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MEETING DATE:
AGENDA #:
PREPARED BY:
AGENDA ITEM:
DISCUSSION:
CITY COUNCIL AGENDA REPORT
APRIL 30,2007
2A
Ralph Teschner, Finance Director
CONSIDER APPROVAL OF THE FOLLOWING BOND SALE
RESOLUTIONS:
1. A RESOLUTION AUTHORIZING THE ISSUANCE OF $1,400,000
GENERAL OBLIGATION STREET RECONSTRUCTION BONDS
OF 2007
2. A RESOLUTION AUTHORIZING THE ISSUANCE OF $8,500,000
WATER TREATMENT PLANT WATER REVENUE BONDS OF
2007
Introduction
The City's bond and fiscal consultant Steve Mattson from Northland
Securities will be out of state and Dick Asleson who has worked with
Steve for the past 18 years will present to the Council completed
resolutions formally authorizing the issuance of $1,400,000 in general
obligation street reconstruction improvement bonds to finance the
reconstruction of CSAH 21 between Franklin Trail and Adelmann Street
and $8,500,000 in revenue bonds to finance, in part, the construction of
the water treatment plant.
History
The City Council approved Resolution 07-073 and Resolution 07-074 on
April 16, 2007, which authorized a negotiated bond sale for each project
designed to time the sale in the market to obtain the optimum interest
rate on these bonds.
Current Circumstances
In an effort to provide the lowest possible interest cost to the taxpayer
we solicited cost proposals for insuring the bonds which underwrites the
bonds at a AAA bond rating rather than the City's current rating (AA).
The total insurance premiums are approximately $23,500 but it ends up
reducing the bond discount by approximately $30,000. The bond
discount represents the cost of marketing the sale of the bonds which is
accelerated, and therefore less expensive, in a larger market that occurs
due to an AAA bond rating. Also, there is a significant interest savings
which will be reported to the Council by Dick on Monday when the bond
sale will be concluded.
At this time the reconstruction bonds are estimated to be sold at a net
effective interest rate of 3.94% and the water revenue bonds at 4.19%.
Both of these estimates are less than what were reported to the Council
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as the market has rallied this past week which is good news for the
taxpayer. It is hoped that this market improvement will be sustained until
the final interest rates are determined on Monday.
ALTERNATIVES: The following alternatives are available to the City Council:
1. Adopt the following resolutions to be provided by Northland
Securities:
a) A Resolution Authorizing the Issuance of $1 ,400,000 General
Obligation Street Reconstruction Bonds of 2007.
b) A Resolution Authorizing the Issuance of $8,500,000 General
Obligation Water Revenue Bonds of 2007.
2. Reject bond sales for a specific reason.
RECOMMENDED Alternative 1.
MOTION:
Reviewed by:
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