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NOV 07 '95 12 :45PM EHLERS & ASSOCIATES P. 2/3 , MEMO To: Joel Hanson From: Rusty Fifield Subject: G.O. Taxable Tax Increment Bonds, Series 1995B City Purchase of 2005 Maturity Date: November 7, 1995 In planning for the sale of these bonds, we have discussed the potential for the City to purchase the $300,000 of the lame maturing nn Frhnlary 1,, 1995. We have disowned this option internally, with bond counsel and with potential purchasers. This memo describes the steps to implement this change in the finance plan. We do not believe that this change inhibits our ability to conduct a competitive sale of the bonds. The terms of the offering would be amended to indicate that the City will purchase the successful bidder. This provision should simplify the transaction and make it more appealing for a purchaser. There is some risk that a bidder will attempt to play games with the interest rates because of your commitment to purchase. To provide a representative bid, we propose including the provision that the interest rate on the 2005 maturity be set at a rate 50 basis points (1 /a of 1 %) higher than the rate for 2000. This represents the typical interest rate scale for a taxable issue. Also, it has no impact on the bidder since the City agrees to purchase the bonds. This change also gives us more flexibility on the call date. The underwriter will only deal with the bonds maturing in 2000. We also propose adjusting the call date to February 1, 1999. This change allows as to call the bonds as soon as the loan is repaid and minimizes the potential for negative arbitrage. I would like the City Council to approve these changes. I have prepared a resolution for Council consideration. Please add this matter to the agenda for Wednesday's meeting. Call me with any questions. EHLERS AND ASSOCIATES, INC. 2950 Norwest Center O 90 South Seventh Street O Minneapolis, MN 55402 -4100 Tdephone 612 - 339.8291 O FAX 612.3390854 Page 7