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Home My WebLink About3. Executive Session AGENDA #: PREPARED BY: SUBJECT: DATE: INTRODUCTION: DISCUSSION: ALTERNATIVES: 3 RALPH TESCHNER FINANCE DIRECTOR CONSIDER APPROVAL OF RESOLUTION 95-111 CALLING FOR THE EARLY REDEMPTION OF THE $150,000 GENERAL OBLIGATION TAX INCREMENT BONDS OF 1985 October 23, 1995 The request before the City Council is to consider paying off the remaining three (3) years of the $150,000 Tax Increment Bonds of 1985 thereby retiring the remaining $70,000 outstanding debt associated with this bond issue. This district was created to facilitate development along T.R. 13 for Amoco and other area businesses. Currently the interest rate for the last four years range from 8.75% for the '95 payment to 9.0% for each of the final three years 1996 thru 1998. The market today is substantially less and the City could cut its interest cost by nearly one-half and achieve a net savings of nearly $5,000 by prepaying the bonds. (This takes into account investment forfeiture on cash used for such payment.) There are two conditions necessary for the City to meet in order to enact an early redemption. The first is that the City must first wait until the call date occurs which is 12/1/95. The second is that the City must have a sufficient fund balance in order to cover the redemption amount. It is estimated that the paying agent will require proceeds of $73,131.25 for principal/interest costs plus approximately $200 to cover bank and bondholder notification expenses. Presently we have $71,677 on hand and expect to cover the difference with proceeds from our November 2nd half property tax installment. Staff has also conferred with Roger Guenette of Advanced Resources to ensure that the debt retirement would not affect the existence of any of the associated tax increment districts that have been created. He has informed us that the City would continue to receive its tax increment stream for the duration of these districts. Therefore, such action would not result in any district de-certification. (See attached memorandum). The following alternatives are available to the City Council: 1. Approve the debt retirement of the outstanding principal balance of the $150,000 Tax Increment Bonds of 1985 as authorized by Resolution 95-111 and direct staff to prepare a report on desirable modifications to the Tax Increment Plan as set forth by Advance Resources for development consideration. 16200 Eagle Creek Ave. S.E., Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER 2. Take no action subject to receipt of additional information. RECOMMENDATION: Staff has reviewed this scenario with the City's financial consultant, Juran & Moody, Inc., and Steve Mattson concurs with Staffs advised course of action. Therefore, Staff would recommend Alternative #1. REVIEWED BY: ve solution 95-111 Calling for the Early Redemption of ener ' Obligation Tax Increment Bonds of 1985. ACTION REQUIRED: IURAN4.WRT DVANCE DATE: October 16, 1995 TO: Ralph Teschner FROM: Roger Guenette RE: Tax Increment Financing District No. 1-1 You recently informed me that the City has the opportunity to prepay bonds relating to Tax Increment Financing District No.1-I. This tax increment district was established as a redevelopment district in 1985 and had an original budget set at $175,000. The bonds which may be prepaid represent the only debt obligation currently outstanding in the TIF district. The district may operate until 2010 and continue to generate tax increment revenue if the City Council would take action to modify the plan document and expand the budget. Based upon the current tax increment income stream of approximately $40,000/year, the City would realize a net present value benefit of approximately $367,000 based upon a 7% discount factor through the year 2010. These proceeds could be pledged in support of additional redevelo ment activities for the downtown or ot er areas In t e community. e ouncil is 'ntereste in embracing this strategy, I recommend that prompt action be taken to modify the plan. ....... If you have any questions, please contact me. Business Finance and Economic Development Specialists CORPORATE OFFICES P,O, Box 32609 Mpls" MN 55432-0609 Phone: (612) 755-7741 Fax: (612) 755-5393 P,O, Box 3027 Mankato, MN 56002-3027 Phone: (507) 387-7117 Fax: (507) 387-6115 SE\i BY, 10-16-95 : 9:59AM JLRA\ & ~100DY- 612 ~~7 ~2~~.~ i J- EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF PRIOR LAKE, MINNESOTA Held: October 23, 1995 Pursuunt to due call and notice thereof, a regular meeting of the City Council of the City of Prior Lake, Minnesota, was duly called and held at (he City Hall in said City on the 23m day of October, 1995, at .