06/01/1992 Park Board Packet - Laserfiche WebLink

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City of Inver Grove Heights, Minnesota n August 16, 1990 year's maximum debt service reserve, which is estimated at $602,250. The $18,250 will be adjusted up or down based on actual sale results. Page 2 of Appendix I illustrates the recommended debt service repayment schedule for this issue. These bonds will be dated October 1, 1990 and will mature on December 1 of each year beginning in 1995 through 2014. You will note under column 5 we have capitalized interest which will fund the 1991 interest payments estimated at $539,835, and which will fund $318,645 of the total estimated debt service due in 1992 of $473,040. After receipt of interest income from the bond reserve, the first net debt requirement in 1992 which will be payable from gross revenues of the golf course, will be equal to $106,215. This revenue will have to be earned in 1992. After 1992, debt service for the 1993 and 1994 years of operation will represent an estimated annual $424,860 requirement. With the first principal payment of $125,000 due In 1995, the debt service will Increase to $549,860. These estimated figures nearly match exactly the estimates provided Effective Golf Course Systems Incorporated, at the time they performed the feasibility report for determining whether or not the golf course could earn sufficient revenues to pay both debt service and operating costs. We have provided that the City may retain the right to call bonds in advance of their normal maturity. On December 1, 2001, the City will be able to redeem all bonds due on December 1, 2002 and thereafter at a price of par and accrued interest. As a result, $4,715,000 of the total bond issue will be subject to early redemption should the City want to ^ refund these bonds at some point in the future when successful operating experience might make a refunding bond rateable, and thus more marketable, producing lower interest rates. We also have provided that on the day of sale the City Council may reduce the bond issue size by up to $500,000. This will serve to protect the City from issuing excess bonds if the construction bids received on September 18 are less than anticipated. Any reduction in the amount of bonds issued will reduce the annual debt service requirements which must be paid from golf course revenues, and will reduce any problem with excess proceeds which might require the City to pay an arbitrage rebate penalty after 24 months from the date of issuance. Traditionally the City has applied for a bond rating on its bond issues and currently enjoys an "A" rating from Moody's Investors Services from New York. We do not believe these bonds will qualify for a credit rating, nor do we believe they would qualify for insurance from any of the bond insurance companies. As a result, the bonds will be offered as non-rated and non- insured. This will reduce the attractiveness of this issue to investors and will require a higher than normal interest rate,when compared with the City's rated general obligation issues. Originally we had anticipated offering these bonds through a negotiated process where the City would have taken proposals from underwriters, selected an underwriter to purchase the bonds, and negotiated the terms and conditions with that underwriter. However, we determined there is no legal authority in Minnesota for negotiation of these kinds of issues and so the bonds will be offered through a public, competitive sale. We believe that the City will receive one or more bids for the purchase of these bonds unless market conditions change between now and the recommended sale date. In the event the City should not receive any bids on the bonds, the City Council could then negotiate the sale of the bonds with one or more underwriters, so long as no major terms or conditions of the bond issue would change from those terms and conditions contained in this attached Notice of Sale and the Bond Resolution. Page 2