1n. Bond redemption Program, Auth to Call Various Existing Bonds Ihr
in .
CITY OF CHANHASSEN
\ , ,
•
690 COULTER DRIVE • P.O. BOX 147 • CHANHASSEN, MINNESOTA 55317
(612) 937-1900
1 MEMORANDUM
TO: Mayor and City Council
FROM: Don Ashworth, City Manager
1 DATE: July 25 , 1988
SUBJ: Bond Redemption Program, Authorization to Call Various
Existing Bonds
1
Federal arbitrage regulations make it nearly impossible for a
1 City to look to a "refunding" of existing debt. Such previously
allowed refundings would save a City substantially in that higher
interest debt would be replaced with lower interest debt.
1 An alternative to a "refunding" is a "defeasance" . A defeasance
is possible if large sums exist in the debt service fund, i .e.
special assessments have been paid quicker than was originally
1 called for in the bonding resolution. A good example of where
this has occurred is in the Pheasant Hill subdivision. The City
has received nearly 100% of all special assessments levied;
1 however, the bonds will not mature for another 5 years . In this
example, the City paid nearly 8% as a net interest rate on the
bonds . The project was assessed back to property owners at 94% .
Normally, the 14% differential would assure that any tax
1 delinquencies, defaults , etc. , would be covered. Normally, early
payment would work to a City' s advantage if the bonds were sold
at a low interest rate and the City were then able to invest such
1 idle funds at a higher interest rate. In this example, the
reverse has occurred, i .e. we cannot currently achieve interest
earnings at a 94% return level.
1 Four bond issues are proposed to be defeased. The total cost of
the defeasance is approximately $1. 8 million with cash available
in the same funds equalling approximately $1 . 7 million. The dif-
ferential is proposed to be short-term funded loan via the
Improvement Bonds of 1986 which has the available cash. Benefits
of the defeasance include:
- The removal of approximately $1. 9 million from the City' s
indebtedness schedule; and
- A pure savings of $176 ,975 will be achieved through interest
payments which would not then be required to be made; and
1
"40441
Mayor and City Council
July 25 , 1988
Page 2
1
- The remaining receivables for each of the funds proposed to
be defeased would be freed-up and would be available for
other projects, i .e. nearly $600 ,000 would become available
within the next four year period of time without con-
sidering potential interest earnings .
The attached sheets , prepared by Andy Merry, generally represent
the proposed defeasance. The actual defeasance will require that
an escrow account is established wherein T-bills/other invest-
ments match, dollar-for-dollar, scheduled debt payments . As
federal rates fluctuate daily, the authorization being sought is
one of approving the proposed defeasance, using the attached
documents as a guideline, with the Manager instructed to carry
out the acquisition of the security purchases as required by
state/federal laws regarding funding of escrow accounts. If
approved, the LeFevere Law Firm will prepare the necessary reso-
lutions and they will be included in a future packet prior to
consummating the defeasance.
