03-26-2003 Council Agenda - Laserfiche WebLink

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Proposed Issue: Purpose: Term/Call Feature: Funding Sources: Discussion Issues: Schedule: City of Little Canada, Minnesota Pre -Sale Report March 26, 2003 Approximately $3,440,000 Taxable G.O. Tax Increment Refunding Bonds, Series 2003A To refinance at lower interest rates the $3,000,000 Taxable G.O. Tax Increment Bonds, Series 2001A and two •pay -as- you -go notes known as Howe and Goodyear totaling approximately $350,000. All projects are supported by tax increments from District 3 -2. The current interest rates on the existing bonds are over 7.1% (and are held by the City as an investment) and the notes are at 9.5% and 10 %. The new bonds are expected to be under 5.5 %, Present value savings should be at least $400,000 during the term of the bonds. There is a possibility that up to $1,000,000 of the bonds may be able to carry tax - exempt interest rates, which would mean two bond issues instead of one. The lower interest rates of tax - exempt bonds also come with certain restrictions. Specifically, the use of the proceeds must be for a project which the City receives no land payment for and which are not secured by an assessment agreement and a shortfall agreement with a developer. We are evaluating the legal and financial implications of structuring the Sherman development without these security provisions and still be able to minimize risk to the City. We will update the Council on these issues the evening of March 26°i. The total term of the Bonds will be slightly less than 20 years. The Bonds can be callable on August 1, 2013. The Bonds are expected to be rated by Moody's Investors Service at an "A2" level. The Bonds will be paid with tax increments from a variety of projects in District No. 3 -2 including the proposed Sherman townhomes, the proposed Sherman commercial development of 50,000 to 75,000 s.f., and existing increment from other projects within the district. Any type of up -front financing for development projects involves some level of risk. The development agreement for the Sherman developments is expected to be presented to the Council the same night as the bond sale. If progress on the development agreement is slowed or if interest rates increase significantly, the sale of the debt can be delayed. Taxable interest rates are much more variable than tax - exempt rates. There will be other City up -front financing required for the project, which is expected to be in the form of an interfund loan. This loan would have more flexible pre - payment terms as the bond but would carry approximately the same interest rate as the bond. The amount of the loan will depend upon negotiations with the developer but would approximately $700,000 to $900,000. Pre -Sale Review: Distribute Official Statement: Conference with Rating Agency: EDA Pledge Agreement and Bond Sale: Estimated Closing Date: March 26, 2003 Week April 14, 2003 Week of April 14 , 2003 April 23, 2003 Week of May 12, 2003