4.1. SR 08-27-2001Item~ 4.1.
MEMORANDUM
TO:
FROM:
Mayor and City Council
Lori Johnson, Finance Director
DATE:
August 27, 2001
SUBJECT: Consider Resolution Providing for the Sale of $3,590,000 General
Obligation Water Revenue Bonds Series 200lA.
The Elk River Municipal Utilities has requested that the City issue $3,590,000 of General
Obligation Water Revenue Bonds to finance new water system facilities. Please see the
attached Bond Sale Report prepared by Ehlers & Associates for detailed information on this
bond issue. Bryan Adams has determined the bond amount and terms in consultation with
Rusty Fifield of Ehlers & Associates, Inc. Both Bryan Adams and Rusty Fifield will be at
Monday's meeting to address any questions you have on this issue. Rusty will also give you an
update on a change in the way bids will be received for this issue in an attempt to reduce
interest costs by increasing the number of bidders.
Action Requested
The City Council is asked to consider the attached resolution providing for the sale of
$3,590,000 General Obligation Water Revenue Bonds Series 200lA.
s:\council\watrevbonds.doc
Alk River
Municipal Utilities
322 King Avenue
Elk River, MN 55330
August 21,2001
phone: 763.441.2020
Fax: 763.441.8099
To: Mayor & City Council
From: Bryan Adams
Subject: G.O. Water Revenue Bonds Series 2001A
As Elk River continues to grow and expand, the municipal water needs of our community
continue to increase as well. This growth and expansion requires the Elk River Municipal Utilities
to expand the water production and water storage capabilities to satisfy the water system demands
for domestic water and fire protection. Water production facility/t7 and a water tower in eastern
Elk River has been planned for some time. The location of water production facility #7 is at the
intersection of Tyler Street and Co Rd 13 on the property previously owned by the Deschenes'.
The location of the eastern water tower is locates between Co Rd 12 and 175m Avenue on property
recently purchased from Riverside Development.
The cost to construct these facilities are as follows:
Well #7
Water Treatment Plant #7
Water Tower
$178,400
$1,482,500
$1,844,000
Total Net Proceeds $3,504,900
Required from Bond Sale
Well #7 was completed in August 2001 by Mark J. Traut Well, Inc. The contract to construct
water treatment facility #7 was awarded to EnComm at the 8-14-01 Elk River Municipal Utilities
Commission meeting. Construction will start in September 2001 and will be completed in May
2002. The contract to construct a 1.5MG water tower was awarded to CBI at the 8-14-01 Elk
River Municipal Utilities Commission meeting. Construction will start in October 2001 and will
be completed in November 2002.
Enclosed is Ehlers & Associates Bond Sale Report for G.O. Water Revenue Bonds Series
200lA for an issue amount of $3,590,000.
The Elk River Municipal Utilities Commission at their 8-14-01 meeting approved the sale of
the above referenced bonds. Minutes of this meeting are attached. Elk River Municipal Utilities
Commission requests the City Council to authorize sale ofG. O. Water Revenue Bonds Series
200lA.
Page 2
Regular meeting of the Elk River Municipal Utilities Commission
August 14, 2001
_ .~ Review and Consider Bids for Water Treatment Plant #7
Bids for Water Treatment Plant #7 were received on August 9,2001.
EnComm Midwest were discussed, along with projected completion dates.
Details of the low bid' from
James Tralle moved to accept the bid from EnComm for the Water Treatment Plant #7, at
S 1,234,567.00. John Dietz seconded the motion. Motion carried 3-0.
5.3 Review and Consider Bids for Electric Line Truck
Bids for an Aerial Bucket Truck were received on July 25, 2001. The tabulation was Presented to the
Commission, with recommendation from Staff to a~vard the purchase to the lowest responsive bidder, Altec
Industries, with trade-in for the Freightliner at $95;555.00. Staff indicated that the ERMU has had excellent
experience with the Freightliner chassis. Questions of alternate chassis were revie~ved.
James Tralle moved to accept the low bid frOm Altec Industries fOr the purchase ora new FL-70.
Freightliner electric, line truck, with the trade-in. John Dietz seconded the motion. Motion carried 3-0.
5.4 Review and Consider Water Revenue Bonds
Bryan Adams reviewed a spreadsheet reflecting estimated costs for several large projects for the Water
'-',partment. Recommendation by Staff is to authorize bonding for the Water Tower, Well #7, and Water
.eatment Plant #7.
Rusty Fifield, Ehlers & Associates, Inc. appeared to discuss the Bond Issue, and answer questions from
Staff and Commission. Mr. Fifield noted positively the financial planning forecasts done by Staff, and the
control that the Utility has over construction. Marketing of the Bond sale was reviewed in response to a
question from George Zabee.