411110
IIPP
MN .1. 1111111 OM 1.11 MN IIIIII NMI MI ME .111 ME 1111. I= NM 1.111 IIIM IIII. 1111111
S.
I
DEF508-2
CITY OF CHANHASSEN MN. .
1988 FULL CASH DEF ASANCE PROGRAM -
18-Jul-B8 4.
ESCROW
REQUIREMENTS
ACCRUED
BONES OF BONDS OF BONDS OF BONDS OF TOTAL ESCROW DOLLAR PAR PRINCIPAL INTEREST TOTAL
PAYMENT DATE 01-Nov-76 01-Dec-77 0I-Jun-78 01-Oct-84 REQUIREMENT PAYMENT DATE CANDIDATE MATURITY COUPON YIELD PRICE AMOUNT COST 01-Aug-88 COST
01-Aug-88 14,925.00 0.00 14,340.00 0.00 29,265.00 01-Aug-88 CASH 01-Aug-88 N/A N/A 100.00 29,415 29,415.00 0.00 29,415.00
01-Sep-88 0.00 6,706.25 0.00 0.00 6,706.25 01-Sep-88 N/A 01-Sep-88 N/A N/A N/A 0 0.00 0.00 0.00
01-Dec-88 0.00 0.00 0.00 93,843.75 93,643.75 01-Dec-88 FARM CREDIT-i 01-Dec-68 7.250% 7.68% 99.23 80,000 73,925.00 966.67 80,891.67
01-Feb-89 545,925.00 0.00 534,340.00 0.00 1,084,265.00 01-Feb-89 T NOTE-2 01-Feb-89 6.250% 7.61% 93.05 1,050,000 1,041,140.63 0.00 1,041,140.63
01-Mar-89 0.00 81,706.25 0.00 0.00 81,706.25 01-Mar-89 FARM CREDIT-3 01-Mar-89 6.875% 7.82% 99.13 70,000 69,584.38 2,005.21 71,589.58
01-Jun-89 0.00 0.00 0.00 15,937.50 15,937.50 01-Jun-89 FARM CREDIT-4 01-Jun-89 7.350% 8.04% 95.13 0 0.00 0.00 0.00
01-Sep-89 0.00 4,925.00 0.00 0.00 4,925.00 O1-Sep-89 N/A Of-Sep-89 N/A N/A N/A 0 0.00 0.00 0.00
01-Dec-89 0.00 0.00 0.00 390,937.50 390,937.50 01-Dec-89 T NOTE-5 01-Dec-83 7.675% 8.08% 93.23 375,000 373,945.31 4,921.88 378,867.19
01-Mar-90 0.00 204,925.00 0.00 0.00 204,925.00 01-Mar-90 T NOTE-6 01-Mar-90 7.250% 8.15% 98.18 195,000 192,196.88 5,890.63 198,087.50
TOTAL DUE 564,850.00 298,262.50 548,680.00 500,718.75 1,912,511.25 1,799,415 1,785,207.19 13,784.36 1,799,991.56
ESCROW) INCOME AND
' CASHFLON
FARM FARM FARM TOTAL DEBT SERVICE PERIOD'.0 CUMULATIVE
INCOME DATE CASH CREDIT-1 T NOTE-2 CREDIT-3 CREDIT-4 T NOTE-5 I NOTE-6 INCOME REQUIREMENTS CASH FLOW CASH FLOW
01-Aug-88 23,415.00 23,415.00 3,265.00 150.00 150.00
01-Sep-88 2,406.25 7,068.75 9,475.00 6,706.25 2,768.75 2,918.75
01-Dec-88 82,900.00 0.00 14,765.63 97,665.63 93,843.75 3,821.88 6,740.63
01-Feb-89 1,082,812.50 1,082,612.50 1,084,265.00 (1,452.50) 5,288.13
01-Mar-89 72,406.25 7,068.75 79,475.00 81,705.225 (2,231.25) 3,056.88
01-Jurr89 0.00 14,765.63 14,765.63 15,937.50 (1,171.88) 1,885.00
01-Sep-89 7,068.75 7,068.75 4,925.00 2,143.75 4,028.75
01-Dec-89 389,765.63 395,765.633 390,937.50 (1,171.88) 2,856.87
01-Mar-90 202,063.75 202,068.75 204,925.00 (2,856.25) 0.62
23,415.00 82,900.00 1,082,812.50 74,812.50 0.00 419,296.88 223,275.00 1,912,511.88 1,912,511.25 0.62
1,1r508
CI1Y OF CH0,111SEEN, MN.
1'383 FULL CASH DEFETISANCE PROGRAM
18-Jul-GB
ORIGINAL CALL ISSUE PRINCIPAL AMOUNT DATED CALLABLE CALL BONDS PRICE PAGENT
FUND 5f28 GO IMPROVEMENT BONDS, SERIES 2 1,960,000 01-Nov l 01-F eV-89 01-Feb-83 100 NORWEST
FUND 508 CO IMPROVEMENT BENDS 900,000 01-Ucc-7 7 01-Mar-90 01-Mar-90 100 HONEST
FUND 508 GO REFUNDING IMPROVEMENT BONDS 2,390,000 16-Jun-78 01-Feb-87 01-Feb-89 100 MURWEST
FUND 515 GO IMPROVEMENT BONDS 590,000 01-Oct-84 01-Dec-89 01-Dec-89 100 FIRST TRUST
PRINCIPAL DUE PRINCIPAL TOTAL INTEREST P AND I INTEREST INDICATED
ISSUE THRU CALL DATE TO BE CALLED F RINCIP'AL DUE TO CALL DATE TO CALL DATE TO MATURITY INTEREST SAVINGS
