The URL can be used to link to this page

Home My WebLink About07H Call for Sale of General Obligation Improvement Bonds 2016B Cotta e City Council Action Request g � Grove �here Pride and Pc°SPerity Meet Meeting Date 9/21/2016 Department Finance Agenda Category Consent Agenda Title Call for Sale of General Obligation Improvement Bonds 2016B Staff Adopt the resolution calling for the sale of$4,400,000 General Obligation Recommendation Improvement Bonds,Series 2016B. Budget Implication Attach me nts Memo from R Roland.tif 714.7KB Res call for 2016B.tif 772.97KB Presale report 2016B bonds.tif 7.97MB � �h�r� Prid�ar�a�C��p�rity ��t To: Mayor and City Council Members Charlene Stevens, City Administrator From: Robin Roland, Finance Director Date: September 13, 2016 Subject: Consider resolution calling for the sale of$ 4,400,000 General Obligation Improvement Bonds of 2016B Introduction With the 2016 Pavement Management Project completed and the 2017 Pavement Management Project ordered, funding is necessary to reimburse expenditures for the two projects. Discussion This bond issue will finance the 2016 and 2017 Pavement Management projects. The total project costs for the 2016 project were $4,758,750 of which $915,500 was paid by city utility funds and $876,000 was paid by MSA. The 2017 costs are estimated at$1,950,800 with $203,000 being paid by city utility funds. The bonds will be repaid over 15 years with special assessments of$2.3 million and approximately $3.1 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 calling for the sale of $4,400,000 General Obligation Improvement Bonds, Series 2016B. RESOLUTION NO. 2016 - xxx Resolution Providing for the Sale of $4,400,000 General Obligation Improvement Bonds, Series 2016B 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 $4,400,000 General Obligation Improvement Bonds, Series 2016B (the "Bonds"), to finance the 2016 and 2017 pavement management improvement projects in the City; and WHEREAS, the City has retained Ehlers & Associates, Inc., in Roseville, Minnesota ("Ehlers"), as its independent municipal advisor for the Bonds 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; Findinqs. The City Council hereby authorizes Ehlers to assist the City for the sale of the Bonds. 2. Meetinq; Proposal Openinq. The City Council shall meet at 7:00 P.M. on October 19, 2016, for the purpose of considering 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. Passed this 21 St day of September, 2016. Myron Baily, Mayor Joe Fischbach, City Clerk , , �' I �� : i � � �i� . ' P��G��I��III� �'�J931��; �"IMA�9��: September 21 , 2016 Pre-Sale Report for City of Cottage Grove, Minnesota $4,400,000 General Obligation Improvement Bonds, Series 2016B �� 4�4�� u��I I, _ .., ��,��t ,,,,, .�F �� f Prepared by: Shelly Eldridge, CIPMA Senior Municipal Advisor And Sean Lentz, CIPMA Senior Municipal Advisor And Stacie Kvilvang, CIPMA Senior Municipal Advisor IIIIIIIIIIIIIIIIIIIIIIII �IIIII�IIII �-. . _ i �,l�r,e�,, >,.�i�,,�� i �, ,�,�,��i�;, � „-�<<,r,�,,��, Executive Summary of Proposed Debt Proposed Issue: $4,400,000 General Obligation Improvement Bonds, Series 2016B Purposes: The proposed issue includes financing for the City's 2016 and 2017 Pavement Management improvement Projects. Debt Seivice for the Bonds will be paid from special assessments to be levied by the City in 2016 and 2017 and a property tax levy. Authority: The Bonds are being issued pursuant to Minnesota Statutes, Chapter 429and 475. Because 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. The Bonds will be general obligations of the City for which its full faith, credit and taxing powers are pledged. Term/Call Feature: The Bonds are being issued for a 17 year