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5.1.B. SR 05-16-2005 Item # 5.I.B. MEMORANDUM TO: Mayor and City Council FROM: Lori Johnson, Finance and Administrative Services Director DATE: May 16, 2005 SUBJECT: Consider Resolution Awarding the Sale of the City's $645,000 General Obligation Equipment Certificate, Series 2005D; Fixing its Form and Specifications; Directing its Execution and Delivery; and Providing for its Payment Attached is a resolution awarding the sale of the city's $645,000 General Obligation Equipment Certificate, Series 2005D. This issue funds the budgeted 2005 capital outlay items as well as the fire pumper that was recently delivered. The certificate is being purchased by The Bank of Elk River at an interest rate of 3.9% payable over five years. Action Requested City Council is asked to approve the resolution awarding the sale of the city's $645,000 General Obligation Equipment Certificate, Series 2005D; fixing its form and specifications; directing its execution and delivery; and proyiding for its payment. S:\Council\Lori\2005\Series 2005D Bonds Sales.doc EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF ELK RIVER, MINNESOTA HELD: MAY 16, 2005 Pursuant to due call and notice thereof, a regular or special meeting of the City Council of the City of Elk River, Sherburne County, Minnesota, was duly held at the City Hall on May 16,2005, at 7:30 P.M., for the purpose, in part, of awarding the sale of $645,000 General Obligation Equipment Certificate, Series 2005D. The following members were present: and the following were absent: Member introduced the following resolution and moved its adoption: RESOLUTION NO. 05- RESOLUTION AWARDING THE SALE OF THE CITY'S $645,000 GENERAL OBLIGATION EQUIPMENT CERTIFICATE, SERIES 2005D; FIXING ITS FORM AND SPECIFICATIONS; DIRECTING ITS EXECUTION AND DELIVERY; AND PROVIDING FOR ITS PAYMENT BE IT RESOLVED by the City Council (the "Council") of the City of Elk River, Minnesota (the "City"), as follows: 1. It is hereby determined: (a) It is necessary and expedient to issue the City's $645,000 General Obligation Equipment Certificate, Series 2005D (the "Certificate") pursuant to Minnesota Statutes, Section 412.301, to finance the costs of the City's acquisition of certain street equipment, consisting of a sweeper, truck with plow and radiant patcher, and to pay a portion of the cost of a fire pumper (hereinafter collectively referred to as the "Equipment"). (b) The Equipment has an expected useful life at least as long as the final maturity of the Certificate, and the $645,000 amount of the Certificate does not exceed 0.25% of the market value ofthe taxable property in the City. ( c) The City is authorized to issue the Certificates pursuant to Minnesota Statutes, Section 475.60, Subdivision 2(1), in such manner and on such terms and conditions as determined by the City Council. 1768935vl 2. The offer of The Bank of Elk River, in Elk River, Minnesota (the "Purchaser"), to purchase the Certificate is hereby accepted, such offer being to purchase the Certificate at a price of par ($645,000), the Certificate to be subject to the terms and conditions herein provided. 3. The City shall forthwith issue and sell its $645,000 General Obligation Equipment Certificate, Series 2005D. The Certificate shall be dated June 1, 2005, shall be a single, fully registered obligation without interest coupons, shall bear interest payable on February 1,2006, and semiannually thereafter on each February 1 and August 1, and shall mature and bear interest as provided in the form of the Certificate set out in paragraph 5 of this Resolution. The Certificate shall be subject to redemption in whole or in part at the option of the City at any time, in inverse order of the principal maturities thereof, upon prior written notice to the Registered Owner thereof, at par plus accrued interest to date of redemption. Interest on the ~ertificate shall be calculated on the basis of a 360-day year consisting of 12 months of 30 days each. 4. Both principal of and interest on the Certificate shall be payable by the City Finance Director, who shall also act as registrar and transfer agent (the "Certificate Registrar") for the Certificate. 