1c. Approve Resolution for Issuance and Sale of $3,720,000 G.O. Water Revenue Refunding Bonds, Series 2011BSeptember 14, 2011
Sale Report
$3,720,000 G.O. Water Revenue
Refunding Bonds, Series 2011B
City of Chanhassen, Minnesota
Issue and Purpose:Due to the very low interest rates achieved in the competitive sale of
bonds on September 12, 2011, the City Council authorized Ehlers to work
with the Mayor and the Finance Director to negotiate a sale of up to
$4,000,000 in G.O. Water Revenue Refunding Bonds, Series 2011B to
advance refund a portion of the G.O. Water Revenue Bonds, Series
2004B (the “Prior Bonds”). The Council’s authority was predicated on a
net present value savings of at least 4% of The Prior Bonds were issued in
the amount of $7,930,000 and are callable on August 1, 2014. This
refunding will be a partial advance crossover refunding. Savings will not
occur until after the call date.
Ehlers contacted the low bidder on the City’s competitive sale, United
Bankers Bank, who declined to work with the City at the same rates as the
competitive sale due to the longer term of the 2004B issue. Ehlers then
contacted Raymond James, the second lowest bidder. Raymond James
proposed a scale similar to its competitive sale bid. The Bonds were
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priced and confirmed on September 14. The results are attached.
The Prior Bonds refunded were the 2019 through 2025 maturities totaling
$3,575,000. The entire Prior Bonds were not able to be priced due to the
$10,000,000 bank qualification limit. Interest rates on the existing debt
average 4.4%. The true interest cost on the new issue is 2.4866%.
Term/Call Feature:
Interest is payable each six months beginning August 1, 2012. Principal
will be due on February 1 in the years 2016 through 2025. The Bonds
will be subject optional redemption or prepayment on February 1, 2021.
Funding Source:
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 revenues from the water utility to make all
debt service payments.
Discussion Issues:
The savings as a result of the refunding is approximately $23,000 per year
from February 1, 2015 through 2025, after all fees and expenses. This
savings expressed in present value terms is $217,165 or 5.6% percent of
the refunded debt service. The state law minimum requirement for
present value savings is 3% and the City’s policy is 4%.
Risk Factors:
The Bonds were sold assuming a AAA rating from Standard & Poor’s.
The rating has not technically assigned to this issue, but we reasonably
expect the rating to be maintained because it was confirmed less than
seven days ago. If the City does not receive a AAA rating, the Bonds will
need to be re-priced.
With a crossover refunding, the key risk factor is the call date. Because
the Prior Bonds are first callable on August 1, 2014, it must be believed
that comparable or better conditions will not occur over the next three
years. The remaining portion of the Prior Bonds will likely not be
refunded until much closer to the call date due to the short-term nature of
the remaining debt.
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.
Bank Qualification:
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.
Authority and Rating:
The Bonds are being issued pursuant to Minnesota Statues, Chapter 475
and Chapter 444. The Bonds are anticipated to be rated by Standard &
Poor’s at an “AAA” level. The rating will not be finalized for this issue
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until approximately September 20.