term. Principal on the Bonds will be due on February 1 in the years 2018 through 2033. interest is payable every six months beginning August 1, 2017. The Bonds maturing on and after February 1, 2027 will be subject to prepayment at the discretion of the City on February 1, 2026 or any date thereafter. Bank Qualification: Because the City is expecting to issue no more than $10,000,000 in tax exempt debt during 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. Tf 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. Basis for Recommendation: Based on our knowledge of your situation, your objectives communicated to us, our advisory relationship as well as characteristics of various municipal financing options, we are recommending the issuance of General Obligation Bonds as a suitable financing option because this is the most overall cost- effective option that still maintains future flexibility for the repayment of debt. In addition, it conforms to the city's policy and past practices to finance this type of project with this type of debt issue. Method of Sale/Placement: In order to obtain the lowest interest cost to the City,we will competitively bid the put-chase of the Bonds from local and national underwriters/banks. We have included an allowance for discount bidding equal to 1.00% of the Presale Report September 21, 2016 City of Cottage Grove, Minnesota Page 1 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. Tf 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. Premium Bids: Under current market conditions, most investors in municipal bonds prefer "premium" pricing structut-es. A premium is achieved when the coupon for any maturity (the interest rate paid by the issuer) exceeds the yield to the investor, resulting in a price paid that is greater than the face value of the bonds. The sum of the amounts paid in excess of face value is considered "reoffering premium." For this issue of Bonds we have been directed to use the premium to reduce the size of the issue. The adjustments may slightly change the true interest cost of the original bid, either up or down. You have the choice to limit the amount of premium in the bid specifications. This may result in fewer bids, but it may also eliminate large adjustments on the day of sale and other uncertainties. Other Considerations: The Bond has been reduced by anticipated prepaid assessments of $400,000 and a contribution of MSA and other City funds in the amount of 2,009,550. 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 agr-eeing to provide certain updated Annual Financial Information and its Audited Financial Statement annually as well as providing notices of the occurrence of certain reportable 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 obligations/tax credit obligations, 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 issuet-s 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 your Bond Attorney and provided at closing. You have retained Ehlers to assist you with compliance with these rules. Presale Report September 21, 2016 City of Cottage Grove, Minnesota Page 2 Risk Factors: Special Assessments: We have assumed $400,000 of pt-e-paid special assessments and that assessments levied as projected. If the City receives a significant amount of additional pre-paid assessments or does not levy the assessments as scheduled, the levy portion of the debt setvice may need to be increased to make up for lower interest earnings than the expected assessment interestrate. Other Service Providers: This debt issuance will require the engagement of other public finance service providers. This section identifies those other service providers, so Ehlers can coordinate their engagement on