09-22-14 Council Packet - Laserfiche WebLink

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$1,510,000 Improvement Portion Description of Purpose PURPOSE: AUTHORITY: SECURITY AND SOURCE OF PAYMENT: Proceeds of the Improvement Portion plus other cash sources of funds totaling $818,207, will be used to finance (i) an extension of 21st Avenue north of Main Street, including signal improvements and the extension of utilities (water, sewer and stormwater) and trails, and (ii) infrastructure improvements to Northpointe, including paving of Cedar Street from CSAH 54, construction of 21st Avenue and Palm Street and the installation of utilities (water, sewer and stormwater) and sidewalks. Statutory Authority: The Improvement Portion of the Bonds is being issued pursuant to Minnesota Statutes, Chapters 475 and 429 and the City's home rule charter (the "City Charter"). Federal Considerations: Federal regulations permit cities to issue tax exempt bonds secured by special assessments only if the assessment procedures meet certain criteria. One of those criteria is that owners of business and non -business property must be required to pay assessments on an equal basis. The City Charter provision that applies in this area permits owners of certain residential property to "opt out" of being assessed, which does not meet the "equal basis" requirement. However, in the areas being assessed, no residential properties qualify for the "opt out" provision. The projects being financed by the Improvement Portion of the Bonds are 100% assessed against benefitted properties and all properties are being treated equitably for purposes of assessing. Therefore, the Bonds meet the requirements for tax exemption under federal tax law. The Improvement Portion will be a general obligation of the City for which the City pledges its full faith and credit and power to levy general ad valorem taxes. The projects being financed by the Improvement Portion are being 100% assessed. A general ad valorem tax levy is not expected to be required. Assessments are expected to be filed on or about October 1, 2015 for collection beginning in 2016. The total principal amount of the assessments for 21st Avenue is $340,000 and $1,170,000 for Northpointe (any adjustment to the principal amount of the Bonds on the day of sale will not change the principal amount of the assessments). Assessments have been structured with level annual payments over a term of 10 years for the 21st Avenue project and five years for Northpointe. The interest charged on the unpaid balance of the assessments will be 2.0% over the true interest cost (rate) of the each project's respective portion of the Bonds. For structuring purposes, we have assumed a rate of 4.21% on the 10 -year 21st Avenue assessments and 3.66% on the five-year Northpointe assessments. Interest due through and including February 1, 2016 will be paid with capitalized interest included in the principal amount of the Improvement Portion of the Bonds. Beginning with the August 1, 2016 interest payment, special assessments will be used to make the August 1 interest payment due in the collection year and the February 1 principal and interest payment due in the following year. STRUCTURING The 21st Avenue project has been structured to be repaid over a term of eleven years SUMMARY: (10 years of principal) and the Northpointe project has been structured to be repaid over a term of six years (5 years of principal). Principal payments on both projects are structured around the projected assessment income to achieve an approximately uniform surplus of assessment collections over the debt service payments. Springsted Page 3