Attachments:
Sources and Uses of Funds
Debt Service Schedule
Ehlers Contacts:
Financial Advisors:
Mark Ruff (651) 697-8505
Dave Callister (651) 697-8553
Bond Analysts: Diana Lockard (651) 697-8534
Bond Sale Coordinator: Connie Kuck (651) 697-8527
Chanhassen, MN
$3,720,000 G.O. Refunding Bonds, Series 2011
Proposed Crossover Refunding of
$7,930,000 G.O. Water Revenue Bonds, Series 2004B
Table of Contents
Report
Sources & Uses1
Prior Original Debt Service2
Debt Service Schedule3
Debt Service Comparison4
Crossover Escrow Fund Cashflow5
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Chanhassen, MN
$3,720,000 G.O. Refunding Bonds, Series 2011
Proposed Crossover Refunding of
$7,930,000 G.O. Water Revenue Bonds, Series 2004B
Sources & Uses
Dated 10/06/2011 | Delivered 10/06/2011
Sources Of Funds
Par Amount of Bonds$3,720,000.00
Reoffering Premium182,339.25
Total Sources $3,902,339.25
Uses Of Funds
Total Underwriter's Discount(0.650%)24,180.00
Costs of Issuance33,538.00
posit to Crossover Escrow Fund3,843,718.03
De
Rounding Amount903.22
Total Uses $3,902,339.25
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Chanhassen, MN
$7,930,000 G.O. Water Revenue Bonds, Series 2004B
Prior Original Debt Service
DatePrincipalCouponInterestTotal P+IFiscal Total
02/01/2012-----
08/01/2012--129,073.77129,073.77-
02/01/2013--78,756.8878,756.88207,830.65
08/01/2013--78,756.8878,756.88-
02/01/2014--78,756.8878,756.88157,513.76
08/01/2014--78,756.8878,756.88-
02/01/2015--78,756.8878,756.88157,513.76
08/01/2015--78,756.8878,756.88-
02/01/2016--78,756.8878,756.88157,513.76
08/01/2016--78,756.8878,756.88-
02/01/2017--78,756.8878,756.88157,513.76
08/01/2017--78,756.8878,756.88-
02/01/2018--78,756.8878,756.88157,513.76
08/01/2018--78,756.8878,756.88-
02/01/2019440,000.004.250%78,756.88518,756.88597,513.76
08/01/2019--69,406.8869,406.88-
02/01/2020460,000.004.250%69,406.88529,406.88598,813.76
08/01/2020--59,631.8859,631.88-
02/01/2021485,000.004.375%59,631.88544,631.88604,263.76
08/01/2021--49,022.5049,022.50-
02/01/2022505,000.004.400%49,022.50554,022.50603,045.00
08/01/2022--37,912.5037,912.50-
02/01/2023535,000.004.500%37,912.50572,912.50610,825.00
08/01/2023--25,875.0025,875.00-
02/01/2024560,000.004.500%25,875.00585,875.00611,750.00
08/01/2024--13,275.0013,275.00-
02/01/2025590,000.004.500%13,275.00603,275.00616,550.00
Total$3,575,000.00-$1,663,160.73$5,238,160.73-
Yield Statistics
Base date for Avg. Life & Avg. Coupon Calculation10/06/2011
Average Life 10.515 Years
Average Coupon4.4242395%
Weighted Average Maturity(Par Basis)10.515 Years
Refunding Bond Information
Refunding Dated Date 10/06/2011
Refunding Delivery Date 10/06/2011
Ser 04B $7.93M Wtr Rev Bd | SINGLE PURPOSE | 9/14/2011 | 11:33 AM
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Chanhassen, MN
$3,720,000 G.O. Refunding Bonds, Series 2011
Proposed Crossover Refunding of
$7,930,000 G.O. Water Revenue Bonds, Series 2004B
Debt Service Schedule
DatePrincipalCouponInterestTotal P+IFiscal Total
10/06/2011-----
08/01/2012--86,861.1186,861.11-
02/01/2013--53,000.0053,000.00139,861.11
08/01/2013--53,000.0053,000.00-
02/01/2014--53,000.0053,000.00106,000.00
08/01/2014--53,000.0053,000.00-
02/01/2015--53,000.0053,000.00106,000.00
08/01/2015--53,000.0053,000.00-
02/01/201630,000.002.000%53,000.0083,000.00136,000.00
08/01/2016--52,700.0052,700.00-
02/01/201730,000.002.000%52,700.0082,700.00135,400.00
08/01/2017--52,400.0052,400.00-
02/01/201830,000.002.000%52,400.0082,400.00134,800.00
08/01/2018--52,100.0052,100.00-
02/01/2019470,000.002.000%52,100.00522,100.00574,200.00
08/01/2019--47,400.0047,400.00-
02/01/2020480,000.003.000%47,400.00527,400.00574,800.00
