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515 Little Canada Road, Little Canada, MN 55117 -1600 <br />(651) 766 -4029 / FAX: (651) 766-4048 <br />www.eLlittle-canada.mn.us <br />MEMORANDUM <br />TO: Mayor lllesener and Members of the City Council <br />FROM: Joel Hanson, City Administrator <br />DATE: December 13, 2013 <br />MAYOR <br />Bill Blesener <br />COUNCIL <br />Rick Montour <br />John Reis <br />Michael McGraw <br />Shelly Bass <br />ADMINISTRATOR <br />Joel R. I- lanson <br />RE: General Obligations Capital Improvement Bonds and CIP Public <br />Hearing <br />Attached is a resolution giving preliminary approval to the issuance of $2,570,000 GO <br />Capital Improvement Plan Bonds to finance the new Public Works /Park building. The <br />resolution also adopts the Capital Improvement Plan for the years 2014 through 2018 <br />(copy attached). <br />As has been previously discussed, Ehlers & Associates is recommending financing this <br />project with G.O. Capital Improvement Bonds. Doing so will allow the City to maintain <br />its existing cash reserves. Staff also believes over the 20 -year bond term, interest rates <br />are likely to rise and the use of debt versus cash will be prudent move in terms of return <br />on investment. Finally, a tax levy will not be needed to support this debt for the years <br />2015 through 2034. Rather, we will use depreciation from the Water & Sewer funds to <br />make the approximately $190,000 annual payment (note: we depreciate $300,000 of <br />costs so we will still have $110,000 per year available for other purposes). It should be <br />noted that we are making a tax levy for this bond issue in 2014. This levy is being <br />used to help us decrease reliance on Local Government Aid and represents a 3% <br />increase in our gross levy. <br />Finally, this type of bond issue is subject to a reverse referendum whereby if a petition is <br />received from Little Canada voters containing signatures equal to 5% of the voters in our <br />last general election (278 valid signatures), then the proposed bond issue would need to <br />be put to the voters to proceed with this method of financing. In lieu of that, the City <br />could contemplate other debt options or pay cash for the project. <br />Mark Ruff of Ehlers & Associates will be present to answer questions at Wednesday's <br />hearing. <br />2 <br />