___P.M. The following ~mbers were present: 3rui tilt: tollowing were abserlr: Mcnlber intnxluccd the follc)wing resolution and moved its adoption: RESOLlJTION CALLING FOR THE REDEMPTION OF OUTSTANDING GENERAL OBLIGA nON TAX INCREME!\TT BONDS OF 1985 WHEREAS: A. The City Council of the City of Prior Lake issued on behalf of the City, $150,000 General Obligation Tax Increment Bonds of 1985, dated October 1, 1985, maturing December 1, 1987 through December L 1998, of which, $70,000 still remain outstanding; and B. All of said bonds maturing December 1, 1995 and ther~after. are ~ubject to redemptiol\~md prepayment at the option of the City on December 1, 1994) and on any interest pi~YLnent ~te L'1ereafter at 100 percent of par and accrued interest per Bond called. all as provided in [he resulution of the City Council dated , authorizing chs: is~uanct: of s~dd bonds; and C. The City C.ouncil deems it desirable and in the best interest of the City to call all of said bonds maturing December 11 1995 through December 1, 1998 on December 1, 1995~ the c:lll date. in accordance \J..'ith said resolution authorizing the issuance of said bonds; and NOW THEREFORE, BE IT RESOLVED by the City Council of the City of Prior Lake, Minnesota, as follows: 1. All of the General Obligation Tax Increment Bonds of 1985 of the City maturing December 1, 1995 through December 1. 1998, shall be redeemed and prepaid on December 1) 1995 at 100% of their principal amount plus accrued interest for each such bond called 2. The City Manager is hereby authorized and directed to give mat led notice of cull prior (0 seJid cJ.l1 date to the bank where said bonds are payable and LO all holders of the bonds, if any, who hav~ registered their names, addresses and bond numbers with ~ City I\.1anager. Said notice shall oe in substantially the following form: SE\T BY, 10-16-95 :10:01AM JLR.-\\ & ~100DY- bl~ ~47 ~245:= 4: ~ 3. The City Manager is hereby authorized and directed to deposit with the bank where said bond~ are payable prior to said call dare sufficient funds to pay all principal and interest due on said bonilii itS of tht: call date. m~mber thereof: The motion for the adoption of the foregoing resolution was duly seconded by and upon a vote taken thereon., the following voted in favor and the following voted against the same: Whereupon said resolution was declared duly passed and adopred. SE.\T BY: 10-16-95 :lO:OOA~ .JLR.-\\ & \100DY... 612 447 1215:~ 3' ~- NOTICE OF CALL FOR REDEMPTION GENERAL OBLIGA nON TAX LNCREl\1E.NT BONDS OF 1985 DATED October 1, 1985 CITY OF PRIOR LAKE, WNNESOTA N(JTlCE IS HEREBY GTVEN that by order of The CiTY Council of Prior Lake, Minne~or.a, there have been called for redemption and prepayment on Deccmber I, 1995 those outstanding bonds of the Otv designated as General Oblieation Tax Incrernenr Eonds of 1985, daI~d October 1, 1985, having st~lted marurity dates ofDecenlber 1, 1995 through December 1, 1998, and totaling $70,000 in principal amount. The bonds are being called for redemption at a price of 1000/(1 of their principal amount plus accrued iJll~rest to December t 1995, on which dale all interest on s~id bonds will cease fO accrue. Holders of the hont1s ht':rehv ralled for redemptIon are requested to present their bonds for'payment~ at First Trust National ~ Ass~ciation, 180 East Fifth Street, St. Paul, l\1innesoca 55101. Datoo: October 23, 1995 BY ORDER OF TI-ffi CITY COUNCIL Isf Frank Boyles Manager hnportant Norice: Under the Interest and Dividend Compliance Act of 1983, 31 % will be withheld if tax identification is not properly certified. Additional Information may be obtained from: flJRAN..~ MOODY. INC. 400 North Rob~n Street, Suite 800 Sr. Paul, Minnesota 55101-2091 612/224-1500 Ann: Cherit: L. ~lockler Public Finance Departrnenr .SE.\T BY: lu-l~-95 :lO:OlAM .Jl"RA\ .& ~iOODY- 612 4~7 4~~5,~ ~, ~ STATE OF MINNESOTA COUNTY OF scon I, the undersignetl being the duly qualified and acting Clerk- Treasm-er of the City of Prior Lake, Minneso~ DO HEREBY CERTIFY that 1 have carefully compared the attaChed and foregoing extract of minutes ofrhe Ciry Council of the City of Prior Lake held on the date therein indicated\ with the original rhereof on file in my office. and the same i~ a full~ tnIe and complete transcript tht:~fro[n insof3r as the same relates to c31ling far redemption the outstanding GenerJI Obligarion Tax IncTelnent Bonds of 1985. WITNESS my hand us such Manager and official seal of the City this day of . 1995. Manager (SEAL)