James Tralle moved to approve the G.O. Water Revenue Bonds, Series 2001A for the Water Tower,
Well #7, and Water Treatment Plant #7, in the amount of approximately $3,504,900.00 net proceeds. John
Dietz seconded the motion. Motion carried 3-0.
5.5 LFG Project Update
Bryan Adams reviewed the slowing progress of the project, explaining that risk management is the
reason. Gas quality analysis is the present issue. Our goal is to promote this project, but not to lose money. It
is noted that local cooperation is excellent, but much slower from the Corporate side. This item informational
only.
BOND SALE REPORT
$3,590,000
G.O. Water Revenue Bonds, Series 2001A
City of Elk River, Minnesota
Elk River Municipal Utilities
August 27, 2001
LEADERS IN PUBLIC FINANCE
Bond Sale Report
INTRODUCTION
This report describes the proposed plan to issue $3,590,000 G.O. Water Revenue Bonds, Series
2001A. Ehlers & Associates prepared this report in consultation with Staff' and bond counsel.
The report describes:
Purpose and components of bond issue.
Structure.
Other considerations in issuing bonds.
Market conditions.
Issuing process.
PURPOSE
The $3,590,000 G.O. Water Revenue Bonds, Series 200lA (the "Bonds") are being issued
pursuant to Minnesota Statutes, Chapter 475 and Section 444.075. The Bonds are being issued
to finance improvements to the municipal water system including storage, well and treatment
facilities.
Financing these projects requires a bond issue in the amount of $3,590,000. The proposed
finance plan consists of the following sources and uses of funds:
SOURCES
Par Amount of Bonds $3,590,000
Up-Front Revenue 0
USES
Project Costs $3,504,900
Costs of Issuance 30,100
Discount 55,000
Capitalized Interest 0
Other 0
Total Sources $3,590,000 Total Uses $3,590,000
The above costs reflect construction bids received by the Utilities Commission.
Page 2
Bond Sale Report
STRUCTURE AND REPAYMENT
The Bonds are general obligations of the City and as such are secured by a pledge of the City's
full faith, credit, and taxing powers. It is the intent of the City to pay the entire amount of
principal and interest from net revenues of the municipal water system.
The preliminary projection of debt service and revenues for the Bonds appears in the table below.
Date
2/1/2002
2/1/2003
2/1/2004
2/1/2005
2/1/2006
2/1/2007
2/1/2008
2/1/2009
2/1/2010
2/1/2011
2/1/2012
2/1/2013
2/1/2014
2/1/2015
2/1/2016
2/1/2017
2/1/2018
2/1/2019
2/1/2020
2/1/2021
2/1/2022
TOTAL
Principal Rate Interest P&l
60,000
120,000
125,000
130,000
135,000
140,000
150,000
155,000
160,000
170,000
180,000
185 000
195 000
205 000
215 000
230 000
240 000
250 000
265 000
280 000
3.750%
3.850%
3.950%
4.050%
4.150%
4.300%
4.400%
4.550%
4.700%
4.850%
4.950%
5.100%
5.100%
5.200%
5.200%
5.250%
5.250%
5.300%
5.350%
5.400%
233 953.33
173 215.00
168 595.00
163 657.50
158 392.50
152 790.00
146 770.00
140 170.00
133,117.50
125,597.50
117,352.50
108,442.50
99,007.50
89,062.50
78,402.50
67,222.50
55,147.50
42,547.50
29,297.50
15,120.00
293 953.33
293 215.00
293 595.00
293 657.50
293 392.50
292 790.00
296 770.00
295 170.00
293 117.50
295 597.50
297 352.50
293,442.50
294,007.50
294,062.50
293,402.50
297,222.50
295,147.50
292,547.50
294,297.50
295,120.00
3,590,000 2,297,860.83 5,887,860.83
Fiscal Annual
Year Revenue
2001
2002 293,953
2003 293,215
2004 293,595
2005 293,658
2006 293,393
2007 292,790
2008 296,770
2009 295,170
2010 293,118
2011 295,598
2012 297,353
2013 293,443
2014 294,008
2015 294,063
2016 293,403
2017 297,223
2018 295,148
2019 292,548
2020 294,298
2021 295,120
Doted 10/01/2001
Delivery Dote 10/01/2001
First Coupon Dote 8/01/2002
Costs to finance 3,504,900
Water tower 1,844,000
Wall # 7 178,400
Wl'P # 7 1,482,500
Bond Year Dollars 45,062 Costs of issuance 30,100
Average Life 12.552 Years Discount 55,000
Average Coupon 5.09937% Capitalized interest 0
Net Interest CoSt (NIC) 5.21887% Other 0
True Interest CoSt (TIC) 5.22637% Total issue 3,590,000
The traditional bond sale process has scheduled the sale on a date coinciding with a regular City
Council meeting. To get the best possible bids, it is necessary to receive and accept the bids on
the same day. Since most local governments meet on Monday and Tuesday, the bond market can
get crowded on these days. For example, on August 20 Ehlers alone conducted sales for seven
separate issues. Heavy volume may produce negative results for issuer through increased interest
rates and loss of bidders.
