1o. Set 1994 Bond Sale DateCITY OF
---
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937 -1900 • FAX (612) 937 -5739
TO: Mayor and City Council
FROM: Don Ashworth, City Manager
DATE: September 6, 1994
SUBJ: Set 1994 Bond Sale Date
Our proposed fall bond sale is smaller than I
which are either starting or are in progress.
issues were refunded at the beginning of the
Accordingly, to ensure that we maintain banl
issues in 1994 must be under $10 million.
issue to $2.2 million. The proceeds are prop
project and the south frontage road/Galpin."JBi
projects is anticipated to be a part of a si I
Boulevard, finalization of funding forlanh,
v "d have liked given the number of projects
owever, as the council may recall, a number of
z
Wr W en interest rates were at an all time low.
4ual fication for our fall issue, the total of all
at cap' educed the funding available for this
ied to tie split between the community center
ilevard project. Funding to complete these two
1995 bone sale including funding for Lyman
sen Estate; etc.
MEMORANDUM
Extract of Minutes of Meeting
of the City Council of the City
of Chanhassen, Carver and Hennepin Counties, Minnesota
Pursuant to due call and notice thereof a regular meeting of the City Council
of the City of Chanhassen, Carver and Hennepin Counties, Minnesota, was held at
the City Hall in the City on Monday, September 12, 1994, commencing at 7:30 P.M.
The following members of the Council were present:
and the following were absent:
* **
The following resolution was presented by Councilmember
who moved its adoption:
RESOLUTION NO.
RESOLUTION PROVIDING FOR THE ISSUANCE
AND SALE OF $2,240,000 GENERAL OBLIGATION
TAX INCREMENT BONDS, SERIES 1994E
BE IT RESOLVED By the City Council of the City of Chanhassen, Carver and
Hennepin Counties, Minnesota (City) as follows:
1. It is hereby determined that:
(a) the City has duly established City Development District No. 2
(District) pursuant to Minnesota Statutes, Sections 469.124
through 469.134 (the Act);
(b) the City has duly established tax increment financing district no.
2 -1 (TIF District) within the District pursuant to Minnesota
Statutes, Section 469.174 to 469.179 (TIF Act);
(c) the City is authorized by Section 469.178 of the TIF Act to issue
and sell its general obligations to pay all or a portion of the
public development costs (Costs) related to the District as
identified in the program and tax increment financing plan (Plan)
for the TIF District;
DJK75539
CH135 -27
1I
(d) the following Costs to be financed by the Bonds are authorized
by the Plan:
Public Improvements
Cost
Frontage Road Construction $1,000,000
Chanhassen Community Center Construction 1,182,000
Subtotal $2,182,000
Costs of Issuance 23,600
Discount Bonds 33,600
Total Bond Issue $2,240,000
(e) it is necessary and expedient to the sound financial
management of the affairs of the City to issue $2,240,000
General Obligation Tax Increment Bonds, Series 1994E
(Bonds) to provide financing for the Costs.
2. In order to provide financing for the Costs, the City will therefore
issue and sell Bonds in the amount of $2,206,400. In order to provide in part the
additional interest required to market the Bonds at this time, additional Bonds
will be issued in the amount of $33,600. The excess of the purchase price of the
Bonds over the sum of $2,206,400 will be credited to the debt service fund for the
Bonds for the purpose of paying interest first coming due on the additional
Bonds. The Bonds will be issued, sold and delivered in accordance with the
terms of the following Official Terms of Proposal:
DJK75539
CH135 -27
I �
THE CITY HAS AUTHORIZED SPRINGSTED INCORPORATED TO NEGOTIATE THIS
ISSUE ON ITS BEHALF. PROPOSALS WILL BE RECEIVED ON THE FOLLOWING BASIS:
TERMS OF PROPOSAL
$2,240,000
CITY OF CHANHASSEN, MINNESOTA
GENERAL OBLIGATION TAX INCREMENT BONDS, SERIES 1994E
Proposals for the Bonds will be received on Monday, September 26, 1994, until 11:00 A.M.,
Central Time, at the offices of Springsted Incorporated, 85 East Seventh Place, Suite 100, Saint
Paul, Minnesota, after which time they will be opened and tabulated. Consideration for award
of the Bonds will be by the City Council at 7:30 P.M., Central Time, of the same day.
DETAILS OF THE BONDS
The Bonds will be dated October 1, 1994, as the date of original issue, and will bear interest
payable on August 1 and February 1 of each year, commencing August 1, 1995. Interest will
be computed on the basis of a 360 -day year of twelve 30-day months. The Bonds will be
issued in the denomination of $5,000 each, or in integral multiples thereof, as requested by the
purchaser, and fully registered as to principal and interest. Principal will be payable at the main
corporate office of the registrar and interest on each Bond will be payable by check or draft of
the registrar mailed to the registered holder thereof at the holder's address as it appears on the
books of the registrar as of the close of business on the 15th day of the immediately preceding
month.