5. The Certificate shall be substantially the following form: 1768935vl 2 [Form of Certificate] No. R-l $645,000 UNITED STATES OF AMERICA STATE OF MINNESOTA COUNTY OF SHERBURNE . CITY OF ELK RIVER GENERAL OBLIGATION EQUIPMENT CERTIFICATE, SERIES 2005D THE CITY OF ELK RIVER, SHERBURNE COUNTY, MINNESOTA (the "City"), acknowledges itself to be indebted and, for value received, hereby promises to pay to The Bank of Elk River, or its registered assigns (the "Registered Owner"), the Principal Sum of SIX HUNDRED FORTY -FIVE THOUSAND DOLLARS ($645,000) on February 1 in the years and principal amounts, respectively, as follows: Year Principal Amount 2006 $ 58,000 2007 14~750 2008 146,750 2009 146,750 2010 146,750 or on any earlier date on which the principal amounts of this Certificate may be and shall have been duly called for prepayment, and to pay interest to the Registered Owner from the date hereof on the principal amounts hereof until the same are paid at the rate of three and ninety hundredths percent (3.90%) per annum, interest to maturity payable on February 1,2006, and on each February 1 and August 1 thereafter (the "Interest Payment Dates"). Interest shall be calculated on the basis of a 360-day year consisting of 12 months of 30 days each. The City Finance Director will pay the interest due on this Certificate on each Interest Payment Date by mailing or delivering a check or draft made payable to the person that was the Registered Owner at the end of the day preceding such Interest Payment Date. Both principal of and interest on this Certificate are payable in any coin or currency of the United States of America which on the date of payment is legal tender for public and private debts. At the time of final payment of all principal of and interest on this Certificate, the Registered Owner shall surrender this Certificate to the City Finance Director. This Certificate is subject to prepayment at the option of the City at any time, in inverse order of the principal maturities hereof, in whole or in part, at par plus accrued interest to the date of prepayment, upon prior written notice to the Registered Owner. This Certificate is issued by the City pursuant to and in full conformity with the Constitution and laws of the State of Minnesota for the purpose of providing funds to finance costs of acquiring certain capital equipment of the City. This Certificate constitutes a general 1768935vl 3 obligation of the City, and to provide moneys for the prompt and full payment of the principal hereof and the interest thereon, as the same become due, the full faith and credit and taxing powers of the City have been and are hereby irrevocably pledged. This Certificate may be assigned but upon such assignment the assignor shall promptly give written notice thereof to the City at the office of the City Finance Director, and the assignee shall surrender this Certificate to the City Finance Director either in exchange for a new fully registered Certificate or for transfer of this Certificate on the registration records. Each such assignee shall take this Certificate subject to this condition. The City shall treat the Registered Owner as the absolute owner of this Certificate for purposes of paying the principal of and interest on this Certificate and for all other purposes whatsoever. This Certificate has been designated by the City as a "qualified tax-exempt obligation" for purposes of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended. IT IS HEREBY CERTIFIED AND RECITED that all acts, conditions, and things required by the Constitution and laws of the State of Minnesota to be done, to have happened, and to be performed precedent to and in the issuance of this Certificate have been done, have happened, and have been performed in regular and due form, time, and manner as required by law; and that this Certificate, together with all other indebtedness of the City outstanding on the date hereof, does not cause the indebtedness of the City to exceed any constitutional or statutory limitation thereon. IN WITNESS WHEREOF, the City of Elk River, Sherburne County, Minnesota, by its City Council, has caused this Certificate to be executed by the manual signatures of its Mayor and City Administrator; has caused the official seal of the City to be impressed upon this Certificate; and has caused this Certificate to be dated June 1,2005. Mayor City Administrator (SEAL) 1 768935vl 4 CERTIFICATE OF REGISTRATION It is hereby certified that the foregoing Certificate was as of the latest date specified below registered in the name of the last Registered Owner noted below and that, at the request of said Registered Owner of this Certificate, the undersigned City Finance Director has as of said applicable date registered the Certificate as to principal and interest in the name of such Registered Owner, as