6.1 ERMUSR 03-09-2004 Elk River
Municipal Utilities
322 King Avenue phone: 763.441.2020
Elk River,MN 55330 Fax:763.441.8099
March 1, 2004
To: Elk River Municipal Utilities Commission
John Dietz
Jerry Takle
James Tralle
From: Bryan Adams
Subject: MMUA Bond Pool Financing Program
The Elk River Municipal Utilities 2004 electric budget contains an allowance for
$750,000 to $1,000,000 bond to pay for our large electric feeder projects along with
relocating lines in Otsego to accommodate Co. Rd. 39 and 42 interchange construction.
Normally we would issue a single bond for the amount required. MMUA is starting a
bond pool financing program that may be of benefit to us. Attached are two fact sheets
that explain their program. Please review this information. If you desire to pursue this
concept further, I can arrange a MMUA representative to attend our April commission
meeting. By that time, staff will have a better handle on the size of the bond required.
MMUA
MINNESOTA MUNICIPAL UTLLITIES ASSOCIATION
MMUA Finance Program
To assist municipal electric, water and wastewater utilities throughout the State
of Minnesota, the Minnesota Municipal Utilities Association is developing a
program to provide low-cost financing to its members. Tax-exempt bonds will be
issued by the Midwest Consortium of Municipal Utilities, a nonprofit organization
being created by MMUA members. The bond proceeds will fund the financing
program, from which individual members can then borrow within one year after
the bond issue date (expected to be in June 2004).
The MMUA Finance Program will make municipal utility financing more
affordable and easy and have a number of attractive features, including:
• Flexible amounts from $200,000 or less to $10 million or more
• Terms up to 30 years
• Flexible repayment
• No prepayment penalty
> Fixed or variable rates
• Simple application
> Low transaction costs
• Insulation of city from risk of bond pool default
• Borrowing through loans or leases
The MMUA Financing Program takes advantage of the economies of scale
offered through pooled financing, which allows municipal utilities to:
• Reduce individual cities' transaction costs by sharing bond issuance costs
> Participate in bond issues of sufficient size to achieve the lowest cost of
borrowing through favorable pricing
Funds will be available for municipal utility purposes, including:
• New construction
• Equipment
Refinancing of existing debt
For additional information on the MMUA Finance Program, contact MMUA.
Why should a municipal use the MMUA financing program
(Midwest Consortium of Municipal Utilities)
Flexibility of rates with in the program—Fixed or variable rates
The cost of issuance is allocated between the municipals within the bond
issue, thus affording a lower cost of issuance with the individual municipals.
Lower credit fees because of the diversification that is provided to the credit
provider.
Variable rates, which most municipal issuers cannot access.
Early payoff of the debt, if desired, without any prepayment penalty or call
protection.
Secondary benefit is to MMUA via administrative fees paid to MMUA.
The costs associated should be lower even for highly rated municipals.
The financing team for MCMU has met with Ehlers & Associates, Inc. to
discuss the MMUA financing program. They appeared to be highly
interested in it.