HomeMy WebLinkAbout03 23 2015 Debt Service Strategies Work Session Report PR12
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4646 Dakota Street SE
Prior Lake,MN 55372
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CITY COUNCIL WORK SESSION REPORT
MEETING DATE: MARCH 23, 2015
PREPARED BY: JERILYN ERICKSON, FINANCE DIRECTOR
PRESENTED BY: JERILYN ERICKSON
STEVE MATTSON, NORTHLAND SECURITIES
TAMMY OMDAL, NORTHLAND SECURITIES
AGENDA ITEM: 2. DEBT SERVICE STRATEGIES
DISCUSSION: Introduction
The City Council will be considering the approval of two resolutions later this
evening for the issuance of general obligation bonds, 2015A and taxable general
obligation bonds, series 20158. With the number and cost of projects rising, City
staff and Northland Securities have sought options for managing the debt service
levy. The purpose of this worksession is to discuss a revised debt service strat-
egy starting with the 2015 bond issuance.
History
The City has historically issued special assessment and reconstruction debt with
10-year terms. The City has also strived to stay within the $10 million limit for
bank qualified bonds.
Current Circumstances
Development of the 2015-2019 Capital Improvement Program highlighted the
challenges the City was facing with regard to the annual debt service levy. The
increase in debt service levy for projects planned for 2015 was estimated at
$505k or an approximate 5% increase in overall tax levy. Future projects were
placing significant pressure on the tax levy, as well.
At a recent workshop, Council members had also expressed an interest in length-
ening the term of the bonds associated with the TH13/150th Street improvement
project due to the benefits for future residents.
With these factors in mind, City staff and Northland Securities' representatives,
Steve Mattson and Tammy Omdal, analyzed the impacts of revising the City's
debt service strategy, including compliance with the Comprehensive Financial
Management Policy. A graphical presentation of two scenarios will be made to
illustrate these impacts.
Scenario A (New Strategy)
• Amortize debt within 15 year period or less (starting with the 2015 bond
issuance);
• Structure future debt payments to achieve a total annual debt service levy
of$3.2 million or less.
Scenario B (Existing Strategy)
• Amortize debt over 10 year period;
• Structure future debt payments to achieve level annual payments.
Information regarding the use of tax exempt and taxable bonds in 2015 will also
be presented.
Please refer to agenda item 9A for the meeting this evening for more details
on the 2015 bond issuance.
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