HomeMy WebLinkAboutLegal and Fiscal - Bond Correspondence ROBERT J.CHR ISTIANSON THOMASL.MMER F A E G R E Sc BENSON J.B,FAEG RETE ETIEEOI
GEORGE D.MCCLINTOCK JOSEPH M.PRICE
NAT A,DRAKE W,SMITH SHARPE,JR,
DONALD
DONALD L.ROBERTSON PHILIP S.CARON JOHN C.BENSON
WRIGHT W. BROOKS JOHN F.BEUK EMAPAUL CHRISTOPHERSON
RODGER L.NOROBYE WALTER J.DUFFY,JR, 1300 NORTHWESTERN BANK BUILDING JOHN B.FAEGRE,JR.
GEORGE E.HARDING JAMES P.STEPHENSON COUNSEL .I
JOHN S.HOLTEN F.REID CARRON
R.W.OELKENINGHAM JOHNI KDKELLY
.STEFFEN MINNEAPOLIS, MINNESOTA 55402
ERWIN MITCH GOLDSTEIN CHARLES E.BOHLEN,JR.
JAMES A.HALLS JOHN B,GORDON
GERALD T.FLOM THOMAS M.MAYERLE
CHARLES L.HORN THOMAS G.MORGAN
JACK D.GAGE JOHN D.SHIVELY 612/371-5300
PETER W.ANSON EDWARD G.HEILMAN
JAMES FITZMAURICE JOHN H.HINDERAKER
GORDON G.BUSDICKER ROBERT L.SCHN ELL,JR.
JOHN D.FRENCH RICHARD A.N ELSON
RONALD B.HEMSTAD BRIAN B.O'NEILL
NORMAN R.CARPENTER WILLIAM R.BUSCH,JR.
LAWRENCE C.BROWN BONNIE M.FLEMING
MARTIN N.BURKE HENRY F.FRISCH
JOHN E.HARRIS LOREN F.HART
PAUL T.BIRKELAND RANDY L.MILLER
DAVID M.BEADIE OP A.ROCKWELL
RICHARD C.SOSBY,J R PATRICK B.BAUER
THOMAS M.CROSBY,JR, JACK M. FRIBLEY
JAMES T,HALE JOHN S.JAGIELA
LUDWIG B.GAR. NER,JR. DAVID B,DEAN October 31, .1979
JAMES LOKEN JOHN P.BORGER
L.DO
ARTHUR HEIDI M.HOARD
DUANE W.. K O KE DAVID PEA RS ON
GEORGE W,.FLYNNFNLYJAMES G G.RAY
JAMES A,V.
FORCI M RICHARD A.S.
ANG
JAMELDE
ES
V.AMPLE R MARGARET N ANGLE
JAMES.BEIHO FE STEVEN R.ANDERSON
DALE E.R.
KI CHAK JAY D.ES S.FE NSEN
PETER R.K LUM CHARLES S.LERRELL
GALE R.MELF.
BURT DAVID F.
MILLER
BRUCE F,BURTON MARK F, ENG EBRETSON
JERRY W.SNIDER JAMES A.
H ENDRIK De JONG RICHARD T.T, THO OM SON
STEPHEN ROSHOLT
FRANK BUTLER
GORDON
BRUCE A. RMAN
H.HA
MICHAEL H. RPER,JR.
Mr. Duane McCarty, Mayor
Members of the City Council
City of Mounds View
City Hall
2401 Highway 10
St. Paul, MN 55112
Re: Proposed Home Rule Charter
Dear Sirs:
At your request we have examined the copy of the
proposed Home Rule Charter, dated October 11, 1979, to
consider the effect which the Charter, if adopted, would
have on future bond financing by the City.
In general, the Charter provides more complex
procedures than the procedures provided by Minnesota law for
statutory cities. This will inevitably cause some increase
in the time and effort and therefore the expense involved in
following and establishing compliance with the procedures to
the satisfaction of bond counsel. In addition, until Minnesota
municipal bond dealers become familiar with the City' s new
procedures, some educational effort will be required to
fully explain these procedures to the satisfaction of bond
dealers so that they will not hesitate to bid on the City' s
bonds under the new Charter.
However, subject to certain specific problems
mentioned below, we think in most instances the City will be
able to obtain financing and sell its bonds on the market
and the City' s bond counsel will be able to provide the
necessary approving legal opinion under the procedures of
the new Charter if it is approved by the voters. In particular,
the procedures required for public improvements and special
assessments under Chapter 8 of the Charter are not much
different from the procedures required by South Dakota state
law for special assessment bonds except for the somewhat
longer periods of time established by the Charter.
Mr. Duane McCarty
Page 2
October 31, 1979
However, there are certain specific problems which
may arise (and in other places have arisen) under the
Charter language, including the following:
1. Section 7 . 05 requires a long term financial
plan. The plan must be adopted after public hearing, apparently
annually, by ordinance. The Charter does not indicate
whether failure to include a capital project in the long
term financial plan will prohibit the construction and
financing of that project during the year pursuant to a bond
election or special assessment proceedings, nor does it
indicate whether the plan can be amended during the year.
This problem could be a source of concern to your bond
counsel and may need to be resolved by litigation if the
situation arises.
2. Similarly, Section 7. 07 prohibits the incurring
of any obligations of the City unless an appropriation has
been made in the budget resolution and there is a sufficient
unexpended balance. The Charter does not say that this
prohibition is limited to obligations incurred in anticipation
of collection of taxes or other ordinary revenues. Arguably,
it could apply to obligations to be paid from bond proceeds,
and unless bond proceeds are appropriated in the budget resolution
itself, it might be contended that the Charter would be
violated. If bond proceeds cannot be spent for the purpose
for which they were voted or otherwise authorized, bond
counsel would hesitate to approve the issuance of the bonds.