FUND 508 G0 IMPROVEMENT BONDS, SERIES 2 125,000 410,000 535,000 29,850.00 564,850.00 87,200.00 57,350.00
FUND 508 80 IMPROVEMENT BONDS 125,000 150,000 275,000 23,262.50 298,262.50 38,212.50 14,950.00
FUND 508 60 REFUNDING IMPROVEMENT BONDS 145,000 375,000 520,000 28,680.00 548,680.00 67,730.00 39,050.00
FUND 515 00 IMPRO'VEMENT BONDS 150,000 300,000 450,000 50,718.75 500,718.75 116,343.75 65,625.00
545,000 1,235,000 1,780,000 132,511.25 1,912,511.25 309,486.25 176,975.00
CASH BONDS OF BONDS OF BONDS OF BONDS OF
REQUIREMENTS DATE 01-Nov-76 01-Dec-77 16-Jun-78 01-Oct-84 TOTAL
01-Aug-88 14,925.00 0.00 14,340.00 0.00 29,265.00
01-Sep-88 0.00 6,706.25 0.00 0.00 6,706.25
01-Dec-88 0.00 0.00 0.00 93,843.75 93,843.75
01-Feb-89 549,925.00 0.00 534,340.00 0.00 1,084,265.00
01-Mar-89 0.00 81,705.25 0.00 0.00 81,706.25
01-Jun-63 0.00 0.00 0.00 15,937.50 15,937.50
01-Sep-89 0.00 4,925.00 0.00 0.00 4,925.00
01-Dec-89 0.00 0.00 0.00 330,937.50 3390,937.50
01-Mar-90 0.00 204,9'-5.00 0.00 0.00 22204,925.00
TOTAL DUE 564,850.00 238,262.50 543,680.00 500,718.75 1,912,511.25
1
T
NM IIIIII MI 1111111 111111 IIIMI ME ME 1111. ME ME 111111 1111111 MN IIIIII MN 111111 IIIIII
LJMMARi OF FINANCIAL RESOURCES
"ti
(ROM SFP7FMEER yr757 Dc97 SFRVICF STUDY) 7U:7.. -.- �t .cic IOTA_
�! rL
JAN 1, 1968 BALANCE 1,693,OG.- 335,499 2,0 8,499
FIRST HALF RECEIPTS FROM COUNTIES 9:,746 1',721 103.-27
DISBURSEMENTS THRU JULY 15, 1988 (455,580) (1E,844) (475,424)
SUBTOTAL 1,3^_3,166 328,436 1,556,602
INTEREST EARNED THRU JULY 15, 1988 37,170 9,854 47,024
IAPPROXIMATE JULY 15, 1988 BALANCE L.-- -- ______` 1,365,335 338,290 1,783,626
' FUNDS AVAILABLE JULY 15, 1988 1,703,626
FUNDS NEEDED TO FUND DEFEASANCE ESCROW 1,799,992
SURPLUS (DEFICIT) (96,36G)
ITRANSACTION COSTS
ESCROW AGENT (7,500)
LEGAL (2,500)
II ACCOUNTING (5,000)
FINAN:IAL RDVISOR (15,000)
(30,000) •
ITOTAL SHORTFALL (122,366)
LOAN FROM FUND 517 125,366
IINE7 SURPLUS (DEFICIT) - 0
LOAN REPAYMENT PLAN (100% ASSESSMENT
I COLLECTIONS, NO INTEREST EARNIN3S)
LOAN RNOUT (DUE FUND 517) CUMULATIVE
,3 -
1986 SECOND HALF RECEIVABLE FROM
� NTT 91; 6
,;�. .ES iFUt�'D 508) 74
' 1985 SECOND HALF RECEIVABLE FROM - -
COUiJTI E (FUND 515) `!_r
DEC. 31, 1988 LOAN AMOUNT/SURPLUS (22,839) (22,639)
I 1989 RECEIVABLE FROM COUNTIES (FUND 508) 173,260
585 RECEIVABLE FROM COUNTIES (FUND 515) 1::,.775
DEC. 31 1983 SURPLUS' 715
II , _ L'J 183,..Jt 1:r3,r.
1990 RECEIVABLE FROM COUNTIES (FUND 163,25O
1990 RECEIVABLE FROM COUNTIES (FUND 515) 13,29
I DEC. 31, 1990 SURPLUS 175,558 340,277
1991 RECEIVABLE FROM COUNTIES (FUND 508) 15:,345
1991 RECEIVABLE FROM COUNTIES (FUND 515) 13,298
I DEC. 31, 1991 SURPLUS
164,643 504,920 •
1992 RECEIVABLE FROM COUNTIES (FUND 508) 74,193
1992 RECEIVABLE FROM COUNTIES (FUND 515) 13,298
IIDEC. 31, 1992 SURPLUS 89,494 594,414
1993 RECEIVABLE FROM COUNTIES (FUND 508) 8,251
1993 RECEIVABLE FROM COUNTIES (FUND 515) 13,298
1 DEC. 31, 1993 SURPLUS 21,559-
615,973
1994 RECEIVABLE FROM COUNTIES (FUND 508) 6,542
I 1994 RECEIVABLE FROM COUNTIES (FUND 515) 13,298 -_
DEC. 31, 1994 SURPLUS 21,840 637,313
1995 RECEIVABLE COUNTIES _, '' 0
_ FROM OUNviI (FUND 508) . =
II 19SE
RECEIVABLE FROM COUNTIES (FUND JiJi .,,_r..
DEC. 31, 1995 SURPLUS 2.298 551.111