Page 3
Bond Sale Report
To help the City achieve the lowest possible interest rates, we are proposing an alternative sale
process. The process will begin with a traditional approach. We will schedule the sale for
Council meeting date of September 17, 2001. Ehlers will monitor the market for all scheduled
sales and other relevant factors. If we believe that the City will be better served by an alternative
date, we will propose an alternative sale date. In adopting the resolution calling for the sale of
bonds (attached to this report), the City Council authorizes the City Administrator to change the
sale date and authorizes the City Administrator and the Mayor to accept the low bid on that date.
The bond resolution would be brought to the City Council for ratification at the next scheduled
meeting.
We believe that the flexibility created by this approach will help the City achieve the lowest
interest costs for the debt. The process maintains good administrative oversight on the process.
The Bonds will be dated October 1, 2001. The first interest payment on the Bonds will be August
1, 2002, and semiannually thereafter on February 1 and August 1. Principal on the Bonds will be
due on February 1 in the years 2003 through 2022. We recommend that Bonds maturing in the
years 2011 through 2022 be subject to prepayment at the discretion of the City on February 1,
2010 and any date thereafter.
Page 4
Bond Sale Report
OTHER CONSIDERATIONS
Bank Qualified Bonds
We anticipate that the City (in combination with any subordinate taxing jurisdictions or debt
issued in the City's name by 501 (c)3 corporations) will not issue more than a total of $10,000,000
in tax-exempt debt during this calendar year. This will allow the Bonds to be designated as bank
qualified. Bank qualified status broadens the market and achieves lower interest rates.
Arbitrage
Rebate: Since the City does not anticipate issuing more than $5,000,000 in tax-exempt bonds in
this calendar year, the Bonds qualify for the small issuer exemption from arbitrage rebate.
Ongoing: This exemption from rebate does not eliminate the need to comply with other arbitrage
regulations governing the investment of bond proceeds and debt service funds. In particular, the
City should become familiar with the requirements for maintaining a "bona fide" debt and the
potential need to restrict the investment of monies in the debt service fund. These requirements
will be explained in the bond record book received following closing.
Global Book Entry
The Bonds will be global book entry. As "paper less" bonds, you will avoid the costs of bond
printing and annual registrar charges. The City will designate a Paying Agent for the issue. The
Paying Agent will invoice you for the interest semi-annually and on an annual basis for the
principal coming due. You will be charged only for paying agent/transfer agent services provided
by the bank.
Rating
Moody's Investors Service will be asked to rate this issue. The City currently has an "A3" rating
on its outstanding general obligation bonds. Ehlers will work with City staffto prepare and
conduct the rating review for this issue.
Continuing Disclosure
Regulations of the Securities and Exchange Commission on the continuing disclosure of municipal
securities apply to long-term securities with an aggregate principal amount of $1,000,000 or
more. Since aggregate amount of this issue is over $1,000,000 and the City has more than
$10,000,000 in total municipal obligations outstanding, you will be obligated to comply with Full
Continuing Disclosure requirements as required by paragraph (b)(5) of Rule 15c2-12 promulgated
by the Securities and Exchange Commission under the Securities Exchange Act of 1934. You
will be required to provide certain financial information and operating data relating to the Bonds
annually and to provide notices of the occurrence of certain material events. In preparing for the
sale of the Bonds, Ehlers will work with Staffand Bond Counsel to draft the certificate that
describes the requirements for continuing disclosure related to this issue.
Page 5
Bond Sale Report
Existing Debt
Ehlers' routinely monitors outstanding debt to advise the City on refinancing opportunities. The
feasibility of refinancing is influenced by both market conditions and the terms of each bond issue.
At this time, none of your existing bond issues merit refunding.
ISSUING PROCESS
Following is a tentative schedule for the steps in the issuing process.
August 14, 2001
August 27
Week of September 4
Week of September 11
September 17, 2001
Week of October 8, 2001
Utilities Commission approves finance plan and
requests City issue bonds
City Council adopts resolution calling for the sale of
the Bonds.
Distribute Official Statement
Receive credit rating
Bond sale
(Unless changed by the City Administrator)
Bond closing (estimated)
Page 6
Bond Sale Report
TERMS AND CONDITIONS OF ISSUE
$3,590,000 G.O. Water Revenue Bonds, Series 200lA
DATE:
ISSUER:
BOND NAME:
BOND ATTORNEY:
PURPOSE:
August 27, 2001
City of Elk River, Minnesota
$3,590,000 G.O. Water Revenue Bonds, Series 200lA
Briggs & Morgan (Jim O'Meara)
Finance improvements to the municipal water system including
storage, well and treatment facilities.
