1h. Call for Sale, Crossover Refunding of Library Funds
CITY OF
CHANHASSEN
7700 Market Boulevard
PO Box 147
Chanhassen, MN 55317
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MEMORANDUM
TO:
Mayor
City Council Members
FROM:
~. S?
o~.
Greg Sticha, Finance Director
DATE:
February 9, 2009
SUBJ:
Consider Approval of Resolution Providing for the Sale
of $3,965,000 G.O. Library Refunding Bonds, Series 2009A
PROPOSED MOTION
Staff recommends the City Council adopt the following motion:
"The City Council adopts a resolution providing for the sale of $3,965,000
General Obligation Library Refunding Bonds."
Approval of this item requires a simple majority vote of those City Council
members present.
BACKGROUND
Earlier this evening, City Council reviewed with staff the advantages of
conducting a crossover/advance refunding of our original issue of 2002A
G.O. Library Bonds. Based on that information, staff believes it is in the best
interest of the city to refund the 2002A G.O. Library Bonds.
The following resolution calls for a sale of those bonds, and the bonds will then
be sold or awarded for bid at the March 9, 2009 City Council meeting.
RECOMMENDA TION
Staff recommends that City Council adopt a resolution providing for the sale of
$3,965,000 General Obligation Library Refunding Bonds.
ATTACHMENTS
1. Resolution
2. Pre-Sale Report
Chanhassen is a Community for Life - Providing for Today and Planning for Tomorrow
cmOF
CHAIIIASSER
BOND ISSUE PRE-8ALE REPORT
$3,965,000 G.O. Library Refunding Bonds, Series 2009A
February 9, 2009
Proposed Issue:
Purpose:
Authority and
Rating:
Bank Qualification:
Term/Call Feature:
Funding Sources:
. !!~!!
$3,965,000 G.O. Library Refunding Bonds, Series 2009A to be
secured by the full faith and credit of the taxpayers of the City of
Chanhassen (the "Bonds").
To provide funds sufficient for a crossoverrefunding of all of the City's
callable General Obligation Library Bonds, Series 2002, dated March
20, 2002 (the "Prior Bonds"). The Prior Bonds were issued in the
amount of$6,095,000 and are callable in the amount of$3, 780,000. The
savings will occur on bonds that mature on February 1 in the years 2013
through 2022. Current interest rates are 4.25% to 4.85%.
The Bonds are being issued pursuant to Minnesota Statues, Chapter
475. The Bonds are anticipated to be rated by Standard & Poor's at an
"AA +" level. The low bidder ofthe Bonds may elect to purchase bond
insurance to bring the rating to a "AAA" level.
Because the City is issuing less than $10,000,000 in the calendar year,
the City will be able to designate the Bonds as "bank qualified"
obligations. Bank qualified status broadens the market for the Bonds,
which reduces interest rates.
Interest is payable each six months. Principal on the 2009A Bonds
will be due on February 1 in the years 2013 through 2022. The
2009A Bonds maturing February 1,2019, and after will be subject to
prepayment at the discretion of the City on February 1,2018.
The Bonds will be 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 utilize the same source of payment originally
pledged to the Prior Bonds, an annual property tax levy, to make all debt
service payments.
Page 1
Discussion Issues: Only one crossover refunding of the Prior Bonds is legally allowed. In a
crossover refunding, the Bonds are sold in advance of the February 1,
2012 call date of the Prior Bonds. The proceeds of the Bonds are
invested in government securities and held in escrow. The money in the
escrow is used to pay interest on the Bonds until the call date and to
prepay the Prior Bonds at the first opportunity on February 1, 2012. The
City continues to make payments on the Prior Bonds until the call date.
After the call date, the City begins making payments on the Bonds. In
other words, savings will not be experienced until after February 1,
2012. The City is "locking in" savings starting in 2012.
The City will use $500,000 to write down the cost of the debt service.
Based on interest rates of 1.70% to 3.20%, the estimated savings as a
result of the Refunding is approximately $750,000 to $825,000 including
cash and $125,000 to $150,000 excluding the cash deposit, after all fees
and expenses. This savings expressed in present value terms is between
3% to 4% percent of the refunded principal. The state law minimum
requirement for present value savings is 3.00%. We will continue to
monitor the market and the call dates for the City and alert you to any
other future opportunities.
Risk Factors:
With a crossover refunding, the key risk factor is the call date. Because
the Prior Bonds are first callable on February 1, 2012, it must be
believed that comparable or better conditions will not occur over the
next three years.
Arbitrage:
The City will also need to continue to keep its debt service funds within
IRS parameters to avoid penalties on carrying too high of a balance
during the life of the issue.
Schedule:
Pre-Sale Review by Council:
Distribute Official Statement:
Conference with Rating Agency:
Bond Sale and City Council meeting to
award:
Estimated Closing Date:
February 9,2009
February 26,2009
Week of March 2, 2009
March 9, 2009
Week of March 30, 2009
Attachments:
Sources and Uses and Debt Service Estimates
Ehlers Contacts:
Financial Advisors: Mark Ruff
Dave Callister
Bond Analysts: Diana Lockard
Debbie Holmes
Bond Sale Coordinator Connie Kuck
(651) 697-8505
(651) 697-8553
(651) 697-8534
(651) 697-8536
(651) 697-8527
The Official Statement for this financing will be mailed to the home of each Council Member at
their home address for review prior to the sale date.