indicated in the registration blank below, on the books kept by the undersigned for such purposes. NAME OF REGISTERED OWNER The Bank of Elk River 1768935vl DATE OF REGISTRA nON June 1, 2005 5 SIGNATURE OF CITY FINANCE DIRECTOR REGISTER OF PARTIAL PAYMENTS The installment of principal amount of the attached Certificate has been prepaid on the dates and in the amounts noted below: DATE AMOUNT SIGNATURE OF REGISTERED OWNER SIGNATURE OF CITY FINANCE DIRECTOR If a notation is made on this register, such notation has the effect stated in the attached Certificate. Partial payments do not require the presentation of the attached Certificate to the City Finance Director, and a Registered Owner could fail to note the partial payment here. (End of Form of Certificate) 1 768935vl 6 6. The City Finance Director shall obtain a copy of the proposed approving legal opinion of bond counsel for the Certificate, Briggs and Morgan, Professional Association, St. Paul, Minnesota, and shall cause such opinion to be filed in the offices of the City. 7. The Certificate shall be executed on behalf of the City by the manual signatures of the Mayor and the City Administrator and shall be duly registered by the manual signature of the City Finance Director as Certificate Registrar. The official seal of the City shall be impressed upon the Certificate. The Certificate, when fully executed and sealed, shall be delivered by the City Finance Director to the Purchaser upon receipt of the purchase price thereof, and the Purchaser shall not be obligated to see to the proper application thereof. 8. The proceeds of the Certificate shall be deposited in and expended from a separate capital account or subaccount of the City to provide financing for the Equipment. The City Finance Director shall establish and maintain a separate debt service account Dr subaccount (the "Debt Service Account") for the payment of the Certificate. The Debt Service Account shall be maintained to pay the debt service on the Certificate and any additional obligations of the City which may hereafter be made payable therefrom. 9. The Debt Service Account shall be held in trust by the City for the benefit of the Registered Owner from time to time of the Certificate, as hereinafter provided. Until the principal of and interest on the Certificate are paid, or until the Certificate is otherwise discharged as hereinafter provided, there shall be credited to and maintained in the Debt Service Account: (a) the proceeds of the general ad valorem taxes levied by the City for the purpose of paying the principal of and interest on the Certificate, including if applicable and necessary prior tax levies, if any, made for that purpose (and made in anticipation of the issuance of the Certificate); (b) amounts of capitalized interest, if necessary, needed to pay the interest first coming due on the Certificate; and (c) any other funds which are properly available and are appropriated by the Council to the Debt Service Account. The aforesaid funds, when deposited in the Debt Service Account, shall be used only and exclusively for, and are hereby pledged to, the payment of the principal of and interest on the Certificate, when due, and such other obligations of the City as may be made payable therefrom.. If any payment of principal or interest shall become due when there are not sufficient funds in the Debt Service Account to pay the same, the City Finance Director shall pay such principal or interest from the general fund or other available fund of the City, and such fund shall be reimbursed for such advances from the proceeds of the ad valorem taxes levied for such purpose, when collected. 10. The full faith and credit and taxing powers of the City are hereby pledged to the payment of the principal of and interest on the Certificate, and in the event of any current or anticipated deficiency of funds in the Debt Service Account of amounts needed to make any such payment, when due, the City Council shall levy ad valorem taxes on all taxable property in the City in the amount of such deficiency. 11. To provide moneys for payment of the principal of and interest on the Certificate (in addition to the $86,000 which has already been levied for the Certificate for payable 2005 property taxes) there is hereby levied upon all ofthe taxable property in the City a direct annual ad valorem tax which shall be spread upon the tax rolls and collected with and as part of other general property taxes in the City for the years and in the amounts as follows: 1768935vl 7 Year of Year of Amount Tax Levy Tax Collection 2005 2005 $167,210.62 2006 2007 161,344.29 2007 2008 155,477.96 2008 2009 149,611.63 The foregoing tax levies shall be irrepealable so long as the Certificate is outstanding and unpaid, provided that the City reserves the right and power to reduce the levies in the manner and to the extent permitted by Minnesota Statutes, Section 475.61, Subdivision 3. 