4e. Finan. Model/Land Use Tx Bs
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CITY OF
CHANHASSEN
MEMORANDUM
690Círy Cellte,. D,.ìl'e, PO Box 147
ChllilhIlSh'lI, Milllll'.lwa 553/"':' TO:
P/¡olle612.9371900
Mayor and City Council
1
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Gmem! [,1.\ 612.9375739
bgiìlcaing f~l.\" 612.937.9152
P!!b/it' S4'~)' ¡';1.\"612.93-L!)J~
FROM:
Don Ashworth, City Manager
DATE:
August 12, 1998
ni1i li/{','i'.â.(ll,lili\!_,.'cll.iilil,IIS
SUBJ:
Fiscal Impacts of New Development
The city council requested that this item be placed back onto this agenda.
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The City o[Chall!Jassm. A gmll'Îl/g commu1/ity with c!t'111/ !¡lkf.i, ql!û/it;' sr/Jno/.;, (/ r!J¡¡/7lÚ¡¡g downtowll) thrÎ1Ù¡g VIl5Ùw::es, tlwl /;eil!lt~f¡¡j ¡tift. A gi'(';:t p/,I(f to Ih't', wid" alld pllly.
CITY OF
CHANHASSEN
690 City Center Drive, PO Box 147
ChanlJûssen, Minnesota 55317
Phone 612.937.1900
General Fax 612.937.5739
Engineering Fax 612.937.9152
Public S4ery' [,1.\' 612.934.2524
\réb li'/{'Ii'.â.c!lilll!rœ.fCII. 11111. lIS
MEMORANDUM
TO:
Mayor and City Council
FROM:
Don Ashworth, City Manager
DATE:
July 7,1998
SUBJ:
Fiscal Impacts of New Development
This memorandum has four components: I) Overview; 2) Existing tax
calculations; 3) Fiscal impacts of new development; and 4) Recommendation.
1) OVERVIEW
I have seen fiscal impact studies, but the computer generated results are pnly as
good as the numbers entered by the consultant/engineer and herlhis assumptions.
For example, let's say sewer and water through a major area of the city costs
$IOM. Your attorney says he cannot defend special assessments to that level as
the 30-inch pipes are larger than anyone subdivision needs. A typical study
would then label the 30% - 40% oversizing costs as "general obligation" and,
therefore, be bad for an existing resident. This could be true, but it could also be
false. Is the bird in my hand dead or alive?
The Upper Bluff Creek sewer and water project is exactly the hypothetical
described above, i.e. total cost, size of pipes, sustainable assessments, etc. Was I,
as a taxpayer, burdened with this $3-4M deficit? No! Connection charges were
set to pay system charges on a community wide basis. Will the $3-4M be paid?
Yes! Was the water tower on Murray Hill repainted (major expense removing old
lead base paint) via the same fees? Yes! Would I have had to pay for this had
new development not occurred? Yes! [Note: Murray Hill was developed long
before "connection charges" were established, and, therefore, they had no monies
to pay this cost if new development had not occurred.]
All of the points made above are true in regards to other improvements; i.e.
streets, parks, etc. For example, our attorneys/appraisers advised the city that we
could not sustain assessments of more than 40% of the anticipated costs of
building Kerber Boulevard. We built the road and assessed 40% of its costs to the
abutting properties. Did "general obligation" pick up the remaining 60%? No!
The City ofChanhassen. A grou'ing commnnity with c!enl1lakes, quality schools, a channing downtown, thriving businesses, and beautifid parks. A great place to live, work, and plar.
As the project was partially within a TIF district, that district paid 40% of the total project costs. We
additionally applied for and received state aid designation and the state paid 70% of the total project cost.
Was collecting 50% more than a project cost the city legal? Yes. Is this scenario typical? No, but it was
true of at least four projects that I am aware of and the 1997 audit report shows a healthy balance in the
fund labeled "municipal state aid" even after it funded many years of "water quality projects" and
suffered major damages during the "investment debacle." [Note: You need a few good projects to help
those that stumble.] Another example could be the Steiner Development (41 & 5), CSM (Dell & 5), or
Villages on the Pond (Market & 5). In each of these projects, we did or will assess ±90% of the project
costs to the developer. The remaining 10% will come from tax increment. Could we have charged 100%
of the costs to tax increment and simultaneously assessed 90%? Yes. Would this be legal? Yes. Would
we have paid the entire cost of the park referendum by doing such? Yes. City councils need to make
decisions each day as to what is fair and right. I think the decisions we have made are fair and justified,
but my point is there are a number of ways to ensure that new development does not occur at the expense
of existing homeowners.
Mayor and City Council
July 7, 1998
Page 2
The above overview was presented to reflect my dismay with a fiscal analysis that concentrates primarily
on capital costs of new development. The comprehensive planning process should not be driven by fiscal
considerations - those are within your hand to live or die. Our overriding principle should solely be -
What do we want this community to be?
Before presenting my "Fiscal Impacts of New Development," a review of existing property values and
tax calculations is in order. Following the statistics are various "Hypotheticals" which can be fallacies to
any "Fiscal Impact Analysis or Formula," including my own.
2) EXISTING TAX CALCULATIONS (All Operating and Debt Expenditures)
Residential
Value
0-$150,000
150,000-250,000
250,000+
No. of
Homes
2,500
2,000
900
5,400
Average
Value
(I,OOO's)
130
200
300
Average Tax
Capacity
1,600
3,000
5,300
Total Tax
Capacity
3.8M
5.7M
4.5M
14.0M
Other Tax Class
Residential-Other
Rural (Ag)
C & I (Hennepin)
C & I (Carver)
1.0M
.2M
13M
.5M
17.0M
1998 City Tax Levy - 4.67M
City Tax Rate (4.67 + 17.0) = 27.404%
Total Tax Rate (city, county, school, misc.) = 150%. Accordingly the city's 27.4% =
18% of your tax bill)
Cost per household (4.67 + 5400) = $865
Cost per household factoring out services to "Other tax class" = $710
Mayor and City Council
July 7, 1998
Page 3
The City Council asked that tax increment revenues be included in this report. These revenues
are as follows:
District
Tax Increment
Collections
nF District #24, Arbor Business Park
nF District #25, Downtown
nF District #26, McGlynn
nF District #27, National Weather Service
nF District #28, Entertainment
nF District #29, North Bay
Hennepin County District #3-1
Total
5,116
5,394,954
711,702
378,272
86,756
5,470
580,000
$6,931,176
Before I present my Fiscal Impact Model, various hypotheticals need to be presented. They are:
Hypothetical Scenario #1
Assume that the growth that has occurred over the past 10-15 years had not occurred, but that our
5,400 total residential units still exist. We now become a Columbia Heights. With 5,400 units
valued at less than $150,000 and a tax levy of $4.7M, our tax rate would be 50% or a whopping
85% increase. However, based on state aid formulas (under which we currently get $0), our
hypothetical town would get $2.5M in state aids which would produce a net tax rate of 25%.
What's the bottom line? The state has massaged state aids, homestead credit, fiscal disparity
contributions/distributions, etc. to virtually guarantee (rich or poor) that any city's tax levy will
be within 10% of our previous 25% level. [Note: Within two years, the formula will probably
kick in to reduce our current levy of27% (created by the park referendum) back to the average
25% level.]
Hypothetical Scenario #2
Let's assume we all have newer houses and are all paying taxes at the higher rate for new homes
($150,000-$250,000). In that case, our tax rate would reduce to 20% or a 40% decrease.
Another way of making this same point is that a new homeowner is now paying $5,000/year in
property taxes to subsidize my taxes of $3,000/year. Any "formula" developed should recognize
that the 4,090 units (vacant in 1991 MUSA) proposed to be built through a plan amendment will
be burdened with a significantly higher percent of the tax bill than a home built today (then being
20 years old) or mine (then being 50 years old).
Hypothetical Scenario #3
The proposed comprehensive plan maintains approximately the same number of
commercial/industrial properties to residential as currently exists. As commercial/industrial
property pays approximately 2-3 times more than residential property, a reduction in
commerciallindustrial acreage would be reasonably easy to calculate in terms of net tax
difference. I will return to the start of this memorandum in terms of why we attempt to plan, i.e.
to develop a community that is a community. If your definition of a well planned community is a
"no tax community," then bring in three Koch Refineries and we can put this exercise to bed.
