ❑ PLANNING ❑ PUBLIC SAFETY ❑ PUBLIC WORKS ❑ PARKS AND RECREATION ❑ HUMAN SERVICES/RIGHTS ❑ ECONOMIC DEV. AUTHORITY ❑ BUDGETED AMOUNT DATE ACTUAL AMOUNT DENIED ❑ ❑ ❑ ❑ ❑ ❑ ❑ SUPPORTING DOCUMENTS: � MEMO/LETTER: � RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: � OTHER: Pre-sale report from Ehlers REVIEWED ❑ ❑ ❑ ❑ ❑ ❑ ❑ APPROVED ❑ ❑ ❑ ❑ ❑ ❑ ❑ ADMINISTRATORS COMMENTS � �' City Administrator Date ******�***********�***************************:�* H:\Council items\council-action.doc Cottage J Grove � Pride and QCOSPerity Meet To: From: Date: Subject: Mayor and City Council Members Ryan Schroeder, City Administrator Robin Roland, Finance Director August 9, 2013 Consider resolution calling for the sale of $7,600,000 G.O. Improvement Bonds of 2013A Introduction The 2013 Pavement Management projects (including Hinton Avenue) are almost completed. The assessment hearing will be held in early October. Discussion This bond issue will finance the 2013 Pavement Management projects, Including Hinton Avenue. The total project costs were approximately $9.7 million of which $1.562 million is paid by City Park, Utility and MSA funds. South Washington Watershed District funding also supports these projects. The bonds will be repaid over 15 years with special assessments of $2.7 million and approximately $6.32 million in future property tax levies. 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 $7,600,000 General Obligation Improvement Bonds, Series 2013A. RESOLUTION NO. 13 Resolution Providing for the Sale of $7,600,000 General Obligation Improvement Bonds, Series 2013A 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 $7,600,000 General Obligation Improvement Bonds, Series 2013A (the "Bonds"), to finance the 2013 street improvements in the City; and B. WFIEREAS, the City has retained Ehlers & Associates, Inc., in Roseville, Minnesota ('Bhlers"), 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: l. Authorization; Findin�s. The City Council hereby authorizes Ehlers to solicit proposals for the sale of the Bonds. 2. Meetin�; Proposal Opening. The City Council shall meet at 7:30 p.m. on September 4, 2013, 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 atrthorized 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 thereo£ and the following voted against the same: Adopted by the City Council of the City of Cottage Grove this 14 day of August, 2013. : Myron Bailey, Mayor ATTEST: Caron Stranslcy, City Clerk ������ LEADERS IN PUBLIG Fl1VANGE August 7, 2013 Pre-Sale Report for City of Cottage G rove, M i n nesota $7,600,000 General Obligation Improvement Bonds, Series 2013A Prepared by: Shelly Eldridge Financial Advisor And Sean Lentz Financial Advisor � 1-800-5��-11 T 1 I �Vw�v,ehlers-inc.com Executive Summary of Proposed Debt Proposed Issue: $7,600,000 General Obligation Improvement Bonds, Series 2013A Authority: The Bonds are being issued pursuant to Minnesota Statutes, Chapters 429 and 475. The Bonds will be general obligations of the City for which its full faith, credit and taYing powers are pledged. Chapter 429 allows that if the City is 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. Purpose: The proposed issue will finance costs incurred for the City's 2013 Street Project. The debt service will be paid from special assessments and property taxes. Term/Call Feature: The Bonds are being issued for a 15 year tenn. Principal on the Bonds will be due on February 1 in the years 2015 through 2029. Interest is payable every six months beginning August l, 2014. The Bonds maturing February 1, 2023 and thereafter will be subject to prepayment at the discretion of the City on February 1, 2022. 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. R�ting: The City's most recent bond issues were rated AA+ by Standard & Poor's. The City will request a new rating for the Bonds. 