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HomeMy WebLinkAbout1998-12-16 PACKET 08.C.REQUEST O� CiTY COUNCIL ACT{ON COUNCIL AGENDA MEE7ING ITEM DATE 12/16/98 �• PREPARED BY Economic Dev. Authority Kirsten Barsness ORfGINATiNG DEPARTMENT STAFF AUTHOR { # Y * * * * R 'k * 'k * x * +F 'k + L 3 + � t 'k * 3 * * * + * * * * * 'F 'k # * # k f * * X * * %' f COUNCIL ACTiON REQUEST: Adopt resolution modifying the budget for TIF district 1-7 and authorizing the sale of bonds for the Renewai by Anderson Tax Increment District STAFF RECOMMENDATION: Adopt the Resolution SUPPORTING DOCUMENTS: � MEMO/LETTER: Memo from Kirstin Barsness dated December 11, 1998 ❑ RESOLUTION: ❑ ORDINANCE: ❑ ENGINEERING RECOMMENDATION: ❑ LEGAL RECOMMENDATION: ❑ OTHER: ADMINISTRATORS COMMENTS: The enclosed bond sale report and resulting cash flows ailow for funding of the future reconstruction of 100th Street, which is not included in this proposed sale. The project shows up as a$300,000 local expenditure with a$100,000 Metro Council match, which is the extent of their cffer ±o date. Whiie negotiations may improve aur pasitior from there, giver our obligation to construct the road, our distric cash flows must include the most conservative possibility at this time. Likewise, cash flows do not su e appreciation in market values for District 1-9. With these two conservat e ass ti s, e bon 'ssue casn flows. . ���� Z f---� - � �' ° � Gity Administrator atC�� <«R��,»��„��«����.��<�����>���«����.���.�.«x.� GOUNCIL ACTIO�I 7AKEN: ❑ APPRC7VED ❑ DENfED ❑ OTHER • � To: Honorable Mayor and City Council From: Kirstin Barsness, Economic Development Director Date: 12/11 /98 Re: Budget Modification of Tax Increment District No. 1-7 and proposed bond sale of $1.015,000 G.O. Tax Increment Bonds Series 1999c and $300,000 G.O. Taxable Tax Increment Bonds Series 1999D for Tax Increment District 1-9 (Renewal by Rndersen) INTRODUCTION Tax Increment District No. 1-7 (Target) will be decertified on December 31, 1998. The District has been instrumental in accomplishing a number of community goals from encouraging commercial development to providing the seed capital for purchasing property within the industrial park. Staff has been working with Ehlers & Associates to finalize the budget expenditure from TIF District 1-7 and to determine a financing program for the Renewai by Andersen District 1-9. Councii wiil be considering: . A resolution modifying the budget for TIF District 1-7. The budget will accurately depict the expenditure to date from the district. • A proposed bond sale for tax increment bonds to support expenditures made for the Renewal by Andersen project. ($1,015,000 G.O. Improvement Tax Increment Bonds, Series 1999C and $300,000 G.O. Taxabfe Tax Increment Bonds, Series 1999D) DISCUSSION On August 5, 1998, the City Council modified the Tax Increment Plan for TIF District 1-7 to allow for the expenditure of $580,000 for site improvements in the tax increment financing district for Renewal by Andersen project. To date costs associated with the Renewal project have been funded from internal revenue sources including TIF District 1-7. After meeting with Ehlers & Associates, staff is recommending that the budget for TIF District 1-7 be modified so that the excess TIF \\CG_FS1\SYS\USERS\KBARSNES\TIF 1-TTIF 1-7 Budget.doc funds can be used for land acquisition for the Renewal project. By allocating the funds in this manner, the taxabie component of the bond sale for the Renewal District can be minimized. Land acquisition is not a permitted expenditure for tax-exempt financing. A detailed report prepared by Ehlers on the bonding for the Renewal Tax Increment District is attached to this memorandum. In addition, a representative from Ehlers will be at the City Councii meeting to answer any questions. ACTION REQUIRED The City Council should consider the passing of the Resolution for modifying the budget for TIF District 1-7 and the authorization of a bond sale for $1,015,000 General Obligation Tax Increment Bonds, Series 1999C and $300,000 General