Mayor and City Council
July 7,1998
Page 4
[Note: The first line under the headings 2000, 2010 and 2020 uses constant dollars for our
current cost per household ($710), times the number of additional units to derive a tax rate. That
line treats the 1100 additional homes in 2000 or 3000 additional homes in 2010 as isolated
communities in which only they existed. The "Blended Rate" line folds their values/taxes back
into the community as a whole, i.e. the tax impact for a new home in 2020 assumes that 1100
additional homes were built between now and the end of 2000 and that 3000 additional homes
were built between 2000 and 2010.]
3) FISCAL IMPACTS OF NEW DEVELOPMENT
No. of Add'l Average Average Tax Total Tax Costs of City Tax Capacity Rate
Homes Value Capacity Capacity Services
($1,000'5) ($710/home)
Year 2000
1100 $275 $4,700 5.2M .781M 18%
Current Rate 27.4%
Blended Rate 25.3%
-2.1%(-8%)
Year 2010
3000 $300 $5,300 16.0M 2.l3M 16.2%
Blended Rate 21.7%
-5.7% (-21%)
\3.0%
Year 2020 $325 $5,700 22.8M 2.8M 17.4%
4000 -10.0% (-36%)
Tax Increment _ The above analysis considers tax increment as tax neutral. Why? The following
analogy is not totally correct, but the bottom line is. Think of a tax increment district as a typical
subdivision. As the streets are built in that subdivision and normal services extended (plowing,
fire, police, etc.), the city receives the same 18% ofthe tax dollar from that parcel as we receive
from you or I. Tax increment districts are no different. Instant Web, Rosemount, etc. are paying
18% of their tax dollar towards operating the city. The difference is that the remaining 82% of
CSM or the DataServ's taxes can be used at the discretion of the council, i.e. tax incentives to
businesses, paying oversizing costs (discussed earlier), building a water tower benefiting far
more than that subdivision (TI District), etc. In the above example, the losers of the 82% ofthe
Mayor and City Council
July 7, 1998
Page 5
tax dollar are Hennepin County and the State of Minnesota (technically the Eden Prairie school
district), [but whatever tax they would have received fÌ"om CSM will be reduced fÌ"om their state
aids. Therefore, they do not care if we create a district or not.] If the council has discretion in
setting the amount of tax increment to be used to offset operating costs, why not set it at 36% and
therefore reduce everybody's taxes? The answer is simple. You have just lit the fuse of a major
time bomb; i.e. our largest district has operating expenditures of $718, 918. These expenses
include street lighting, signals, maintenance, police, fire, etc. Assuming the district ceased today,
our normal 18% of the tax dollar from these same parcels would produce $702,000 in tax dollars
or a loss of approximately -$16,918. If the city would have set operating expenditures for this
district at 1.5M, in 2003 we would be faced with firing every other employee associated with this
district, answering lout of 2 fire/police calls, etc. The minor difference between operating
revenues and expenditures for this district will be corrected before 2004, but the bottom line is
that this district, and all others, are "tax impact neutral."
4) RECOMMENDATION
We should move ahead with the comprehensive planning process. As parcels come before us
where the use is proposed to be changed to something having a detrimental tax impact, we
should do what we did with the Town and Country Homes property - challenge the applicant to
show where other parcels can make-up for the loss. This planning strategy has worked in the
past and it will work in the future.
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Tax Capacity Rates
Residential homestead
Residential non-
homestead
Apartments
Commercia!·industrial
Agricultural homestead
Agricultural non· 2b
homestead
Public utility 5
Seasonal Recreational
Commercial
Residential
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Pay 1999 ~'." .¡.,;~
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Classification
First $75.000
Over $75.000
4bb
First $75.000
Over $75.000
2·3 Units & undeveloped land
4b
4.
4d
Regular
Low income
SmaHcities
3
First $150,000
Over $150,000
2.
First $115.000
Over $ t 15.000/320 acres or Jess
Over $1 IS,aoO/over 320 acres
Ie
4e
Homestead resons
Seasonal resorts
First $75.000
Over $75,000
Current
Pay 1998
1.0%
1.85
1.9 1.25
2.1 1.7
2.1 1.7
2.' 2.5
1.9 1.0
2.3 2.15
2.7 2.~5
4.0 3.5
0.4 0.35
0.9 0.8
1.4 1.25
1.4 1.25
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4.0 3.5
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1.0 1.0 --""""'.
2.1 1.8 c.,.;.-...·ii~·
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Inclusion of Downtown Tax Increment Financing No. I Study and
Related Bond Sale Analysis
CITY OF
CHANHASSEN
MEMORANDUM
TO:
Mayor and City Council
Don Ashworth, City Manager D A ¡-t-,
(,90 Cit)' G'¡¡Ii', D,i,'c, 1'0 Ii'H I r FROM:
(},lI1h/j,i/'il, JfÍilìltSOl1l 553/""
1'/'oil,'('ll9rI9110 DATE:
/,;¡x 6Jl.9,r. )~)9
!:'\('ll9r~lil SUBJ:
!-,i:': 6L!.9.)L\~~t
August 12, 1998
Dave MacGillivrary has put together a report outlining work activities that have
been carried out during the past six months to eliminate the major tax increment
problems occurring in our primary district, i.e. TID # I. I would like to take this
opportunity to thank Rob Tautges (Tautges Redpath); Ron Batty (Kennedy &
Graven); Pam Snell, and Dave MacGillivrary (Springsted). Research was
completed by Tautges to identify potential candidate refundings as well as the
work by Springsted in actually completing the analysis to assure that new
principal/interest payments coincided with our decreased revenues. Finally, the
research and the final findings by Kennedy and Graven were vital to the
successful conclusion of the refundings and solution to our problems.
Following our last meeting with Dave MacGillivrary, it was my belief that the
council was comfortable in understanding the conclusions that he presented that
evening. In light of the fact that Nancy was not present, I would suggest that she
and I meet to review the attached documents. Should any other council member
wish to join Nancy and I, please feel free to contact me.
g:\mgr\tifl study-bond sale.doc
Tbe Cit)' ofC/)(/lIbassCJI. ,,1
ii'i¡/; 'i! /'},':', qtli¡/ity ,irl'()(If-.'. II (/I,m/ling dOll'lltOU'JI, thril'iilg bu.rillf,'j'CS> ¡{wi (I¡'d/((¿rd Pt1i:Z'." A g)'c";¡ p/.Ì("(;O iin', !cor!:. ,nitl ¡!¡IY
_ 85 K SEVENTII PIACE, SUIIE 100
'.' SAINT PAUL, MN 551Ot-2887
612-223-3000 FAX: 612-223-3002
SPRINGSTED
Public FlMance Advisors
$-
July 30, 1998
Mayor Nancy Mancino
Members, City Council
Mr. Donald W. Ashworth, City Manager-
Ms. Pam Snell, Finance Director
City of Chanhassen
P.O. Box 147
690 Coulter Drive
Chanhassen, MN 55317-0147
Re: Conclusion of Downtown Tax Increment Financing (TIF)
No. 1 Study and Related Bond Sale Analysis
This report summarizes both the analysis of the City's Tax Increment Financing (TIF) District
No. 1 and the resulting bond issuance. Recent changes in state law had brought into question
this District's capacity to adequately meet its present and future financial obligations. This
District has been the principal financing source for many of the City's downtown redevelopment
efforts. As such the financial demands and resources are very significant for the City. This
report brings together the results of the eight-month effort to examine the estimated situation,
identifies potential corrective actions, and review the debt financing package to mitigate the
estimated future situation.
The Results of the Analysis
The City Council held a series of workshops in May and June to review the results of a report
provided by City staff and consultants. The consultants participating in the report besides
Springsted were Rob Tautges of Tautges Redpath, City CPA firm,and Ron Batty and Dave
Kennedy of Kennedy & Graven, economic development and bond counsel.
This report covered both estimated future scenarios as well as outlining a range of policy
alternatives. This report and the related workshops became the basis for a number of the City's
current and anticipated future actions. A copy of the report and the last response to Council are
provided herein as Exhibit I.
The report references a number of actions beyond the refunding of bond issues which are
anticipated to be undertaken by the City. The findings of the report anticipate these non-debt
actions to occur in the near term.
