5.8. SR 06-19-1995**ITEM 5.8.**
MEMORANDUM
of _i.
River TO: Mayor & City Council
FROM: Lori Johnson, Assistant City
Administrator
DATE: June 19, 1995
SUBJECT: Resolution Calling for the Early
Redemption of $1,975,000 General
Obligation Improvement Bond, Series
1986A
The 1986A General Obligation Improvement Bond became subject to call on
February 1, 1995. Because of uncertainties in the action that the Legislature
was proposing at that time, the bond issue was not called on February 1.
Since none of the proposed action was approved by the Legislature, it is now
appropriate to prepay a portion of the principal outstanding on this issue.
There is currently principal outstanding in the amount of $900,000. Of that,
$135,000 is due in 1996, and $765,000 is due in years 1997 to 2003. The
bond fund currently has a cash balance of $867,000. Therefore, not all of the
• issue can be prepaid. The attached resolution calls for the prepayment of
bonds outstanding in 1997-2003. Prepayment will result in an interest
savings of $223,900.
This bond issue was used to fund improvements in Deerfield III, Royal Oaks
Ridge, Ridgewood, Simonet and 6th, and School Street. The Developer's
Agreements for Deerfield III and Royal Oaks Ridge required that all of the
assessments be paid within three years. This meant substantial
prepayments resulting in a sizable cash balance in this bond fund.
Unfortunately, the bond resolution did not allow for early redemption until
February, 1995. The net interest rate on the bonds is 7.449 which is higher
than the rate of return on investments in the 1990's. If the bond was not
prepaid at this time, tax levies would be required to pay off this bond issue.
Recommendation
The Council is asked to approve the attached resolution calling for the early
redemption of the 1986A General Obligation Improvement Bond.
13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425
RESOLUTION 95-
A RESOLUTION FOR THE CITY OF ELK RIVER
• A RESOLUTION CALLING FOR THE EARLY REDEMPTION
OF $1,975,000 GENERAL OBLIGATION IMPROVEMENT BOND
SERIES 1986A
WHEREAS, the Elk River City Council approved Resolution 86-47,
authorizing the issuance, awarding the sale, prescribing the
form and details and providing for the payment of General
Obligation Improvement Bonds Series 1986A dated August
1, 1986; and,
WHEREAS, the Bonds remaining outstanding mature in the years 1996
through 2003; and in the principal amount of $900,000, and,
WHEREAS, Section 2.05 of the Resolution states, and the Bonds so
provide, that Bonds maturing in the years 1996 through
2003 shall be subject to redemption and prepayment at the
option of the issuer on February 1, 1995, and at any interest
payment thereafter, at a price equal to the principal amount
thereof and the accrued interest to the date of redemption;
and,
• WHEREAS, the City Council requests that principal outstanding for the
years 1997-2003 in the amount of $765,000 be prepaid using
funds available due to the prepayment of special
assessments in accordance with the terms of the Bonds; and,
WHEREAS, the City Council hereby directs the Paying Agent, Norwest
Bank Minnesota, N.A., to proceed with mailing the proper
notice to all registered holders not less than 30 days before
the redemption date as required in the Resolution for early
redemption.
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Elk River that the $765,000 of principal outstanding for
years 1997-2003 on the $1,975,000 General Obligation
Refunding and Improvement Bonds Series 1986A be
redeemed on August 1, 1995.
•
Passed and adopted by the City Council of the City of Elk River this
day of June, 1995.
•
C~
Henry A. Duitsman, Mayor
ATTEST:
Sandra A. Thackeray, City Clerk
•