Agenda Packets - 1994/03/28 - Laserfiche WebLink

Home Browse Search

City of Mounds View, Minnesota March 22, 1994 be dated May 1, 1994 and mature each February 1, 1998 through 2005. Column 6 of Schedule E shows the estimated annual savings to the City accomplished by the refunding, averaging approximately $3,824 per year. In addition to its general obligation pledge, the City pledges tax increment revenue generated by Tax Increment Financing District No. 1 and Development District No. 2, as originally pledged to the 1989A Bonds. Interest on the 1994A Bonds due through February 1, 1997 will be payable from an escrow account established upon the sale of this issue. Thereafter, the interest payments due each August 1 will be payable from the first-half collections of tax increment income and the principal and interest payments due the following August 1 will be payable from second-half collections, together with surplus first-half collections. This payment sequence will continue throughout the life of the 1994B Bonds. Werecommendthe-1994B-Bonds- maturing in the years -2004 and 2005-be callable at the - option of the City on February 1, 2003 at par. This call feature will permit the City to prepay a portion of the issue should tax increment revenue collections accrue or other City funds become available. Rebate-Arbitrage The 1994B Bonds are subject to the Tax Reform Act of 1986 and 1989 amendments concerning rebating arbitrage requirements to the U.S. Treasury. Generally speaking, all arbitrage profits (the yield difference between the earnings of the investments and the yield on the bonds) must be rebated to the Treasury. The City will not owe any rebate from investments because the refunding bond proceeds will be used to purchase yield restricted securities for the escrow account. Another potential source of rebate stems from the debt service fund to pay debt service on the 1994B Bonds. The City will be exempt from rebate from this source so long as it maintains a "bona fide" debt service fund. A bona fide debt service fund is defined as a fund which is used to achieve a proper matching of revenues with principal and interest payments within each bond year and is depleted at least once each bond year except for a reasonable carryover amount which may not exceed the greater of: 1. The earnings on the fund for the preceding bond year; or 2. One-twelfth of the principal and interest payments on the issue for the immediately preceding bond year. Any earnings from a bona fide debt service fund are exempt from rebate. A debt service fund can lose its bona fide status when the issuer accumulates too much investment earnings or if tax increment revenues, in this instance, are transferred in excess of semiannual debt service payments. It is important to monitor the debt service fund to assure compliance with the new regulations. Bank Qualification - Series 19948 Prior to the adoption of the Tax Reform Act, financial institutions were generally permitted to deduct 80% of their interest expense allocable to tax-exempt obligations. Under the Act, however, financial institutions are generally not entitled to such a deduction for tax-exempt obligations purchased after August 7, 1986. There is an exemption to this for issuers of less than $10,000,000 of tax-exempt bonds during the calendar year. These bonds meet that exemption since the City will not incur any additional tax-exempt indebtedness this year that, Page 3