Adopt Resolution #14-11-235 Authorizing the Issuance and Sale of $875,000 General Obligation Equipment Certificates, Series 2014A

Purpose:  To accept bids for the sale and issuance of $875,000 of capital equipment certificate debt whose proceeds will be used to fund 50% of the city's capital equipment to be purchased over the next three years:  2015-2017.  Total funding will come from the city's Revolving Fund and the issuance of Capital Equipment Certificates.

Background:   On September 9, 2014, the City Council adopted the 2014 preliminary General Fund budget and property tax levy.  Included in the preliminary levy was a debt service levy of approximately $102,000 attributed to the funding of capital equipment needs for the years 2015-2017.  The City Council direction at previous budget worksessions was to have the city's
capital equipment for 2015-2017 be funded 50% from the issuance of debt and 50% from the city's Equipment Revolving Fund.

At its regular meeting of October 14, 2014, City Council passed resolution 14-10-217 authorizing the sale of $875,000 General Obligation Equipment Certificates.

Ehler's, the city's financial consultant, will present the bid results on the night of November 12, 2014, as the equipment certificate debt will be bid on earlier that afternoon by prospective bond buyers.

Included in the 2015 General Fund budget is $545,000 of capital equipment expenditures.  Budgeted items include:  squad car, copiers, ATV, 800 MHZ Radio System (3-year funding), Engineering truck, Plow truck and Sidewalk machine.
 The total of the three years (2015-2017) equipment purchases to be funded totals $1,664,975 (listing of equipment for 2015-2017 is attached).  As stated, the Equipment Certificates would fund 50% or $832,488 and the Equipment Revolving Fund the other $832,488.  The amount of certificates to be issued to  fund the capital items is proposed to be $875,000 which covers the principal costs of the capital items and underwriting costs.  The certificates would be for a ten-year time frame and levied to the property tax for years 2015-2024.  The annual debt as currently proposed in the presale report shows an annual levy of approximately $102,000.  As the city is selling by competitive bid, this number is subject to change when the final bond sale is held November 12.

A pre-sale report from Ehler's is attached that outlines the debt structure.

  Alternative #1.  Authorize the issuance and sale of $875,000 Equipment Certificates to lowest bidder as presented by Ehlers on November 12.

   Alternative #2.  Do not issue the debt in 2014 and wait until next year after the 2015 budget and levy have been adopted in December.  (2-month process to issue debt).  Interest rates may rise and levy amount cannot be increased.

   Alternative #3.  Not issue debt.  Look at using the city's Equipment Fund for 100% of funding noting that the fund will be depleted by year 2017.

2015-2017 Capital Equipment will be funded from the City's Equipment Revolving Fund and from the issuance of Capital Equipment Certificate debt.

Staff's recommendation is to authorize the issuance and sale of the certificates to the lowest bidder as presented by Ehler's on November 12, 2014.

Approve Resolution #14-11-235 authorizing the issuance and awarding the sale of $875,000 General Obligation Equipment Certificates of Indebtedness, Series 2014A.