. !!~.s
Page 2
Resolution No.
introduced the following resolution and moved its adoption:
Council Member
Resolution Providing for the Sale of
$3,965,000 General Obligation Library Refunding Bonds, Series 2009A
A. WHEREAS, the City Council ofthe City ofChanhassen, Minnesota, has heretofore determined
that it is necessary and expedient to issue the City's $3,965,000 General Obligation Library
Refunding Bonds, Series 2009A (the "Bonds"), to refund the outstanding $6,095,000 G.O.
Library Bonds, Series 2002, maturities due in 2013 to 2022;
B. WHEREAS, the City has retained Ehlers & Associates, Inc., in Roseville, Minnesota
("Ehlers"), as its independent financial advisor for the Bonds and is therefore authorized to
solicit proposals in accordance with Minnesota Statutes, Section 475.60, Subdivision 2(9);
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Chanhassen,
Minnesota:
1. Authorization: Findings. The City Council hereby authorizes Ehlers to solicit proposals for the
sale of the Bonds.
2. Meeting: Pro"osal Opening. The City Council shall meet at 7:00 P.M. on March 9,2009, for
the purpose of considering sealed proposals for and awarding the sale of the Bonds.
3. 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 City upon its completion.
The motion for the adoption of the foregoing resolution was duly seconded by Council Member
and, after full discussion thereof and upon a vote being taken thereon,
the following Council Members voted in favor thereof:
and the following voted against the same:
Whereupon said resolution was declared duly passed and adopted.
Dated this _ day of
,2008.
City Clerk
Chanhassen, MN
Proposed Crossover Refunding of
$6,095,000 G.O. Library Bonds, Series 2002
Table of Contents
Report
Prior Original Debt Service
Debt Service Schedule
2
Sources & Uses
3
Debt Service Comparison
4
Crossover Escrow Fund Cashflow
5
06 xover of Sar 02 $6.095 I SINGLE PURPOSE I 1/2312009 I 2:48 PM
Ehlers and Associates, Inc.
Leaders In Public FlIlance
Chanhassen, MN
$6,095,000 G.O. Library Bonds, Series 2002
Prior Original Debt Service
Date Principal Coupon Interest Total P+I Fiscal Total
08/01/2009 87,497.50 87,497.50
02/01/2010 87,497.50 87,497.50 174,995.00
08/01/2010 87,497.50 87,497.50
02/01/20 II 87,497.50 87,497.50 174,995.00
08/01/20 II 87,497.50 87,497.50
02/01/2012 87,497.50 87,497.50 174,995.00
08/01/2012 87,497.50 87,497.50
02/01/20 I3 300,000.00 4.250% 87,497.50 387,497.50 474,995.00
08/01/20 I3 81,122.50 81,122.50
02/01/2014 315,000.00 4.400% 81,122.50 396,122.50 477,245.00
08/01/2014 74,192.50 74,192.50
02/01/2015 330,000.00 4.500% 74,192.50 404,192.50 478,385.00
08/01/2015 66,767.50 66,767.50
02/01/2016 345,000.00 4.550% 66,767.50 411,767.50 478,535.00
08/01/2016 58,918.75 58,918.75
02/01/2017 365,000.00 4.600% 58,918.75 423,918.75 482,837.50
08/01/2017 50,523.75 50,523.75
02/01/2018 380,000.00 4.650% 50,523.75 430,523.75 481,047.50
08/01/2018 41,688.75 41,688.75
02/01/2019 405,000.00 4.700% 41,688.75 446,688.75 488,377.50
08/01/2019 32,171.25 32,171.25
02/01/2020 425,000.00 4.750% 32,171.25 457,171.25 489,342.50
08/01/2020 22,077.50 22,077.50
02/01/2021 445,000.00 4.800% 22,077.50 467,077.50 489,155.00
08/01/2021 11,397.50 1l,397.50
02/01/2022 470,000.00 4.850% 11,397.50 481,397.50 492,795.00
Total $3,780,000.00 $1,577,700.00 $5,357,700.00
Yield Statistics
Average Life 8.911 Years
Weighted Average Maturity (par Basis) 8.911 Years
Average Coupon 4.6836871%
Refunding Bond Information
Refunding Dated Date 2/01/2009
Refunding Delivery Date 2/01/2009
S8r 02 $6.095 Go Library I SINGLE PURPOSE I 1/23/2009 I 2:48 PM
Ehlers and Associates, Inc.
Leaders III PubliC FIIl31lce Page 1
Chanhassen, MN
Proposed Crossover Refunding of
$6,095,000 G.O. Library Bonds, Series 2002
Debt Service Schedule
06 xaver of Ser 02 $6.095 I SINGLE PURPOSE I 1/23/2009 I 2:48 PM
Ehlers and Associates, Inc.