SAI:"JTPAUl,M!\ . MINNEAPOLIS,MN . BROOKFlELD,WI . OVERLANDPARK,KS WASHINGTON,DC
IOWA CITY, IA
Summary of Bond Issuance Actions
City of Chanhassen
July 30, 1998
Page 2
This report addressed two actions requiring the issuance of debt. The first was to provide
funding for approximately $1.7 million to reimburse existing project costs incurred in the District.
The second was to identify any outstanding bond issues paid from the District which could be
refunded to provide cash flow relief particularty in the period 1998 through 2000. The report had
highlighted this period as having the greatest potential for negative cash flow. These refundings
were intended to redistribute cash flow requirements and not to necessarily reduce total costs.
This situation was greatly aided by the very favorable interest rate marKet.
The City had previously taken advantage of other low interest rate marKets by refunding other
outstanding issues paid from the District. This situation in conjunction with the federal
restrictions generally limiting to one the number of times an issue can be advance refunded
reduced the candidate refunding issues.
It should be noted that the City also had approximately $1.2 million of project costs in its TIF
District No. 2 which also required funding through bond issuance. This issue was sold in
conjunction with the TIF District No.1 issues.
What follows is a short synopsis of each of the four issues generally described above. The final
debt service requirements for each issue are shown in Exhibit II. These requirements are the
final cash flows given the sales results.
The Series 1998D Bonds
The proceeds of the Series 1998D Bonds were issued to reimburse the City for the cost of
constructing the road that services the City's Recreation Center located in TIF District No. 2-1.
The composition of this Issue is as follows:
Total Series 1998D Bonds
$1,200,000
15,200
9.800
$1,225,000
Project Costs
Costs of Issuance
Allowance for Discount Bidding
The Series 1998D Bonds have been structured around estimated future tax increment revenues
from Tax Increment District No. 2-1. City staff provided the tax increment revenue projections
and Springsted has not independently verified the accuracy of such revenue projections. The
amortization schedule for the Series 1998D Bonds given the actual sale results is shown on
page 11-1 of Exhibit II. Columns 1 through 7 show the years and amounts of principal and
interest due on the Series 1998D Bonds, including the 5% overtevy required by State statutes.
Column 8 is the projected tax increment revenue stream, provided by City staff, which will be
available to make the debt service payments on this Issue. Column 10 is the estimated annual
excess of tax increment revenues over the debt service requirements on the Series 1998D
Bonds.
The Series 1998E. Series 1998F and Series 1998G Bonds
The Series 1998E, Series 1998F and Series 1998G Bonds have been structured as part of the
study prepared by Springsted on Tax Increment Financing District NO.1.
City of Chanhassen
July 30,1998
Page 3
The Series 1998E Bonds
The Series 1998E Bonds were issued to reimburse the City for the costs of financing road
improvements within Tax Increment District NO.1. The composition of the Series 1998E Bonds
is as follows;
Project Costs
Costs of Issuance
Allowance for Discount Bidding
Total Series 1998E Bonds
$1,690,000
16,240
13.760
$1,720,000
The amortization schedule for the Series 1998E Bonds given the actual sale results is shown on
page 11-2 of Exhibit II. The Series 1998E Bonds have been structured as part of the Tax
Increment District No. 1 cash flow study prepared by Springsted. Columns 1 through 7 show
the years and amounts of principal and interest due on the Series 1998D Bonds, including the
5% overlevy required by State statutes.
The Series 1998F Bonds
The proceeds of the Series 1998F Bonds were issued to refund in advance of maturity all of the
outstanding maturities of the City's $3,885,000 General Obligation Tax Increment Bonds, Series
1995A, dated March 1, 1995 (the "1995A Bonds"), which are due in the years 1999 through
2001. The purpose of this refunding is to enhance the cash flow of the City's Tax Increment
District NO.1. This has been accomplished by extending the final maturity on the original 1995A
Bonds and making a single principal payment due on February 1, 2004.
The refunding of the 1995A Bonds is structured as a "full net advance" refunding. Proceeds of
the Series 1998F are placed in an escrow account with a major bank and invested in
government securities. These securities and their earnings are structured to pay debt service
on the 1995A Bonds, until the 1995A Bonds can be called for early redemption on February 1,
1999 at a price of par.
The actual bond sale results are shown on Pages 11-3 through 11-5 of Exhibit II. Page 11-3 is the
sources and uses of funds. Page 11-4 is the debt service schedule on the new 1998F Bonds
showing interest only payments until the final maturity on February 1, 2004. Page 11-5 shows
the comparison of debt on the Series 1998F Bonds to the original debt service on the 1995A
Bonds.
The Series 1998G Bonds
Proceeds of the Series 1998G Bonds were issued to refund in advance of maturity portions of
the City's $5,675,000 Taxable General Obligation Tax Increment Bonds, Series 1993A, dated
March 1, 1993 (the "1993A Bonds"). Those portions to be refunded include all of the 1999
maturity and $950,000 of the $1,225,000 maturing in 2000. The purpose of this refunding is
also to enhance the cash flow of the City's Tax Increment District No.1, which has been
accomplished by extending the final maturity on those portions of the original 1993A Bonds
being refunded.
Proceeds of the Series 1998G are placed in an escrow account with a major bank and invested
in government securities. These securities and their earnings are structured to pay the principal
of and interest on the 1999 maturity and the refunded portion of the 2000 maturity, until these
rnaturities can be called for early redemption on February 1, 1999 at a price of par.
City of Chanhassen
July 30, 1998
Page 4
The actual bond sale results are shown on Pages 11-6 through 11-8 of Exhibit II. Page 11-6 is the
sources and uses of funds. Page 11-7 is the debt service schedule on the 1998G Bonds,
showing principal and interest payments due through February 1, 2004. Page 11-8 shows the
comparison of debt on the Series 1998G Bonds to those maturities of the 1993A Bonds, which
are being refunded by this issue.
Credit Rating
The City applies to Standard & Poor's for the credit rating of its general obligation bonds. For
these issues, S&P reaffirmed the City's general obligation rating at A-. The City had not made
application for recent ratings to Moody's Investors Service. As Moody's maintains ratings on
other outstanding City issues, Moody's continues to rate the City's general obligation bonds.
We have enclosed copies of both rating agency reports in Exhibit V.
Amended TIF No. 1 Cash Flow Estimates
Given these sale results we have provided in Exhibit 11\ the actual debt service expenditures into
the estimated cash flows for TIF District NO.1. Those cash flows should provide the City with
an updated estimate of the future position of this District.
Bond Sale Bid Results
The competitive bond sale occurred on July 6th, with results presented to the City Council at its
special meeting held that day. The bid tabulations for each issue are included as Exhibit IV.
Summary
The changes in state property tax law have adversely affected a good number of Minnesota
cities, particularly those engaged in tax increment financing projects. The City should be
commended on its early efforts to identify those areas of vulnerability. This report provides only
an estimate of future situations based on a number of assumptions. We are pleased that the
Council accepted our recommendation for the submission to them of periodic financial reports
on the current status and future estimated position of each of their tax increment Districts. The
exact frequency and scope of these reports and how new projects within the Districts would
alter previous estimates we believe is best determined by the City.
We again acknowledge the efforts of all of the contributors to this process.
City of Chanhassen
July 3D, 1998
Page 5
We are available at anytime to address any questions the City would have on the report, the
actions to-date and the advisability of future actions.
. Respectfully,
\ "'.
\
-. '.! ':-__u
-..
David N. MacGillivray
Principal
Director of Project Management
cc: Rob Tautges; Tautges Redpath & Co., Ltd.
