The URL can be used to link to this page

A. Review Bonding vs. City Financing/Funding Options for Public Works Facility CITY OF CHANHASSEN 7700 Market Boulevard PO Box 147 Chanhassen, MN 55317 Administration Phone: 952.227.1100 Fax: 952.227.1110 Building Inspections Phone: 952.227.1180 Fax: 952.227.1190 Engineering Phone: 952.227.1160 Fax: 952.227.1170 Finance Phone: 952.227.1140 Fax: 952.227.1110 Park & Recreation Phone: 952.227.1120 Fax: 952.227.1110 Recreation Center 2310 Coulter Boulevard Phone: 952.227.1400 Fax: 952.227.1404 Planning & Natural Resources Phone: 952.227.1130 Fax: 952.227.1110 Public Works 1591 Park Road Phone: 952.227.1300 Fax: 952.227.1310 Senior Center Phone: 952.227.1125 Fax: 952.227.1110 Web Site www.ci.chanhassen.mn.us A - MEMORANDUM TO: Mayor & City Council Members t't. Greg Sticha, Finance Director ~ ,/ O'~' August 11, 2008 FROM: DA TE: SUBJ: Financing Resident's Share of Street Reconstruction Costs & Funding Public Works Facility BACKGROUND The City has a policy of using the Revolving Assessment Construction Fund (RACF) to finance residents' portions of assessed street reconstruction costs. In 2007, the City Council requested that this policy be re-evaluated and staff included it as a KFS goal for 2008. Staff review and discussion of the RACF with our financial advisors, Ehlers & Associates, has yielded the following information. Current market conditions indicate that the city could issue debt for between 4-5%, depending on the exact timing and amount of the issuance. Typically these "residential share" issuances are smaller in size (around $1 million per year or $2 million on an every other year basis), and the rate we would receive would be slightly higher than if we were to issue larger amounts of debt. Currently the city is investing its reserves at a rate of return near 3%. Should bond interest rates continue to be higher than available investment rates, the City would face some negative arbitrage (earnings < cost) in both the construction and debt service funds of these related projects. In addition, the current assessment rate is 6% and assuming bond rates of 4-5% and investment rates of 3%, it makes more sense to use the RACF to earn that additional rate of return rather than using borrowed funds. Also, there are additional costs associated with bond financing, such as issuance costs (fees and underwriting costs), staff time in arranging the issuance, making debt service payments, and arbitrage/rebate reporting. Current projections indicate a positive cash flow position for the RACF