81-45
!
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CITY OF CHANHASSEN
CARVER AND HENNEPIN COUNTIES, MINNESOTA
RESOLUTION
DATE:
December 2l, 1981
RESOLUTION NO:
8l-45
MOTION BY COUNCILMAN:
Neveaux
SECONDED BY COUNCILMAN: Horn
A RESOLUTION CONSOLIDATING 1978, 1979, and 1980 TEMPORARY IMPROVEMENT
BONDS
WHEREAS, a majority of the construction projects authorized
in 1978 and 1979 were anticipated to be multi-year construction
projects (See Exhibit A, attached hereto); and
WHEREAS, the only known factor at the time of proceeding
with the construction projects of 1978 or 1979 was the cost of that
phase of the project(s); and
WHEREAS, all phases of each construction project were not proposed
to be assessed prior to the completion of said phased projects, the
aggregate amount of said assessments approximating 100% of the
construction costs incurred by each project during the period of 1978
through 1980; and
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WHEREAS, upon the advise of bond and legal consultants, the
City of Chanhassen did authorize and sell "Temporary Improvement
Bonds" in 1978, 1979, and 1980 to pay construction costs incurred
in those years - such recognizing that any definitive bonds could
not be sold until the total costs/total pledged assessments were
known; and
WHEREAS, the sale of one definitive bond issue permanently
financing similar projects, having common pledged assessments,
is not only allowable under State Statute, but also recommended in
State and National Accounting Standards; and
WHEREAS, the City of Chanhassen did notify prospective bond
holders of the City's committment to sell definitive bonds to
permanently finance the temporary construction projects of 1978,
1979 and 1980 - a majority of which construction projects being
shown to have common pledged assessments.
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NOW, THEREFORE, BE IT RESOLVED By the City Council of the City
of Chanhassen that the City Treasurer of the City of Chanhassen
shall maintain separate accounts accurately reflecting the project
costs and principal/interest payments made for each of the separate
Temporary Improvement Bond Issues of 1978, 1979 and 1980. However,
for reporting purposes and to aid in the sale of definitive bonds,
the Treasurer shall be allowed to consolidate the assets and
liabilities of said temporary bond issues.
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Passed and adopted by the City Council of the City of Chanhassen
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this 2lst day of December, 1981.
ATTEST:
Lfl~
Don Ashworth, City lark/Manager
YES
NO
Mayor Hamilton
None
Councilman Neveaux
Councilman Horn
Councilman Swenson
Councilman Geving
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PROJ.
#
75-2
75-11
77-2
78-1
78-5
78-6
_78-7
77-6
78-3
78-8
60-3
_
EXHIBIT A
Distribution of Proceeds to Construction Funds
(Per Approving Resolutions)
PROJECT
DESCRIPTION
Carver Beach
Erie ChanView
Lake Riley San. Swr.
So. Lotus Lk. Drainage
Hwy. 5 Frontage Rd.
E. Lotus Lk. Swr. & Wtr.
Chaska Rd. Water
Kerber Drive (MSAS 101)
North Lake Susan
Bandimere Hgts. Sewer
Coulter Drive Imprv.
Capitalized/Consultive
TOTAL BONDING
TEMPORARY
BONDS OF
1978
40,000
15,000
25,000
80,000
370,000
330,000
12,000
100,000
TEMPORARY
BONDS OF
1979
76,000
116,175
2,759,898
TEMPORARY
BONDS OF
1980
45,000
85,000
200,000
800,000
70,000
18,000 347,927 220,600
280,000
$990,000 $3,300,000 $1,700,600
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C ITV 0 F
CHAHHASSEH
.
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J I ,,-.,
690 COULTER DRIVE. P.O. BOX 147 . CHANHASSEN, MINNESOTA 55317
(612) 937-1900
MEMORANDUM
TO: Mayor and City Council
FROM: City Manager, Don Ashworth
DATE: December 2l, 1981
SUBJ: 1978, 1979, 1980 Temporary Improvement Bonds, Consolidate
Projects such as Kerber Drive, East Lotus Lake Sewer and Water and,
most significantly, the Chanhassen Lakes Business Park public improvements
were carried out over a number of years. As construction was proposed
to be phased, i.e. sanitary sewer constructed in the business park
in 1978, other underground utilities in 1979, and surface improvements
in 1980, the city's bonding consultant recommended that these
improvements be completed through temporary improvement bonds.