David Kennedy; Kennedy and Graven
Ron Batty; Kennedy and Graven
mdg
CITY OF CHANHASSEN, MINNESOTA
G.O. Tax Increment Bonds, Series 199BD
Tax Increment District No. 2-1
Dated:
Mature:
First Interest:
8- 1-1998
2- 1
8- 1-1999
Year of Year of
Levy Mat. Principal Rates
(1) (2) (3) (4)
1998 2DOO 50,000 4.20%
1999 2001 175,000 4.20%
2000 2002 275,000 4.20%
2001 2003 355,000 4.20%
2002 2004 370,000 4.30%
TOTALS: 1,225,000
EXHIBIT II
prepared July 21, 1998
By SPRINGSTED Incorporated
Total
Principal 105% Increment Annual
Interest & Interest of Total Income Surplus
(5) (6) (7) (8) (9)
77,730 127,730 134,117 237,354 103,237
49,720 224,720 235,956 342,426 106,470
42,370 317,370 333,239 435,615 102,376
30,820 385,820 405,111 510,608 105,497
15,910 3B5,910 405,206 510,608 105,402
216,550 1,441,550 1,513,629 2,036,611
Bond Years:
Avg. Maturity:
Avg. Annual Rate:
T.I.C. Rate:
5,107.50
4.17
4.240%
4.441%
Annual Interest:
Plus Discount:
Net Interest:
N.I.C. Rate:
216,550
9,BOO
226,350
4.432%
Interest rates are estimates; changes may cause significant alterations of this schedule.
The actual underwriter's discount bid may also vary.
11-1
CITY OF CHANHASSEN, MINNESOTA
G.O. Tax Increment Bonds, Series 1998E
TIF District #1
Dated:
Mature:
First Interest:
8- 1-1998
2- 1
8 - 1 - 1999
Year of Year of
Levy Mat. Principal Rates
(1) (2) (3) (4)
1998 2000 0 0.00%
1999 2001 430,000 4.25%
2000 2002 430,000 4.25%
2001 2003 430,000 4.25%
2002 2004 430,000 4.25%
TOTALS: 1,720,000
Bond Years:
Avg. Maturity:
Avg. Annual Rate:
T. 1. C. Rate:
6,880.00
4.00
4.250%
4.459%
Annual Interest:
Plus Discount:
Net Interest:
N.1.C. Rate:
292,400
13,760
306,160
4.450%
Prepared July 21, 1998
By SPRINGSTED Incorporated
Total
Principal 105%
Interest & Interest of Total
(5) (6) (7)
109,650 109,650 115,133
73,100 503,100 528,255
54,825 484,825 509,066
36,550 466,550 489,878
18,275 448,275 470,689
292,400 2,012,400 2,113,021
Interest rates are estimates; changes may cause significant
alterations of this schedule.
The actual underwriter's discount bid may also vary.
11-2
Dated 08/01/ I 998
Delivered 08/10/1998
City of Chanhassen, Minnesota
G.O. Tax Increment Refunding Bonds
Series I998F
Refund Series I995A
SOURCES & USES
SOURCES OF FUNDS
Par Amount of Bonds............................................,.....................................................................,..,
Accrued Interest from 08/01 /1998 to 08/10/ 1998..,...,..........................................................
TOTAL SOURCES................................................................ ....................................................
USES or FUNDS
Total Undenvriter's Discount (0.800%) .....................................................................,.................
Costs of Issuance........,...........................................,........,...............................................................,
Deposit to Debt Service Fund...............................................,.......,..,..............................................
Deposit to Net Cash Escrow Fund..................................................................................................
RoundìngAmount......................................................................,,.....,..,..,.",..,,,..............................
TOTAL USES.....................................................................................................................................
Springsted
Public Finance Advisors
53,415,000.00
3,713,81
$3,418,71.3.81
27,320.00
:\2,003.00
:~,713.81
3,351,856.65
3,820.35
$3,418,71:t81
-----
File = C!fANHASN-/ ,'I,')/{ - 2- ft),95A Ref /.9!J8F
1/21/1.9tJ8.J:/6'PM
---.-----------.
11-3
City of Chanhassen, Minnesota
G.O. Tax Incremcnt Refunding Bonds
Scrics 1998F
Refund Serics 1995A
DEBT SERVICE SCHEDULE
Date Principal Coupon Interest TotalP+1
2101/1999
2101/2000 222,828.75 222.828.75
2101/2001 148,552.50 148.552.50
2/01/2002 148,552.50 148.552.50
2101/2003 148,552.50 148,552.50
2101/2004 3,415,000.00 4.350% 148,552.50 3.563,552.50
Total 3,415,000.00 817,038.75 4,232.038.75
ytELD STATISTICS
Accru.ed Interest from Ox/O I / 1998 to 08/ I Of 1998............"......................................................
Bond Year DOllars..............................................................................................."..............................
Average Lif~........, ............. ....... ....... ..... ..........." ......., ........... .... ....... .................. ........... ....." ..... ............
Average Loupon...........................................................................,......................................................
3,713.81
$18,782.50
:7>.500 Years
~.3500000%
Net (nterest Cost (NIC).......................................................................................................................
True Interest Cost ITIC)......................................................................................................................
Bond Yield for Arbitrage t·urposes....................................................................................................
AJllnclusive Cost (A1C)......................................................................................................................
~A95454~'X,
~.;:;OG51 13';'(,
L\ I 50895%
~.718548G'K,
IRS FORM 8038
Net Interest Cost...........................................................................,......................................................
\Veighted Avera:01;e /:o.1aturity ....................................................................... .....................................
4.35000000/.,
;;.475 Yc:ars
Spn/{'(s!cd
FllblÙ: ¡i¡¡:/nee Advl.'·<1r,ç
file = UlLV/f,1.\X· {.'HIS - :!-I.'J.<15A Rd 19!J8F
,-/,,'/1.9.')8 1:251'M
11-4
City of Chanhassen, Minnesota
G.O. Tax Increment Refunding Bonds
Series 1998F
Refund Series 1995A
DEBT SERVICE COMPARISON
Date TotalP+1 Net New 0/5
ZlOI/1999
ZlOl12000 222,828.75 222.828. ï5
2/01/2001 148,552.50 148,552.50
2/01/2002 148,552.50 148,552.50
ZlOl/2003 148,552.50 148,552.50
2/01/2004 3,563,552.50 3,563.552.50
Total 4,232,038.75 4,232.038.75
Old Net 0/5
885,510.00
1,330,620.00
1,404,420.00
3,620,550.00
PRESENT V AWE ANALYSIS SUMMARY (NITTa NIT)
Gross PV Debt ServIce Savmgs......
................................................................................................
Net PV Cashtlow Savmgs@ 4.315% (Rand Yteld).......................................................................
Accnu:d Inte~st Lredit to Debt Semcc fund..............................................................................
Contingency or Roundin.:<: Amount................................................................................................
NET PRESENT VALUE LOSS.............................................................................................................
NET PV LOSS I 53,335.000 REruNDED rRJ:-.'CIPAL...............................................................
NET PV LOSS / 53,415,000 Rr.rUNDI:-:C m:-:ctrAL.... ..........".............................................
SprinLv:..;t~d
Public FÙt.1ncc Advl:~rs
Savings
885.5 t 0.00
1,107.791.25
[,255,867.50
(148,552.50)
fI48.552.50)
(3.563.552.50)
(G It ,488.75)
(.40.1.57.20)
(40,157.20)
3,71.3.81
1,320.35
$(35.123.04)
1.053%
1.028%
file = C/I.-INHtI.\iV· I!J,'I,'" - :!. I.'J.?5A Gel I !/!J8F
ï/ú"/I.tJ.?S 1:25PM
11-5
City of Chanhassen, Minnesota
Taxable G.O. Tax Increment Refunding Bonds
Series 1998G
Partial Refunding of Series 1993A
SOURCES & USES
Dated 08/01/1998
Delivered 08/10/1998
SOURCES OF FUNDS
Par Amount of Bonds......................................................................................................................
Accrued Interest from 08/01/1998 to 08/10/1998.................................................................
$2,180,000.00
3,168.13
TOTALSOURCES.............................................................................................................................
$2.I8~\,lG8.t3
USES or FUNDS
Total Under.vriter's Discount (0.684%) ............................................................................".........
Costs of Issuance...................................................."........................................................................
Deposit to Debt Service Fund...........................,........................................................................"...
Deposit to Net Cash Escrow fund..................................................................................................
Rounding AInount...........................................................................................................................
14,904.57
30,297.00
3,168.13
2,134,729.25
69.18
TOTAL USES.....................................................................................................................................