12. It is hereby determined that the funds available to the Debt Service Account pursuant to this Resolution (including from the ad valorem tax levies herein and heretofore made and other funds appropriated by the council for payment of debt service on the Certificate) will be in amounts not less than 5% in excess of the amount needed to meet, when due, the principal of and interest on the Certificate. 13. The City Finance Director is directed to file a certified copy of this Resolution with the County Auditor of Sherburne County, Minnesota, together with such other information as the County Auditor shall require, and to obtain the County Auditor's Certificate that the Bonds have been entered in the County Auditor's Bond Register and the tax levy required by law has been made. 14. The officers of the City are hereby authorized and directed to prepare and furnish upon request to the Purchaser and to the attorneys approving the Certificate, certified copies of proceedings and records of the City relating to the Certificate and to the financial condition and affairs of the City, and to furnish such other certificates, affidavits, and transcripts as may be required to show facts within their knowledge or as shown by the books and records in their custody and under their control relating to the validity and marketability of the Certificate, and such instruments, including any heretofore furnished, shall be deemed representations of the City as to the facts stated therein. 15. The City covenants and agrees with the Registered Owner from time to time of the Certificate that the City will not take or permit to be taken by any of its officers, employees, or agents any action which would cause the interest on the Certificate to become generally subject to taxation under the Internal Revenue Code of 1986, as amended (the "Code"), and regulations issued thereunder, as now existing or as hereafter amended or proposed and in effect at the time of such action, and that the City will take, or it will cause to be taken, all affirmative actions within its power which may be necessary to insure that such interest will not become subject to income taxation under the Code. Without limitation of the foregoing, the City shall not enter into any lease, use agreement, management or operation contract or other agreement respecting the Equipment or any portion thereof which would adversely affect the exemption from federal income tax of the interest on the Certificate, taking into account and observing the requirements of Revenue Procedure 97-13 I 768935vI 8 of the Internal Revenue Service and any similar or other applicable revenue procedures or guidelines relating to leases, management contracts and service contracts involving facilities fmanced with tax-exempt obligations. 16. The City shall comply with requirements necessary under the Code to establish and maintain the exclusion from gross income under Section 103 of the Code of the interest on the Certificate, including without limitation: (a) requirements relating to temporary periods for investments, (b) limitations on amounts invested at a yield greater than the yield on the Certificate, and (c) the rebate of excess investment earnings to the United States if the Certificate (together with other obligations reasonably expected to be issued and outstanding at one time in this calendar year) exceed the small-issuer exception amount of $5,000,000, or do not otherwise qualify for available exceptions. For purposes of qualifying for the small-issuer exception to the federal arbitrage rebate requirements, the City hereby finds, determines and declares that: (a) the Certificate is issued by a governmental unit with general taxing powers, (b) the Certificate is not a private activity bond, (c) 95% or more of the net proceeds of the Certificate are to be used for local governmental activities of the City (or of a governmental unit the jurisdiction of which is entirely within the jurisdiction of the City), and (d) the aggregate face amount of all tax -exempt bonds (other than private activity bonds) issued by the City (and all entities