The Bonds will mature February 1 in the years and amounts as follows:
1996 $315,000 1998 $430,000 2000 $590,000
1997 $385,000 1999 $520,000
OPTIONAL REDEMPTION
The City may elect on February 1, 1998, and on any day thereafter, to prepay Bonds due on or
after February 1, 1999. Redemption may be in whole or in part and if in part, at the option of
the City and in such order as the City shall determine and within a maturity by lot as selected by
the registrar. All prepayments shall be at a price of par plus accrued interest.
SECURITY AND PURPOSE
The Bonds will be general obligations of the City for which the City will pledge its full faith and
credit and power to levy direct general ad valorem taxes. In addition the City will pledge tax
increment income of Economic Tax Increment Financing Development District No. 2 -1. The
proceeds will be used for construction of a frontage road and community center.
TYPE OF PROPOSALS
Proposals shall be for not less than $2,206,400 and accrued interest on the total principal
amount of the Bonds. Proposals shall be accompanied by a Good Faith Deposit ( "Deposit ") in
the form of a certified or cashier's check or a Financial Surety Bond in the amount of $22,400,
payable to the order of the City. If a check is used, it must accompany each proposal. If a
Financial Surety Bond is used, it must be from an insurance company licensed to issue such a
bond in the State of Minnesota, and preapproved by the City. Such bond must be submitted to
Springsted Incorporated prior to the opening of the proposals. The Financial Surety Bond must
identify each underwriter whose Deposit is guaranteed by such Financial Surety Bond. If the
Bonds are awarded to an underwriter using a Financial Surety Bond, then that purchaser is
required to submit its Deposit to Springsted Incorporated in the form of a certified or cashier's
check or wire transfer as instructed by Springsted Incorporated not later than 3:30 P.M., Central
Time, on the next business day following the award. If such Deposit is not received by that
time, the Financial Surety Bond may be drawn by the City to satisfy the Deposit requirement.
The City will deposit the check of the purchaser, the amount of which will be deducted at
settlement and no interest will accrue to the purchaser. In the event the purchaser fails to
comply with the accepted proposal, said amount will be retained by the City. No proposal can
be withdrawn or amended after the time set for receiving proposals unless the meeting of the
City scheduled for award of the Bonds is adjourned, recessed, or continued to another date
without award of the Bonds having been made. Rates shall be in integral multiples of 5/100 or
1/8 of 1 %. Rates must be in ascending order. Bonds of the same maturity shall bear a single
rate from the date of the Bonds to the date of maturity. No conditional proposals will be
accepted.
AWARD
The Bonds will be awarded on the basis of the lowest interest rate to be determined on a true
interest cost (TIC) basis. The City's computation of the interest rate of each proposal, in
accordance with customary practice, will be controlling.
The City will reserve the right to: (i) waive non - substantive informalities of any proposal or of
matters relating to the receipt of proposals and award of the Bonds, (ii) reject all proposals
without cause, and, (iii) reject any proposal which the City determines to have failed to comply
with the terms herein.
BOND INSURANCE AT PURCHASER'S OPTION
If the Bonds qualify for issuance of any policy of municipal bond insurance or commitment
therefor at the option of the underwriter, the purchase of any such insurance policy or the
issuance of any such commitment shall be at the sole option and expense of the purchaser of
the Bonds. Any increased costs of issuance of the Bonds resulting from such purchase of
insurance shall be paid by the purchaser, except that, if the City has requested and received a
rating on the Bonds from a rating agency, the City will pay that rating fee. Any other rating
agency fees shall be the responsibility of the purchaser. '
Failure of the municipal bond insurer to issue the policy after Bonds have been awarded to the
purchaser shall not constitute cause for failure or refusal by the purchaser to accept delivery on
the Bonds. '
REGISTRAR
The City will name the registrar which shall be subject to applicable SEC regulations. The City ,
will pay for the services of the registrar.
CUSIP NUMBERS
If the Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the
Bonds, but neither the failure to print such numbers on any Bond nor any error with respect
thereto will constitute cause for failure or refusal by the purchaser to accept delivery of the
Bonds. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers
shall be paid by the purchaser. I
-ii - I
SETTLEMENT
Within 40 days following the date of their award, the Bonds will be delivered without cost to the
purchaser at a place mutually satisfactory to the City and the purchaser. Delivery will be
subject to receipt by the purchaser of an approving legal opinion of Holmes & Graven,
Chartered of Minneapolis, Minnesota, which opinion will be printed on the Bonds, and of
customary closing papers, including a no- litigation certificate. On the date of settlement
payment for the Bonds shall be made in federal, or equivalent, funds which shall be received at
the offices of the City or its designee not later than 12:00 Noon, Central Time. Except as
compliance with the terms of payment for the Bonds shall have been made impossible by action
of the City, or its agents, the purchaser shall be liable to the City for any loss suffered by the
City by reason of the purchaser's non - compliance with said terms for payment.
