6.5 Bonds of 1988 CITY OF 6. s-
`j
t '°f 690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937-1900
MEMORANDUM
TO: Mayor and City Council
FROM: Don Ashworth, City Manager
DATE: October 10, 1988
SUBJ: Bonds of 1988, Discussion
' Andy Merry, the City' s Bond Financial Consultant, will be present
Monday evening to discuss the attached enclosures . The City
' Council previously authorized the sale of various types of bonds
to accomplish our bonded work functions for 1988 . At the time of
receiving that approval from the Council, this office had stated
that Mr. Merry would be present at a future meeting to review the
' details of the bond sale. Again, the purpose of this meeting is
to review those documents. No action is being sought with the
proposed bond sale being scheduled for November 7 , 1988. [Note:
' As a part of this item we should discuss whether the meeting of
November 7th should be an early session or scheduled at our regu-
lar 7 : 30 p.m. time frame. ]
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CITY OF CHANHASSEN, MN.
1988 MUNICIPAL BONDING PROGRAM I
OCTOBER 10, 1988 CITY COUNCIL MEETING
1
SEPTEMBER 15, 1988 SALE
$1,200,000 GENERAL OBLIGATION BONDS OF 1988
$1,775,000 GENERAL OBLIGATION TAXABLE TAX INCREMENT BONDS OF 1988 ,
NOVEMBER 7, 1988 SALE '
$4,185,000 GENERAL OBLIGATION IMPROVEMENT BONDS OF 1988
$740,000 GENERAL OBLIGATION TAX INCREMENT BONDS' OF 1988, SERIES 2
$1,015,000 GENERAL OBLIGATION TAX INCREMENT BONDS OF 1988, SERIES 3 '
PREPARED BY:
MERICOR FINANCIAL SERVICES, INC. '
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I ISSUE: $1,200,000 GENERAL OBLIGATION BONDS 1988
PURCHASED BY: PIPER, JAFFRAY & HOPWOOD, INC., MANAGER
I ALLISON-WILLIAMS COMPANY, INC.
AMERICAN NATIONAL BANK, ST. PAUL
i MILLER & SCHROEDER FINANCIAL, INC.
I JURN & MOODY, INC.
ERICOR FINANCIAL SERVICES, INC.
15-Sep-88
IDATED 9-1-88
CALLABLE 11-1-96 @ 100
IPRINCIPAL COUPON INTEREST P & I
I Nov-89 25,000 5.75% 94, 106.25 119,106.25
■
Nov-90 25,000 5.90% 79,2225.00 104,225.0$
Nov-91 25,000 6.00% 77,750.00 102,750.00
I Nov-92 50,000 6.10% 76,250.00 126,2250.00
Nov-93 50,000 6.20% 73,200.00 123,200.00
Nov-94 50,000 6.30% 70,100.00 120,100.00
Nov-95 75,000 6.40% 66,950.00 141,950.00
I Nov-96 75,000 6.50% 62,150.00 137,150.00
Nov-97 75,000 6.60% 57,275.00 132;275.00
Nov-98 100,000 6.70% 52,325.00 152,325.00
Nov-99 100,000 6.80% 45,625.00 145,625.00
INov-2000 125,000 6.90% 38,825.00 163,825.00
Nov-2001 125,000 7.00% 30,200.00 155,200.00
Nov-2002 150,000 7.10% 21,450.00 171,450.00
Nov-2003 150,000 7.20% 10,800.00 160,800.00
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1,200,000 856,231.25 2,056,231.25
IBOND YEARS 12,475.00
AVERAGE COUPON 6.86358%
IAVERAGE MATURITY 10.40 YEARS
NET ti-f-tCTIVE RATE 7.05115%
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ISSUE: $1,775,000 GENERAL OBLIGATION TAXABLE TAX INCREMENT BONDS OF 1988
PURCHASED BY: GRIFFIN, KUBIK, STEPHENS & THOMPSON, INC. I
PREPARED BY: MERICOR FINANCIAL SERVICES, INC.