subordinate to, or treated as one issuer with, the City) during the 2005 calendar year is not reasonably expected to exceed $5,000,000, all within the meaning of Section 148(f)(4)(D) of the Code. 17. The City hereby designates the Certificate as a "qualified tax-exempt obligation" within the meaning of Section 265(b)(3) of the Code and further represents that: (a) the reasonably anticipated amount of tax-exempt obligations (other than private activity bonds, treating qualified 501 (c)(3) bonds as not being private activity bonds) which will be issued by the City (and all entities subordinate to, or treated as one issuer with, the City) during calendar year 2005 will not exceed $10,000,000; and (b) not more than $10,000,000 of obligations issued or to be issued by the City during calendar year 2005 have been designated for purposes of Section 265(b )(3) of the Code. The City shall use its best efforts to comply with any federal procedural requirements which may apply in order to effectuate the designation made by this paragraph. 18. When any obligation of the Certificate has been discharged as provided in this paragraph, all pledges, covenants and other rights granted by this Resolution to the registered owner of the Certificate (with respect to the obligation thereof so defeased) shall, to the extent permitted by law, cease. The City may at any time discharge any or all of such obligation(s) with respect to the Certificate, subject to the provisions of law now or hereafter authorizing or regulating such action, by depositing irrevocably in escrow, with a suitable institution qualified by law as an escrow agent for this purpose, cash or securities which are backed by the full faith and credit of the United States of America, bearing interest payable at such times and at such rates and maturing on such dates and in such amounts as shall be required and sufficient, subject to sale and/or reinvestment in like securities, to pay said obligation(s), which may include any interest payment on such Certificate and/or principal amount due thereon at a stated maturity (or 1768935vl 9 if irrevocable provision shall have been made for permitted prior redemption of such principal amount, at such earlier redemption date). 19. With respect to the Equipment, the City has complied and will continue to comply with the "Reimbursement Regulations" provided in United States Treasury Regulations Section 1.150-2. In particular, except where the following may not be required by said Regulations (e.g., with respect to certain "preliminary expenditures"), to the extent that any of the proceeds of the Certificate will be used to reimburse the City for a cost of the Equipment theretofore paid and temporarily financed by the City out of other City funds, prior to the initial payment thereof (or within applicable time limits thereafter) the City has made or will have made a duly qualifying statement of its official intent to bond for such costs; otherwise, the proceeds of the Certificate are to be used for initial payment, and not for such reimbursement, of costs of the Equipment. 20. The Council hereby fmds that the Certificate is exempt from continuing disclosure requirements of Rule 15c2-12 of the Securities and Exchange Commission because the Certificate is issued in the aggregate principal amount ofless than $1,000,000. Consequently, the City is not covenanting to provide and will not provide annual fmancial information, notices of certain material events or any other disclosure or information which would otherwise be required by that Rule. 21. If any section, paragraph or provision of this resolution shall be held to be invalid or unenforceable for any reason, the invalidity or unenforceability of such section, paragraph or provision shall not affect any of the remaining provisions of this resolution. The motion for the adoption of the foregoing resolution was duly seconded by member and, after a full discussion thereof and upon a vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Whereupon the resolution was declared duly passed and adopted. I 768935vI 10 STATE OF MINNESOTA COUNTY OF SHERBURNE CITY OF ELK RIVER I, the undersigned, being the duly qualified and acting City Clerk of the City of Elk River, Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of minutes with the original thereof on file in my office, and that the same is a full, true and complete transcript of the minutes of a meeting of the City Council, duly called and held on the date therein indicated, insofar as such minutes