HomeMy WebLinkAbout9A - General Obligation Bond
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DISCUSSION:
STAFF AGENDA REPORT
SEPTEMBER 16, 2002
9A
RALPH TESCHNER, FINANCE DIRECTOR
CONSIDER APPROVAL OF A RESOLUTION AUTHORIZING
NEGOTIATED SALE OF $1,050,000 GENERAL OBLIGATION
IMPROVEMENT BONDS OF 2002
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 $1,050,000 to finance improvements associated with
the Pixie Point street reconstruction project (Project 02-11).
History
The City Council approved Resolution 02-84 on April 15, 2002 that
accepted the feasibility report for the reconstruction of various
streets within the Pixie Point area during 2002 that would be
financed by a combination of general obligation bonds, trunk,
enterprise and water quality fund appropriations. A summary of
those improvements and their costs in round numbers are listed
below:
Project Description
Project Financinl!
1.
Pixie Point street
reconstruction
$1,050,000.00
$220,000.00
$419,000.00
$80,000.00
$1,769,000.00
G.O. Bonds ...
Trunk Reserve ...
Enterprise Fund ...
Water Quality ...
Project Total...
Subsequently, the public hearing for these 2002 improvement
projects was conducted on March 18, 2002 and Resolution 02-55
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 itselfthe 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
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The structure of the bond issue itself would be based upon the
following components in rounded amounts:
Construction Bid (City Proj 02-11)
Engineefing (18% of $828,037 bid which excl. services
option, trunk, construction & water quality expenditure portion)
Administration (5% of $828,037 bid which excl. services
option, trunk, construction & water quality expenditure portion)
Financing (-4% of $828,037 bid which excl. services option,
trunk, construction & water quality expenditure portion)
Less est. accrued intefest due at bond closing
Project Total...
Less... Trunk Reserve Fund Contribution
Less ... Enterprise Fund Contribution
Less... Water Quality Fund Contribution
Less on Rounding
Net Bond Issue Total...
$1,547,000.00
$149,000.00
$44,000.00
$31,000.00
<$2,000.00>
$1,769,000.00
<$220,400.00>
<$418,578.00>
<$80,000.00> .
<$22.00>
$1,050,000.00
The above financing expenses fepfesent appfoximately 4% of the
actual construction bid amounts of the city pfojects and afe detailed
below:
Discount (1.96%)
Bond Rating
Bond Counsel
Official Statement Printing
Subtotal...
$20,580.00
$6,000.00
$4,500.00
$500.00
$31,580.00
Appfoximately 40% of the bonds will be fecovefed through special
assessments. The femainder of the bonds will be levied against the
ovefall pfoperty taxes within the City. If bid today, a net effective
intefest fate of 3.86% with an avefage bond coupon fate of 3.52%
would probably be a close estimate. Typically we would schedule a
special meeting for the following Monday at 5:00 p.m. (Septembef
23) because normally thefe is very little selling competition fOf
bonds within the last full week of the month which would benefit the
city as interest fates should be lower.
The bond issue will probably be dated 10/1/02, with maturities each
yeaf of Decembef 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 theif corresponding amounts necessary
to amortize the bond debt:
10 yeaf assessment stream
10 year pfoperty tax levy
Total...
$424,000.00
$626,000.00
$1,050,000.00
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ALTERNATIVES:
RECOMMENDED
MOTION:
REVIEWED BY:
Attachments:
Attached is a worksheet from Juran & Moody that pfovides
additional detail with respect to debt service pfincipal/intefest
payments, pfojected assessment stream and annual special tax levies
necessary to amortize this bond issue. The second page lists the
estimated coupon and net effective intefest fates for this bond issue
plus it identifies the financing costs and other miscellaneous
information.
Financial Impact
The estimated special tax levy calculation associated with this bond
issue has alfeady been factofed in along with the City's pfoposed
genefal fund opefating budget levy, fevolving equipment fund levy
and othef special debt levies for payable 2003 property taxes.
The following alternatives are available to the City Council:
1. Approve a Resolution Authorizing Negotiated Sale of
$1,050,000 General Obligation Improvement Bonds of 2002.
2. Delay financing to a future time as determined by the City
Council.
Motion and second to approve a Resolution Authorizing Negotiated
Sale of $1,050,000 General Obligation Improvement Bonds of 2002.
Steve Mattson will be present at the meeting to discuss the
resolution and answ. r any questions the Council may have with
respect to the bo d' uance process.
1. Res ution Authorizing Negotiated Sale of $1,050,000 General
Obligation Improvement Bonds of 2002
2. Juran & Moody Bond Analysis
RESOLUTION 02-
'D"L -IS
4rINNESO~~ RESOLUTION AUTHORIZING NEGOTIATED SALE
OF $1,050,000 GENERAL OBLIGATION IMPROVEMENT BONDS OF 2002
MOTION BY:
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
WHEREAS,
SECOND BY:
The City of Prior Lake has conducted the appropriate public hearings to consider
comments regafding those public improvement pfojects deemed necessary for
construction in 2002; and
The City Council has determined that such construction projects scheduled for 2002
are consistent with the City's Capital Improvement Plan (CIP); and
The City of Prior Lake has complied with all requirements of Chaptef 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 02-11 Pixie
Point for street feconstruction; 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, fOf the issuance of $1,050,000 of general
obligation improvement bonds, and the City Manager is hereby authorized to convene a special meeting
to appfove the bond sale pursuant to the procedural requifements of State law.
Passed and adopted this 16th day of September, 2002.
{Seal}
YES
NO
Haugen
Gundlach
LeMair
Petefsen
Joe Zieska
Haugen
Gundlach
LeMair
Petersen
Joe Zieska
City Manager
City of Prior Lake
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16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (952) 447-4230 / Fax (952) 447-4245
AN EQUAL OPPORTUNITY EMPLOYER
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