for all future years. This projection includes bonding for a public works facility and improvements to Audubon Road. Therefore, based on the information listed above, it is staff's recommendation to continue financing the residential share of assessments with the RACF and bonding for state aid routes like Audubon Road. This position should be Chanhassen is a Community for life. Providing for Today and Planning for Tomorrow Mayor & City Council August 11, 2008 Page 2 reconsidered if market conditions change or if the RACF were to run into a negative cash flow position. In addition, Ehlers & Associates has helped us put together a cost benefit analysis that compares financing the residential share of these costs with the RACF versus bond financing under the current market conditions (see Attachment #3). We will also be discussing the financing options available for the Public Works Facility. Staff's recommendation to finance the Public Works facility would be to issue General Obligation CIP Bonds. At the work session on Monday night, staff will discuss the requirements involved in issuing this type of debt and other options available to finance the Public Works Facility. The anticipated bond sale date for financing the facility will be the middle of October 2008. ATTACHMENT 1. RACF projection worksheet. 2. 2008-2025 Debt Levies. 3. Example Financing/Bonding Scenario. 4. Estimated Public Works Bonding Schedule. "0 c: " u. E " E '" '" " '" ~ C> c: 0> (; > " a: o '" o '" 000 000 000 666 000'" "!.:!.f'-- ol o '" 000 000 000 cad 000'" "!.:!,.f'. 00 o '" 000 000 000 ddo 000'" N.:::!..J"'-. I'- o '" 000 000 000 oarS 000'" ~:!.I'-- <D o '" 000 000 000 6ci6 000'" C\!.:!..'" "' o '" 000 000 000 000 000'" t\t:!.. ,.... " o '" 000 000 000 cicici 000'" ~_:!.r--- co o '" 06'0 000 000 ciao 000'" "!.:!..l'-- '" o '" 000 000 000 ac5e 000'" "!.:!..I'- o '" 000 888 aceS 000'" ~:!..l'-- o o '" 888 000 666 O<D" ~t:.:: m o o '" coo 888 8-00 00'" ~:!.." 8 '" g@g cicici ~~~ ~ o '" g@g 1if81if I'-CO" N~~ <D 8 '" 8 '" :R o " '" ~~" () t: ca t5(1),I:: (J)~cn -e- ~.~ o..<(u OO<D <DOlI'- O"CO 6~05 <D0l_ <D<D <DO<D I'-Oll'- ",,,,co ...j .....- as Olol_ <D<D ",O<D 00l<D COCO" ~C\fM 000l<D <D<D _O<D _0l<D 00" ~6c<5 <DO<D I'-<D coo'" "olCO ,,-'" NetSa)' g~gs 00", "olCO CO<D'" 8-,..:..;- -'" ""00 "'000 OOmCO ",I'-ol a5 r---~ f"-.- CO_I'- "'''I'- ",0_ gj81<:b L600M "'-'" 1'-"1'- OO~ "' ol <DCO N......-<.O ~~<:b COOl'- C1;[;;3 C\I- as oi co ol <D oq-.N LO CO "'0 00l<D 0l",<D "":"":<6 gsg;;j: N CD 00 C') "_<D 00 CO CO t-:cioi ",<D<D ,,"'co c.;- ..... (Of'.. f:::~;;Ij 00)<0 <D<D<D ol '" '" ...