$2,183,168.13
----..-
Springs/cd
Public Finance Advisers
-..----- '--'-"--'--'--'-
File := (7fANHASN-1 !)!JS Txbl 2- SINGLE PURPOSE
7/21/1.998 4:16PM
11-6
City of Chanhassen, Minnesota
Taxable G.O. Tax Increment Refunding Bonds
Series 1998G
Partial Refunding of Series 1993A
DEBT SERVICE SCHEDULE
Date Principal Coupon Interest Total P+I
2/01/1999
2/0112000 190,087.50 190,087.50
2/0112001 126,725.00 126,725.00
2/0112002 1,230,000.00 5.750% 126,725.00 1,356,725.00
2/01/2003 500,000.00 5.800% 56,000.00 556,000.00
2/0112004 450,000.00 6.000% 27,000.00 477,000.00
Total 2,180.000.00 526.537.50 2,706,537.50
YIELD STATISTICS
Accrued Interest from 08/01/ I 998 to 08/10/ I 998.....................................·..·········......·...·..·.....
Bond Year Dollars.......................................··.··..·...··......···......······......................................................
Average life..........................................·..·...·...·..··......··...··..·..·....·.......................................................
Average Coupon....................................................................·..··..·..·...··..............................................
Net Interest Cost (NIC) .......................................................................................................................
True [nterest Cost (TIC)........................................·..............·..··..·.........................·...............-.............
Bond Yield for Arbitrage Purposes.....................................................·....................·....·....................
All Inclusive Cost (AIC) ......................................................................................................................
IRS FORM 8038
Net Interest Cost.................................·...·..·.......·..·..···.......·.....·....·............................... ......................
Weighted A\'erage Nlaturity..... ........................................................................................................
3,IG8.13
59,030.00
4.142 Years
5.8309801%
5.99GO:~G2%
5.995R:\52%
5.80G07;¡;¡~{,
6.3735503%
;;.13310887%
4.117 Years
Sprin:~Slcd
Public Finance Advisors
File: = ClJ..WHASN- /,C'.<JS Txb/2- S!i\'(;LE PURPOSE
7/¡j/I.IW8 1:25PM
11-7
City of Chanhassen, Minnesota
Taxable G.O. Tax Increment Refunding Bonds
Series 1998G
Partial Refunding of Series 1993A
DEBT SERVICE COMPARISON
Date Total P+I Existing D/S Net New D/S Old Net D/S Savings
2/01/1999 56,325.00 56,325.00 1,294,962.50 1,238,637.50
2/01/2000 190,087.50 387,650.00 577,737.50 1,395,600.00 8 J 7.862.50
2/01/2001 126,725.00 1,570,875.00 1,697,600.00 1,570,875.00 026,725.00)
2/01/2002 1,356,725.00 1,356,725.00 (1,356,725.00)
2/01/2003 556,000.00 556,000.00 (556,000.00>
2/01/2004 477,000.00 477,000.00 (477,000.00)
Total 2,706,537.50 2,014,850.00 4,721,387.50 4,261,437.50 (459,950.00)
PRESENT VALUE ANALYSIS SUMMARY (NIT TO NLT)
Gross PV Debt Service Savings.........................................................,.............................................
(50,626.21 )
Net PV Cashtlow Savin~s @ 5.806% {Bond Yidd).......................................................................
(:;O,GZ{ì.21)
Accrued Interest Credit to Debt Ser....ice .fund.............................................................................
Contingency or Roundin,'l; Amount................................................................................................
NET PRESENT VALUE LOSS.............................................................................................................
:~,lG8.13
1,069.18
$(46,388.90)
NET PV LOSS / $2,125,000 REn.JNDED rRJ:-.:clPAL................................................................
NET PV LOSS / $2,180,000 REFUNDING rRJNCIPAL..............................................................
2.183%
2.128%
Springstro
Public Finance Advisors
Fiïe = CII:WlfASN-I.?lJ.'{ Txbl2· SINGLE Fl/RPOSE
1/6·//9.lJS 1:25PM
11-8
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85 E. SEVENTH PLACE, SUITE 100
SAINT PAUL, MN 55101-2887
612·223-3000 FAX, 612-223·3002
EXHIBIT IV
//
SPRINGSTED
Public Finana Advisors
~
$2,185,000·
CITY OF CHANHASSEN, MINNESOTA
TAXABLE GENERAL OBLIGATION TAX INCREMENT REFUNDING BONDS, SERIES 1998G
(BOOK ENTRY ONLY)
AWARD:
MilLER & SCHROEDER FINANCIAL, INC.
MillER, JOHNSON & KUEHN, INC.
SALE: July 6, 1998
Interest
Bidder Rates
MillER & SCHROEDER FINANCIAL, INC. 5.75% 2002
MillER, JOHNSON & KUEHN, INC. 5.80% 2003
6.00% 2004
NORWEST INVESTMENT SERVICES, INC. 5.80% 2002-2004
PIPER JAFFRAY INC.
CRONIN & COMPANY, INCORPORATED 6.00% 2002-2004
FIRST UNION CAPITAL 6.00% 2002
MARKETS CORPORATION 6.125% 2003
6_15% 2004
Standard & Poor's Rating: A-
Net Interest True Interest
Price Cost Rate
$2,170,061.25
$542,482.50
5.9953%
$2,167,520.00 $542,235.00 5.9992%
$2,172,601.85 $555,248.15 6.1337%
$2,167,520.00 $566,855.00 6.2688%
These Bonds are being reoffered at par_
BBI: 5.15%
Average Maturity: 4.14 Years
Subsequent to bid opening, the issue size was reduced by $5,000 in the 2002 maturity.
SAINT PAUL, MN MINNEAPOLIS, MN BROOKFIELD. WI . OVERLAND PARK, KS WASHINGTON, DC . DES MOINES. fA
IV-1
85 E. SEVENTH PLACE, SUITE 100
SAINT PAUL, MN 55101-2887
612-223·3000 FAX, 612·223-3002
//
SPRINGSTED
Public Finan" Advisors
~
$1,720,000
CITY OF CHANHASSEN, MINNESOTA
GENERAL OBLIGATION TAX INCREMENT BONDS, SERIES 1998E
(BOOK ENTRY ONL YI
AWARD:
SALOMON SMITH BARNEY
CRONIN & COMPANY,INCORPORATED
MORGAN, STANLEY & CO., INC.
PAINEWEBBER INCORPORATED
CIBC OPPENHEIMER CORPORATION
SALE:
July 6, 1998
Standard & Poor's RatIng: AAA
FSA Insured
Interest Net Interest True Interest
Bidder Rates Price Cost Rate
SALOMON SMITH BARNEY 4.25% 2001-2004 $1,706,240.00 $306,160.00 4.4594%
CRONIN & COMPANY, INCORPORATED
MORGAN, STANLEY & CO., INC.
PAINEWEBBER INCORPORATED
CIBC OPPENHEIMER CORPORATION
NORWEST INVESTMENT SERVICES, INC_ 4.10% 2001 $1,709,680.00 $307,020.00 4.4633%
PIPER JAFFRAY INC. 4.20% 2002
4.35% 2003 ,
i
4.45% 2004
DAIN RAUSCHER INCORPORATED 4.30% 2001-2004 $1,708,170.70 $307,669.30 4.4781%
----.-------------------
REOFFERING SCHEDULE OF THE PURCHASER
Rate
425%
4.25%
4.25%
4.25%
Year
2001
2002
2003
2004
Yield
4.00%
4_10%
4.20%
Par
BBI: 5.15%
Average Maturity: 4.00 Years
SAINT PAUL, MN MINNEAPOLIS, MN BROOKFIELD, WI OVERLAND PARK, KS WASHINGTON, DC ' DES MOINES, fA
IV-2
85 E. SEVENTH PLACE, SUITE 100
SAINT PAUL, MN 55101-2887
612·223·3000 FAX, 612-223.3002
//
SPRINGSTED
Public Financt Advisors
~
$3,410,000'
CITY OF CHANHASSEN, MINNESOTA
GENERAL OBLIGATION TAX INCREMENT REFUNDING BONDS, SERIES 1998F
(BOOK ENTRY ONLY)
AWARD:
DAIN RAUSCHER INCORPORATED
SALE:
July 6, 1998 Standard & Poor's Rating: A-
Interest Net Interest True Interest
Rates Price Cost Rate
4.35% $3,382,720.00 $843,122.50 4.5061%
4.35% $3,382,720.00 $843,122.50 4.5061%
4.45% $3,386,812.00 $857,785.50 4.5811%
Bidder
DAIN RAUSCHER INCORPORATED
CRONIN & COMPANY, INCORPORATED
NORWEST INVESTMENT SERVICES, INC.