15-Sep-88 _ I
DATED 9-1-88
CALLABLE 11-1-95 El 100
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PRINCIPAL COUPON INTEREST P & I
II
Nov-89 0 190,239.58 190,239.58
Nov-90 0 163,062.50 163,062.50
Nov-91 75,000 8.75% 163,0622.50 238,062.50 II Nov-92 100,000 8.90% 156,500.00 256,500.00
Nov-93 150,000 9.00% 147,600.00 297,600.00
Nov-94 150,000 9.10% 134,100.00 284,100.00
Nov-95 200,000 9.10% 120,450.00 320,450.00 '
Nov-96 200,000 9.20% 102,250.00 302,250.00
Nov-97 200,000 9.25% 83,850.00 283,850.00
Nov-98 200,000 9.30% 65,350.00 265,350.00
II
Nov-99 250,000 9.30% 46,750.00 296,750.00
Nov-2000 250,000 9.40% 23,500.00 273,500.00
1,775,000 1,396,714.58 3,171,714.58 I
BOND YEARS 15,120.83
AVERAGE COUPON 9.24% II
AVERAGE MATURITY 8.52 YEARS
NET EFFECTIVE RATE 9.45508% II
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. IMPSU88
CHANHASSEN MINNESOTA
III , 1988 MUNICIPAL BONDING PROGRAM
04-Oct-88
IGENERAL OBLIGATION IMPROVEMENT BONDS COST TOTAL PRO-RATA %
1 PROJECT COSTS
* 87-2 POWERS BLVD./W. 78TH ST. DETACHMENT IMPROVEMENT PROJECT
CONSTRUCTION COSTS (FROM BRW REPORT OF 7-21-88) PHASE 1 PHASE 2
I SANITARY SEWER 17,050 0
WATERMAIN 42,525 0
DRRINAGE/STORM SEWER 184,800 161,000
GRADING/ROADWAYS/LIGHTING 534,025 168,300
II TRAFFIC SIGNALS 6,500 0
LANDSCAPING, PATHS,LIGHTIN6 247,500 117,100
PRIVATE UTILITIES 86,500 26,000
SUBTOTAL 1,118,900 472,400 1,591,300
IILAND ACQUISITION/EASEMENT COSTS 135,000 135,000
ENGINEERING, LEGAL, APPRAISAL, ADMINISTRATIVE 313,500 118,100
IITOTAL PROJECT COST OF 87-2 1,567,400 590,500 2,157,900 60.27%
FROM CITY (COSTS ARE 122%-130% OF CONSTRUCTION TO
II COVER 10%-12% CONTINGENCIES, 7%-9% ENGINEERING, TIMES
4%-6% ADMINISTRATIVE AND 1%-3% LEGAL AND ADVERTISING) CONSTRUCTION % TOTAL
* 87-5 CHURCH ROAD SANITARY SEWER IMPROVEMENTS 16,600 3,652 20,252 0.57%
22.00%
II * 87-9 KERBER BLVD. STREET AND DRAINAGE IMPROVEMENTS 455,000 136,500 591,500 16.52%
30.00%
I * 88-2 MINNEWASHTA MEADOWS STREET, WATER, SEWER AND
DRAINAGE IMPROVEMENTS 153,100 33,682 186,782 5.22%
22.00%
I * 86-11 DOWNTOWN PUBLIC IMPROVEMENTS (4.00% ADDITIONAL
COST WILL BE ADDED FOR ADMINISTRATIVE) 600,000 24,000 624,000 17.43%
4.00%
TOTAL COST OF THESE IMPROVEMENT PROJECTS 1,224,700 197,834 1,422,534
I TOTAL PROJECT COST OF 87-2 -----------=_-- 2,157,900
TOTAL COST OF ALL IMPROVEMENT PROJECTS 3,580,434 100.00%
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IMPSU88
CHANHASSEN MINNESOTA '
1988 MUNICIPAL BONDING PROGRAM
MAY 05-Oct-88
ESTIMATED SOURCES AND USES OF FUNDS 87-2 87-5 87-9 88-2 86-11 TOTAL
SOURCES
BOND PROCEEDS 2,522,2267 23,672 691,376 218,321 729,364 4,185,000
USES 60.27% 0.57% 16.52% 5.22% 17.43% 100.00%
BOND COUNSEL 3,616 34 991 313 1,046 6,000
REGISTRAR & PAYING AGENT 6,027 57 1,652 522 1,743 10,000