- 000 "''''0 ml'-O <.00"": <D_", co'" .,; 01'- 0'" Om 8m "'-- 000" om", 000 6lriui "' '" '" " ~ ONOOroO gd';88::~ 6",66<.06 aDDU') (0 "!..C\J:!.N ~ 8(O88~~ O..-OO......C\1 8~ggr-:~ "!.N:!,.C\1 ~ 00:>00"1.0 8~88~g 8ct"gg<6;i "!.C\J:!..N ~ 8ffi88~:: 00000......0 6"'; ci 6 <.0"": COOlD CD "!,C\1 :::!:,N ~ OLOOOo:)M 81e88~;;j: ggiggti~ "!.",,":!..N C") ~ 6.....6'00>0 8;;88~~ 8~gg~g N.t.O:!,.N ..". ~ s.......SOC.DC\I ONOOLOOO OlOOOOI.O 6006660:5 OWOLOC'\JC") N.<O::!.N LO ~ 8~88~:g OMOOI.OCO 6666L6L6 OLOOLONN ,,!co:::tc\/ f'-.. ~ 000000 o<OooO)U') OCDOOO)<<> OO>OONN omOLOMOO N.q:!..C\1 0'> ~~~8~~ 8-<600<6N MOLO'<:tCf> ~~:!..N ..;t'. O<D om 000 octS O<D "'co i:.C\i Ol'-CO 000 000l ci.....- r---- ",1'-00 '" <D N 0'" OCO 0_ gli <DCO ::'(1) 00 8<:b C\I-C\i "' 00 1'-00 r:!N '" (ij o~ " u; cng'->- i.cn~ ~ 0 .....mcn[O Q) W (ij ~Q:8~.8= ~ ro 5.~oS::)~1iim -g ~~~.~~~c75~~ ar...Ja: CLE Eu.. >- o ro "<D -" 1'-00 6r' 0", -" c.; ol m 1'-- ,,- wm OO<D m N o '" m <6 <D co .,; f'-.f'.f'-.t'--t'--t'--t'--LO cnmcncncnmmN C\!."t"t"tNRNRNRr---: f'-..f"-.f"-.I"--I"--f"-.f"-.m f'-.f"-.f"-..f"-.f"-.f"-.f"-.N r-: I'- ff7 f"-..f'-.f"-.f'-.f'-.f'-.f'-.LO mcnmmmmmN "tC\!."t"!."!."t"tr---: f"-.f'-.f"-..t'--I"--f'-.f'-.m f"-..f'-.f"-..f'-.f'-.f'-.f'-.N r-: I'- ff7 f'-.f'-.f'-.f'-.f'-.I"--f"-..LO commmmmmN ~"!.C\!."!."!."!."!.r---: C\If'-.f'-.f"-.f'-.f'-.f'-.m Nf"-..f'-.f'-..f'-.f'-.f"-.C\1 - r-: I'- ff7 I"--I"--t'--f'-.f"-..f'-.I"--LO mcomcnmmmC\l C\I~~"!.N.."!.N..NRr---: f'-.Nf"-.f"-.f'-..I"--I"--m f"-.C\If'-.f"-.f'-.f'-.f'-.N ~ r-: I'- ff7 (1")f'-.f'-.f'-.I"--t'--I"--LO (OmcoO)O'>mmN OR"t~"!."t"!.C\IRr---: (1")f'-.C\If"-.f'-.f'-.f"-.m Ol"--Nt'--I"--t'--f'-.N ..-..- r--: I'- ff7 OMf"-.f"-.f"-.I"--f'-.LO o(OmcommmC\l ~q,"!.~"!."!.NRr---: C)Ct)f'.,Nf'.,f'.,,,,,,,m OOf"-..Nf"-.f"-.f"-.N C\I..-..- r--: I'- ff7 OOMf"-..I"--I"--f'-.LO OO<OmCOmmC\l q,~OR"!.~C\IR"!.r---: -q-m(1")f"-..C\lf"-.f"-.O'> (1")OOf"-..C\If"-.f'-.C\1 C\I..-..- r--: I'- ff7 OOO(1")f"-.t'--l"--l.O oooc.omcomN q,q,~q,"!.~C\IRr---: (1")-q-m(1")f"-..C\If"-.O':I C\IMOOS'--C\If"-.C\1 C\I..- ..- r-: I'- ff7 OOOMf'-.f"-.LO oooc.omcoC\l q,q,~O_"!~r---: ('I')..".m('l')f';.C\Im C\IMOOr---C\IC\1 C\I..- "-r--: I'- ff7 OOO('l')l"--C\1 8oo(Om(1") ROR~q,"tr---: ('I')..".mM!"'--OO C\IMOO""'M C\I..- N '" ;;; OOOMLO &~~~~ gJ(J)~8re C\I..-r--: I'- ff7 0000 0000 C?C?~(1) ('I')-q-mc.o NMOO "'c.; o ;;; OOCO 001'- C? OR cO [Zj;;lj;;lj .,; o '" ff7 00 00 ORC coo "'0 i ff7 o o g o N " ;;; LOCDf'-.oomO..-N 00000.......-..