Obligation Taxable Tax Increment Bonds, Series 1999D for the Renewal by Andersen Tax Increment District. • Page 2 CITY OF COTTAGE GROVE COUNTY OF WASHINGTON STATE OF MINNESOTA BELNG A RESOLUTION APPROVING THE BtiDGET MODIFIC'ATION OF TAX INCREMENT FINANCING DISTRICT NO. 1-7 OF THE CITY OF COTTAGE GBOVE. WHBREAS, on June 7, 1989 the Ciry of Cottage Grove (the °City") created its Tax Increment �inancing District No 1-7, (the "District") within its Development Project and Devetopment Disirict No. 1 (the'Project"); and WHEREAS, modifications were made on April 25, 1990, December 18, 1996, the District to decrease Yhe authorized budgeted expenditures; and WHEREAS, the modification of December 18, 1996 authorized the expenditure of $589,500 for a ]oan program, uaffic and roadway improvements, and industria] park land acquisition costs within Development DistricY No. 1, and WHEREAS, $330,000 has been expended from the District on land acquisition and road improvements within the Project, and WF3EREAS, currenfly there is $229,500 of aut�horrzed by the December 18, 1996 budget modification of the District which has not been expended on any eligible ar authorized expenditures, and WHEILEAS, it has been determined thaT $530,000 will be necessary £ar land acquisition in Tax Increment District No. 1-9, and WAEREAS, it has been determined that the estimated tax increments generated in Tax Increment District No. 1-9 will be insufficient to finance the enrire land acquisition costs neeessary for the project, znd WHEREAS, the modificarion of August 5, 1998 authorized the expenditure of $580,000 for site preparation costs from the DisYrict in Tax Increment Pinancing Dlstriet No. 1-9, ;vTOW TIIEREFORE, BE IT RESOLVED by the City Council of the Ciry of Cottage Grove auThorizes that $229,500 from the December 18, 1996 modified budget and �300,500 from Yhe Au�ust 5, 1998 modified budget be reallocated, and $530,000 is hereby authorized Yo be experided on land acquisition costs to be incurred in Tax Inerement District No. 1-9. DATED: , 1998 Mayor ATTEST: City Administrator .�..•. . . .,.. ....�. . � � .•. .� . $1,015,000 General Obligation Tax Increment Bonds, Series 1999C , . $300,000 General Obligation Taxable Tax Increment Bonds, Series 1999D City of Cottage Grove, Minnesota r- - .- . •'•: � - . ,. . . . - OvERView This report describes the proposed plan for the City of Cottage Grove to issue $1,015,000 General Obligation Tax Increment Bonds, Series 1999C and $300,000 General Obligation Taxable Tax Increment Bonds, Series 1999D. This report has been prepared by Ehlers and Associates, in consultation with City Staff. The concepts of the repart have been discussed with Bopd counsel who is in the process of completing their review. This repart deals with: • Purpose and components of the issues. • Structure. • Other considerations in issuing bonds. • Marlcet conditions. • Issuing process. $1,015,000 GENERA� OBLIGATION TAX INCREMENT BONQS, SERIES 1999C PURPOSE During June, 1998, the City Council created Tax Increment District No. 1-9 in Development District No. 1("TID No. 1-9"). TID No. 1-9 was created to finance land and public improvements for the Anderson Window Company, Renewal Project. The $1,015,000 General Obligation Tax Increment Bonds, Series 1999C (the "1999C Bonds") are being issued pursuant to Minnesota Statutes, Chapters 469 and 475 for the purpose of financing the construction of the public improvements in Tax Increment District No. 1-9. Fiilancing these pxojects requires a bond issue in the amount of $1,015,000. The proposed finance plan consists of the following sources and uses of funds: Sources Par Amowlt of 1999C Bonds Total Sources Uses Total Project Costs Contingency Discount A11o�vance Capitalized Interest Finance Related Expenses Total Uses STRUCTURE AND REPAYMENT � 1.015,000 $1,015,000 $938,528 807 11,165 45,000 19,5�� $1,015 ,000 The 1999C Bonds are general obligations of the City of Cottage Grove and as such are secured by a pledge of the City's full faith, credit, and taxing powers. It is the