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Home My WebLink About10B - General Obligation Improvemnt Bonds 1991 NDS\A98CALL.DOC DISCUSSION: STAFF AGENDA REPORT OCTOBER 19, 1998 lOB RALPH TESCHNER, FINANCE DIRECTOR CONSIDER APPROVAL OF RESOLUTION 98-XX CALLING FOR THE REDEMPTION OF THE OUTSTANDING GENERAL OBLIGATION IMPROVEMENT BONDS OF 1991 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 payoff the remaining debt associated with the $525,000 G.O. Improvement Bonds of 1991. Current Circumstances, Staff regularly examines those outstanding bond issues of the City to see if there are any candidates for either refunding or defeasance. During a market of declining interest rates which we are presently experiencing we look to refund those issues that would qualify. Typically the following three criteria must exist to refund a bond Issue: 1. A bond issue must possess a sufficient spread between its interest rate and that which the current market may offer. 2. The outstanding bond amount must be of sufficient size to return a cost savings to the City. 3. The remaining years within the bond issue are usually 10 or more to provide the opportunity of time to reduce debt service costs of principal and interest. The City has taken advantage of the market conditions in the past to refinance all of our eligible bond issues at a lower rate to the point that our aggregate rate of interest that we pay on our 22 existing bond issues is less than 5%. During this review process Staff has identified the above referenced bond issue as a prime bond issue to be paid off instead of being refunded. Our financial consultant Juran and Moody concurs with this proposed course of action and has prepared the required documents. They would also be responsible for the proper notification to the existing bondholders and publication requirements. 16200 Eagle Creek Ave. S.L, Prior Lake, Minnesota 55372-1714 / Ph. (612) 447-4230 / Fax (612) 447-4245 AN EQUAL OPPORTUNITY EMPLOYER H:\BONDS\A98CALL.DOC ALTERNATIVES: RECOMMENDED MOTION: REVIEWED BY: Attachments: Financial Imvact While no further issues appear to qualify for refinancing, the outstanding debt on the $525,000 G.O. Improvement Bonds of 1991 could be paid off to save City taxpayers a minimum of $10,000 to $12,000 in interest cost. There are $195,000 of bonds left in this issuance that have a payable net effective interest rate of 6.5026% which is nearly 150 basis points higher than what the city is currently getting in this investment climate (see attached analysis of remaining bond payments and their coupon interest rates). The cash fund balance of this bond issue is $264,385.01. Therefore these bonds could be refunded on their next call date of December 1, 1998. The reason for the size of this fund balance is because of assessment prepayments and the fact that the city had invested these funds in the early 1990's at a much higher interest rate than today which resulted in additional investment income. The remaining funds after paying off the bonds would be retained in our pooled debt service fund to reduce future scheduled property tax levies. The following alternatives are available to the City Council: 1. Approve Resolution 98-XX Calling for the Redemption of the Outstanding General Obligation Improvement Bonds of 1991. 2. Continue payment of the existing bonds. Adopt a motion and a second to approve Resolution 98-XX Calling for the Redemption of t Outstanding General Obligation Improvement Bonds of 199 r\~ '" 1.0utstandin a Payment Schedule (FILE: PL 1991 BOND) 2. Resolution 98-XX Calling for the Redemption of the Outstanding General Obligation Improvement Bonds of 1991. IFILE: PL 1991 BOND I DATE OF ANALYSIS: Stl'l t.MBER 16. 1998 START DATED DATE OF ISSUE: DECEMBER 1. 1998 (A) (B) (C) (D) FINAL (12-D INTEREST YEAR PRINCIPAL RATES IN 1 hKEST 1998 1999 45,000.00 6.00% 12.285.00 2000 45,000.00 6.10% 9,585.00 2001 15.000.00 6.20% 6,840.00 2002 15,000.00 6.30% 5.910.00 2003 15.000.00 6.40% 4,965.00 2004 15,000.00 6.50% 4,005.00 2005 15,000.00 6.60% 3,030.00 2006 10.000.00 6.70% 2,040.00 2007 10,000.00 6.80% 1,370.00 2008 10,000.00 6.90% 690.00 2009 0.00 0.00% 0.00 2010 0.00 0.00% 0.00 2011 0.00 0.00% 0.00 2012 0.00 0.00% 0.00 2013 0.00 0.00% 0.00 2014 0.00 0.00% 0.00 2015 0.00 0.00% 0.00 2016 0.00 0.00% 0.00 2017 0.00 0.00% 0.00 2018 0.00 0.00% 0.00 195.000.00 50,720.00 AVERAGE COUPON RATE: 6.5026 % EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF PRIOR LAKE, MINNESOTA Held: October 19, 1998 Pursuant to due call and notice thereof, a regular