OFFICIAL STATEMENT
The City has authorized the preparation of an Official Statement containing pertinent
information relative to the Bonds, and said Official Statement will serve as a nearly -final Official
Statement within the meaning of Rule 15c2 -12 of the Securities and Exchange Commission.
For copies of the Official Statement or for any additional information prior to sale, any
prospective purchaser is referred to the Financial Advisor to the City, Springsted Incorporated,
85 East Seventh Place, Suite 100, Saint Paul, Minnesota 55101, telephone (612) 223 -3000.
The Official Statement, when further supplemented by an addendum or addenda specifying the
maturity dates, principal amounts and interest rates of the Bonds, together with any other
information required by law, shall constitute a "Final Official Statement' of the City with respect
to the Bonds, as that term is defined in Rule 15c2 -12. By awarding the Bonds to any
underwriter or underwriting syndicate submitting a proposal therefor, the City agrees that, no
more than seven business days after the date of such award, it shall provide without cost to the
senior managing underwriter of the syndicate to which the Bonds are awarded 90 copies of the
Official Statement and the addendum or addenda described above. The City designates the
senior managing underwriter of the syndicate to which the Bonds are awarded as its agent for
purposes of distributing copies of the Final Official Statement to each Participating Underwriter.
Any underwriter delivering a proposal with respect to the Bonds agrees thereby that if its
proposal is accepted by the City (i) it shall accept such designation and (ii) it shall enter into a
contractual relationship with all Participating Underwriters of the Bonds for purposes of assuring
the receipt by each such Participating Underwriter of the Final Official Statement.
Dated September 12, 1994 BY ORDER OF THE CITY COUNCIL
/s/ Donald Ashworth
City Manager
ICJ
3. Springsted Incorporated is authorized and directed to negotiate the
Bonds in accordance with the foregoing Terms of Proposal. The City Council will
meet at 7:30 p.m. on Monday, September 26, 1994, to consider proposals on the
Bonds and take any other appropriate action with respect to the Bonds.
The motion for the adoption of the foregoing resolution was duly
seconded by Councilmember , and upon vote being taken thereon
the following members voted in favor of the motion:
and the following voted against:
whereupon the resolution was declared duly passed and adopted.
DJK75539
CH135 -27
STATE OF MINNESOTA )
COUNTIES OF CARVER )
AND HENNEPIN )
CITY OF CHANHASSEN )
I, the undersigned, being the duly qualified and acting City Manager
of the City of Chanhassen, Minnesota, hereby certify that I have carefully compared
the attached and foregoing extract of minutes of a regular meeting of the City
Council of the City held on Monday, September 12, 1994, with the original minutes
on file in my office and the extract is a full, true and correct copy of the minutes,
insofar as they relate to the issuance and sale of $2,240,000 General Obligation Tax
Increment Bonds, Series 1994E of the City.
WITNESS My hand as City Manager and the corporate seal of the City
this day of , 1994.
City Manager
City of Chanhassen, Minnesota
(SEAL)
�I
CE13 -27
CH135 -27
SPRINGSTED
PUBLIC FINANCE ADVISORS
Home Office
85 East Seventh Place
Suite 100
Saint Paul, MN 55101 -2143
(612) 223 -3000
Fax: (612) 223 -3002
August 10, 1994
Mr. Don Ashworth, Manager
Chanhassen City Hall
690 Coulter Drive
Chanhassen, MN 55317
1800 K Street NW
Suite 831
Washington, DC 20006 -2200
(202) 466.3344
Fax: (202) 223 -1362
Re: Timetable for the Issuance of the $2,250,000 General Obligation Tax Increment
Financing Bonds, Series 1994E
Dear Mr. Ashworth:
Based on our meeting, I have developed the following timetable for the sale of this issue:
Monday, Est -H ,v
City Council adopts resolution setting sale
date
Monday, September 26
November 1, 1994 (approximate)
120 South Sixth Street
Suite 2507
Minneapolis, MN 55402 -1800
(612) 333 -9177
Fax: (612) 349 -5230
16655 West Bluemound Road
Suite 290
Brookfield, WI 53005 -5935
(414) 782 -8222
Fax: (414) 782 -2904
6800 College Boulevard
Suite 600
Overland Park, KS 66211 -1533
(913) 345 -8062
Fax: (913) 345 -1770
Receipt of Bids
Council Consideration of Award of Sale
Settlement
I have listed an approximate principal amount of $2,250,000. This amount will be refined
based on the final numbers on prior transactions and equipment leases for the calendar year
1994. As discussed, one of the primary objectives is for the total amount of bonds to remain
under $10,000,000 in order to ensure bank qualification.
