Adopt Resolution #15-02-038 calling for Public Hearing on issuance of Capital Improvement Bonds and Capital Improvement Plan (Fire Station #2)

Purpose:  To provide the funding mechanism for the construction of Fire Station #2 whose final plans and designs and bid letting were authorized at the regular City Council meeting of January 27, 2015.

Background:  In 2003, the Minnesota State Legislature adopted a statute known as the "CIP Act" that allows cities to issue municipal bonds under a capital improvement plan without the usual referendum requirement (CIP bonds are subject to a reverse referendum.  Whereby, if a petition (filed with the City Clerk) is signed by voters equal to at least five percent of the votes cast in the City in the last general election within 30 days after the public hearing regarding the bonds (March 10, 2015), the bonds may not be issued unless approved by the voters.  The "CIP Act" applies to capital improvements consisting of city halls, public works and public safety facilities.  The City used the CIP bonding method when it refinanced its Fire Station #1 bonds in 2004.

The fire station #2 project has been included in the city's regular Capital Improvement Plan (CIP) since 2010 with its funding source listed as the issuance of CIP debt (General Obligation debt).  If the CIP calls for funding of the project to be provided by the issuance of General Obligation bonds, additional procedures must be followed:  Council must hold a public hearing regarding the issuance of the bonds and the CIP bonded project -Fire Station #2. 

The public hearing request is the first step of the bonding process that needs to be undertaken for financing fire station #2 construction which is what is being requested at tonight's meeting.
  
 

Ehlers and Associates, the city's financial consultants, has prepared a schedule of events outlining the timeframe of the bonding process for fire station #2.  They have also prepared a Five-Year Capital Improvement Plan for the years 2015-2019 which outlines the CIP planning process that is a requirement of the "CIP Act". 

It should be noted that the amount of the fire station project listed in the CIP document is higher-$4.2M than the bonded request amount of $3.97M.  The CIP amount is at a higher amount to account for any unforeseen costs, such as the bonds being sold at a premium.  You cannot bond for an amount higher than what is listed in the CIP document, so the higher amount included in the CIP is just a precautionary factor.

The following schedules are attached for review:  The bonding schedule of events, 2015-2019 CIP dedicated only to those projects being funded via CIP debt, and the full debt service payment schedules.
 

This is only a request to authorize the calling of a public hearing on the CIP and debt issuance.  Preliminary approval of the sale of any debt is not until March 10, 2015.

The issuance of Capital Improvement Debt will finance the construction of Fire Station #2.

Staff recommends that council authorize the calling of a public hearing on the CIP and debt issuance with the understanding that preliminary approval of the sale of any debt is not until March 10, 2015.

↵Motion to approve Resolution #15-02-038 Calling for Public Hearing on issuance of Capital Improvement Bonds and Capital Improvement Plan (Fire Station #2)