your behalf. Where you have previously used a particular firm to provide a service, we have assumed that you will continue that relationship. For setvices you have not previously required, we have identified a service provider. Fees charged by these service providers will be paid from proceeds of the obligation, unless you notify us that you wish to pay them from other sources. Our pre-sale bond sizing includes a good faith estimate of these fees, so their final fees may vary. If you have any questions pertaining to the identi�ed service providers or their role, or if you would like to use a different service provider for any of the listed services please contact us. Bond Attorney: Briggs and Morgan,Professional Association Paying Agent: Bond Trust Services Corporation Rating Agency: S&P Global Ratings This presale report summarizes our understanding of the City's objectives for the structure and terms of this financing as of this date. As additional facts become known or capital markets conditions change,we may need to modify the structure and/or terms of this financing to achieve results consistent with the City's objectives. Presale Report September 21, 2016 City of Cottage Grove, Minnesota Page 3 Proposed Debt Issuance Schedule Pre-Sale Review by City CounciL September 21, 2016 Distribute Official Statement: Week of October 6,2016 Conference with Rating Agency: Week of October 6, 2016 City Council Meeting to Award Sale of the Bonds: October 19,2016 Estimated Closing Date: November 10,2016 Attachments Sources and Uses of Funds Proposed Debt Service Schedule Resolution Authorizing Ehlers to Proceed With Bond Sale Ehlers Contacts Municipal Advisors: Shelly Eldridge (651) 697-8504 Sean Lentz (651) 697-8509 Stacie Kvilvang (651) 697-8506 Disclosure Coordinator: Meghan Lindblom (651) 697-8549 Financial Analyst: Alicia Gage (651) 697-8551 The Official Statement for this financing will be distributed to the City Council at their home or e-mailed address for review prior to the sale date. Presale Report September 21, 2016 City of Cottage Grove, Minnesota Page 4 City of Cottage Grove, Minnesota $4,400,000 General Obligation Improvement Bonds, Series 2016B Issue Summary Assumes Current Market BQ AA+ Rates plus 25bps Total Issue Sources And Uses Dated 11/10/2016� Delivered 11/10/2016 Issue 2016 Projects 2017 Projects Summary Sources Of Funds ParAmo�mtafBonds $2,G25,000.00 $1,775,000.00 $4,400,000.00 Other City 915,500.00 21 R,050.00 1,133,550.00 Prepaid Assessments �00,000.00 - 400,000.00 MSA Funds R76,000.00 R76,000.00 Total Sources $4,816,SUO.UU $1,993,USU.00 $6,809,SSU.UU Uses Of Funds Total Underwiiter's Discount (1.000%) 26,250.00 17,750.00 44,000.00 Costs of Tssuance 30,724.43 20,775.57 51,500.00 Deposit to Project Consuuction Fund 4,758,750.00 1,950,800.00 6,709,550.00 Rounding Amount 775.57 3,724.43 4,500.00 Total Uses $4,816,SUO.UU $1,993,USU.00 $6,809,SSU.UU Series 2016B GO Imp Bonds I Issue Summary � 9/13/2016 � 12:51 PM °; EH �� F�.� �.�nut:rzs irv Wusi.ir,r iNnr�c[: City of Cottage Grove, Minnesota $4,400,000 General Obligation Improvement Bonds, Series 2016B Issue Summary Assumes Current Market BQ AA+ Rates plus 25bps Debt Service Schedule Date Principal Coupon Interest Total P+I Fiscal Total 11/l0/�01� - - - - - 08/O1/2017 - - 55,26151 55,261.31 - 02/O1/2018 160�000.00 0.950% 3R�111.25 19R�111.25 253�372.56 08/O1/2018 - - 37,351.25 37,351.25 - 02/O1/2019 290�000.00 1.050% 37�351.25 327�351.25 364�702.50 08/O1/2019 35,828.75 35,828.75 - 02/O1/2020 2R5�000.00 1.150% 35�R2R.75 320�828.75 356�657.50 OB/O1/2020 - - 34,190.00 34,190.00 - 02/Ol/2021 285�000.00 1300°/a i4�190.00 319�190.00 353�380.00 OB/O1/2021 - - 32,337.50 32,337.50 - 02/Ol/2022 �� 285�000.00 �� I.400°/a�� i2,337.50 �� 317,337.50 �� 349�675.00� OB/O1/2022 - - 30,342.50 30,342.50 - 02/Ol/2023 290�000.00 1.500°/a i0�342.50 320�342.50 350�685.00 OB/O1/2023 - - 28,167.50 28,167.50 - 02/Ol/2024 290�000.00 1.600°/a 28�167.50 318�167.50 346�335.00 OB/O1/2024 25,847.50 25,847.50 - 02/Ol/2025 290�000.00 1.700°/a 25�847.50 315�847.50 341�695.00 OB/O1/2025 - - 23,382.50 23,382.50 - 02/Ol/2026 295�000.00 1.800°/a 23�382.50 318�382.50 341�765.00 OB/O1/2026 - - 20,727.50 20,727.50 - 02/Ol/2027 �� 295�000.00 �� I.850°/a�� 20,727.50 �� 315,727.50 �� 336�455.00� OB/O1/2027 - - 17,998.75 17,998.75 - 02/Ol/2028 300�000.00 1.950°/a 17�998.75 317�998.75 335�997.50 OB/O1/2028 - - 15,073.75 15,073.75 - 02/Ol/2029 300,000.00 2.050% 15,073.75 315,073.75 330,747.50 OB/O1/2029 11,998.75 11,998.75 - 02/Ol/2030 300,000.00 2200% 11,998.75 311,998.75 323,997.50 OB/O1/2030 - - 8,698.75 8,698.75 - 02/Ol/2031 305,000.00 2300% 8,698.75 313,698.75 322,397.50 OB/O1/2031 - - 5,191.25 5,191.25 - 02/Ol/2032 305,000.00 2.400% 5,I9125 310,I9125 315,382.50 OB/O1/2032 - - 1,531.25 1,531.25 - 02/Ol/2033 125,000.00 2.450% 1,53125 126,53125 128,062.50 Total $4,4UU,UUU.OU - $75U,7U7.56 $S,15U,7U7.56 - Yield Statistics Bond Year pollars $38,490.00 Average Life 8.74b Years Average Coupon 1.9503964% Net Tnterest Cost(NTC) 2.0647118% True Interest Cost(TIC) 2.0641785% Bond Yield for Arbitrage Purposes 1.9369063% All Inclusive Cost(AIC) 2.2153902% IRS Form 8038 Net Tnterest Cost 1.9503964% �'eighted Average Maturity 8.748 Year� Series 2016B GO Imp Bonds � Issue Summary � 9/13/2016 � 12:51 PM . ENL.� R� i.�.ao�:�{s irv r>u[�tic rirvnNct. City of Cottage Grove, Minnesota $4,400,000 General Obligation Improvement Bonds, Series 2016B Issue Summary Assumes Current Market BQ AA+ Rates plus 25bps Debt Service Schedule Date Principal Coupon Interest Total P+I 105°/a of Total Assessments Levy/(Surplus) 02/0l/2017 - - - - - - - 02/01/2018 160,000.00 0.950% 93,372.56 253,372.56 266,041.19 9C,090.R2 169,95037 02/Ol/2019 290,000.00 1.050% 74,702.50 364,702.50 382,937.63 177,275.86 205,661.77 02/O1/2020 285,000.00 1.150% 71,657.50 356,657.50 374,490.38 173,481.60 201,008.78 02/Ol/2021 285,000.00 1.300°/ 68,380.00 353,380.00 371,049.00 169,68734 201,361.66 02/O1/2022 �� 285,000.00 �� 1.400%� 64,675.00 �� 349,675.00 �� 367,158.75 �� 165,893.10�� 201,265.65� 02/O1/2023 290,000.00 1.500% 60,685.00 350,685.00 36b',21925 162,098.84 206,120.41 02/O1/2024 290,000.00 1.600% 56,335.00 346,335.00 363,651.75 158,304.55 205,347.20 02/Ol/2025 290,000.00 1.700% 51,695.00 347,695.00 35b',779.75 754,510.29 204,269.46 02/O1/2026 295,000.00 1.800% 46,765.00 341,765.00 358,853.25 150,716.05 208,137.20 02/Ol/2027 �� 295,000.00 �� 1.850%� 41,455.00 �� 336,455.00 �� 353,277.75 �� 146,921.79�� 206,355.96� 02/O1/2028 300,000.00 1.950% 35,997.50 335,997.50 352,797.38 143,127.53 209,669.85 02/O1/2029 300,000.00 2_O50% 30,147.50 330,147.50 346,654_88 139,333.29 207,321_59 02/Ol/2030 300,000.00 2.200% 23,997.50 323,997.50 340,197.38 135,539.03 204,658.35 02/O1/2031 305,000.00 2.300% 17,397.50 322,397.50 338,517.38 131,744.77 206,772.61 02/Ol/2032 305,000.00 2.400% 10,382.50 315,382.50 331,151.63 127,950.51 203,201.12 02/O1/2033 125,000.00 2.450% 3,062.50 128,062.50 134,465.63 58,565.27 75,90036 Total $4,400,OOOAO - $750,707.56 $5,150,707.56 $5,408,242.94 $2,291,240.64 $3,117,002.30 Significant Dates D�red l lno/2oi6 First Coupon Date h/O1/2017 Yield Statistics Bond Year pollars $38,490.00 Av�iagc Lifc 8.748 Ycars .Average Coupon 1.9i03964% Net Intetest Cost(NIC) 2.0647118% Tiue Tnterest Cost(TTC) 2.06�17R5% Bond Yield far Arbiu'xge Purpose� 1.9369063% .All Inclusive Co;t(.AIC) 2.2153902% Series 2016B GO Imp Bonds � Issue Summary � 9/13/2016 � 12:51 PM EHLER.