09/11/2006 Council Packet - Laserfiche WebLink

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• • • City of Lino Lakes September 8, 2006 Page 2 Refinancing all of the 1998A bonds as GO CIP Refunding Bonds was estimated to save $213,314 in August. The present value savings as a percentage of the refunded debt service was 4.7 %. This is well above the 3% threshold set by the State for advance refundings. Although this is not an advance refunding, as they would be refinanced after the call date, the 3% threshold is a consideration. Annual savings through 2019 would average $21,191. Education Center Usage of Facility The Council scheduled a public hearing regarding a CIP and issuance of CIP refunding bonds, and Kennedy & Graven, Bond Counsel together with Springsted began to prepare for issuance of refunding bonds under the 2003 statute. As the underlying documents were reviewed, we became aware that the Early Childhood Education Center was leased to and operated by Independent School District No. 12 (School District) which raised a question about eligibility for funding under the 2003 CIP legislation. The CIP legislation is very narrow in its description of eligible CIP Bond improvements. It clearly includes city halls, public works facilities and public safety buildings, but it specifically excludes parks, roads, and other administrative offices. While there may be circumstances where recreational and education programs are considered part of the municipal function of a city hall, the early childhood education facility in Lino Lakes is somewhat different. First, it was specifically constructed as an educational facility, according to specifications of the School District. Second, it is leased to the School District, which operates the facility independently from the City, for a term that extends (potentially) to 2011. Third, the school district's lease payments align with the School District's share of the original facility cost. As a result, Kennedy & Graven advised staff that CIP refunding bonds would be available to refinance the portion of the existing debt related to the City Hall and Police Station, but CIP bonds could not be used to refinance the facility leased to the School District. Alternatively, the City could also review the possibility of refunding the entire 1998 debt with lease- purchase bonds through the EDA, as in the original transaction. Because this analysis was still in process at the time of the workshop on September 6, and we could only assure Mr. Rolek that the lease revenue option provided savings in the range of $180,000, it appeared that the hearing was not necessary and that savings may be less, subject to completion of the analysis. Mr. Rolek suggested canceling the public hearing on the capital improvement plans, based on the feasibilities competed at the time. Partial Refunding Option Springsted Incorporated and Kennedy & Graven continued to work to find a viable option to allow the City of Lino Lakes to capture the maximum interest savings available while complying with state and federal laws. The two most viable options were as follows: • Complete the refunding using lease revenue bonds. Present value savings had improved because interest rates dropped by about 40 basis points since the last analysis. Present value savings for this option are now estimated to be $182,665. While not as much savings as the CIP Bonds, this was substantial. • Refunding only the portion of the debt representing the city hall and police building. These two components comprise about 80% of the Civic Center Complex. The GO CIP Bonds would refund 80% of the lease revenue bonds, paying off the longest maturities of those bonds. The remaining 20% lease revenue bonds would be made up of only early maturities and would be paid in full by 2010. Upon final payment of the outstanding lease revenue bonds, title to the Civic Center Complex would transfer to the City. In order to keep debt level, smaller principal payments on the GO CIP Bonds would be made until 2010 and then starting in 2011 only payments on the CIP Bonds would be in place. With improved interest rates and selecting the longer maturities with the highest rates to refund, we were able to improve savings. Estimated savings for this partial GO CIP