PIPER JAFFRAY INC.
~-----------
These Bonds are being reoffered at par.
BB/: 5.15%
Average Maturity: 5.50 Years
.
Subsequent to bid opening, the issue sIze was increased by $5,000.
SAINT PAUL, MN MINNEAPOLIS, MN BROOKFIELD, WI OVERLAND PARK. KS WASHINGTON, DC ' DES MOINES. IA
IV-3
85 E. SEVENTH PLACE, SUITE 100
SAINT PAUL, MN 55101.2887
612-223-3000 FAK 612-223-3002
//
SPRINGSTED
Public Finance Advisors
~
$1,225,000
CITY OF CHANHASSEN, MINNESOTA
GENERAL OBLIGATION TAX INCREMENT BONDS, SERIES 1998D
(BOOK ENTRY ONLY)
SALOMON SMITH BARNEY
CRONIN & COMPANY,INCORPORATED
MORGAN, STANLEY & CO., INC.
PAINEWEBBER INCORPORATED
CIBC OPPENHEIMER CORPORATION
AWARD:
SALE:
Bidder
SALOMON SMITH BARNEY
CRONIN & COMPANY, INCORPORATED
MORGAN, STANLEY & CO., INC.
PAINEWEBBER INCORPORATED
CIBC OPPENHEIMER CORPORATION
DAIN RAUSCHER INCORPORATED
NORWEST INVESTMENT SERVICES, INC.
PIPER JAFFRAY INC.
---------
REOFFERING SCHEDULE OF THE PURCHASER
Rate
4.20%
4.20%
4.20%
4.20%
4.30%
July 6, 1998
Standard & Poor's Rating: A-
Interest
Rates
Net Interest True Interest
Cost Rate
Price
4.20% 2000-2003
4.30% 2004
$1,215,200_00
$226,350.00
4.4406%
425% 2000-2003 $1,215,211.00 $227,875.25 4.4709%
4.30% 2004
4.00% 2000 $1,217,037.50 $229,855.00 4.5033%
4.10% 2001
4.25% 2002
4.35% 2003
4.45% 2004
Year
2000
2001
2002
2003
2004
Yield
4.00%
4.10%
Par
4.25%
4_35%
BBI: 5.15%
Average Maturity: 4.17 Years
SAINT PAUL, MN MINNEAPOLIS. MN BROOKFIELD. WI OVERLAND PARK, KS . WASHINGTON, DC . DES MOINES.IA
IV-4
STANDARD
&POOKS
Public Finance
New Issue Review
ISSUER: CHANHASSEN, MINNESOTA
NEW RATING
$1.23 mil 00 I"" inere hnd..er 1998D did Aug I, 1998 due reo I. 2004 A-
$1.72 mil GO lax incl" bnds scr 1998" dId Aug I. 1998 due Feb I. 2004 A.
S3.41 mil GO tax inere rrdg bnds str 1998r dld Aug I. 1998 due rcb I, 2004 A.
$2.19 mil ,.."bl. GO tax incre rrdg bnd5 sor 19980 dId AIIg I. I99K due Feb I. 2004 A-
AFFIRMF.D
S29.57 mil parity GO hnds A-
OUTLOOK: STABLE
RATIONALE
The rating on Chanha.~cn, Minn. ':i bonds reflects:
· Rapidl)' growing tax bas~ that benefits from its location within the Minncapolis.St. Paul metropolitan
arca.
· Good wc¡dth 2.I}d income indicutur1t. and
· Signiticant financial rC$Crve levels.
Facton offsctúng these strengths i",::lud~:
· Tax hue: concentration.
· V.ry high fixed e05t5, and
· Ongoing growth rrcssurcs.
The city is primarily residential and continues to c:xp¡;rience rapid population and lax b¡1:i~ growlh. Estimated
Il'IarKtt value has increased by an average of II % annually over the past fotlr yetU'$l() $1.2 billion for fiscal
1998. The 10 Icctdjng taxpayers account for onc·tïfth of total nct UIX capncily. rl!:tlecting steady rcduclion M
conccnlrntion. Unemployment It':vtl~ .art': VCI')' low, which is cQnsistent WiÛl the region. SeveraJ midsized
..:mploytJ'5 arc located within the: city in a variety of $cctor~ including high-lcchnology manufacturing and
engineering, bU!iineS!; services, !lnd food production. Pcr capitu incomc !c.;vc1!i !.:xcccd the state average by i"nl;-
third. Per capIta market valuation is high at 565.000.
Financial managoment and liquidity is good, despite high fl:ll:cd costs. Operating revenues increased by
3.8% tlnnually during 1994-199710 $9.7 Jnillion. with propeny IHX\:.\i nnd :;pc::cial 3.'I!\C$."imcnts accounling for
6&% oftolal. The gcncrnl fund halanec at Dec. 31. 1997 of$2. J million represents 42% of annual gCI'lt':ral fund
expenditurcs und retlect'l a modest surplll!ô for the year. The city has no rcmuinin5;. eX"I)~urc to investment
O&&c::~ that occumd in 1994 and have heen fully recognized.
Overall nct debt ¡ Ii very high, at $5.100 per eapila and 7.5% of true value. About SSO miJlion of the eity'!>
sub~lanhNI $56 million of direct debt burden is supponcd by tax inçrçmcnt and ~peciaJ assessmcnts. or by
cntcrpri:-;c revenues. Future [ax-~upp(Jrted capital needs are limited. with the city anticipaling funding future
::;'~11cral improvcmçnt~ (rom general fund and capital project fund surpluses. including a new puhlic works
building cxpan$ion that will be: internally funded.
OUTLOOK
The outlook reflects the cxpcchUjon that increment. utility. fLnd :.-peciai a,,,seS!iment revenues. will ctmtinuc
to support the city's high debt carrying charges.
St.tuuLml & Poor's gz
ADiuIiI""',a" 1w~~
"JioI~""-"'.~"Mo;.ioioIt4lTheMcc;r:-.'U"("'_Î_bc.~¡...oIroCl1>': IUS ^1',..u r,~C^oncroc.'" N$WT..ø. NY. ,oom.EdiIotilolotll",:1~8fNCI\oIlYo"":'.'V(l'" \If., 1II1II101
5''''~''C\L'___(Z':12uIo11.a(;, C'IIih'ri lltlm"·n.cWcÇaWoHill C'.n........I"o!. R~ID.IllIIM."'I"I"WIP"'IIibõko¡I~....IIO'*"'t£lilllll. ""1:1111-". omcertor IkU~ill
t·~....-.;IIC - J""" L. 0",-. CI..,¡......~ ....(1oICtI~_¡,.c om." H...14 \II hf<:Gr_. 111. ,,~ I.... t" tI'ør-~Ir. ()M.~ .:..,;.... M v_. ~al'" Vo"~..... Ge¡1 I¡I1 tOpo..or!: ~__
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.."'........ ...·..mCll'csCOC'..-,." 1COr....II~nIIIi lõ~ÍUI. s....... eo.~Í(I 1.tl.1Jq "'I.~ ';1"" 1IlOl cß'.. ......"..,...,11... '.liIIA.... ......01IIII1) Jlltld rtI""...\, II.. __.(...._,,;.Î".....~ <I..
____IafI,g,.¡,oc 1..hedl5J 'ittttIOllIllc,",·, 'l'I>c _Ø l~I. ,·...,fllllI\U.~røJI' II.I I'II "f1IhIcSl......«: 1·\Ot".._,~1ItI.'p.I...llrJ" 1114i_nitUre'IIc: ; /ft ;. II I'KCI\'CJMpiI)' QI l",ml.'III'.
'-'003W"'_"';1''''¡''¡¡1IIo~
--
V-1
EXHIBIT V
July 7,1998
Offices:
Main Office:
25 Broadway
New York, NY 10004
(212) 208-8000
Regional Offices:
84 State Street, 6th Floor
Boston, MA 02109
(617) 371-0300
10 South Wacker Drive
Suite 2915
Chicago. IL 60606
(3 J 2) 83 1-0400
500 North Akard Street
Suite 3200
Dallas, TIC 75201
(214)871-1400
555 California Street
21st Floor
San Francisco. CA 94 I 04
(415) 765-5000
Analysts:
Peter Murphy
212-208-1195
Michael FOlTester
212-208-1763
,-
..- .
