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Home My WebLink About9B - 2001 Improv Bonds H:\BONDSIAOlBONDS.DOC DISCUSSION: STAFF AGENDA REPORT SEPTEMBER 17, 2001 9B RALPH TESCHNER, FINANCE DIRECTOR CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING NEGOTIATED SALE OF $1,035,000 GENERAL OBLIGATION IMPROVEMENT BONDS OF 2001 Introduction The City's bond and fiscal consultant Steve Mattson from Juran & Moody will be present during the Council meeting to request Council approval to negotiate the sale of general obligation bonds in the amount of $1,035,000 to finance improvements associated with the Frog Town street reconstruction project (Project 01-11). History The City Council approved Resolution 00-129 on June 19,2000 that accepted the feasibility report for the reconstruction of various streets within the Frog Town area during 2001 that would be financed by a combination of general obligation bonds, trunk, collector street and water quality fund appropriations. A summary of those improvements and their costs in round numbers are listed below: Project Description Project Financing 1. Frog Town street reconstructi on G.O. Bonds ... Trunk Reserve ... Construction Fund. . . Water Quality... Project Total... $1,035,000.00 $662,000.00 $29,000.00 $53,000.00 $1,779,000.00 Subsequently, the public hearing for these 2001 improvement projects was conducted on January 22, 2001 and Resolution 01-26 ordering the improvement was approved. Current Circumstances In previous sales the Council has authorized a negotiated bond sale directly from Juran & Moody. Staff would propose a similar process for this sale. The advantage of the negotiated sale method versus public sale is the flexibility it affords the City because our fiscal consultant, Steve Mattson would attempt to time the sale of bonds with the market in an effort to obtain the lowest interest rate possible. Also, the City saves itself the fiscal fee of$13,500.00. 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER H:IBONDSIAO I BONDS.DOC The structure of the bond issue itself would be based upon the following components in rounded amounts: Construction Bid (City Proj 01-11) Engineering (18% of $876,880 bid which excl. services option, trunk, construction & water quality expenditure portion) Administration (5% of $876,880 bid which excl. services option, trunk, construction & water quality expenditure portion) Financing (-4% of $876,880 bid which excl. services option, trunk, construction & water quality expenditure portion) Less est. accrued interest due at bond closing Project Total... Less.n Trullk Reserve FUlld COlltribution Less... COllstructiOIl FUlld COlltributioll Less... Water Quality FUlld Contributioll Less ... Rounding/Colltillgellcy Net Bond Issue Total... $1,568,000.00 $143,000.00 $40,000.00 $31,000.00 <$3,000.00> $1,779,000.00 <$661,848.00> <$28,686.00> <$52,600.00> <$866.00> $1,035,000.00 The above financing expenses represent approximately 4% of the actual construction bid amounts of the city projects and are detailed below: Discount (1.96%) Bond Rating Bond Counsel Official Statement Printing Subtotal... $20,286.00 $6,000.00 $4,500.00 $500.00 $31,286.00 Approximately 50% of the bonds will be recovered through special assessments. The remainder of the bonds will be levied against the overall property taxes within the City. If bid today, a net effective interest rate of 4.45% with an average bond coupon rate of 4.11 % would probably be a close estimate. The bond issue will probably be dated 10/1/01, with maturities each year of December 1, depending upon the sale date, and will be structured 10 years in length. The following is a schedule of tax levies/assessment terms and their corresponding amounts necessary to amortize the bond debt: 10 year assessment stream 10 year property tax levy Total... $518,000.00 $517,000.00 $1,035,000.00 Attached is a worksheet from Juran & Moody that provides additional detail with respect to debt service principal/interest payments, projected assessment stream and annual special tax levies necessary to amortize this bond issue. The second page lists the estimated coupon and net effective interest rates for this bond issue H:\BONDSIAOlBONDS.DOC AL TERNA TIVES: RECOMMENDED MOTION: REVIEWED BY: Attachments: plus it identifies the financing costs and other miscellaneous information. Financial Impact An estimated special tax levy calculation associated with this bond issue was factored in along with the City's proposed general fund operating budget levy, revolving equipment fund levy and other special debt levies for payable 2002 property taxes. Based upon our preliminary assessment calculation and most recent debt service run calculation, the special levy identified in our preliminary property tax resolution can be reduced by $12,000 from $72,000 to $60,000 when the City Council considers its final property tax levy in December. The reason for this reduction is that Engineering originally estimated $108,835.00 for water and sewer service replacement. The number of residents that signed up was significantly lower which will lower the construction contract bid amount by approximately $80,519.00 as a result. The following alternatives are available to the City Council: 1. Approve a Resolution Authorizing Negotiated Sale of $1,035,000 General Obligation Improvement Bonds of 200 1. 2. Delay financing to a future time as detern1ined by the City Council. Motion and second to approve a Resolution Authorizing Negotiated Sale of $1,035,000 General Obligation Improvement Bonds of 200 1. Steve Mattson will be present at the meeting to discuss the resolution and answer any questions the Council may have with respect to the bond issuance process. J~~ 1. Resolution Ol-XX Authorizing Negotiated Sale of $1,035,000 General Obligation Improvement Bonds of 2001 2. Juran & Moody Bond Analysis RESOLUTION 01~ \ \)\0 .1tINNESO'\~ RESOLUTION AUTHORIZING NEGOTIATED SALE OF $1,035,000 GENERAL OBLIGATION IMPROVEMENT BONDS OF 2001 MOTION BY: WHEREAS, WHEREAS, WHEREAS, WHEREAS, WHEREAS, \~V\ SECOND BY: ~~ The City of Prior Lake has conducted the appropriate public hearings to consider comments regarding those public improvement projects deemed necessary for construction in 2001; and The City Council has determined that such construction projects scheduled for 2001 are consistent with the City's Capital Improvement Plan (CIP); and The City of Prior Lake has complied with all requirements of Chapter 429 of Minnesota State Statutes with respect to special assessment improvement projects; and The City of Prior Lake has awarded the construction bids for Project 01-11 Frog Town for street reconstruction; and It is necessary to issue general obligation bonds for the purpose of financing these construction improvements. NOW THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF PRIOR LAKE, that it has determined it is in the best interest of the City of Prior Lake to enter into a negotiated sale with Juran & Moody, in an effort to obtain the lowest interest rate possible, for the issuance of $1,035,000 of general obligation improvement bonds, and the City Manager is hereby authorized to convene a special meeting to approve the bond sale pursuant to the proceduralrequirements of State law. Passed and adopted this 17th day of September, 2001. {Seal} Mader Ericson Gundlach Petersen Joe Zieska NO Mader Ericson Gundlach Petersen Joe Zieska City Manager City of Prior Lake aIBONDSIResOI.DOC 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER ~ rI.) j>; ~ 9 ~ ~ .... => => f'I ~ "" 0 0 g <I) tIJ => f;I;l ~ ,,; z a ~ 0 ~ ll:l ... Z ~ 0 ~ ~ ... ..:i .. 0 ~ ~ ; c. ~o "" 0 f;I;l~ ~ ~~ Tn" Wh < Po. ~@ l:>:r- <8 ::t ....N .... . ~ 0.... 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