intent of the City to pay the entire amount of principal and interest from a pledge of tax increments collected in Taac Increment District No. 1-9. The repayment schedule has been structured to match anticipated collections of tax increment revenues. The projected debt service and flow of funds can be Page 2 found in E�ibit 1. This issue has been structured to be end-loaded so that the 1999D Bonds are paid earlier and to allow for possible payment of the �325,000 of project costs for 100th Street in 2001 through 2003. The $400,000 project for 100th Street is likely to be constructed in 2000 or 2001 with $100,000 to tze paid by the Ivletropolitan Council. The 1999C Bonds would be sold January 20, 1999 and be dated February 11, 1999. The first interest payment on the 1999C Bonds will be February l, 2000, and semiannually thereafter on August 1 and February 1. Principal on the 1999C Bonds will be due on February 1 in the years 2004 through 2009. We recommend that 1999C Bonds maturing February 1, 2007 and thereafter will be subject to prepayment at the discretion of the City on February 1, 2006 and any date thereafter. We anticipate that the City (in combination with any subordinate taxing jurisdictions or debt issued in the City's name by 501(c)3 corporations) will not issue more than a total of $10,000,000 in tax-exempt debt during this calendar year. This will allow the 1999C Bonds to be designated as bmik �{ualifie�l. Bank qualified status broadens the market and achieves lower interest rates. Because the City is issuing more than $5,000,000 in tax-exempt obligations during calendar year 1999, the 1999C Bonds will not qualify for the small issuer exemption from arbitrage rebate. Final arbitrage details �vill be stated in the arbitrage certificate provided to you at the closing. Page 3 $300,000 GENERAL OBLIGATION TAXABLE TAX INCREMENT BONDS, SERIES 1999D PURPOSE The $300,000 General Obligation Ta�cable Tax Increment Bonds, Series 1999D are being issued pursuant to Minnesota Statutes, Chapters 469 and 475. The Bonds are being issued to finance the remaining 300-acre land aequisition cose in Tax Increment District No. 1-9 in the City. Financing these projects requires a bond issue in the amount of $300,000. The proposed finance plan consists of the following sources and uses of funds: Sources Par Amount of 1999D Bonds 1997 Funds from TID No. 1-7 1998 Funds from TID No. 1-7 Total Sources Uses Land Purchase Contingency Discount Allowance Capitalized Interest Finance Related Expenses Total Uses STRUCTURE AND REPAYMENT $300,000 250,000 520.000 $1,070,000 $1,032,000 2,800 4,200 17,000 14.000 �1,0�0,000 The Bonds are general obiigations of the City of Cottage Grove and as such are secured by a pledge of the City's full faith, credit, and taxing powers. It is the intention of the City to pay the entire amount of principal and interest from a pledge of taY increments collected in Tax Increment District No. 1-9. Page 4 The repayment schedule has been structured to match anticipated collections of tax increment revenues. Because the 1999D Bonds are taxable and carry higher interest rates than the 1999C Bonds, we have structured the 1999D Bonds to be retired as quicldy as possible. The 1999D Bonds would be dated February 11, 1999. The first interest payment on the 1999D Bonds will be February I, 2000, and seiniannually thereafter on August 1 and February l. Principal on the 1999D Bonds will be due on February 1 in the years 2001 through 2003. We recommend that 1999D Bonds maturing February I, 2003 be subject to prepayment at the discretion of the City on February l, 2002 and any date thereafter. The 1999D Bonds are taxable and therefore, not exempt from State or Federai income taxes. The issuance of the 1999D Bonds will not affect the City's annual limit on bank qualified bonds or bonds eligible for the smaller issuer exemption from arbitrage rebate. The projected debt service and flow of funds can be found in E�ibit 2. PROVISIONS COMMON TO BOTH ISSUES Following is a summary of lcey factors in the finance plan: • The 1944C and 199RI� Bonds wiil be global book eratry. As "paperless" bonds, you will avoid the costs of bond printing and the need for registrar/paying agent. • Moody's Investors Service will be asked to rate these issues. The City currently has an"A2 rating on its outstanding general obligation bonds. Page 5 We will request that the 1999C Bonds be considered for qualification for bond insurance so that potential purchasers will have the option of bidding this issue as "insured". If it is sold with bond insurance, the issue will be rated "Aaa" by Moody's Investors Service and/or "AAA" by Standard & Poor's. m New regulations of the Securities and Exchange Commission on the continuing disclosure of municipal securities apply to long-term securities with an aggregate principal amount of $1,000,000 or more. Because the aggregate principal amount of the 1999C Bonds when integrated with the 1999D Bonds is an aggregate amount of over $1,000,000, and the City has more than $10,000,000 in total municipal obligations outstanding, you �vill be obligated to comply with FuTI ContinuingDisclosure requirements as required by paragraph (b)(5) of Rule 15c2-12 promulgatedby the Securities and Exchange Commission under the Securities Exchange Act of 1934. You will be required to provide certain financial infomlation and operating data relating to the City annually and to provide notices of the occurrence of certain material events. The specific nature of the Undertaking, as well as the information to be contained in the notices of material events will be set forth in the Continuous Disclosure Undertaking that you will enter into at the time of closing far this issue. You are responsible for reparting any of the material events listed below and in the Undertalcing. 1. Principal and interest payment delinquencies; 2. Non-payment related defaults; 3. Unscheduled draws on debt service reserves reflecting financial difficulties; 4. Llnscheduled draws on credit enha�cements reflecting financial difficulties; 5. Substitution of credit of liquidity providers, or their failure to perform; 6. Adverse tax apinions or events affecting the taac-exempt status of the securities; 7. Modification to rights of holders of the Securities; S. Securities calls; 9. Defeasances; 10. Release, substitution or sale of property securing repayment of the Securities; 11. Rating changes; 12. Failure to provide annual financial information as required; and 13. Other material events. Page 6 REFUNDING OPPORTUNITIES We have revie�ved all outstanding indebtedness for the City and find that there are no other immediate refunding opportunities for the at this time. We wili continue to monitor the market and the call dates and alert you to any future opportunities. MARKET CONDITIONS The graph on the following page shows the trends in the Bond Buyer's 20-Year G.O. Index (BBI) since 1979. Current interest rates are close to historic lows. Page 7 � � .. • . = • � �/ - � , � � � d' M N r O 6) O� I� GO t.() d' T T P' T T % �ua� aad � � r m � rn rn v rn M rn N m m •• • • • � � � m V W C� � N W � 0 � rn � � '' � � x � I I � '"',, 1.� � � M � W I � li � �Q W m N N N D G O m m O a U C N d m U O � a a c N N L W ISSUING PROCE55 Foliowing is a tentative schedule for the steps in the issuing process. December 16, 1998 City Council adopts resolution calling for the sale of the 1999A, 1999B, 1999C and 1999D Bonds Weelc of January 4, 1999 January 7, 1999 Weelc of January 11, 1999 January 20, 1999 February 11, 1999 FURTHER CONSIDERATIONS Submit draft Official Statement and rating materials to Moody's Investors Service for credit rating Distribute Official Stateinent Receive credit rating Bond sale Bond closing (approximate) We recommend a reallocation within the budget for Tax Increment District No. 1-7 to reflect final adjustments in project costs. Page 9 T C � C O . 