� I.F.ADF.:f251N PUk31.IC FIN�NCI:. City of Cottage Grove, Minnesota $983,865 General Obligation Improvement Bonds, Series 2016B 2016 Projects - Assessments Equal Principal - Flat Rate 3.10% Assessments Date Principal Coupon Interest Total P+I 12/31/2017 65�591.00 3.100% 30�499.R2 96�090.R2 12/31/2018 65,591.00 �.100°/n 28,466.50 94,057.50 12/31/2019 65�591.00 3.100% 26�433.18 92�024.1 R 12/31/2020 65,591.00 �.100°/n 24,�99.86 89,990.86 12/31/2021 65�591.00 3.100% 22�366.54 R7�957.54 12/31/2022 G5,591.00 �.100°/n 20,��.22 85,92�.22 12/31/2023 65�591.00 3.100% 1 R�299.R8 R3�890.RR 12/31/2024 65,591.00 �.100% 16,266.56 81,857.56 12/31/2025 65�591.00 3.100°/a 14�23324 79�82424 12/31/2026 65,591.00 3.100% 12,199.92 77,790.92 12/31/2027 65�591.00 3.100°/a 10,166.60 75�7�7.60 12/31/2028 65,591.00 3.100% 8,133.28 73,724.28 12/31/2029 65�591.00 3.100°/a 6�099.96 71�690.96 12/31/2030 65,591.00 3.100% 4,066.64 69,657.64 12/31/2031 65�591.00 3.100°/a 2�033.32 67�624.32 Total $983,865.00 - $243,998.52 $1,227,863.52 Significant Dates Filing Date 1/01/2017 First Payment Date 12/31/2017 Series 2016B GO Imp Bands � 2016 Projects � 9/13/2016 � 12:49 PM EHL.FR� I.E�.AI7[�.RS IN FU[3l.IC FINANCE: City of Cottage Grove, Minnesota $852,065 General Obligation Improvement Bonds, Series 2016B 2017 Projects - Assessments Equal Principal - Flat Rate 3.10% Assessments Date Principal Coupon Interest Total P+I 12/31/2018 56�R0434 3.100% 26�414.02 R3�218.36 12/31/2019 56,80454 �.100% 24,65�.08 81,457.42 12/31/2020 56�R0434 3.100% 22�892.14 79�696.4R 12/31/2021 56,80454 �.100% 21,1�1.22 77,9�5.56 12/31/2022 56�R0434 3.100% 19�370.28 76�174.62 12/31/202� 5G,804.�� .100°/n 17,609.�4 74,�1�.G7 12/31/2024 56�R0433 3.100% 15�84R.40 72�652.73 12/31/2025 56,8045� �.100°/n 14,087.48 70,891.S 1 12/31/2026 56�804.33 3.100°/a 12�326.54 69�7 30.87 12/31/2027 56,804.33 3.100% 10,565.60 67,369.93 12/31/2028 56�804.33 3.100°/a b',804.6b' 65�609.01 12/31/2029 56,804.33 3.100% 7,043.74 63,848.07 12/31/2030 56�804.33 3.100°/a 5�282.80 62�087.13 12/31/2031 56,804.33 3.100% 3,521.86 60,326.19 12/31/2032 56�804.33 3.100°/a 1�760.94 58�56527 Total $852,U65.00 - $211,312.12 $1,U63,377.12 Significant Dates Filing Date 1/Ol/2018 First Payment Date 12/31/2018 Series 2016B GO Imp Bands � 2017 Projects � 9/13/2016 � 12:49 PM EHL.FR� I.E�.AI7[�.RS IN FU[3l.IC FINANCE: Resolution No. Council Member introduced the following resolution and moved its adoption: Resolution Providing for the Sale of $4,400,000 General Obligation Improvement Bonds, Series 2016B 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 $4,400,000 General Obligation Improvement Bonds, Series 2016B (the "Bonds"),to fmance the 2016 and 2017 pavement management improvement projects in the City; and B. WHEREAS, the City has retained Ehlers&Associates, Inc.,in Roseville,Minnesota("Ehlers"), as its independent municipal advisor for the Bonds 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; Findin�s. The City Council hereby authorizes Ehlers to assist the City for the sale of the Bonds. 2. Meetin�; Proposal Opening. The City Council shall meet at 7:00 P.M. on October 19, 2016, for the purpose of considering proposals for and awarding the sale of the Bonds. 3. Official Statement. Tn 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 fot-the adoption of the foregoing t-esolution was duly seconded by City Council Member and, after full discussion thereof and upon a vote being taken thereon, the following City Council Members voted in favor thereof: and the following voted against the same: Whereupon said resolution was declared duly passed and adopted. Dated this 21 St day of September, 2016. Myron Baily, Mayor Joe Fischbach, City Clerk