I~~ §Moody's Investors ServIce
..
..--- _- unicipaJ:CrcditResearch:.- .
Rating Update
Published 07/02198
Chanhassen (City of) MN
Contacts
Edward Damutz
Nicole Johnson
212-553-0323
212-553-4573
Moody's Rating
Moody's Assigns Baa1 to Chanhassen's General Obligation Bonds
Opinion
Moody's Investors Service has assigned a Baa 1 rating with a positive outlook to
Chanhassen's general obligation debt. due to the city's growing taxbase, high wealth
levels, sound financial position with increasing reserves, high debt levels with rapid
principal amortization, and stable liquidity position.
CONTINUED TAXBASE AND POPULATION GROWTH EXPECTED DUE TO
__.....__~____ . ___. _...,_._._~. ._'__" _ ,_.., .---'- ---_"o"..._ .__,....._ ,- -. --~._-
FAVORABLE LOCATIOÑ .- . . . - .. .
Moody's expects the city's taxbase and population to continue to grow due to its
beneficial location in the southwestern portion of the Minneapolis/St. Paul metropolitan
area. The city's $1.3 billion taxbase has grown at an average of 13% annually in the last
four years. Continued growth is anticipated as the city's diverse economy expands. The
population. presently estimated at 18,331. has increased 56.25% since 1990. Wealth
levels remain high in this relatively affluent suburb of the Twin Cities. The median family
income and per capita income level for Chanhassen are over 50% above state averages.
Unemployment in Carver County remains low at 1.8% for April 1998.
HEALTHY RESERVE LEVELS; HIGH DEBT SERVICE COSTS
The city has achieved operating surpluses in 1995, 1996 and 1997, and has increased
reserves substantially. City officials have budgeted an operating surplus for 1998.
Although the level of operating surpluses dropped in 1997, the General fund balance rose
to 38.3% of General Fund Balances in 1997. City officials anticipate an increase in 1998,
and plan to continue to build up reserves. Total annual debt service requirements are
very high, accounting for 63% of the city's expenditures in 1997. However, only 11 % of
Debt Service Fund revenues were derivectfrom'general property taxes in that year, with
89% coming special assessments, tax increments and revenues.
HIGH DEBT LEVELS MITIGATED BY TAX INCREMENT AND SPECIAL ASSESSMENT
SUPPORT AND RAPID PAYOUT
The city's debt levels are high, reflecting frequent bond issuances for infrastructure
needed to accommodate the city's very rapid population growth. The debt burden, at
7.9%, is over two times the 3.3% median for similarly sized cities. However, a large
, ,
V-2
portion of the debt is supported by tax increments, special assessments and other
revenues, thereby limiting the impact on the general tax levy. Principal amortization is
rapid with neariy 90% scheduled to be retired in ten years. No future borrowing is
anticipated for 1998.
INCREASED INVESTMENT IN SHORT-TERM SECURITIES
Earlier in thè decade, the city's operating funds were invested in a portfolio dominated by
highly voiatile securities which lost value as interest rates rose in 1994. Long maturities
and an unwillingness to sell rendered those investments valueless to the city for liquidity
purposes or as potential budgetary reserves. In the fall of 1995, the city sold most of its
portfolio and invested the proceeds in money market funds and in securities with
maximum stated five year maturity dates. In addition, the city follows its now more
conservative financial management policy, adopted in December 1994, including specific
guidelines for the investment of city funds, to consider safety, liquidity and yield, in that
order, to ensure the preservation of principal.
~ CoPyright 1996 Moody's Investors Service
V-3
~s E. SEVE~TH PLACE surrE 100
SAINT PAUL, MN 55101-21+3
612.223-3000 FAX, 612.223·3002
EXHIBIT I
/
May 13, 1998
SPRINGSTED
Purbc Finan" AdvISors
Mr. Donald Ashworth, Manager
City of Chanhassen
P.O. Box 147
Chanhassen, MN 55317-0147
-$
Re: Redevelopment Tax Increment Financing (TlF) District NO.1 (Downtown)
Estimate of Financial Status
Dear Mr. Ashworth:
Various State legislative actions and related property tax situations have required a review of
the current and estimated future financial status of the City's major TIF district, the Downtown
TIF District. This review was conducted by City staff; Kennedy & Graven, the City's legal
counsel for TIF and debt issuance; Tautges and Redpath, the City's auditor; and Springsted,
the City's financial advisor. The review is now complete, and this report summarizes its
findings. This report also summarizes certain courses of action that the City may wish to
consider relative to this District.
BRIEF HISTORY OF DOWNTOWN DISTRICT
The District is a "pre-1979" district, which means it was established prior to 1979 and is subject
to particular restrictions under statute. As a redevelopment district, it can receive TlF income
for a considerable time period. Current statute now restricts the collection of TlF income after
2000 to only that sufficient to pay debt service obligations outstanding prior to April 1, 1990, or
refundings of those issues. The statute further restricts that the collections will, in no event,
continue beyond 2009.
Over the last 20 years, the City has used the resources of this District to redevelop the
downtown, to construct related public infrastructure, and to provide development incentives on
both sides of Highway 5.
Over the last three years, a number of events relating to the state property tax system have led
to decreases in the amount of annual TIF revenues. Of particular importance are the following:
· Commercial-Industrial property tax relief brought about by state law changes to the tax
classification system, specifically from 4.6% to 3.5% (a potential reduction of 24% in tax
payments for this property class). This reduction has and is occurring over a multi-year
period.
· Increased state funding of education, leading to reduced reliance on the property tax.
· In addition, certain major commercial developments in the District have been successful
in appealing their market valuation downward or have been tax delinquent.
SAINT P,I¡Ul. MN . MINNEAPOUS. M:\ BROOKFIELD, WI . OVERL\ND PARK, KS . W^SHt\GTO~. DC . IOWA em. [A
1-1
City of Chanhassen
May 13, 1998
Page 2
These conditions singularly, and particularly in combination, have generallly caused the need
for this comprehensive review of this District's estimated future cash flow as to its capacity to
meet its scheduled obligations.
METHODOLOGY
The basic approach is to estimate the cash position of the total District activity from now
through the District's termination in 2004. To make these estimates, the study starts with a
beginning cash position, here January 1,1997 (last available audited date), then adds a variety
of revenues and subtracts a variety of expenditures.
The largest sources of revenue are from TIF revenues and from "Agreement Income:
Agreement Income results from an existing contract with Carver County dealing with the cost
sharing of certain road improvements. The two major expenditure categories are debt service
and developer incentives. Developer incentives are rebates of TIF revenues paid by specific
property owners based on contracts regarding their initial construction.
In addition to these four major categories, a large number of revenue and expenditure
categories exist but play a comparatively smaller role. City staff can best address exact
explanation of each category's origin, amounts, and impact.
The District has two major factual conditions that become aspects of this study. First, the
beginning cash position as of January 1, 1997 was $379,851. Second, as of December 31,
1997, the City had unfunded construction costs of $1.7 million.
The study presents two cash flow estimates. The first presents estimates without the impact of
the two major legislative changes. The second presents estimates given these and other
referenced changes, as well as after restructuring the City's debt service through refunding of
those issues which either legally or financially benefit the situation. This debt restructuring is a
summary of a more extensive effort at reviewing a large number of options and after legal
counsel has reviewed all statutory and contractual possibilities. As none of these efforts
completely remedy the situation. the objective of the refunding exercise is to shift the major
cash flow problems from the near term to spread them out over a longer repayment period.
The effect of spreading out principal payments over a longer period is to increase overall
interest costs.
ASSUMPTIONS
This analysis uses a large number of assumptions, anyone of which can markedly change the
conclusions. A listing of a portion of the assumptions follows.
General Assumptions
· No additional changes in statutory property tax classification ratios.
· No additional expenditures from this District other than those contained in the estimates.
· No additional changes in the property tax system or in the financing of school districts,
counties and cities which would lead to reductions in reliance on the property tax.
· No increases or decreases in the market values of properties within the District from
those payable in 1998.