FINANCIAL PRINTING 2,109 20 578 183 610 3,500
MOODY'S RATING 1,205 11 330 104 349 2,000
FINANCIAL ADVISOR 14,492 136 3,972 1,254 4,191 24,045
UNDERWRITING DISCOUNT 49,184 462 13,482 4,257 14,223 81,608
CAPITALIZED INTEREST (NET) * 323,847 1,520 44,385 14,016 93,647 477,414
SUBTOTAL 400,481 2,239 65,391 20,649 115,807 604,566
PROJECT COSTS FROM ABOVE 2,157,900 20,252 591,500 186,782 624,000 3,580,434
GRAND TOTAL FOR ISSUANCE 2,558,381 22,491 656,891 207,431 739,807 4,185,000
* CALCULATED AS FOLLOWS: PROJECT: 87-2 87-5 87-9 88-2 86-11
ASSESSMENT CERTIFICATION YEAR/COLLECTION YEAR 90/91 89/90 89/90 89/90 90/91 TOTAL
CONSSTRUCTIONTAMOUNTT DISCOUNT 2,157,900 20 252 591 500 186,782 624000 -~---�~
APPROXIMATE TOTAL BY PROJECT 2,481,585; 25%
23,290 90% 680,225 25% 214, %795 717, 600%
YEARS INTEREST 17991/55 1, 89 689 49�16 15503 026
INTEREST REQUIRED 359,830 1 689 49,316 15,573 104,052
FACTOR NETTING INTEREST EARNINGS CREDIT 90.00% 96.00% 90.00% 90.00% 90.00%
NET CAPITALIZED INTEREST NEEDED 323,847 1,520 44,385 14,016 93,647 477,414
all OM 11111 11111 MO MI iii. NM NM MO ION INI ai. MN NM MO WM INN all
NM INN MO A - OM
IMPMAT88
CHANHASSEN MINNESOTA
1988 MUNICIPAL BONDING PROGRAM
05-Oct-88
BOND MATURITY STRUCTURING
4,185,000 GENERAL OBLIGATION IMPROVEMENT BONDS.OF 1988
PROJECT NUMBER 87-2 87-5 87-9 88-2 86-11
LEVY YEAR/
COLLECTION YEAR 90/91 89/90 89/90 89/90 90/91
YEARS ASSESSED 8 8 8 8 12
AMOUNT ASSESSED 2,559,480 100% 22,501 100% 351,437 54% 207,526 100% 493,451 67%
PAID BY TIF 0 0 305,454 0 246,356
GRAND ROUNDED FOR
TOTAL BY PROJECT 2,558,381 22,491 656,891 207,431 _ 739,807 TOTAL ISSUANCE ANNUAL +/- CUMULATIVE +/-
Nov-89 0 0 0 0 0 0 0 0 0
Nov-90 0 2,811 82,111 25,929 0 110,852 110,000 852 852
Nov-91 319,798 2,811 82,111 25,929 61,651 492,300 475,000 17,300 18,151
Nov-92 319,798 2,811 82,111 25,929 61,651 492,300 500,000 (7,700) 10,451
Nov-93 319,798 2,811 82,111 25,929 61,651 492,300 500,000 (7,700) 2,751
Nov-94 319,798 2,811 82,111 25,929 61,651 492,300 500,000 (7,700) (4,949)
Nov-95 319,798 2,811 82,111 25,929 61,651 492,300 475,000 17,300 12,351
Nov-96 319,798 • 2,811 82,111 25,929 61,651 492,300 475,000 17,300 29,651
Nov-97 319,798 2,811 82,111 25,929 61,651 492,300 475,000 17,300 46,950
Nov-98 319,798 0 0 0 61,651 381,448 400,000 (18,552) 28,399
Nov-99 0 0 0 0 61,651 61,651 75,000 (13,349) 15,049
Nov-2000 0 0 0 0 61,651 61,651 75,000 (13,349) 1,700
Nov-2001 0 0 0 0 61,651 61,651 75,000 (13,349) (11,650)
Nov-2002 0 0_ 0 ---�--- 0 61,651 61,651 50,000 11,651 1
2,558,381 22,491 656,891 207,431 _-- 739,807- 4,185,001 4,185,000 1
IMPDS
ISSUE: $4,185,000 GENERAL OBLIGATION IMPROVEMENT BONDS 1988
PURCHASED BY:
IIPREPARED BY: MERICOR FINANCIAL SERVICES, INC.