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 local banks in your area and regional underwriters. We have included an allowance for discount bidding equal to 0.9% 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 their 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: Because yields for investors are very low at this time, a bank ar underwriter may choose to submit a bid for your competitive sale with higher coupon rates than the yield on the bonds. Higher coupons are valuable for institutional and retail investors who may trade bonds in the future. For example, a given coupon ra#e may be 3% but the yield may only be Presale Report August 7, 2013 City of Cottage Grove, Minnesota Page 1 1.5%. To achieve the lower yield of 1.5%, the investoN will pay you, the issuer, a"premium " at the time of closing. In other words, they will pay more than $5,000 for a$5,000 block of bonds in exchange for more tax-exempt interest at a later date. The amount of the premium varies, but can be as high as 10% of the bond issue. This means for a $2,000,000 issue, you may receive a bid that offers $2,200,000 in proceeds. For this bond issue, the City may have the choice of • Keeping the premium for your project costs, • Putting it in the debt service fund or • Reducing the size of the issue. The adjustment may slightly change the true interest cost of the original bid, either up or down. • Review of Existing Debt: We have reviewed all oLrtstanding indebtedness for the City and find that, other than the obliga'tions proposed to be refunded by the Bonds; there are no other refunding opportunities at this time. We will continue to monitor the marlcet 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 Infortnation 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: Because the Bonds are tax-exempt securities/t� credit securities, the City must ensure compliance with certain Internal Revenue Service (IRS) rules throughout the life of the issue. These rules apply to all gross proceeds of the issue, including initial bond proceeds and investment earnings in construction, escrow, debt service, and any reserve funds. How issuers spend bond proceeds and how they track interest earnings on funds (arbitrage/yield restriction compliance) are common subjects of IRS inquiries. Your specific responsibilities will be detailed in the Nonarbitrage Certificate prepared by yot�r Bond Attorney and provided at closing. We recommend that you regularly monitor compliance with these rules andlor retain the services of a qualified firm to assist you. You have retained Ehlers to assist you with compliance with these rules on select prior bond issues. Risk Factors: Special Assessments: We have not assumed any pre-paid special assessments and we have assumed that assessments will be levied as projected. If the City receives a significant amount of pre-paid assessments or does not levy the assessments, it may need to increase the levy portion of the debt service to make up for lower interest earnings than the expected assessment interest rate. Presale Report August 7, 2013 City of Cottage Grove, Minnesota Page 2 Proposed Debt Issuance Schedule Pre-Sale Review by City Council: August 7, 2013 Adopt Resolution Calling for Sale of Bonds August 15, 2013 Distribute Official Statement: Week of August 22, 2013 Conference with Rating Agency: Week of August 26, 2013 City Council Meeting to Award Sale of the Bonds: September 4, 2013 Estimated Closing Date: October 2, 2013 Attachments Sources and Uses of Funds Proposed Debt Service Schedule Bond Buyer Index Resolution Authorizing Ehlers to Proceed With Bond Sale Ehlers Contacts Financial Advisors: Disclosure Coordinator: Bond Sale Coordinator: Financial Analyst: Shelly Eldridge Sean Lentz Pia Troy Alicia Baldwin Alicia Gage (651) 697-8504 (651) 697-8509 (651) 697-8556 (651) 697-8523 (651) 697-8551 The Official Statement for this financing will be distributed to the City Council members at their home address or e-mailed for review prior to the sale date. Presale Report City of Cottage Grove, Minnesota August 7, 2013 Page 3 City of Cottage Grove, Minnesota $7,600,000 General Obligation Improvement Bonds, Series 2013A Assumes Current Market BQ AA+ Rates + 20bps Sources & Uses Dated 10l01/2013 � Delivered 10/01/2013 Sources Of Funds Paz Amount of Bonds $7,600,000.00 Planned Issuer Equity contribution - 2 240 000.00 Total Sources Uses Of Funds Total Underwriter's Discount (0.900%) 68,400.00 Costs of Issuance 57,000.00 Deposit to Project Construction Fund __ __ _ __ 9,711,029.17 Roundine Amount � ��n a� Total Uses Series 2013A GO Imp Bonds � SINGLE PURPOSE � 8/ 2/2013 � 1:03 PM EHLERS