Please feel free to contact me if you have any questions.
Respectfully,
David N. MacGillivray
Principal
Director Project Management
PIP
/Saint Paul Office
cc: Mr. David Kennedy, Holmes & Graven, Chartered
' F S P R 1 N GSTED
120 South Sixth Street
Suite 2507
PUBLIC FINANCE ADVISORS
Minneapolis, MN 55402 -1800
(612) 333 -9177
Fax: (612) 349 -5230
Home Office
85 East Seventh Place
Suite 100
16655 West Bluemound Road
Saint Paul, MN 55101 -2143
Suite 2 Brookfield, 53005-5935
(612) 223 -3000
Fax: (612) 223 -3002
(414) 7 - 8222
Fax: (414) ) 782-22
782 -2904
6800 College Boulevard
Suite 600
Overland Park, KS 66211 -1533
(913) 345 -8062
Fax: (913) 345 -1770
1850 K Street NW
Suite 215
Washington, DC 20006 -2200
(202) 466.3344
Fax: (202) 223 -1362
September 6, 1994
Mr. Don Ashworth, City Manager
City of Chanhassen
690 Coulter Drive
Chanhassen, MN 55317 -0147
Re: Recommendations for the Issuance of $2,240,000 General Obligation Tax Increment
Bonds, Series 1994E
Dear Mr. Ashworth:
We have enclosed 20 copies of our recommendations for the above captioned issue for
distribution to Council members and City staff prior to your meeting on Monday, September 12,
1994.
If you should have any questions pertaining to these recommendations, or if you require
additional copies, please do not hesitate to contact us.
Sincerely,
Rebecca Lawrence
Financial Analyst
sms
Enclosures
t
i
Recommendations
i
For
i
City of Chanhassen, Minnesota
$2,240,000
General Obligation Tax Increment Bonds, Series 1994E
1
1
1
1
i
1
' Study No. CO236V1
SPRINGSTED Incorporated
September 6, 1994
Recommendations for
City of Chanhassen, Minnesota
$2,240,000
General Obligation Tax Increment Bonds, Series 1994E
EXECUTIVE SUMMARY
This summary is intended to highlight data contained in these recommendations. It is intended
to be an adjunct to the recommendations and not to be used solely as the basis of
determination of actions required. Your actions should be based on the information more fully
set forth in the recommendations.
1. Action Requested
2. Type and Purpose of Offering
To establish the date and time of receiving
bid information and establish the terms and
conditions of the Offering.
Proceeds of the issue will be used for the
construction of a frontage road and the
City's portion of an initial construction phase
of a community center.
3. Principal Amount of Offering
4. Repayment Term
5. Source of Debt Service Revenues
6. Optional Redemption
7. Credit Rating Comments
8. Sale Date and Time
9. Award Date and Time
$2,240,000
Interest will be payable on August 1 and
February 1 of each year to maturity
beginning August 1, 1995. Principal is
payable yearly on February 1, 1996 through
2000.
Tax increment income from Economic
Development Tax Increment Financing
District 2 -1.
Bonds are callable on February 1, 1998, and
on any day thereafter at par.
City is rated "Baa -l" from Moody's Investors
Service.
September 26, 1994 at 11:00 A.M.
September 26, 1994 at 7:30 P.M.
S P R I N GSTE D
120 South Sixth Street
Suite 2507
PUBLIC FINANCE ADVISORS
Minneapolis, MN 55402 -1800
(612) 333 -9177
Fax: (612) 349 -5230
Home Office
85 East Seventh Place
16655 West Bluemound Road
Suite 100
Suite 290
Saint Paul, MN 55101 -2143
Brookfield,
(612) 223 -3000
(414) 7 - 8222 5935
Fax: (612) 223 -3002
Fax: (414) ) 782-22
782 -2904
6800 College Boulevard
Suite 600
Overland Park, KS 66211 -1533
(913) 345 -8062
Fax: (913) 345 -1770
1850 K Street NW
Suite 215
Washington, DC 20006 -2200
September 6, 1994
(202) 466 -3344
Fax: (202) 223 -1362
Mayor Don Chmiel
Members, City Council
Mr. Don Ashworth, City Manager
City of Chanhassen
690 Coulter Drive
Chanhassen, MN 55317 -0147
' Re: Recommendations for the Issuance of $2,240,000 General Obligation Tax Increment
Bonds, Series 1994E
We respectfully request your consideration of our recommendations for the bond issue
referenced above. The details of the offering are set forth in the attached "Terms of Proposal."
These recommendations will discuss the finance plan for the bonds and address general
concerns relevant to the offering.