- 00000000 C\IC\1C\1C\1C\1C\1C\1N " "5 "0 ~* o<D (j)@ 55'E E '" ,.,,,, '" '" 0._ " ,., a: 00 :u " >- "6 " "e- o.. c: o :a Iii ~ IT: ~ + ~ 0.. m (j) + ~ 0.. oE I'- + c: o .c " "0 " <( + "0 c: o .c '" ~ o Z '" o '" C C ~ c: '" '" ~ .~ .e > c ",-'", .eX", ~~~ o"Ocb ,.,CO u~~ ~~-C(J) o~~-g lOCOOO 8m"w "'~ :5 _et3 "'<1>"0 'OCm 1-<1>"0 Clg al C\ICO<OMLOOOOOOOOOOOO <DC\Jt--omC\lOOOOOOOOOO .....v.....l.t)LOCOa)C\J~lOO.....COO)r-..LO ro~~~W~ro~~N~~NMMr-.. C\ICJ)O>O).....C\JCJ)oooao.................... ~~~~<O<O~LOlOLOLOLOlOlOLOLO '0 ~~.~ -gOj en caOO('l')C")lt)O ~vOOmN 010......<0........,. NC\J-NNN<D ;::!~~~~~ .0 g~'O ~gO: ooCOCf)Cf)LOO V<<:tOOO)C\J OLOr-..<o.....v C'iNNNN<O C\IC\I(\JC\JC\lC\l .............................. 'OE ~~.~ :g~.3 en en 000 000 000 ciaci 000 ~ a. '" alE"O ~-c 000 ~(!Jro (J) a. (/) m.s-g ~gs 000 000 000 000 000 '0 ~O.~ ~C)~ en .....0('1')0 .....COI'--O CDC\ICOm ';as';": coa>com 'l:tvvC\J < '" "0"0 gc)5 '" al 0000 0000 comr-..m ..o<OcOr-: """", Cf)(")Cf)C\1 C- ~.~~ oW,Q) ~go "0'" ~ ex,,_ (X)"'~ oS"":a;i ",,,,,, C- o"S U) ~ ""'" OW ?3go '" o .~ ~~j :g~~ en '" > 0000000000000000 0000000000000000 LO<OCOOvva)C\lvIOO.....romr-..r.n ~~<D~<D~ro~NNr-:"ONMMr-.. C\Jcoco<ommmooooo.................... ~ '"'": ......_ V_ V "<f" V 10 lO to lO lO lO 1.0 LO LO e:- <eel') g~g "'Oal Cl 0000000000000000 0000000000000000 r-.......r-..C"?...;t'vCONvLOo.....o:>mr-...LO <Dmci~<D..oa:i~NN~"ONMMr-... coO)O)O)O)mmooooo.................... .qvvv........,......LOlOLOIOIOlt')LOlOlO 0000 0000 Q)LOO)...... ...t'<D..oN (")men,.... <0<0<00> c o 'On (ij~ <1>0 >-0 <Dr-...oomO~NM~~m~oomo~ OOOO~~~~~~....................NN 0000000000000000 NNNNNC\t(\J(\J(\J(\J(\JNNNNN '" (X) '" (X) CD '" '" '" ex> '" ,.. '" "' (X) '" ,.. o o o o o '" o o o o o '" ,.. <D <D .0 '" ,.. o o '" ,.. '" '" ,.. <D '" (X) :;: o o " " '" o :::: o o '" " '" o (X) o o '" '" '" '" '" '" <ii o >- ] ~ ,1/-' ~~~~~~~~~8~~~~~~~~~~~~~~ rommmmmmmmmmmmmmmmmmmmmmm ~~~~~~~~~~~~~~~~~~~~~~~~ ~ !.3 o . ~ 8 0. X W IR8888888.8iiii88iiii U') C") C") C) r-- (0.... 0 (") N '<t (0............................................ 0~~~~~~g~~;~ggg8gggg (,,)N'<t'<t'<t'<t'<tr--(O(O(O(O~~~~~~~~ "0 .1i - . . " ~I w o 0) (0 (") (0 0(")<0.....(") OC\lC)(")U') gri*~lf~ C\I C\I N (X) ,.,- > '" <l>W -',,- gO ~3: (\JOOWM~OOOOOOOOOOOOOOOOOOO mN~om(\JOOoooooooooooooooo .....v~~~ooroN~~o.....oom~~oooooooo rowcici~o~o~~wciw~~~~~~~~~~~ o~~wo.....rommmmo...............(\Jooooooo~ mm..........wwvvvvv(\JNNNN~~~~~~~m ~~cici~~~~~~~~~~~~ (;; ~ w~romO.....NM~~m~oomO~(\JMV~m~rom oooO..................................................NNNN(\J(\J(\J(\JNN 000000000000000000000000 (\J(\JN(\J<.'