Adopt Resolution #15-05-129 Providing for the Issuance and Sale of $3,970,000 General Obligation Capital Improvement Plan Bonds, Series 2015 and Levying a tax for the Payment Thereof

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 with the award of the construction contract on April 14, 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.  No petition was filed by the April 9, 2015 deadline.  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.   When a city issues GO CIP debt, they are required to have what is termed a five-year CIP adopted as part of this process that outlines the project to be funded.  The five year CIP was adopted at the City Council meeting of  March 10, 2015.  The CIP Plan for Years 2015 through 2019 that was adopted March 10th is different from the City's entire 2015-2019 CIP document that was adopted in February 2015.  The City's entire CIP includes all projects within the city:  Buildings, Water, Sewer, Streets, that are proposed to be constructed over the 5-year time frame whereas the Five-Year CIP related to the GO CIP bonding has to include a special narration outlining only those projects that are to be funded via CIP debt.  At is regular meeting of March 10, 2015 City Council passed resolution #15-03-062 authorizing the issuance of GO Capital Improvement Plan Bonds for Fire Station #2 in an amount not to exceed $4,200,000 (as oulined in the Five-Year) with a scheduled sale date of May 26, 2015.   Stacie Kvilvang from Ehler's and Associates, the city's financial consultant, will present the bid results on the night of May 26, 2015, as the GO Capital Improvement Plan Bonds will be bid on earlier that afternoon by prospective bond buyers.  The total bonded sale request is for $3,970,000 which remains constant with the original request in March.  There is the possibility that sale proceeds from the sale of the former City Hall campus could be used to offset future debt service payments, but cannot be determined at this time.

Ehlers and Associates, the city's financial consultant, prepared a Five-Year Capital Improvement Plan  (for GO CIP Bonding Projects only) for the years 2015-2019 which outlines the CIP planning process that is a requirement of the "CIP Act" and a presale report that are attached.  As stated, the GO CIP bond issue would be $3,970,000 which covers the principal costs of the fire station and underwriting and issuance costs.  The debt would be for a 20-year time frame with an estimated annual debt service levy of approximately $294,000.

Alternative #1:  Motion to Adopt Resolution #15-05-129 authorizing approval of the sale of $3,970,000 of GO Capital Improvement Plan Bonds, Series 2015A.

Alternative #2:  Motion to not adopt Resolution #15-05-129 which would be rejecting the bids of the bond sale

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

Staff recommends alternative #1 as fire station #2 construction contract was awarded on April 14, 2015 and bonding was the recommended funding source.

Motion to Adopt Resolution #15-05-129 Providing for the Issuance and Sale of $3,970,000 General Obligation Capital Improvement Plan Bonds, Series 2015 and Levying a tax for the Payment.