The bonds are being issued pursuant to Minnesota Statutes, Chapters 469 and 475. The
bonds will be used to provide financing for the construction of a frontage road and the City's
share of the initial construction costs of a community center in the City's Economic
1 Development Tax Increment Financing District 2 -1 (the District). The second and final
installment of financing for the community center will be sought in 1995. The composition of the
bonds is as follows:
Project Costs:
Frontage Road $1,000,000
Community Center 1.182.800
i Net Proceeds $2,182,800
Plus: Allowance for Discount Bidding 33,600
Costs of Issuance 23.600
Total Bond Size $2.240,000
I Amortization Sched
Attached as Appendix I is the proposed amortization schedule for the bonds. The bonds are
dated October 1, 1994, and mature on February 1, 1996 through 2000. The bonds were
structured to provide for gradually increasing principal payments to accommodate tax increment
J
City of Chanhassen, Minnesota
September 6, 1994
i,
income estimates provided by City staff in the City's Debt Study of May, 1994. These
estimates, as shown in Column 8, estimate the net income of the District available for debt
service on this issue after deductions for existing debt. Tax increment income is expected to be
collected during the period 1994 through 1999 and is expected to cover 105% of the estimated
debt service on the bonds. The first interest payment for this issue, due August 1, 1995, will be
paid from tax increment income received in 1994 and 1995. Thereafter, the semiannual interest
payment due August 1 will be payable from the first half of collections of tax increment income
in the year of collection, and each subsequent February 1 principal and interest payment will be
paid from the second -half collections of tax increment income, as well as surplus first -half
collections.
Tax Increment Income
A summary of estimated revenues and expenditures for the District, as provided in the City's
Debt Study of May, 1994 is set forth in Appendix II. The net income available for debt service,
used in Column 8 of Appendix I, is the projected tax increment revenues available for this issue
after deducting the debt service of currently outstanding bond issues. The City should be
advised that the Minnesota State Legislature has discussed removing local school districts from
the property tax funding system at some future date. No statutory authority to conduct this
currently exists. However, if enacted at some future date, this system has the potential to
adversely affect future increment income.
Prepayment Option
The City may elect on February 1, 1998, and on any day thereafter, to prepay the bonds due on
or after February 1, 1999. All prepayments shall be at a price of par plus accrued interest. This
call feature will permit some prepayment of bonds if future circumstances warrant.
Allowance for Discount Bidding
Included in the principal amount is a provision for discount bidding equal to 1.5% of the principal
amount of the bonds, or $15 per $1,000 bond. The discount provides the underwriters with all
or part of their profit and /or working capital for marketing the issue, and permits them to reoffer
the bonds at or close to a par reoffering scale. The discount is a successful marketing tool the
City has used in past bond issues, and we recommend its continued use here.
Ratina
We recommend that the City request a rating from Moody's Investors Service for this issue.
The City is currently rated "Baa -l" by Moody's. Springsted Incorporated will make an
application to Moody's on the City's behalf.
Federal Rebate - Arbitrage
All tax - exempt bonds are subject to federal arbitrage regulations, including rebating arbitrage
profits to the U.S. Treasury. Generally speaking, all arbitrage profits (the yield difference
between the earnings on the investments and the yield on the obligations) must be rebated to
the U.S. Treasury. There are some exemptions to this rebate requirement which include:
0) A small issuer exemption if the obligations are for governmental purposes and the issuer
reasonably expects to issue not more than $5,000,000 tax - exempt obligations during the
calendar year.
(ii) A six -month exemption if all of the proceeds of the obligations are expected within six
months of issuance of the obligations.
Page 2
City of Chanhassen, Minnesota
September 6, 1994
(iii) An 18 -month expenditure test if at least 15% of the proceeds are expended within 6
months, 60% within 12 months and 100% within 18 months.
(iv) A two -year expenditure test if at least 75% of the proceeds of the issue are used for
construction and if 10% is expended within 6 months, 45% within 12 months, 75% within
18 months and 100% within two years.
For items (iii) and (iv), if it is reasonably required that a retainage be maintained to enforce the
completion of a contract, up to 5% of the proceeds may be retained for an additional 12
months. Net proceeds subject to these expenditure tests include investment earnings on the
original bond proceeds.
The City expects to meet the 18 -month expenditure test, (iii) above, and will therefore be
exempt from reporting and rebate requirements.