\t(\J(\J(\JN(\J(\J(\JNC\tNNC\tC\tN(\J<.'\t(\JC\tN + c + .2 019 ~en 0<1> "'- ii: 0000000000000000000 0000000000000000000 0000000000000000000 0000000000000000000 mmmmmmmmmmmmmmmmmmm ,., #:!::::: #15 ~~ 1\Jg: 00000000000000000000 00000000000000000000 0000000000000-0000000 ~~~~~~~~~~~~~~~~~~~~ ~mm~mm~~mmmm~mmm~~mm '" "0 ",c 00 oal "'''' 1\i 00000000000 00000000000 00000000000 oOLOLOufufuf.n..o.n.n roaJroro<X) <X)<X)<X)Q)coro C\JC\J(\J(\J<.'\t(\J<.'\t(\J(\J ~ (x)'" 0< ~~ c- en E '" ,..'" 0< ~~ c- en E :g~ ~~ c- en E ",,,, 8.'2 "'0 c- en m~oomO.....NMv~m~aJmo.....(\JMv~w~oom oooO~~........................................NNNNN(\J<.'\tNN(\J 000000000000000000000000 (\J<.'\tN(\JNNC\tC\tC\tC\tNNC\tNC\tC\tC\tNNNNNN(\J '" (X) '" 0; '" '" ci '" o '" " (X) " o o o ci ;;:: o o o o (X) '" '" o o o '" '" ,.. '" '" <ii ~ ~ al~ ~~ .8 ~ oE -", " 0 n .Q...8 i~ .S 10 i! '5.2 H -E~ EiI .Q.~ g.;s ,S .~ ~~ h H 'E.2 ~~ g>21 ii.s 80 f~ ~~ 8~ .g'g :g~ ~o . ,,~ ~ ~ 0 E j H ! 0) :8'0 al ~ E C 0; g m'~ ~ ~ ;i ~ ~ - III j t; l~ ~ ~ g~ ~ g: 'E H o il i)j= ~ ~ 2~ ~ ~ ~~ ~ ~ ';' ~ ~ 0 ~~ u.1i' 00: ~~ 1ii:i} oU tr1! 1!>. f-.o i o .0 .9 ~ j f- . > ~ ;; 0. 1! f- " " ~ "'~ ~ .~ "'5- "'1! 8- "'E .S 2 ~~ H ~i 0'0 -1! '8- H ~.9 " W 1! ~ i! go: Biii o . -U 0- ~ m ~ ~ :1! .:: .!If ~ .~ ~ it! ~j ~1! ~~ ii ~~ ~" ~& ~1! - ! " 0 :~ ~ ~E !i " * o ~ H ~- JS ~ o 0 'O- m 0 -~ ~~ 1! .~ ~~ Preliminary - For Discussion Purposes Only City of Chanhassen, MN Proposed G.O. Bonds - Public Works Building Bond Information Dated Date 1 st Interest Pymt 1 st Principal Pymt 4/1/2009 2/1/2010 2/1/2011 7,420,000 7,420,000 Total Underwriter's Discount (1.200%) Costs of Issuance Deposit to Capitalized Interest (CIF) Fund Deposit to Project Construction Fund Rounding Amount Total Uses 89,040 45,000 282,754 7,000,000 3,206 7,420,000 Average Coupon TIC 4.7958% 4.9014% Levy Collect Payment Year Year Date Cap Interest Net P&I P&I +5.00% City Levy 4/1/2009 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 2/1/2023 2008 2009 2009 2010 2010 2011 2011 2012 2012 2013 2013 2014 2014 2015 _'.__ .,'._"'~'~m__#"~"_=h=~_ 2015 2016 2016 2017 2017 2018 2018 2019 ,MW....,...w .', '>'_'_'~___"'__"''''___'_'"_~''~=h_.__~ .,,__ 2019 2020 2020 2021 2021 2022 2022 2023 2023 2024 2024 2025 2025 2026 2026 2027 __ .._'~_~'m___~'~"",.""' nu__ 2027 2028 2028 2029 (282,754) 584,305 _ ,.. ....,.. .... 58.~,~.~}.... 583,545 584,445 584,185 ......._~?2, rQ5"" 585,380 581,808 582,633 58~!6 586, 584,775 586,915 .... .,582,~1!5 582,995 586,898 584,358 .!5?5'.5.98. 585,348 583,583 (282,754) 11,688,585 613,520 .....