05-Oct-88
DATED 01-Nov-88 I
CALLABLE 01-Nov-95 AT 100
FORECASTED FORECASTED
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PRINCIPAL COUPON INTEREST P & I
Nov-89 0 274,735.00 274,735.00
II
Nov-90 110,000 6.10% 274,735.00 384,735.00
Nov-91 475,000 6.20% 268,025.00 743,025.00
Nov-92 5001000 6.30% 238,575.00 738,575.00 I
Nov-93 500,000 6.40% 2071075.00 707,075.00
Nov-94 500,000 6.50% 175,075.00 675,075.00
Nov-95 4751000 6.60% 142,575.00 617,575.00
Nov-96 4751000 6.70% 111,225.00 586,225.00 II Nov-97 475,000 6.80% 79,400.00 554,400.00
Nov-98 400,000 6.90% 47,100.00 447,100.00
Nov-99 75.000 7.00% 19,500.00 94,500.00
Nov-2000 75,000 7.10% 14,250.00 89.250.00 II Nov-2001 75,000 7.10% 8,925.00 83.925.00
Nov-2002 50,000 7.20% 3,600.00 53,600.00
4,185,000 1,864,795.00 6,049,795.00 II
BOND YEARS 27,945.00
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AVERAGE COUPON 6.67309%
AVERAGE MATURITY 6.68 YEARS I
NET EFFECTIVE RATE 6.96512%
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EXTIFSU1
' CHANHASSEN MIt SOTA
' 1988 MUNICIPAL BONDING PROGRAM
05-Oct-88
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$740,000 GENERAL OBLIGATION TAX INCREMENT BONDS OF 1988, SERIES, 2
PROJECT COSTS (FROM CITY)
1 * 86-11 DOWNTOWN REDEVELOPMENT PUBLIC IMPROVEMENTS
LAND ACQUISITION (NO CAPITALIZED INTEREST NEEDED) 700,000
ISSUANCE EXPENSES
' BOND COUNSEL 3,000
REGISTRAR & PAYING AGENT 10,000
II FINANCIAL PRINTING 2,500
' MOODY'S RATING 2,000
FINANCIAL ADVISOR 8,070
UNDERWRITING DISCOUNT 14,430
' SUBTOTAL 40,000
GRAND TOTAL FOR ISSUANCE 740,000
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ISSUE: $740,000 GENERAL OBLIGATION TAX INCREMENT BONDS 1988,
SERIES 1 I
PURCHASED BY:
PREPARED BY: MERICOR FINANCIAL SERVICES, INC. I
05-Oct-88
DATED 01-Nov-88 11 CALLABLE 01-Nov-94 AT 100
FORECASTED FORECASTED
PRINCIPAL COUPON INTEREST P & I I
Nov-89 15,000 6.00% 49,700.00 64,700.00
Nov-90 25,000 6.10% 48,800.00 73,800.00
II
Nov-91 50,000 6.20% 47,275.00 97,275.00
Nov-92 50,000 6.30% 44,175.00 94,175.00
Nov-93 50,000 6.40% 41,025.00 91,025.00
Nov-94 50,000 6.50% 37,825.00 87,825.00
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Nov-95 50,000 6.60% 34,575.00 84,575.00
Nov-96 75,000 6.70% 31,275.00 106,2275.00
Nov-97 75,000 6.80% 26,250.00 101,250.00 II Nov-98 75,000 6.90% 21,150.00 96,150.00
Nov-99 75,000 7.00% 15,975.00 90,975.00
Nov-2000 75,000 7.10% 10,725.00 85,725.00
Nov-2001 75,000 7.20% 5,400.00 80,400.00
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740,C00 414,150.00 1,154,150.00
BOND YEARS 6,040.00 II
AVERAGE COUPON 6.85679%
IIAVERAGE MATURITY 8.16 YEARS
NET EFFECTIVE RATE 7.09570% I
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II EXTIFSU
CHANHASSEN, MINNESOTA
1988 MUNICIPAL BONDING PROGRAM
05-Oct-88
' $1,015,000 GENERAL OBLIGATION TAX INCREMENT BONDS OF 1988, SERIES, 3
PROJECT COSTS (FROM CITY)
I * 88-20 DRAINAGE IMPROVEMENTS 697,846
ADMINISTRATIVE LEGAL AND ENGINEERING FEES
FEES EQUAL TO 30% OF CONSTRUCTION COST 209,354
ICAPITALIZED INTEREST (NET) * 62,155
II TOTAL PROJECT COSTS 969,354
ISSUANCE EXPENSES
R
IGISTRACOUNSEL& AGENT 10,000
FINANCIAL PRINTING - 2,500
MOODY'S RATING 2,040
FINANCIAL ADVISOR 8,353
UNDERWRITING DISCOUNT 19,793
II SUBTOTAL 45,646
GRAND TOTAL FOR ISSUANCE 1,015,000
* CALCULATED AS FOLLOWS:
CONSTRUCTION AMOUNT (AUDOBON ROAD ONLY) 907 200
ISSUANCE COSTS PLUS DISCOUNT 1.05
' APPROXIMATE TOTAL BY PROJECT
B 952,560 7.25%
ANNUAL INTEREST 69,061
11 ' YEARS NEEDED 1.00
INTEREST REQUIRED 69,061
' FACTOR NETTING INTEREST EARNINGS CREDIT 90.00%
NET CAPITALIZED INTEREST NEEDED 62,155
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ISSUE: $1,015,000 GENERAL OBLIGATION TAX INCREMENT BONDS 1988,
SERIES 2 1
PURCHASED BY:
PREPARED BY: MERICOR FINANCIAL SERVICES, INC.