relate to awarding the sale of $645,000 General Obligation Equipment Certificate, Series 2005D. WIlNESS my hand on May _, 2005. City Clerk 1 768935vl 11 City of Elk River, MN Results of Bond Sale May 16, 2005 $1,660,000 General Obligation Sewer Revenue Refunding Bonds, Series 2005B Low Bidder True Interest Cost Number of Bids Rati ng Range of Bids Total Debt Service Proiected 5/2 $1,695,000 $21 ,188 3.9930% 3.05% - 4.10% 6.303% $102,733 $412,217.75 Principal Amount Discount Allowance True Interest Cost Coupon Rates Net PV Benefit Comparative Savings Interest Cost Closing Date Council Action Piper Jaffray & Co. Minneapolis, Minnesota 3.5956% 4 A 1 Moody's Investors Services (Upgraded from A2) 3.5956% - 3.8092% Results of Sale Variance $1,660,000 -$3,108 3.5956% 3.00% - 4.00% 8.785% $143,188 $388,545.89 -$35,000 -$24,296 -0.3974% +2.482% +$40,455 +$23,671.86 June 14,2005 Award the bid of Piper Jaffray & Co. and Adopt the Resolution Providing for the Issuance and Sale of $1,660,000 General Obligation Sewer Revenue Refunding Bonds, Series 2005B. Attachments . Bid Tabulation . Final Debt Service/Comparison Analysis BID TABULATION $1,695,000* General Obligation Sewer Revenue Refunding Bonds, Series 2005B CITY OF ELK RIVER, MINNESOTA SALE: May 16, 2005 AWARD: PIPER JAFFRAY & CO. RATING: Moody's Investors Service, Inc. "A1" NAME OF BIDDER MATURITY RATE REOFFERING (February 1) YIELD PRICE 881: 4.35% NET TRUE INTEREST INTEREST COST RATE PIPER JAFFRA Y & CO. Minneapolis, Minnesota 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 WELLS FARGO BROKERAGE SERVICES, LLC Minneapolis, Minnesota 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 3.000% 3.000% 3.250% 3.250% 3.375% 3.500% 3.625% 3.750% 3.875% 4.000% 2.800% 2.900% 3.000% 3.100% 3.250% 3.400% 3.550% 3.650% 3.750% 3.850% 2.800% 2.900% 3.000% 3.100% 3.250% 3.400% 3.500% 3.600% 3.700% 3.800% $1,698,206.90 $394,117.02 3.5966% $1,684,660.50 $393,899.21 3.6132% *Subsequent to bid opening the issue size was decreased to $1,660,000 with the 2007 maturity decreased $5,000 to $140,000, the 2009 maturity decreased $5,000 to $150,000, the 2011 maturity decreased $5,000 to $160,000, the 2013 maturity decreased $5,000 to $175,000, the 2014 maturity decreased $5,000 to $180,000, the 2015 maturity decreased $5,000 to$185,OOO, and the 2016 maturity decreased $5,000 to $195,000 in maturity value. Adjusted Price - $1,663,108.08 Adjusted Net Interest Cost - $385,437.81 Adjusted TIC - 3.5956% 8 EHLERS & ASSOCIATES INC 3060 Centre Pointe Drive, Roseville, MN 55113 651.697.8500 fax 651.697.8555 www.ehlers-inc.com Offices in Roseville, MN Brookfield, WI and Lisle, IL Elk River, MN FINAL - Crossover Refunding of $2,655,000 G.O. Sewer Revenue Bonds, Series 1996 Debt Service Comparison Date 02/01/2006 02/01/2007 02/01/2008 02/01/2009 02/01/2010 02/01/2011 02/01/2012 02/01/2013 02/01/2014 02/01/2015 02/01/2016 Total Total P+I 36,595.87 198,037.50 198,837.50 199,487.50 204,612.50 199,412.50 204,012.50 203,062.50 201,718.76 199,968.76 202,800.00 $2,048,545.89 PCF (1,666,595.87) Existing DIS 1,706,825.00 Net New DIS Old Net DIS Savings 74,707.09 76,825.00 2,117.91 198,037.50 217,190.00 19,152.50 198,837.50 215,565.00 16,727.50 199,487.50 218,545.00 19,057.50 204,612.50 220,845.00 16,232.50 199,412.50 217,445.00 18,032.50 204,012.50 218,687.50 14,675.00 203,062.50 219,282.50 16,220.00 201,718.76 219,220.00 17,501.24 199,968.76 218,490.00 18,521.24 202,800.00 222,180.00 19,380.00 $2,086,657.11 $2,264,275.00 $177,617.89 (1,666,595.87) $1,706,825.00 PV Analysis Summary (Net to Net) Gross PV Debt Service Savings..................... 141,070.20 Net PV Cashflow Savings @ 3.893%(AIC)............ 141,070.20 Contingency or Rounding Amount.................... Net Present Value Benefit 2,117.91 ........__.._._..._...____._._..._.___.Jl.1?,.!.??.}.L. }::I.~!.I.'..Y._!.!~~!.i.!L!!y.Z?.b.P5:~:l.KY}3::~r.I!:!I_<l.~<l.}?.~~~~!.Y.i.~~_______..__..__._.___._____.____..______.....________.._....______.~:034'Y<>._ Net PV Benefit/ $1,630,000 Refunded Principal... 8.785% ~.!..fy.!!~~!.!.J;1_'66(),OQQ...I3::~.flJ.g~I!g..I.)!i.gg,~!:.:_.....___..______._...__..-__..__..___..____...___________.___..__.__._..__.._...?J>.~_~.'Y<>. Refunding Bond Information _.I3::~l.I!1jJ!:l.gQ~_t:<!.p.~~_____.._._______________._....._._..______...._____.._.._________.....__.._____._._.___...._..___.___.______.._.._____~L1_~~?00? Refunding Delivery Date 6/14/2005 05xoverofSer96A$2.65 I SINGLE PURPOSE I 5/16/2005 I 5:07PM Ehlers & Associates Leaders in Public Finance since 1955 Page 1