~1~t~.? ~.. 612,722 613,667 613,394 .."~~&~~,,. 614,649 6108 613,520 616,174 612,722 613,667 613,394 611,840" 614,649 610,898 611,764 611,748 616,085 614,014 616,261 612061 612,145 616,242 613,575 .............~.~.&?I.._._~ 4,8Z-",- 614,615 614,615 612,762 612,762 12,273,014 12,273,014 4,775 6,915 ...:._~... ..J6?,91!5..._ 4.85% 147,995 4.90% 126,898 4.95% 104,358 5.00% 80...!598. 5.05% 55,348 5.15% 28,583 4,551,339 2/1/2025 2/1/2026 2/1/2027 2/1/2028 ,- ,- -'"--~~----~""-"-,,-,~"," 2/1/2029 2/1/2030 e EHLERS t. ~StiiCi"'t{:l- lid Prepared by Ehlers & Associates, Inc. 7/30/2008 City of Chanhassen, Minnesota Cost-Benefit Estimate for RACF versus Bond Financing August 4, 2008 Scenario 1: Current Market Conditions Scenario Assumptions Total Street Project Costs (2 Years): Residential Assessment %: Residential Assessments: Bond Project Fund: Bond Costs of Issuance: Total Bond Par Amount: Upfront/Ongoing City Staff Costs (pv): Ongoing Bond Paying Agent (pv): Ongoing Arbitrage/Rebate Reports (pv): Total Non-COI Bond Costs Average Bond Interest Rate: Average Assessment Rate: Average City Invest. Rate: Assessment & Bond Terms: Assess & Bond Average Life: Project Fund Average Life: Cost-Benefit with RACF Assessment Interest Earnings: less Foregone RACF Invest. Earnings: Net Benefit (Cost) Cost-Benefit with Bonds Assessment Interest Earnings: plus RACF Investment Earnings: less Bond Interest Expense: less Bond Costs of Issuance: less Non-COI Bond Costs: less Project Fund Neg. Arbitrage: less Assessment Fund Neg. Arbitrage: Net Benefit (Cost) 2,500,000 40% 1,000,000 1,000,000 26,000 1,026,000 15,000 3,450 5,750 24,200 4.25% 6.00% 2.75% 8.00 4.50 6.00 270,000 (123,750) 146,250 270,000 123,750 (196,223) (26,000) (24,200) (7,500) (3,750) 136,078 1 RACF Benefit over Bond Benefit: 10,1731 years years months ($1 M * 6% * 4.5 years) ($1 M * 2.75% * 4.5 years) ($1 M * 6% * 4.5 years) (see Note #1 below) ($1.026M * 4% * 4.5 years) (see above) (see above) ($1 M * 1.50% bond-invest spread * 6 mas) (see Note #2 below) Note #1: Assumes City keeps $1 million from RACF invested and does not use for another purpose. If City spends these funds, the Net Benefit of the Bond scenario drops by as much as $123,750. The amount depends on how much the City benefits from being able to use $1 M now versus at a future date. Note #2: Assumes 10% of $1 M assessment is repaid to the City after bonds are sold but before the bond call date, and that the City must invest these revenues at a rate lower than the bond rate. Prepared by Ehlers and Associates 8/4/2008