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05-Oct-88
DATED 01-Nov-88
ICALLABLE 01-Nov-94 AT 100
FORECASTED FORECASTED
PRINCIPAL COUPON INTEREST P & I I
Nov-89 0 6.00% 66,790.00 66,790.00
Nov-90 15,000 6.10% 66,790.00 81,790.00
Nov-91 50,000 6.20% 65,875.00 115,875.00
Nov-92 75,000 6.30% 62,775.00 137,775.00
Nov-93 100,000 6.40% 58,050.00 158,050.00 I
Nov-94 150,000 6.50% 51,650.00 201,650.00
Nov-95 200,000 6.60% 41,900.00 241,900.00
Nov-96 200,000 6.70% 28,700.00 228,700.00
Nov-97 225,000 6.80% 15,300.00 240,300.00 1
1,015,000 457,830.00 1,472,830.00
BOND YEARS 6,905.00 I
AVERAGE COUPON 6.63041%
IAVERAGE MATURITY 6.80 YEARS
NET EFFECTIVE RATE 6.91705% I
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CITY OF
fr CHANHASSEN
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937-1900
1
MEMORANDUM
TO: Mayor and City Council
Housing and Redevelopment Authority
(Note to HRA: This is being sent as an overview
of 1988 bonding. You may wish to skip to Rosemount/
Tax Increment sections . )
' FROM: Don Ashworth, City Manager
' DATE: September 12 , 1988
SUBJ: Set Special Meeting Dates:
1 - Fire Station/Equipment Bonds of 1988 , September 15
- Budget Worksession, September 19
- General Obligation/Tax Increment Bonds of 1988 , Nov. 7
1
1 Background
In February voters approved "voted bonds" totaling $2 million
(Fire Station - $900 , 000; aerial fire truck - $450,000; Lake Ann
' Park - $300 , 000; and Parks in southern Chanhassen - $300 ,000;
Bonding costs - $50,000) . The sale of those bonds was purposely
delayed until fall when it was anticipated that bids would be
1 received for both the fire station and city hall. Setting simi-
lar time lines is desirable to insure that bonds are not sold
only to find that the building estimates are 100% low; or, in
1 contrast, that the contract is awarded for construction and it is
impossible to sell bonds . At that time is was known that 1988
would be a large bonding year recognizing projects underway
(Kerber Blvd. , West 78th Street Detachment, Church Road, etc. ) as
' well as anticipated tax increment bonds for 1988 . The develop-
ment of proposals and reaching agreement with both McGlynn and
Rosemount simply worsened over bulging workloads . I think we
1 will make it out of the woods, but not without some scars for
trying to do too much too soon.
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Mayor and City Council
September 12 , 1988
Page 2
Set Special Meeting Date, Fire Station and Equipment Bonds of
1988 , September 19: If I were a Council member, I would question
this item. The last piece of correspondence received by the
Council stated that we were seeking authorization to take bids
for our 1988 bonding program and that the details of such would
be presented on September 12th - such being well in advance of an
anticipated sale in late September/early October. Why then is
there nothing included on the September 12th agenda detailing the
bond sales and, instead, a recommendation being made to award
bids at a special meeting on September 15th? [Note: If
September 15th is unacceptable, we can move a few days on either
side of such. ]
Most of the time I will take the fall on goof-ups as appear to be '
portrayed in the above paragraph. This time I won' t. I' ll let the
State take its own lumps . Specifically, we had moved towards a
"voted bonds" sale to approximate the date of the award of bids
for the fire station. It was not until approximately two weeks
ago that we were notified that the approving attorneys would not
approve any bond sale associated with "voted bonds" . The reason
for such is complicated and stems from the legislature' s desire
to move from "real property values" to "tax capacities" . In
essence, the legislature deleted all sections of state law that
refer to real property or the assessed value. State statutes, as
the Council is aware, are voluminous . The legislature did a
fairly good job in catching 95% to 99% of all sections of state
law which refer back to real/assessed values. Unfortunately,
Section 619 (voted bonds) was missed in that review process.
Section 619 establishes the full faith and credit of the munici-
pality as the guarantee for repayment of voted bonds. To make
that guarantee, the statute goes on to define how the assessor is
to divide the monies necessary by the real/assessed values in
determining what percent of the voted bonds is directly attribu-
table
to each parcel within the community. Therein lies the
problem - there is no real property. There is no assessed value.
Accordingly, there is no general obligation and there is no
requirement for your property or mine to stand behind those bonds
if a default were to occur. This would appear to be a tech-
nicality type of issue which could be administratively corrected.
Such is not the case. Moody' s would withdraw its designation of
legal firms (only a handful exist within the State of Minnesota
including the LeFevere Firm used by our City) if it were known
that that firm misstated the guarantees backing the sale.