Another potential source of arbitrage concern stems from the creation of the debt service fund
to pay debt service on the new issues. Prior to the 1993 "final" arbitrage regulations released in
June 1993, the small issuer exemption also exempted any debt service funds from rebate
requirements. The 1993 regulations now permit only bona fide debt service funds to be exempt
from arbitrage regulations. A bona fide debt service fund is defined as a fund for which there is
an equal matching of revenue to debt service expense with a carryover permitted equal to the
greater of the investment earnings in the fund during that year or 1/12 of the debt service of that
year. A debt service fund can lose its bona fide status if the issuer accumulates too much
investment earnings. It is important to monitor the debt service funds for this issue to assure
compliance with the regulations. Any portion in excess of a bona fide debt service fund must be
restricted in yield to the yield on the bonds.
Economic Life of Finance Projects
The 1993 "final" arbitrage regulations brought all tax - exempt issues into the calculation of
"economic life." Previously this requirement was only for private activity bonds. The intent of
this requirement is that the U.S. Treasury does not want bonds outstanding longer than is
necessary, thus creating more tax - exempt bonds in the marketplace than are needed. The
general safe harbor for assuring that bonds comply with the regulations is if the average
maturity of the bonds does not exceed 120% of the economic life of the financed projects. The
bonds are issued for road and building construction, which, under the U.S. Treasury guidelines
have an economic life of 20 and 40 years, respectively, and are therefore in compliance with
this regulation.
Federal Reimbursement Regulations
The U.S. Treasury has enacted reimbursement regulations to regulate issuers who wish to
issue tax - exempt bonds to recover costs of prior expenditures. The reimbursement regulations
require that if the issuer proposes to reimburse itself for expenses they paid prior to receipt of
bond proceeds, it must have made a declaration of that intent within 60 days of the actual
payment of the expense. There are exemptions for architectural and engineering fees and
miscellaneous start-up costs. It is our understanding the City is aware of these regulations and
will take whatever action, as necessary, to comply with the federal reimbursement regulations in
regard to this issue.
-. •.._ .
The Tax Reform Act of 1986 restricts the ability of banks to deduct tax - exempt interest as a
carrying expense under certain circumstances in calculating their tax liability. However, the Act
allows certain bonds to be qualified bonds which can be included in a bank's calculation of
Page 3
City of Chanhassen, Minnesota
September 6, 1994'
interest deduction. That qualification is reserved for municipalities that will issue less than
$10,000,000 of tax - exempt debt within a calendar year. The City does not expect to exceed
this $10,000,000 limit in 1994, and therefore this issue will be bank - qualified. This qualification
will help the marketability of the issue.
Sale Procedures
We recommend these bonds be offered for sale on Monday, September 26, 1994, with
proposals received in the offices of Springsted Incorporated at 11:00 A.M. Subsequent to the
receipt of those proposals, we will tabulate the proceeds and present the results to the City
Council for consideration of award at 7:30 P.M. that evening.
Respectfully submitted,
SPRINGSTED Incorporated
sms
Page 4
1
ity of Chanhassen, Minnesota
eneral Obligation Tax Increment Bonds,
McGlynn Park) Series 1994E
f ated: 10- 1 -1994
ature:. 2- 1
First Interest: 8- 1 -1995
OTALS: 2,240,000
APPENDIX I
Prepared September 6, 1994
By SPRINGSTED Incorporated
Net Income
105%
(See
Annual
Total
Appendix 2)
tear of
Year of
(
(
467,516
Principal
Levy
Mat.
Principal
Rates
Interest
& Interest
(1)
(2)
(3)
(4)
(5)
(6)
1994
1996
315,000
3.90%
130,253
445,253
1995
1997
385,000
4.10%
85,405
470,405
1996
1998
430,000
4.30%
69,620
499,620
1997
1999
520,000
4.50%
51,130
571,130
1998
2000
590,000
4.70%
27,730
617,730
OTALS: 2,240,000
APPENDIX I
Prepared September 6, 1994
By SPRINGSTED Incorporated
364,138 2,604,138 2,734,346 7,800,380
L d Years: 8 Annual Interest: 364038
Avg. Maturity: 3.64 Plus Discount: 33,600
Ug . Annual Rate: 4.467% Net Interest: 397,738
.C. Rate: 4.912% N.I.C. Rate: 4.879%
terest rates are estimates; changes may cause significant alterations of this schedule.
e actual underwriter's discount bid may also vary.
L
,q
I Page 5
Net Income
105%
(See
Annual
of Total
Appendix 2)
Surplus
(
(
(
467,516
2,918,058
2,450,542
493,925
1,386,993
893,068
524,601
1,250,245
725,644
599,687
1,483,871
884
648,617
761,213
112,596
364,138 2,604,138 2,734,346 7,800,380
L d Years: 8 Annual Interest: 364038
Avg. Maturity: 3.64 Plus Discount: 33,600
Ug . Annual Rate: 4.467% Net Interest: 397,738
.C. Rate: 4.912% N.I.C. Rate: 4.879%
terest rates are estimates; changes may cause significant alterations of this schedule.
e actual underwriter's discount bid may also vary.