Sale Date:
Est. Closing Date:
Proposal Opening:
Proposal Award:
Type of Sale:
Bonds Dated:
Maturity:
Term Bond Option:
First Interest:
September 17, 2001'
*The City Administrator, in consultation with the
financial advisor, may determine that it is in the best
interests of the City to receive proposals for the sale of
the Bonds on a different date. If the City Council does
not meet on the date that proposals are received, then the
City Administrator and the Mayor are authorized to
accept the low bid.
October 8, 2001.
11:00 a.m., office ofEhlers & Associates, Inc.
6:00 p.m., City offices. The time may be changed if
proposals are not received on September 17.
Competitive.
October 1, 2001.
February 1 in the years 2003-2022.
All dates are inclusive. Bids for the bonds may contain a
maturity schedule providing for any combination of serial
bonds and term bonds, subject to mandatory redemption,
so long as the amounts of principal maturing or subject to
mandatory redemption in each year conforms to the
maturity schedule set forth above.
August 1, 2002. Interest will be computed on the basis
of a 360-day year of twelve 30-day months and will be
Bond Sale Report
Call Feature:
Minimum Proposal:
Good Faith:
Record Date:
CUSIP Numbers:
Paying Agent:
Book Entry:
Financial Advisor:
Rating Requested:
Bank Qualified:
Continuing Disclosure:
rounded pursuant to rules of the MSRB.
Bonds maturing in the years 2011 through 2022 will be
subject to redemption prior to final maturity on February
1, 2010 and on any date thereafter. Notice of such call
shall be given by mailing a notice thereof by registered or
certified mail at least thirty (30) days prior to the date
fixed for redemption to the registered owner of each
bond to be redeemed at the address shown on the
registration books.
$3,535,000.
$71,800, payable to the Issuer (Cashiers or Certified
Good Faith Check or wire transfer of funds to Ehlers
Good Faith Escrow or financial surety bond.
Close of business on the 15th day (whether or not a
business day) of the immediately preceding month.
The Issuer will assume no obligation for the assignment
or printing of CUSIP numbers on the Bonds or for the
correctness of any numbers printed thereon, but will
permit such numbers to be printed at the expense of the
purchaser, if the purchaser waives any delay in delivery
occasioned thereby.
To be named by the Issuer.
This offering will be issued as fully registered Bonds and,
when issued, will be registered in the name of Cede &
Co., as nominee of The Depository Trust Company, New
York, New York.
Ehlers & Associates, Inc.
Moody's Investors Service.
Yes.
Full Undertaking.
RESOLUTION NO.
Resolution Providing for the Sale of
$3,590,000 G.O. Water Revenue Bonds, Series 2001A
BE IT RESOLVED by the City Council (the "City Council") of the City of Elk River, Minnesota (the
"City") as follows:
1. Background
l. 1. The Elk River Municipal Utilities has heretofore determined that it is necessary and expedient to
undertake improvements to the municipal water system including storage, well and treatment
facilities and has requested the City to issue $3,590,000 G.O. Water Revenue Bonds, Series 200lA
(the "Bonds"), to finance said improvements.
1.2. The City has designated Ehlers & Associates, Inc., in Roseville, Minnesota ("Ehlers"), as its
independent financial advisor and is therefore authorized to solicit proposals in accordance with
Minnesota Statutes, Section 475.60, Subdivision 2(9).
2. Action
2.1. Authorization; Findings. The City hereby authorizes Ehlers to solicit proposals for the sale of the
Bonds.
2.2. Meeting; Proposal Opening, The City Council shall meet at the time and place to be specified in the
Terms of Proposal for the purpose of considering proposals for, and awarding the sale of the Bonds.
Pursuant to Minnesota Statutes, Section 475.60, Subdivision 1, the City Administrator, in
consultation with Ehlers, may determine that it is in the best interests of the City to receive
proposals for the sale of the Bonds on a different date that stated in the Terms of Proposal. The City
Administrator is authorized to change the date to receive proposals for the sale of the Bonds. If the
City Council does not meet on the date that proposals are received, then the City Administrator and
the Mayor are authorized to accept the low bid. In such case, the resolution awarding the sale send
setting the terms of the Bonds shall be presented to the City Council for ratification at its next
meeting.
2.3. Terms of Proposal. The terms and conditions of the Bonds and the sale thereof as set forth in the
Bond Sale Report are hereby approved.
2.4. Official Statement. In connection with said sale, the officers or employees of the City are hereby
authorized to cooperate with Ehlers and participate in the preparation of an official statement for the
Bonds and to execute and deliver it on behalf of the Cityupon its completion.
this 27th day of Augnst 2001.
Adopted
Sandra Peine, City Clerk Stephanie Klinzing, Mayor