To say the least, this office was extremely distressed with the
notification from the LeFevere Firm. Only one course of action
seemed reasonable - scramble. Section 429 of Minnesota Statutes
allows for "negotiated sales" for issues otherwise permitted by
law, but being of such minor value as to not warrant the full
bidding process . Limitations on negotiated sales are based upon
a percent of the total valuation within the community. This
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' Mayor and City Council
September 12, 1988
Page 3
1
section of the statutes had been "fixed" . Accordingly, the
City does have the authority to sell negotiated bonds up to $1.2
' million. It was my decision to move ahead with the sale of the
fire station bonds and one-half of the equipment certificate
bonds (recognizes that the City must pay up to one-half of the
cost of the aerial truck at time of award and recognizing that
' the probability of significant expenditures for either Lake Ann
or parks in southern Chanhassen would be unlikely in 1988) . I
did and do firmly believe that it is imperative that we lock in
' on the good bidding climate for the fire station and have the
funds available to make payments to the contractor. However,
this new process did alter the direction Mr. Merry was moving
1 and the work tasks needed to be completed. All issues could not
be ready for market including the changed direction in how voted
bonds would be handled. Faced with what I considered to be
little choice, I instructed Andy to move forward with the nego-
tiated sale. The movement to September 15th for the negotiated
sale simply gives us a better opportunity to start that project
earlier than waiting until early October. I am very confident
' that Andy can demonstrate to the City Council that the bids to be
received through the negotiated sale process will be as good
as any bids received through an advertised bidding process.
Council members should feel free to pull this item off of the
agenda if September 15th is not acceptable to a majority of the
Council ( only item to be considered that afternoon - 5 : 00 p.m. ) .
' Special Assessment Bonds, 1988: The agenda shows these as
general obligation bonds of 1988 . What they truly are are spe-
cial assessment bonds guaranteed by the value of the property
' being assessed. For the most part, very little risk exists with
special assessment bonds .
This years general obligation bond sale represents an average
year. Projects include Kerber Blvd. , West 78th Street
Detachment, Church Road, etc.
Rosemount/McGlynn Tax Increment Bonds of 1988: The City Council
is fully aware of the intent and purpose of selling bonds asso-
ciated with the McGlynn Industrial Park, i .e. upgrading of
Audubon Road to industrial standards . Unfortunately, I have not
kept the City Council as well informed on the negotiations
associated with Rosemount. It was my belief that the nego-
tiations carried out by the Housing and Redevelopment Authority
should be treated similar to other decisions made by the HRA to
stimulate development of the grocery complex, hotel, or Retail
' West. [ Note: Rosemount is proposed to be located within the
existing HRA Tax Increment District and, accordingly, would
appear to come within their jurisdiction of negotiations
regarding land acquisitions/public improvements . Although all of
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Mayor and City Council
September 12, 1988
Page 4
that is correct, the attorneys properly note that the final
approval of any bond sale must be authorized by the City Council .
As the Council had not been involved with each step of the deve- '
lopment process , I feel like I am now asking the Council to
finish the game playing with only a half deck of cards . ]
Basically the Rosemount and McGlynn proposals are exactly the
same. HRA policy has been one of offering an incentive to a new
business coming into the community equal to 3-4 years of taxes from
that facility. Typically, the amount of money generated is
equivalent to the special assessments that may be placed against
the property, i .e. Fluoroware, DayCo, Chanhassen Lakes Business
Centres I and II, Roos, etc. In the case of Rosemount, the
amount of taxes generated was far in excess of any other type of
proposal previously considered. In that instance, the HRA was in
a position to offer to purchase the lands necessary for
Rosemount' s development as a part of the proposal and still meet
existing criteria. What the Council will be looking to approve
is a tax increment bond sale equalling approximately $1.8 million.
Although this may sound high, it should be noted that the pro- '
perty taxes guaranteed to be generated off of this facility are
approximately $840 ,000 per year. In addition, both McGlynn and
Rosemount have agreed to pay taxes in advance of when they might
ordinarily be required to pay such, i .e. given the size of both
McGlynn and Rosemount construction projects, they would not nor-
mally start paying taxes until 1991. Recognizing that the City
would have interest payments that are payable in both 1989 and
1990 , both firms have agreed to make tax payments equal to those
interest payments in advance of when they would ordinarily start
making tax payments . The 3 year period would then start when
first full taxes were normally due.