meeting of the City Council of the City of Prior Lake, Scott County, Minnesota, was duly called to order on the 19th day of October 1998, at o'clock P.M. The following members were present: and the following members were absent: Member introduced the following resolution and moved its adoption: RESOLUTION CALLING FOR THE REDEMPTION OF THE OUTSTANDING GENERAL OBLIGA nON IMPROVEMENT BONDS OF 1991 WHEREAS: A. The City Council of the City of Prior Lake, Minnesota issued $525,000 General Obligation Improvement Bonds of 1991, dated March 1, 1991, of which, bonds maturing on December 1, 1998, $240,000 still remain outstanding; and B. All of said bonds maturing on December 1, 1997 are subject to redemption, in whole or in part, and prepayment at the option of the City on December 1, 1996 and on any payment date thereafter at 100% plus accrued interest, all as provided in the resolution of the City authorizing the issuance of said bonds; and C. The City deems it desirable and in the best interest of the City to call $195,000 of the outstanding of said bonds maturing in the years 1999 through 2001, inclusive, for redemption on December 1, 1998, in accordance with 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. $195,000 of the General Obligation Improvement Bonds of 1991, dated March 1, 1991 of the City of Prior Lake, Minnesota, maturing in the years 1999 through 2008, shall be redeemed and prepaid on December 1, 1998 at 100% of their principal amount plus accrued interest for each such bond called. 2. The City Finance Director is hereby authorized and directed to give mailed notice of call to the bank where said bonds are payable and to all holders of the bonds. Said notice shall be in substantially the following fonn: NOTICE OF CALL FOR REDEMPTION GENERAL OBLIGATION IMPROVEMENT BONDS OF 1991. DATED: March 1,1991 CITY OF PRIOR LAKE, MINNESOTA NOTICE IS HEREBY GIVEN that by order of the City Council of the City of Prior Lake, Minnesota, there have been called for redemption and prepayment on December 1, 1998, those outstanding bonds of the City designated as General Obligation Improvement Bonds of 1991, dated March 1, 1991, totaling $195,000 in principal amount, and having the following stated maturity dates and amounts: Maturitv Date 12-1-1999 12-1-2000 12-1-2001 12-1-2002 12-1-2003 12-1-2004 12-1-2005 12-1-2006 12-1-2007 12-1-2008 Amount $ 45,000 $ 45,000 $ 15,000 $ 15,000 $ 15,000 $ 15,000 $ 15,000 $ 10,000 $ 10,000 $ 10,000 Cusin The bonds are being called for redemption at a price of 100% of their principal amount plus accrued interest to December 1,1998, on which date all interest on said bonds will cease to accrue. Holders of the bonds hereby called for redemption are requested to present their certificates for payment to Firstar Trust Company, (as successor for American National Bank & Trust Company), 1555 RiverCenter Drive, Suite 300, Milwaukee, Wisconsin 53212 on or before June 1, 1998. Dated: October 19, 1998 BY ORDER OF THE CITY COUNCIL Isl Frank Bovles City Manager Important Notice: Under the Interest and Dividend Compliance Act of 1983, 31 % will be withheld if tax identification is not properly certified. Additional Infom1ation may be obtained from: JURAN & MOODY 1100 World Trade Center 30 East Seventh Street St. Paul, Minnesota 55101-4901 Telephone No. (612) 224-1500 Attn: Lori A. Giampaolo Public Finance Department 3. The City Finance Directo'r is hereby authorized and directed to deposit with the bank where said bonds are payable prior to said call date sufficient funds to pay all principal and interest due on the bonds as of the call date. The motion for the adoption of the foregoing resolution was duly seconded by council member and upon a vote taken thereon, the following voted in favor thereof: and the following voted against the same: Whereupon said resolution was declared duly passed and adopted. STATE OF MINNESOTA COUNTY OF SCOTI CITY OF PRIOR LAKE I, the undersigned, being the duly qualified and acting City Manager of the City of Prior Lake, Minnesota, DO HEREBY CERTIFY that I have carefully compared the attached and foregoing extract of minutes of the City Council meeting held on the date therein indicated, with the original thereof on file in my office, and the same is a full, true and complete transcript therefrom insofar as the same relates to calling for redemption the outstanding General Obligation Improvement Bonds of 1991, dated March 1, 1991. WITNESS my hand as such City Manager of the City of Prior Lake, Minnesota, this 19th day of October , 1998. City Manager