08/04/2008 Council Packet - Laserfiche WebLink

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WS — Item 3 WORK SESSION STAFF REPORT Work Session Item 3 Date: August 4, 2008 To: City Council From: Al Rolek Re: Town Center Update At the July work session staff discussed the financial implications of the special assessment delinquencies on this project. In November, 2005, the City issued $5,550,000 Taxable G.O. Improvement Bonds which were originally expected to be repaid totally out of assessments spread against the benefited properties in the Legacy at Woods Edge development project. Delinquent special assessments are likely to continue that status for some time. Discussion at the last work session centered around using an interfund loan or general tax levies to pay any debt service shortfalls. We have been in contact with the City's fiscal consultant and bond counsel in regard to the situation and have discussed possible relief mechanisms available to the City. The Bonds are first subject to optional redemption on February 1, 2016. Since the Bonds are taxable obligations under the federal tax code, the City has more flexibility in the area of advance refunding possibilities than it would if the Bonds were tax exempt. Another alternative to an interfund loan or tax levy would be that some or all of the Bonds could be advance refunded and restructured to accommodate the current and prospective revenue cash flow, subject to the provisions of Minnesota statutes with regard to advance refundings. This could include capitalizing interest for an additional period of time to avoid any net pay out of funds for debt service in the near term. This may be a rather expensive proposition over the long term as compared to the original structure of the Bonds. Interest rates may be higher today that they were in 2005, and there would surely be some negative arbitrage working against the City relative to the refunding escrow account. But it may be worth it to the City to pay more later for welcome relief in the short term. Terri Heaton of Springsted has prepared some alternatives for a debt restructuring and will be present to discuss the possibilities and related effects of this course of action. 1