It should be noted that the actual repayment schedule has been
set for a longer period of time than would actually be needed to
repay the debt. This was solely to protect the City. The State
Legislature continues to change rules and too often does not con-
sider the implications on an individual city. For example, the
legislature nearly approved reducing the revenues available to
districts , such as ours, by 40% two years ago. That idea is
still well and alive in St. Paul. It is imperative that we pro-
tect
the financial integrity of the City while similarly allowing
us to have the option of closing debt if our projections prove
correct. The proposed schedule by Mr. Merry accomplishes both
goals . Specifically, the repayment is scheduled for 8 years
following the date of full payment of taxes , but the City main-
tains the right to call those bonds five years prior to
maturity. '
Tax Increment Bonds of 1988: Both the HRA and City Council will
be asked to approve tax increment bonds for the downtown project
equalling approximately $800 ,000 . Before someone says "I am
,
' Mayor and City Council
September 12 , 1988
Page 5
surprised" , let me jog memories. Lot 8 ( see attached map -
I Frontier Development Park, West 79th Street) was shown in the
initial feasibility study as a partial taking. After approving
bonds, prior to commencing construction, staff recognized that
the taking as outlined simply did not make sense. Specifically,
' the amount of land being taken for pond and roadway purposes
would be so severe so as to result in "severance" damages equal
to or exceeding the land remaining. The remaining land simply
' could not be built upon and would be far better coupled with Lot
7 (proposed for a total taking) . It was this plan modification
which Mr. Burdick challenged in court and attempted to portray
and that the City had doctored its records so as to prevent him
from seeking higher values. In actuality, there is nothing wrong
with a city modifying its initial feasibility study prior to com-
mencing land acquisitions and the court found that Mr. Burdick' s
positions were totally false. However, such did add approxima-
tely $50 ,000 to land acquisition costs . Similarly, Lot 6 was
anticipated in the original feasibil-ity study to only be a par-
tial taking. In negotiating with the then property owner
' (Chanhassen State Bank as a receivership from a default) , it was
learned that the Bank would be required to sell both parcels
(proposed total acquisition of Lot 7 as well as partial acquisi-
tion of Lot 6 ) as one unit sale. Their estimated land costs were
approximately $1 . 70 per sq. ft. and were willing to sell at a
$1.75 . This position was presented to the Housing and
' Redevelopment Authority and it was felt that purchasing both lots
at current market values made far greater sense than having the
bank sell said lots to another individual and look to condem-
nation of Lot 7 and partial condemnation of Lot 6 . That deci-
sion, as wise as it was , did add approximately $200 , 000 to land
costs over those anticipated in the feasibility study. Finally,
Mr. Renner (owner of Lot 6 ) approached the City stating that the
' current option agreement he had on his property was nearing
expiration. Before he started resale processes, he questioned
whether the City had reasons of its own for acquiring that par-
cel. Again, he would be willing to sell for the same amount as
' shown in that option agreement - $1.75 per sq. ft. Staff pre-
sented this proposal to the Housing and Redevelopment Authority
concluding that although a specific use had not been identified,
' that the overall intent of the redevelopment plan would be
enhanced by such acquisition. The HRA approved that acquisition
- such adding approximately $200 , 000 to original feasibility
study estimates . I can detail a number of other arenas where
costs exceeded original estimates . For the most part, we can
live with these with the one exception of the NSP undergrounding
cost element. BRW correctly assumed that this would be a minor
' cost factor based upon their previous experience. What was
unknown is the change in policies made by NSP and the number of
cities that were seeking undergrounding at little or no cost -
' such representing a primary factor in NSP holding to its newly
adopted policies . In total, $330 ,000 was being sought by NSP
MEM
Mayor and City Council '
September 12 , 1988
1 Page 6
for
� such undergrounding. Mayor Hamilton may wish to remind the
Council of the numerous sessions that he participated in and his
statements regarding those policies . The bottom line is that the
City negotiated that figure down to $110,000 - a cost not antici-
pated in the original feasibility study.
Except for the last item noted in the above paragraph, all other
added costs associated with the proposed tax increment bonds of
1988 represent new assets of the HRA/City. I firmly believe that
the HRA has assets ( land values) on West 79th Street well in
excess of $1,000 ,000 - such easily covering the $700,000 in addi-
tional expenditures . As the HRA is aware, staff has already
brought to the commission two bonafided developers who would be
willing to pay approximately $2 .50 per sq. ft. for the HRA' s
ownership - such not including the specific development proposals
which would generate anywhere from $100 ,000 to $200 , 000 per year
in new taxes . Although either of these two proposals may warrant
some consideration for land write-downs , it may be advisable for
both the HRA and City Council to consider the agony that each
feels with authorizing $700,000 to $800 ,000 in tax increment
bonds of 1988 . In addition, hopefully, the above dissertation
will re-emphasize the fact that the Bernie Hanson proposal does
not make good logical financial sense for our community, i .e.
his request is that the City allow him to construct one-half of
the previously approved building and to have the City give him
the land as well as make site improvements ( the HRA denied this
request) . I am very much in favor of keeping Mr. Hanson within
our community; however, we must maintain the financial integrity
of our community and must seek means by which we insure that the
cross which we are now being asked to finance can be recouped.