L
,q
I Page 5
SUMMARY OF MASTER CONTROL FUND #468
City of Chanhassen, Minnesota
Revenues Available to Pay Debt Service, Series 1994E Tax Increment Bonds
1994
1995
1996
1997
1998
1999
Beginning Balance:
863,045
1,356,214
1,094,328
893,068
725,644
884,184
Current Revenues:
Tax Increment Income
633,795
665,985
750,013
838,243
981,114
Other Income
183,886
49,714
39,499
30,943
37,166
21,891
Total Revenue
817,681
715,699
789,512
869,186
1,018,280
21,891
Less: Expenditures, Existing Debt.'
(324,512
(510,069
(496,847
(512,009
(260,053
(144,862
Net Income /Revenues Available for Debt Service
1,356,214
1,561,844
1,386,993
1,250,245
1,483,871
761,213
Debt Expenditures Series 1994E Bonds
0
(467,516)
(493,925)
(524,601)
(599,687)
(648,617)
Annual Surplus /Ending Fund Balance
1,356,214
1,094,328
893,068
725,644
884,184
112,596
a
V
M
- o
M
z
(D
a) Source: The beginning fund balance, 1994, revenue figures and expenditure figures for existing debt, were taken from the
x
City of Chanhassen's Debt Study, May, 1994.
THE CITY HAS AUTHORIZED SPRINGSTED INCORPORATED TO NEGOTIATE THIS
ISSUE ON ITS BEHALF. PROPOSALS WILL BE RECEIVED ON THE FOLLOWING BASIS:
TERMS OF PROPOSAL
$2,240,000
CITY OF CHANHASSEN, MINNESOTA
GENERAL OBLIGATION TAX INCREMENT BONDS, SERIES 1994E
Proposals for the Bonds will be received on Monday, September 26, 1994, until 11 :00 A.M.,
Central Time, at the offices of Springsted Incorporated, 85 East Seventh Place, Suite 100, Saint
Paul, Minnesota, after which time they will be opened and tabulated. Consideration for award
of the Bonds will be by the City Council at 7:30 P.M., Central Time, of the same day.
DETAILS OF THE BONDS
The Bonds will be dated October 1, 1994, as the date of original issue, and will bear interest
payable on August 1 and February 1 of each year, commencing August 1, 1995. Interest will
be computed on the basis of a 360 -day year of twelve 30 -day months. The Bonds will be
issued in the denomination of $5,000 each, or in integral multiples thereof, as requested by the
purchaser, and fully registered as to principal and interest. Principal will be payable at the main
corporate office of the registrar and interest on each Bond will be payable by check or draft of
the registrar mailed to the registered holder thereof at the holder's address as it appears on the
books of the registrar as of the close of business on the 15th day of the immediately preceding
month.
The Bonds will mature February 1 in the years and amounts as follows:
1996 $315,000 1998 $430,000 2000 $590,000
1997 $385,000 1999 $520,000
OPTIONAL REDEMPTION
The City may elect on February 1, 1998, and on any day thereafter, to prepay Bonds due on or
after February 1, 1999. Redemption may be in whole or in part and if in part, at the option of
the City and in such order as the City shall determine and within a maturity by lot as selected by
the registrar. All prepayments shall be at a price of par plus accrued interest.
SECURITY AND PURPOSE
The Bonds will be general obligations of the City for which the City will pledge its full faith and
credit and power to levy direct general ad valorem taxes. In addition the City will pledge tax
increment income of Economic Development Tax Increment Financing District No. 2 -1. The
proceeds will be used for construction of a frontage road and community center.
TYPE OF PROPOSALS
Proposals shall be for not less than $2,206,400 and accrued interest on the total principal
amount of the Bonds. Proposals shall be accompanied by a,Good Faith Deposit ( "Deposit ") in
the form of a certified or cashier's check or a Financial Surety Bond in the amount of $22,400,
payable to the order of the City. If a check is used, it must accompany each proposal. If a
Financial Surety Bond is used, it must be from an insurance company licensed to issue such a
I Page 7
bond in the State of Minnesota, and preapproved by the City. Such bond must be submitted to
Springsted Incorporated prior to the opening of the proposals. The Financial Surety Bond must
identify each underwriter whose Deposit is guaranteed by such Financial Surety Bond. If the
Bonds are awarded to an underwriter using a Financial Surety Bond, then that purchaser is
required to submit its Deposit to Springsted Incorporated in the form of a certified or cashier's
check or wire transfer as instructed by Springsted Incorporated not later than 3:30 P.M., Central
Time, on the next business day following the award. If such Deposit is not received by that
time, the Financial Surety Bond may be drawn by the City to satisfy the Deposit requirement.
