08/07/2006 Council Packet - Laserfiche WebLink

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August 3, 2006 Mr. Al Rolek, Finance Director City of Lino Lakes 600 Town Center Parkway Lino Lakes, MN 55014 Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul, MN 55101 -2887 Tel: 651 - 223 -3000 Fax: 651- 223 -3002 www.springsted.com RE: Refinancing Lino Lakes Economic Development Authority 1998A (Civic Center Complex) Mr. Rolek: Background In 1998, the construction of the Civic Center Complex was financed using lease revenue bonds issued by the City's Economic Development Authority (EDA). Lease payments of an amount sufficient to cover debt service are made by the City to the EDA annually. The original issue size was $5,350,000 and the bonds have a 20 year term, maturing in 2019. Ownership of the Civic Center Complex will be transferred to the City upon final payment of the bonds. The first call date was 2/1/2006. In 2003, the Minnesota Legislature enacted into law a program that allows home rule and statutory cities to establish a capital improvement program and issue bonds for certain capital improvements without an election. Eligible improvements include city halls, public safety facilities and public works facilities. Such bonds would be general obligation (GO) backed capital improvement plan (CIP) bonds. In order to qualify projects as CIP bondable improvements, a City would need to adopt a plan following a public hearing. Upon adoption, there is a 30 day reverse referendum period. The annual debt service of bonds issued under this authority may not exceed 0.16% of market value or about $2.7 million. This level of debt service would support about $31 million of bonds. The City has not used this financing before and so the entire $31 million is available. The proposed CiP Refunding Bonds would be $3,810,000, which is well below the cap. Refunding Opportunity We have been monitoring opportunities to refinance the 1998A EDA bonds for some time. Since they are not GO backed bonds, refinancing using new lease revenue bonds results in minimal savings (non GO backed to another non GO backed bond). The estimated present value saving without converting to GO CIP bonds was estimated to be $100,739. GO backed bonds result in the lowest interest rates. Using the 2003 CIP bonding authority, the City could issue GO CIP bonds to refinance the EDA bonds too increase the resulting savings. Legal counsel has advised that the City can add the purchase of Civic Center Complex from the EDA to the CIP. Upon adoption of the CIP, the City would be authorized to issue CIP refunding bonds. Even though the facility was built prior to the CIP bond law, the purchase from the EDA occurs when the bonds are refinanced, so the 2003 law would apply. Pub11c Se tor';Adr t cars