LEADERS IN PUBLIC FINANCE City of Cottage Grove, Minnesota $7,600,000 General Obligation Improvement Bonds, Series 2013A Assumes Current Market BQ AA+ Rates + 20bps Debt Service Schedule Date Principal Coupon Interest Total P+I 105% of Total Assessments Levy/(Surplus) 02/Ol/2014 - - - - - - - 02/Ol/2015 380,000.00 0.700% 261,870.00 641,870.00 673,963.50 253,213.55 420,749.95 02/01/2016 450,000.00 1.000% 193,742.50 643,742.50 675,929.63 253,213.55 422,716.08 02/O1/2017 455,000.00 1300% 189,242.50 b44,242.50 676,454.63 253,213.55 423,241.08 02/O1/2018 460,000.00 1.60 183,327.50 643,327.50 675,493.88 253,213.55 422,280.33 ---- ................_........__......_..----.......---..._.................... __._...------._..............._............._............__._..._......_.........._.._.....�........._...._._...-------.._.._..........._..._...........__......_..............................----......_ 02/Ol/2019 465,000.00 1.900% 175,967.50 640,967.50 673,015.88 253,213.55 419,802.33 02/Ol/2020 475,000.00 2.200% 167,132.50 642,132.50 674,239.13 253,213.55 421,025.58 02/O1/2021 485,000.00 2.450% 156,682.50 641,682.50 673,766.63 253,213.54 42Q553.09 02/Ol/2022 495,000.00 2.650% 144,800.00 639,800.00 671,790.00 253,213.54 418,576.46 02/Ol/2023 510,000.00 2.900% 131,682.50 641,682.50 673,766.63 253,213.55 420,553.08 02/O1/2024 525,000.00 3.050% 116,892.50 641,892.50 673,987.13 253,213.54 420,773.59 02/O1/2025 540,000.00 3.200% 100,880.00 640,880.00 672,924.00 253,213.54 419,710.46 02/Ol/2026 560,000.00 3.350% 83,600.00 643,600.00 675,780.00 253,213.55 422,566.45 02/O1/2027 580,000.00 3.500% 64,840.00 644,840.00 677,082.00 253,213.54 423,868.46 02/Ol/2028 600,000.00 3.600% 44,540.00 644,540.00 676,767.00 253,213.55 423,553.45 02/Ol/2029 620,000.00 3.700% 22,94 0.00 642,940.00 675,087.00 253,213.55 421,873.45 Total $7,600,000.00 - $2,038,140.00 $9,638,140.00 $10,120,047.00 $3,798,203.20 $6,321,843.80 Significant Dates Dated First Cou�on Date Yield Statistics Bond Year pollars ----._........._-- ......................._..._.. Average Life Average Coupon 10/O1/2013 8/Ol/2014 8.854 Years 3.0289649% Net Interest Cost (NIC� 3.1306170% _.._._.. --------- .........................___._........_.._..------.................................__..._.._.....-----------._.....---...........__..__....._..__........_...._.___....__------.............._._.........._------........_._...._. True Interest Cost (TIC) 3.1111352% Bond Yield for Arbitrage Purposes 2.99206 All Inclusive Cost (AIC) 32115066% Series 2013A GO Imp Bonds � SINGLE PURPOSE � 8/2/2013 � 1:03 PM EHLERS LEADERS IN PUBLIC FINANCE City of Cottage Grove, Minnesota $7,600,000 General Obligation Improvement Bonds, Series 2013A Assessments - 1.5% over TIC - Equal P&I Assessments Date Principal Coupon Interest Total P+I 12/31/2014 128,976.82 4.600% 124,236.73 253,213,55 12/31/2015 134,909.76 4.600% 118,303.79 253,213.55 12/31/2016 141,115.61 4.600% 112,097.94 253,213.55 12/31/2017 147,606.92 4.600% 105,606.63 253,213.55 12/31/2018 154,396.84 ___ 4.600% _ 98,816.71 253,213.55 12/31/2019 161,499.10 4.600% 91,714.45 253,213.55 12/31/2020 168,928.05 4.600% 84,285.49 253,213,54 12/31/2021 176,698.74 4.600% 76,514.80 253,213.54 12/31/2022 184,826.89 4.600% 68,386.66 253,213.55 12/31/2023 __ 193,328.92 _____ 4.600% 59 ,884.62 253,213.54 12/31/2024 202,222.05 4.600% 50,991.49 253,213,54 12/31/2025 211,524.27 4.600% 41,689.28 253,213.55 12/31/2026 221,25438 4.600% 31,959.16 253,213.54 12/31/2027 231,432,09 4.600% 21,781.46 253,213.55 12/31/2028 242,077.96 4.600% 11,135.59 253,213.55 Total $2,700,798.40 - $1,097,404.80 $3,798,203.20 ificant Dafes Filing llate 1/Ol/2014 First Payment Date 12/31/2014 Series 2013A GO Imp Bonds � SINGLE PURPOSE � S/ 2l2013 � 1:03 PM EHLERS LEADERS IN PUBLIC FINANCE 2 YEAR TREND IN MUNICIPAL BOND INDICES Weekty Rates August, 2011 - August, 2013 The Bond Buyer "20 Bond Index" (BBI) shows average yields on a group of municipal bonds that mature in 20 years and have an average rating equivalent to Moody's Aa2 and S&P's AA. ������ Source: The Bond Buyer The Revenue Bond Index (RBI) shows the average yield on a group of revenue bonds that mature in 30 years and have an average rating equivalent to Moody's A1 and S&P's A+. LEADER51N-PUBUC P€NANCE.