View Agenda Item

7.1.

CC Regular Session

Meeting Date:: 09/28/2021
By:: Diana Lund, Finance

Information

Title:

Adopt Resolution #21-276 Providing for the Issuance and Sale of $9,845,000 General Obligation Capital Improvement Plan Refunding Bonds, Series 2021 and Levying a Tax for the Payment Thereof

Purpose/Background:

Purpose: To refinance the debt issue related to the Municipal Center that was issued in 2012 to take advantage of reduced interest rates.

Background: In 2005, the City issued $19.2M of Public Project Lease Revenue Bonds to construct the new Municipal Center building.

To take advantage of lower interest rates and to place the debt issuance under a General Obligation (GO) Capital Improvement Plan (CIP) bond, the city refunded the 2005 issue and sold $16.875M of GO CIP bonds in 2012. The 2012 bonds have an annual debt service of approximately $1.242M and a net interest cost of 3.07%. The first available call date (date on which the issuer has the right to redeem a bond at par prior to the stated maturity date) for the 2012 debt issue is December 15, 2021.

Given current market conditions, if the city were to call the 2012 bonds and sell approximately $10.7M of GO CIP bonds, the annual debt service would be approximately $1.137M or a savings of $105,000 per year, with a net interest cost of 1.26%. The stated maturity date of December 31, 2031 remains consistent with the 2012 issue.

The numbers presented for 2021 are strictly estimates based on current market conditions plus 15 basis points. The numbers, as currently presented, have been used in the 2022 preliminary debt levy calculation related to the municipal center debt and which will be included with the adoption of the preliminary levy. If there are any further debt savings after the final sale has occurred, this reduction will be reflected in the final debt levy adopted in December.

At its regular meeting of August 24, 2021, City Council passed Resolution #21-244 authorizing the sale of $10,700,000 GO Capital Improvement bonds for the refunding/refinancing of the Municipal Center debt with a scheduled sale date of September 28, 2021. The city is allowed to sell the bonds up to three months prior to the call date of Dec 15, 2021.

Stacie Kvilvang from Ehler's & Associates, the city's financial consultant will present the bids on the night of September 28. Since the original writing of this case, the bond results have been received and are attached. The principal amount has been decreased to $9,845,000 (Sale Day Report) from the original request of the $10,700,000 due to the bonds being sold at a premium.

The city had a ratings call with Standard & Poor's (S&P) on September 14 and S&P assigned a AA+ to this issue and reconfirmed the city's overall AA+ rating on September 20, 2021. The S&P rating report is attached.

Notification:

The refinancing of debt to capitalize on lower interest rates was included in the city's strategic plan under Strategy: Identify and implement operational efficiencies, cost savings, and additional funding sources while maintaining and increasing transparency and accountability.

Funding Source:

1. Motion to Adopt Resolution #21-276 Providing for the issuance and sale of $9,845,000 GO Capital Improvement Plan Refunding Bonds.

2. Motion to not Adopt Resolution #21-276.

Recommendation:

Staff recommends option #1 as this meets the Strategic Plan action of refinancing debt to capitalize on low interest rates and produce a cost savings.

Outcome/Action:

Motion to adopt Resolution #21-276 Providing for the Issuance and Sale of $9,845,000 General Obligation Capital Improvement Plan Refunding Bonds, Series 2021A and Levying a Tax for the Payment Thereof.

Attachments

Form Review

Inbox	Reviewed By	Date
Kurt Ulrich	Kurt Ulrich	09/22/2021 04:21 PM
Kurt Ulrich	Kathy Schmitz	09/28/2021 01:31 PM
Diana Lund (Originator)	Diana Lund	09/28/2021 03:03 PM
Diana Lund (Originator)	Kathy Schmitz	09/28/2021 03:04 PM
Kurt Ulrich	Kathy Schmitz	09/28/2021 03:05 PM

Form Started By:: Diana Lund
Started On:: 08/30/2021 11:55 AM
Final Approval Date:: 09/28/2021