The City will deposit the check of the purchaser, the amount of which will be deducted at
settlement and no interest will accrue to the purchaser. In the event the purchaser fails to
comply with the accepted proposal, said amount will be retained by the City. No proposal can
be withdrawn or amended after the time set for receiving proposals unless the meeting of the
City scheduled for award of the Bonds is adjourned, recessed, or continued to another date
without award of the Bonds having been made. Rates shall be in integral multiples of 5/100 or
1/8 of 1 %. Rates must be in ascending order. Bonds of the same maturity shall bear a single
rate from the date of the Bonds to the date of maturity. No conditional proposals will be
accepted.
.AWARD
The Bonds will be awarded on the basis of the lowest interest rate to be determined on a true
interest cost (TIC) basis. The City's computation of the interest rate of each proposal, in
accordance with customary practice, will be controlling.
The City will reserve the right to: (i) waive non - substantive informalities of any proposal or of
matters relating to the receipt of proposals and award of the Bonds, (ii) reject all proposals
without cause, and, (iii) reject any proposal which the City determines to have failed to comply
with the terms herein.
BOND INSURANCE AT PURCHASER'S OPTION
If the Bonds qualify for issuance of any policy of municipal bond insurance or commitment
therefor at the option of the underwriter, the purchase of any such insurance policy or the
issuance of any such commitment shall be at the sole option and expense of the purchaser of
the Bonds. Any increased costs of issuance of the Bonds resulting from such purchase of
insurance shall be paid by the purchaser, except that, if the City has requested and received a
rating on the Bonds from a rating agency, the City will pay that rating fee. Any other rating
agency fees shall be the responsibility of the purchaser.
Failure of the municipal bond insurer to issue the policy after Bonds have been awarded to the
purchaser shall not constitute cause for failure or refusal by the purchaser to accept delivery on
the Bonds.
REGISTRAR
The City will name the registrar which shall be subject to applicable SEC regulations. The City
will pay for the services of the registrar.
CUSIP NUMBERS
If the Bonds qualify for assignment of CUSIP numbers such numbers will be printed on the
Bonds, but neither the failure to print such numbers on any Bond nor any error with respect
thereto will constitute cause for failure or refusal by the purchaser to accept delivery of the
Bonds. The CUSIP Service Bureau charge for the assignment of CUSIP identification numbers
shall be paid by the purchaser.
Page 8
SETTLEMENT
Within 40 days following the date of their award, the Bonds will be delivered without cost to the
purchaser at a place mutually satisfactory to the City and the purchaser. Delivery will be
subject to receipt by the purchaser of an approving legal opinion of Holmes & Graven,
Chartered of Minneapolis, Minnesota, which opinion will be printed on the Bonds, and of
customary closing papers, including a no- litigation certificate. On the date of settlement
payment for the Bonds shall be made in federal, or equivalent, funds which shall be received at
the offices of the City or its designee not later than 12:00 Noon, Central Time. Except as
compliance with the terms of payment for the Bonds shall have been made impossible by action
of the City, or its agents, the purchaser shall be liable to the City for any loss suffered by the
City by reason of the purchaser's non - compliance with said terms for payment.
OFFICIAL STATEMENT
The City has authorized the preparation of an Official Statement containing pertinent
information relative to the Bonds, and said Official Statement will serve as a nearly -final Official
Statement within the meaning of Rule 15c2 -12 of the Securities and Exchange Commission.
For copies of the Official Statement or, for any additional information prior to sale, any
prospective purchaser is referred to the Financial Advisor to the City, Springsted Incorporated,
85 East Seventh Place, Suite 100, Saint Paul, Minnesota 55101, telephone (612) 223 -3000.
The Official Statement, when further supplemented by an addendum or addenda specifying the
maturity dates, principal amounts and interest rates of the Bonds, together with any other
information required by law, shall constitute a "Final Official Statement" of the City with respect
to the Bonds, as that term is defined in Rule 15c2 -12. By awarding the Bonds to any
underwriter or underwriting syndicate submitting a proposal therefor, the City agrees that, no
more than seven business days after the date of such award, it shall provide without cost to the
senior managing underwriter of the syndicate to which the Bonds are awarded 90 copies of the
Official Statement and the addendum or addenda described above. The City designates the
senior managing underwriter of the syndicate to which the Bonds are awarded as its agent for
purposes of distributing copies of the Final Official Statement to each Participating Underwriter.
Any underwriter delivering a proposal with respect to the Bonds agrees thereby that if its
proposal is accepted by the City (i) it shall accept such designation and (ii) it shall enter into a
contractual relationship with all Participating Underwriters of the Bonds for purposes of assuring
the receipt by each such Participating Underwriter of the Final Official Statement.
Dated September 12, 1994
BY ORDER OF THE CITY COUNCIL
/s/ Donald Ashworth
City Manager
Page 9