09/25/2006 Council Packet - Laserfiche WebLink

Home Search

• • City of Lino Lakes, Minnesota September 18, 2006 Cities may issue general obligation capital improvement plan bonds pursuant to Minnesota Statutes, Section 475.53. Under this statute, the maximum annual debt service on all outstanding bonds issued for this purpose (capital improvement plan), including the Series 2006E Bonds, cannot exceed an amount equal to 0.16% of the taxable market value of the property within the City in the year the Bonds are issued. The City has no other outstanding capital improvement plan bonds. The estimated maximum debt service on the Series 2006E Bonds is $442,212; therefore the Series 2006E Bonds are within the statutory limits. This calculation is shown below. Market Value of Taxable Property for Taxes Payable in 2006 $1,736,514,000 The Series 2006F Bonds Statutory Principal & Interest Limitation 0.160% Statutory Maximum Principal & Interest $2,778,422 The proceeds of the Series 2006F Bonds will be used to refund the February 1, 2008 through 2012 maturities of the City's Water Revenue Bonds, Series 1996B, dated October 1, 1996, (the "Series 1996B Bonds "), currently outstanding in the aggregate principal amount of $1,710,000. This refunding is being undertaken to allow the City to take advantage of lower interest rates. The issuance of the Series 2006F Bonds is being conducted as a "current" refunding, in which the proceeds of the Refunding Bonds (new issue) are used within ninety days of bond settlement to redeem the remaining outstanding principal of the Prior Bonds (old issue). On February 1, 2007, the City will use the proceeds of the Bonds to redeem the remaining $1,710,000 of outstanding principal on the Series 1996B Bonds. The City will need to invest the proceeds of the Refunding Bonds for the period between the closing date and the call date (February 1, 2007) in order to achieve the savings level estimated for this transaction. The Series 1996B Bonds were originally issued to finance improvements to the City's water system. Based on current interest rate estimates, the refunding is projected to produce cash flow savings averaging approximately $11,160 annually. This results in future value savings of approximately $67,830 with a net present value benefit to the City of approximately $62,700. These estimates are net of all costs associated with the refunding. The City will begin to realize cash flow savings beginning with the August 1, 2007 interest payment. The Series 2006F Bonds will be repaid from net revenues of the City's water utility. Pursuant to Minnesota Chapter 444 and the resolution authorizing the Series 2006F Bonds, the City will covenant to maintain water rates in an amount sufficient to generate revenues sufficient to support the operation of the water utility and to pay debt service. The City is required to annually review the budget of the utilities to determine whether current rates and charges are sufficient and to adjust them as necessary. - 6 3 - Page 7