Leaders III Public FlIlallce Page 2
Chanhassen, MN
Proposed Crossover Refunding of
$6,095,000 G.O. Library Bonds, Series 2002
Sources & Uses
Dated 02101/2009 I Delivered 02101/2009
Sources Of Funds
Par Amount of Bonds
Transfers from Prior Issue Debt Service Funds
$3,465,000.00
500,000.00
Total Sources
$3,965,000.00
Uses Of Funds
Total Underwriter's Discount (0.800%)
Costs ofIssuance
Deposit to Crossover Escrow Fund
Rounding Amount
27,720.00
32,000.00
3,904,111.36
1,168.64
Total Uses
$3,965,000.00
06 xover of Ser 02 $6.095 I SINGLE PURPOSE I 1/23/2009 I 2:48 PM
Ehlers and Associates, Inc.
Leaders In PubliC Finance Page 3
Chanhassen, MN
Proposed Crossover Refunding of
$6,095,000 G.O. Library Bonds, Series 2002
Debt Service Comparison
Date
02/01/2009
02/01/2010
02/01/2011
02/01/2012
02/01/2013
02/01/2014
02/01/2015
02/01/2016
02/01/2017
02/01/2018
02/01/2019
02/01/2020
02/01/2021
02/01/2022
Existing D/S
Net New D/S
(1,168.64)
174,995.00
174,995.00
174,995.00
438,992.50
392,720.00
392,365.00
396,285.00
399,520.00
397,040.00
403,760.00
404,400.00
404,040.00
407,640.00
$4,560,578.86
Total P+I
PCF
(82,990.00)
(82,990.00)
(82,990.00)
(3,821,495.00)
174,995.00
174,995.00
174,995.00
3,867,497.50
82,990.00
82,990.00
82,990.00
392,990.00
392,720.00
392,365.00
396,285.00
399,520.00
397,040.00
403,760.00
404,400.00
404,040.00
407,640.00
$4,239,730.00
Total
(4,070,465.00)
$4,392,482.50
PV Analysis Summary (Net to Net)
Gross PV Debt Service Savings.....................
Net PV Cashflow Savings @ 2.547%(Bond yield).....
Transfers from Prior Issue Debt Service Fund......
Contingency or Rounding Amount....................
Net Present Value Benefit
Net PV Benefit / $3,829,939.23 PV Refunded Debt Service
Net PV Benefit / $3,780,000 Refunded Principal...
Net PV Benefit / $3,465,000 Refunding Principal..
Refunding Bond Information
Refunding Dated Date
Refunding Delivery Date
06 xover of Ser 02 $6.095 I SINGLE PURPOSE I 1/2312009 I 2:48 PM
Old Net D/S
174,995.00
174,995.00
174,995.00
474,995.00
477,245.00
478,385.00
478,535.00
482,837.50
481,047.50
488,377.50
489,342.50
489,155.00
492,795.00
$5,357,700.00
Savings
1,168.64
36,002.50
84,525.00
86,020.00
82,250.00
83,317.50
84,007.50
84,617.50
84,942.50
85,115.00
85,155.00
$797,121.14
641,158.31
641,158.31
(500,000.00)
1,168.64
$142,326.95
3.716%
3.765%
4.108%
2/01/2009
2/01/2009
I
Ehlers and Associates, Inc.
Le3dels In Public Finance Page 4
Chanhassen, MN
Proposed Crossover Refunding of
$6,095,000 G.O. Library Bonds, Series 2002
Crossover Escrow Fund Cashtlow
41,495.00
41,495.00
41,495.00
41,495.00
41,495.00
41,495.00
3,821,495.00
54,070,465.00
Cash Balance
0.36
1.16
1.43
0.89
1.29
1.32
0.74
Date Principal Rate Interest + Transfers
02/01/2009
08/01/2009 21,105.48 20,390.32
02/01/2010 21,105.48 20,389.79
08/01/2010 21,105.48 20,388.98
02/01/2011 21,105.48 20,389.92
08/01/2011 21,105.48 20,389.55
02/01/2012 21,105.48 20,388.94
08/01/2012 3,404,111.00 1.240% 21,105.48 396,277.78
Total $3,404,111.00 5147,738.36 5518,615.28
Receipts
0.36
41,495.80
41,495.27
41,494.46
41,495.40
41,495.03
41,494.42
3,821,494.26
54,070,465.00
Disbursements
Investment Parameters
Investment Model [pV, GIC, or Securities]
Default investment yield target
Securities
Bond Yield
Cost ofInvestments Purchased with Fund Transfers
500,000.00
Cash Deposit
Cost ofInvestments Purchased with Bond Proceeds
Total Cost ofInvestments
0.36
3,404,111.00
$3,904,111.36
Target Cost of Investments at bond yield
Actual positive or (negative) arbitrage
$3,256,081.96
(148,029.40)
Yield to Receipt
Yield for Arbitrage Purposes
1.2399995%
2.5465196%
State and Local Govermnent Series (SLGS) rates for
1/21/2009
06 xover of Sec 02 $6.095 I SINGLE PURPOSE I 1/2312009 I 2:48 PM
Ehlers and Associates, Inc.
Leaders In Public Finance Page 5