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0 W leEHLERS LEADERS IN PUBLIC FINANCE To: Heidi Arnson, North Metro Telecommunications Commission From: Nick Anhut, Ehlers & Associates Date: February 9, 2016 Re: Proposed G.O. Financing for Capital Equipment You have asked us to provide an update on background information, procedure and considerations regarding the issuance of general obligation bonds by the City of Circle Pines to purchase $2 million in capital equipment on behalf of the North Metro Telecommunications Commission (the "Commission"). Background Under terms of its Joint Powers Agreement ("JPA"), the Commission was granted authority to issue up to $2 5 million in bonds payable solely from franchise fee revenues collected quarterly from the members. The bonds were to finance the acquisition and improvements for the public access and studio facility. The revenue bonds were refinanced for interest savings in 2012, and then prepaid in full in 2015. The Commission currently has no debt on its books. In discussion with Commission staff about the potential costs of financing a $2 million capital equipment upgrade in 2016, two options were discussed: either a Commission -issued revenue bond (similar to that used to finance the Commission's facility) or a general obligation bond issued by one of the member entities. The JPA is silent to additional debt issuance and either option would require approval from each of the members' governing bodies. It is estimated that today's fixed interest rates for a Commission -issued revenue bond would be 3.00-3.25% for a ten year term. Today's comparable market interest rate estimates for the proposed Circle Pines issue of bank qualified general obligation bonds are 1.83% for a ten year term. In total debt service payments, this difference in rates and financing costs equates to $136,700 less over the ten year term. Circle Pines Bond Issuance Under the authority of Minnesota Statutes Chapter 412, a city can issue general obligation equipment certificates or capital notes to finance capital equipment payable from a property tax levy. Cities can choose to offset this levy requirement with other available revenue sources. The debt can be repaid up to the useful life of the asset or 10 years, whichever is less. A notice is required to be published in the city's newspaper if the total principal amount financed exceeds 0.25% of its current year assessed market value. In discussion with the City of Circle Pines and its bond attorney, the City agrees to facilitate the overall financing and equipment purchase using this bonding authority as long as it 1 800-552-1171 I www.ehlers-inc.com