In conclusion, I believe all costs with the downtown project have
stayed within budgets (as modified) . However, I must warn the
Council and HRA that this could change if the settlements being
sought by Burdick, Pauly, and Kallestad are given. I believe our
appraiser, Swenson-Bjorkland and Associates, did a professional
job. I am hopeful that their work will be sustained.
1
I ' - .
DEBT ANALSIS REPORT
` ORIGINAL PRINCIPAL: $1,775,000 REVENUES,EXPENDITURES,& REQUIRED TAX LEVIES
INTEREST RATE: 9.5X FUND Updated: 04-Oct-88
STARTING YEAR: 1988 ROSEMOUNT TI BONDS OF 1988 06:28 PM
ENDING YEAR: 1998
I1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 TOTAL
BEG. FUND BAL $199,752 $9,512 $71,446 $666,384 $1,242,884 $1,778,284 $2,327,184 $1,739,734
IREVENUE/TRANS.
Proceeds/Trans $ $199,752 .
Interest
IScheduled Levies
Tax Increment $225,00 0 $833,000 $833,000 $833,000 $833,000 $833,000
Allow Del
'TOTAL REVENUE $199,752 $0 $225,000 $833,000 $833,000 $833,000 $833,000 $833,000 $4,589,752
'`LXPENDITURES
Debt Pymts
June 1st - PRIN
IINT $95,120 $81,533 $81,531 $78,250 $73,800 $67,050 $60,225 $537,509
Nov. 1st - PRIN $75,000 $100,000 $150,000 $150,000 $1,300,000 $1,715,000
INT $95,120 $81,533 $81,531 $78,250 $73,800 $67,050 $60,225 $537,509
Agent Fee
$0
1 TOT. EXP'S $190,240 $163,066 $238,063 $256,500 $297,600 $284,100 $1,420,450 $0 $2,850,018
ENDING BALANCE $199,752 $9,512 $71,446 $666,384 1,242,88 $1,778,284 $2,327,184 $1,739,734 $1,739,734 $1,739,734
BAL. CONSISTS OF:
I5X Req. Res. $9,512 $8,153 $11,903 $12,825 $14,880 $14,205 $71,023 $0
TOTAL .
\,
!OST TO DEFEASE $1,295,807 $-,299,47.. $1,253,429 $1,203,704
I
I
I0 / ,, ,,.// '.t c.r 7e7s.e,
IQ 40.-d.t C..w /i/lt/y O..r_ de.S 4-c..e ...,( e914- 0-
of /992 /i,,.i 1993
I
CITY 'OF
--�---
II
CHANHASSEN
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937-1900 '
MEMORANDUM
TO: Mayor and City Council
FROM: Don Ashworth, City Manager
DATE: August 22 , 1988
SUBJ: Set Date for Bond Sale, Various City Bonds
Staff has been working to identify all bonding needs as a part of
our 1988 bonding program. As we discussed with the scheduling
associated with Lake Ann Expansion, the Fire Station, and the
aerial truck, bonds needed to be sold this year. In addition, we
will be looking to equipment certificates to pay back the
Equipment Replacement Fund for acquisitions which have occurred
during the course of 1988. [Equipment certificate notes can only
be sold after the expenditure has been made by the City. The
total is anticipated to be less than budgeted for 1988 . ]
In addition to the above, we will be looking to public improve-
ment bonding for authorized projects , i .e. Kerber Blvd. , Audubon
Road, Church Road, and West 78th Street Detachment.
We have been working so as to present this item on September 12, '
1988. Mr. Merry informs me that that date can be met as far as
presenting all detail; however, such would not meet the statutory
publication requirements . Accordingly, I must ask the City
Council to, at this time, set October 3rd as the official bid
opening date for the bonds of 1988 . The detail associated with
the sale will, again, be presented on September 12, 1988 . Should
there be disagreement or changes desired by the Council on
September 12th, such changes could be made without affecting
either the October 3rd date or the authorization being sought
this evening.
Approval of setting a special meeting date of October 3rd for the
award of bids 1988 bonds is recommended. As this would be an off
Monday night, the Council may wish to either leave it at a 7 : 30
p.m. time frame (potential discussion of 1989 budget incorporated
into such meeting) , or to set the meeting at an earlier time with
such being the only item on the agenda, i .e. 5 : 00 p.m. or 5 : 30
p.m. '�
'D'`) 1k