08/01/2020--40,200.0040,200.00-
02/01/2021500,000.003.000%40,200.00540,200.00580,400.00
08/01/2021--32,700.0032,700.00-
02/01/2022515,000.003.000%32,700.00547,700.00580,400.00
08/01/2022--24,975.0024,975.00-
02/01/2023535,000.003.000%24,975.00559,975.00584,950.00
08/01/2023--16,950.0016,950.00-
02/01/2024555,000.003.000%16,950.00571,950.00588,900.00
08/01/2024--8,625.008,625.00-
02/01/2025575,000.003.000%8,625.00583,625.00592,250.00
Total$3,720,000.00-$1,113,961.11$4,833,961.11-
Yield Statistics
Bond Year Dollars$38,438.33
Average Life10.333 Years
Average Coupon2.8980474%
Net Interest Cost (NIC)2.4865851%
True Interest Cost (TIC)2.4228637%
Bond Yield for Arbitrage Purposes2.3024383%
All Inclusive Cost (AIC)2.5203488%
IRS Form 8038
Net Interest Cost2.3150759%
Weighted Average Maturity10.312 Years
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Chanhassen, MN
$3,720,000 G.O. Refunding Bonds, Series 2011
Proposed Crossover Refunding of
$7,930,000 G.O. Water Revenue Bonds, Series 2004B
Debt Service Comparison
Const Loan
DateTotal P+IPmtExisting D/SNet New D/SOld Net D/SSavings
02/01/2012---(903.22)-903.22
(139,861.11)207,830.65207,830.65207,830.65-
02/01/2013139,861.11
02/01/2014106,000.00(106,000.00)157,513.76157,513.76157,513.76-
02/01/2015106,000.00(3,628,000.00)3,653,756.88131,756.88157,513.7625,756.88
02/01/2016136,000.00--136,000.00157,513.7621,513.76
02/01/2017135,400.00--135,400.00157,513.7622,113.76
02/01/2018134,800.00--134,800.00157,513.7622,713.76
02/01/2019574,200.00--574,200.00597,513.7623,313.76
02/01/2020574,800.00--574,800.00598,813.7624,013.76
02/01/2021580,400.00--580,400.00604,263.7623,863.76
02/01/2022580,400.00--580,400.00603,045.0022,645.00
02/01/2023584,950.00--584,950.00610,825.0025,875.00
02/01/2024588,900.00--588,900.00611,750.0022,850.00
02/01/2025592,250.00--592,250.00616,550.0024,300.00
Total$4,833,961.11(3,873,861.11)$4,019,101.29$4,978,298.07$5,238,160.73$259,862.66
PV Analysis Summary(Net to Net)
Gross PV Debt Service Savings.....................216,261.63
Net PV Cashflow Savings@ 2.302%(Bond Yield).....216,261.63
Contingency or Rounding Amount....................903.22
Net Present Value Benefit $217,164.85
Net PV Benefit / $3,848,876.28 PV Refunded Debt Service5.642%
Net PV Benefit / $3,575,000 Refunded Principal...6.075%
Net PV Benefit / $3,720,000 Refunding Principal..5.838%
Refunding Bond Information
Refunding Dated Date 10/06/2011
Refunding Delivery Date 10/06/2011
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Chanhassen, MN
$3,720,000 G.O. Refunding Bonds, Series 2011
Proposed Crossover Refunding of
$7,930,000 G.O. Water Revenue Bonds, Series 2004B
Crossover Escrow Fund Cashflow
Cash
DatePrincipalRateInterestReceiptsDisbursementsBalance
10/06/2011---1.03-1.03
08/01/201278,004.000.050%8,857.0786,861.0786,861.110.99
02/01/201347,623.000.120%5,376.8952,999.8953,000.000.88
08/01/201347,651.000.170%5,348.3252,999.3253,000.000.20
02/01/201447,692.000.230%5,307.8252,999.8253,000.000.02
08/01/20143,622,747.000.290%5,252.983,627,999.983,628,000.00-
Total$3,843,717.00-$30,143.08$3,873,861.11$3,873,861.11-
Investment Parameters
Investment Model [PV, GIC, or Securities]Securities
Default investment yield targetBond Yield
Cash Deposit1.03
Cost of Investments Purchased with Bond Proceeds3,843,717.00
Total Cost of Investments$3,843,718.03
Target Cost of Investments at bond yield$3,638,994.26
Actualpositive or (negative) arbitrage(204,723.77)
Yield to Receipt0.2859900%
Yield for Arbitrage Purposes2.3024383%
State and Local Government Series (SLGS) rates for 9/14/2011
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