In addition to a recognition of construction phasing was also the
fact that total construction costs could easily change from year
to year and it was better to re-evaluate bonding needs each year.
In retrospect, even though multiple problems would have been created
by carrying out permanent financing on a yearly basis for projects
stretching over multiple years, significant cost savings would have
occurred through locking in lower interest rates at that point in time.
However, this was not done and the city did sell temporary improvement
bonds in 1978, 1979 and 1980.
Each of the temporary bonds mature three years after their issuance.
That means that the first of the temporary bonds, 1978, matures at
the end of this year. This had been foreseen this past spring,
but it was the recommendation of the city's financial consultant
that the three issues not be permanently sold in 1981 unless no
other alternative was available. City staff approached our legal
bond counsel, Dave Kennedy of the LeFever firm, with this problem.
It was his opinion that, as the city would be authorized to carry
out a permanent bond sale encompassing all three temporary issues,
that the city could legally consolidate the three temporary issues
in advance of carrying out the permanent sale. This alternative,
by consolidating cash balances, would assure that sufficient monies
existed to payoff the 1978 temporary issue at maturity. This
position was further confirmed through the special debt service study
carried out by M.J. Long which reflects that the city does have
sufficient resources to repay the 1978 temporary bonds and that a
~ayor and Council
-2-
December 21, '19at,
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definitive bond issue should be sold in 1982 to permanently finance
the 1979 and 1980 temporary bonds. ..,
The above recommendations do not change the overall net debt position
of the city as the debt for the 1978, 1979, and 1980 temporary bonds
is in the form of existing debt. The bonds proposed to be sold in
1982 simply change the form of the debt. In fact, from an overall
debt standpoint, the recommendations from Juran and Moody, LeFever,
auditors and this office improves the overall debt picture of the city
by reducing the outstand~ng debt (repayment of the 1978 temporary
bonds at this time) as well as reducing debt in 1982 (the definitive
issue would be approximately $4 million dollars which, when combined
with existing cash available, would retire both the 1979 and 1980
temporary bonds - a total of approximately $5.3 million) .
It is recommended that the City Attorney's office be instructed to
prepare a resolution consolidating the temporary improvement bonds
of 1978, 1979, and 1980 so as to insure that a future review of
city actions will properly reflect events which have occurred in
1978, 1979 and 1980, and consultant recommendations in 1981.
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Page 4 of 4
ACCOUNTANTS' REPORT ON OTHER FINANCIAL
INfOR~~TION, COrillENTS A~D OBSERVATIONS (CONTINUED)
1972 and 1973 General Obligation Improvement Bond$ (continuyd)
, .
It is evident from the facts and the projections, that unless some
course of remedial action is taken by 1988, it will be necessary to levy
an ad valorem tax to repay funds advanced for payment of obligations of
this sinking fund.
1978 Sinking Fund Bond Issue
Retirement of the 1978 Sinking Fund Bond Issue principal and
interest obligations is to be accomplished from funds received fram
special assessments principal and interest.
The projected cash and investment balances on schedule I, page
7, indicate there will be more than adequate funds to meet all bond
principal and interest payment requirements as a result of anticipated
future interest earnings on investments.
.1978, 1979, 1980 General Obligation Temporary Bond Issues
The Temporary Bond Issues of $990,000 (1978), $3,300,000 (1979)
and $1,730,000 (1980) begin to mature in total on December I, 1981, and
in succeeding years on July I, 1982 and June I, 1983. The projected
cash and investment balances on schedule 1, page 8, indicate there will
be available funds only for the 1981 pa}~ent.
Schedule 1, page 8A, assumes a permanent refinancing bond issue in
1982, of $4,000,000. This reflects both the bond proceeds and a 15
year repayment schedule. This schedule includes the H.R.A. bonding
repayments of $584,000 in 1982 and reflects an increase in the interest
rates on outstanding assessments from 7% to 9%.
It is evident from the facts and the projections on these two
schedules, that if the permanent refinancing bond issue is not made in
1982, there would exist a large deficit with the temporary bond issues
and some other course of remedial action, such as an ad valorem tax levy,
would be necessary to meet the required debt redemption payments.
LONG, FROEHLING AND ASSOCIATES, P.A.
Excelsior. Minnesota
June 26. 1981
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