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N C 5 0 Resolution No. Council Member introduced the following resolution and moved its adoption: Resolution Providing for the Sale of $1,015,000 General Obligation Tax Increment Bonds, Series 1999C A. WHEREAS, the Ciry Counci] oF the City of Cottage Grove, Minnesota, has heretofore determined that it is necessary and expedient to issue the City's $1,015,000 General Obligation Tax Increment Bonds, Series 1999C (the "1999C Bonds"), to finance the construction of various pablic improvements in the City;and B. WHEREAS, the Ciry has recained Ehlers and Associates, Inc., in Minneapolis, Minnesoea ("Ehlers"), as its independent financial advisor for the 1999C Bonds and is therefore authorized to solicit proposals in accordance wiCh MinnesoYa Statutes, Section 475.6Q Subdivision 2(9); NOW, THEREFORE, BE IT RESOLVED by the City Council of Ciry of Cottage Grove, Minnesota, as follows: 1. Authori2ation: FindinQS. The City Council hereby authorizes Ehlers Co solicit proposals for the sale of the 1999C Bonds. 2. Meetinp; Proposal OpeninQ. The City Council shall meet at the time and place to be specified in the Terms of Proposal For the purpose of considering sealed proposals for, and awarding the sale of the 1999C Bonds. The City Clerk, or designee, shall open proposals at the time and place specified in such Terms of Proposal. 3. Bond Sale Report. The terms and conditions of the 1999C Bonds and the sale thereof are fully set forth in the "Bnnd Sale Report" attached hereYO and hereby approved and made a part hereof. 4. Official Statement. In connection with said sale, the officers or employees of the City are hereby authorized to cooperate wiCh Eh(ers and participate in the preparation of an official staCement For the 1999C Bonds and to execute and deliver it on behalf oP the City upon its compietion. The motion for the adoption of the foregoing resolution was duly seconded by City Council Member and, after full discussion thereof and upon a vote being taken chereon, the following Ciry Council Members voted in favor thereof: and the following voted a�ainst the same: Whereupon said reso]ution was declared duly passed and adopted. Dated this _ day of , 1998. City Clerk (SEAL) Resolution No. Council Member introduced the following reso]ution and moved its adoption: Resolution Providing foc the Sale of $300,000 General Obligation Taxable Tax Increment Bonds, Series 1999D A. WHEREAS, the City Council of the City of Cottage Grove, Minnesota, has heretofore determined that it is necessary and expedient to issue Che Ciry's $30Q000 General Obligation Taxabte Tax Increment Bonds, Series 1949D (the "1994D Bonds"), ro finance the purchase of ????????? in the City; and B. WHEREAS,theCiryhasretainedEhlersandAssociates,Inc.,inMinneapolis,Minnesota( as its independent financial advisor for the 1999D Bonds and is therefore aathorized to solicit proposals in accoxdance with MinnesoCa Statutes, Section 475.60, Subdivisio� 2(9); NOW, THEREFORE, BE IT RESOLVED by the City Council of City of Cottage Grove, Minnesota, as follows: 1. AuChorization: FindinQS. The Ciry Council hereby authorizes Ehlers to solicit proposals for the sale of ehe 1999D Sonds. 2. Meetine; Proposal QpeninQ. The Ciry Council shall meet at the time and place to be specified in the Terms of Proposal for the purpose of considering sealed proposals for, a�d awarding the sale of the 1999D Bonds. The City Clerk, or designee, shall open proposals at the time and place specified in such Terms oF Proposal. 3. Bond Sale Report. The terms and conditions of the 1999D Bonds and the sale thereof are fully set forth in the "Bond Sale Report" attached hereto and hereby approved and made a part hereof. 4. Official Statement In connecfion with said sale, the officers or employees of the City are hereby authorized to cooperate wi[h Ehlers and participate in the preparation of an official statement for the 1999D Bonds and to execute a�d deliver it on behalf of the City upon its eompletion. The mo*.ien for !he a�option of the foregoing resolution was du(y seconded by CiCy Council Member and, afrer full discussion thereoF and upon a vote be'rng 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 _ day of , 1998. City Clerk (SEAL)