1-2
City of Chanhassen
May 13. 1998
Page 3
· A tax payment delinquency rate of 5% continues for the term of the District.
· No change in the interpretation of the Agreement and the relevant statutory provisions.
· All revenue collections and expenditure disbursements occur in the timeframes and in
the amounts estimated.
· TIF revenues are based on taxes payable in 1998. then factored down to the new
statutory provisions. The factoring for the new 1998 change is downward 10% based on
a 12.5% reduction in the commercial-industrial classification ratio. in part offset by
assumed slight increase in the property tax rate.
· TIF revenues for now occurring and future development. not contained in the above pay
1998 amounts. are separately listed as "Additional Tax Increment."
· Delinquent tax revenues are City staff estimates of currently delinquent taxes.
· Sale of property is a City staff estimate of the proceeds of existing City parcels in the
District.
· Loan Program is a 1997 receipt from Market Square.
· HRA Administration is the estimated annual cost per City policy.
· Excess Referendum Payments reflect transfers to the Chaska School District under an
existing agreement regarding certain TIF revenues. The City staff is recommending that
under the terms of the agreement no such TIF revenues exist. as such no payments are
warranted.
RESULTS OF ANALYSIS
This analysis first covers the estimated future cash flow of the District prior to the legislative
changes. Exhibit 1 shows the results of this first portion of the analysis.
While this exhibit is prior to legislative changes. it does reflect the impacts of several major
commercial-industrial property owners who have successfully appealed to reduce their property
valuations. This exhibit and the next assume the City finances its current $1.700.000
construction deficit in 1998. with repayment occurring through 2004 from first TIF income and
then Agreement income.
Exhibit I estimates that the City moved into a negative cash position in 1997. with such position
moving lower to reach a maximum negative cash position of $2.680,520 in 2000. The District
potentially recovers in 2004, with a positive cash position of $1.636.101.
The second portion of the analysis covers the estimated future cash flow of the District after the
legislative changes and with the potential of refunding certain outstanding bond issues to shift
cash flow deficiencies to later years. The outstanding issues. which are potential candidates for
refunding. are the Taxable G.O. TIF Bonds. Series 1993A and the G.O. TIF Bonds. Series
1995A. These are the only outstanding issues. which under State and federal tax laws can be
advance refunded. It must be clear that the purpose of refunding these issues is to delay cash
outflows to later years. This is accomplished by delaying the payment of principal. which in
itself leads to greater interest costs. Therefore. these potential refundings ultimately would
result in higher overall cash outflows.
1-3
City of Chanhassen
May 13,1998
Page 4
Exhibit" estimates that the City has a maximum negative cash position of $2,840,582 in 2004,
with the difference being that the cash position is estimated to be positive through 2002.
The causes for these cash position changes are predominately twofold. First, recall that Exhibit
I estimates a condition prior to state actions which, if the estimates of TIF increment are
compared over the period 1997-2000, represents a revenue loss of approximately $2,187,000.
The state actions also reduce the Agreement Income by approximately $1,135,000 over the
term based on the current contract calculation. Second, Exhibit" reflects the refunding of two
outstanding issues, with previously described overall higher interest rates.
CONCLUSIONS
The City has several options in addressing this estimated situation. These options include
actions directly within its scope, as well as those involving other govemmental entities. The
following are not necessarily an exhaustive listing but do represent choices affecting either
revenues or expenditures. These options are put forth from purely a financial viewpoint, without
consideration of other factors.
Those options which are more under the City's direct control would include:
· evaluating the appropriateness of the refundings to reduce the magnitude of the
near term cash positions;
. evaluating the potential of funding all or a portion of the Current construction cash
deficit from other sources, if available;
· determining if any other properties in the District could be developed or developed to
a greater extent to generate more TIF income;
· monitoring the property tax valuation appeal process to appropriately contest
changes; and
. evaluating the non-debt service expenditures as to amount and duration.
Those options, which would include other govemmental entities or use of new statutory powers,
are:
· renegotiating the Agreement with Carver County as to the amount and duration of
Agreement income;
· evaluating the City staff's recommendation on the excess School District referendum
payment; and
· evaluating the potential use of new statutory powers enacted by the Legislature in
anticipation of the adverse impacts on TIF districts created by their other actions.
The Legislature enacted three potential remedies. We understand these remedies must be
acted upon in sequential order as described herein. One legislative action permits the sharing
of TIF revenues among districts if available TIF revenues exist and the deficiency can be
demonstrated to result from these legislative actions. Another action permits the establishment
of a special property-taxing district within a deficient TIF District under a number of conditions,
such as the existence of developer or assessment agreements. Finally, failing the above
1-4
City of Chanhassen
May 13, 1998
Page 5
Numerous cities in Minnesota are facing similar situations in their TIF districts as a result of the
state actions in the property tax area. Springsted and the other members of the Review Team
trust this analysis provides the City with the information necessary to respond to these state
actions.
remedies, the state has established a special fund, but its resources are very limited given the
potential problems that exist statewide.
Springsted, as well as all other members of the Review Team, are prepared to discuss any
aspects of these estimates, as well as the appropriateness of pursuing those listed above and
any other options.
Respectfully,
ÇQ~~'Mi::~±~~~~:)'
Client Representative
Icjb
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S; E, SE\'ENTH PLACE SUITE 100
SAINT PAUL. MN SSIOI-.:! :+3
612-223-3000 FAX: 612-2:3-3002
EXHIBIT IA
SPRINGSTED
Publtc FmanCt Advisors
June 15, 1998
~
Mr. Don Ashworth, Administrator
City of Chanhassen
PO Box 147
690 Coulter Drive
Chanhassen, MN 55317-0147
Re: Redevelopment Tax Increment Financing (TIF) District NO.1 (Downtown)
Cashflow Study - Review of Options
Dear Mr. Ashworth;
At the June 8th Council Workshop the staff was directed to more specifically address the
options available to the City both from a legal and financial basis. Under separate cover the
City staff and legal counsel have addressed certain legal and feasibility areas, which we will
not restate here. Our focus will be on the potential financial cash inflows to the District from
various sources. The Council. directed the City staff to provide a best estimate of funds "truly"
available from TIF No.3 (Hennepin County) and from TIF No. 6 (Gateway). These best
estimates have now been incorporated into these cashflows.
For TIF NO.3 the staff has now included the financing of two major projects, Hwy 5 and
Hwy101), with expenditures in 2003 and TIF costs of $660,000 and $2,000,000, respectively.
TIF NO.3 exists through taxes payable in 2004. To avoid a shortfall in TIF NO.3 we have
funded these projects on a pay-as-you-go basis by committing available increment of
approximately $750,000 in 2002 and using all of the TIF NO.3 revenues in 2003 and 2004.
For TIF NO.6 the staff has now completed a more comprehensive estimate of the projected
expenditures and transfer payments to other governments. This staff analysis estimates that
TfF No.6 will have no ability to transfer assets to TIF NO.1. Their estimate is based on new
TIF revenues for currently anticipated development.
Once again Exhibit II represents the situation where the City refunds the 1993A and 1995A TIF
issues and funds the construction shortfall of $1,690,000. Given the net transfers from TfF No.
3, the estimated cash position remains positive through 2002 and finishes negative in 2004 at
($800,604).
'Ì:\J:\T P:\UL. .\t:\
\1J:\:\E.o\POLlS. ~1.'\;
BROOKFIElD. \\iA-1 OVERL\:-.;D PARK. KS
\\'.~SHINGTO;-';, DC
IOWA cm, IA
City of Chanhassen, Minnesota
June 15, 1998
Page 2
Once again Exhibit III represents Exhibit II without the refundings. Given the net transfers from
TIF No.3, the estimated cash position is negative through 2002, with a maximum deficit of
($3,633,094) in 2000. The estimated ending 2004 cash position is a positive $365,070.
Also enclosed are the revised staff cashflow estimates for TIF No's 3 & 6.
We will be prepared to discuss all aspects of these estimates and courses of action at the
Council Workshop on June 15th.
_f3~spectfuIlY'h ,
. '"", ~~--i ~,.. '\
_ \ )''<''0'' '. . {1 I. \ . \\)l\';/'L-¡
~~.......f' _ "...-- -, /
David N. MacGillivray, Principal
Client Representative
mdg
Enclosures
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