While Section 7. 08 may provide the basis for supplementary
capital appropriations, on the grounds the bond proceeds are
"actual receipts [which] exceeds the estimate" , the conclusion
is not self evident and would require careful research and
analysis.
3. Under Section 5. 07 any ordinance or resolution
may be subjected to referendum by petition " [p] rior to the
date when an obligation or resolution takes effect" . If a
bond election has been called and held and the bonds approved
by the voters, the question arises whether a resolution to
sell the bonds or to let a contract for the project to be
funded from bond proceeds may be subjected to referendum.
Unlike ordinances, most resolutions take effect immediately,
and it may therefore be that the Charter provision would
have no particular effect on such a resolution. On the
other hand, it may be contended that a literal interpretation
Mr. Duane McCarty
Page 3
October 31, 1979
of the quoted phrase affects the fundamental purpose of the
Section and a referendum petition should be allowed some
reasonable time after the effective date of the resolution so
long as the City has not entered into a contract that would
be impaired by the referendum. As a practical matter, in
most cases no one will want to file a referendum petition
under the circumstances I describe and the bonds may be
issued or a contract let upon a certificate by the City
Clerk that no petition for referendum has been filed. But
if a referendum petition is filed under these circumstances,
the correct solution is not obvious.
4 . Section 8 . 04 , Subd. 1 provides for petitions
and counter-petitions by certain percentages "in number of
the benefited property owners" and "owners proposed to be
assessed for such improvement at least equal to the number
of those who petition for the improvement" . These phrases
are ambiguous in that they do not tell the reader how to
compute the number of owners of a lot which is held jointly
by or by tenants in common of two or more persons.
5. Section 8. 04 , Subd. 3 provides that no contract
may be let "in the event that the current proposed contract
exceeds the estimated cost by more than 10%.' Subdivisions
1 and 2 refer to the estimated cost of an improvement, not
to the contract portion of the improvement. The question
then becomes whether the contract limit is 110% of the
estimated cost of the improvement (which includes engineering,
legal, fiscal and miscellaneous costs as well as contract
costs) or is 110% of the contract portion of the total
estimated cost. More serious is, however, the fact that
the quoted provision will probably require the City to let
all contracts for an improvement simultaneously; otherwise,
the City may find itself in a position where it has let a
contract for some portion of the work, for example, sewer
installation, and cannot let another contract to complete
the work, for example, street resurfacing.
I am certain there will be other questions of
interpretation which may cause difficulty, and no one can
visualize all the possible problems or weigh the seriousness
of the problems.
If we can be of any further assistance to you or
clarify any of the foregoing, please let us know.
Very truly yours,
FAEGRE & BENSON cc. Mr. Jeff Nelson
Mr. Don Bragger
Mr. Richard Meyers
•
•
SOBERT J.CHRI STI AN SON THOMAS L F A E G R E Se BENSON J.B.FAEG RE(RET,RE.)
GEORGE D.MCCLINTOCK JOSEPH M
PRICE
EVERETT A DRAKE W,SMITH SHARPE,JR. JOHN C.BENSON
DONALD L ROBERTSON PHILIP S.GABON
L CHRISTOPHER.ON
ROWRIGHTEL BROOKS WALTER
F.BEU KEMA 1300 NORTHWESTERN BANK BUILDING JOHN B.FAEGRE,J R.
GORGE L.HARD BYE E J DUFHENS
GEORGE E.NABBING JAMES P.ST EPH ENSON COUNSEL
JOHN S.HOLTEN JAREID CARBON
R,A.O CUNNINGHAMEA.DAVJOHN ID KELLY
R.W.o ITCH JOHN K.STEFFEN MINNEAPOLIS, MINNESOTA 55402
RWIN M TCH GO LDSTEN CHARLES E.BOHLEN,JR.
• MESA JOHN B.GORDON
G ERALD T HAL
HOMAS M MAYSRLE
CHARLES LF HORN THOMAS G.MORGAN 612/ 371-5300
JACK D.GAGE JOHN D.SHIVELY
• TER W NSON EDWARD G.HEILMAN
JAMES FIT.MAURICE JOHN H iINDERAKER
GORDON G.BSDICKER ROBERT L.SCHN EL L.JR.
JOHN D.FRENCH RICHARD A.NELSON
RONALD B,HEMSTAD BRIAN B.O'NEILL
NORMAN R.CARPENTER WILLIAM R.BUSCH,JR,
LAWRENCE C.BROWN BONNIE M.FLEMING
MARTIN N.BURKE HENRY F.FRISCH
OIKRIS LOREN F.HART
• UL TE BIRKELAND RANDY L.MILLER
DAVID M.BEADIE WINTHROP A.ROCKWELL
RICHARD C.=CH MOKER PATRICK B.BAUER
THOMAS M.CROSBY,JR. JACK M.TREBLED
JAMES T.HALE JOHN S.JAGIELA
LUDWIGNER,JR. DAVID B.DEAN October 31, .1979
JAMES B.LOKKEEN JOHN P.BORN ER
ARTHUR L.DOTEN HEIDI M,HOARD
DUANE W KROHNKE DAVID P PEARSON
GEORGE W.FLYNN JAMES G.RAY
• MES A.DUEHOLM RICHARD A.HELDE
HUBERT V FORCIER MARGARET S.ANGLE
JAMES M.SAMPLES STEVEN R ANDERSON
DALE E BEIHOFFER JAY D.CHRISTIANSEN
PETER R TCHAK CHARLES S.FERRELL
GALE R.MELLUM DAVID B MILLER
BRUCE F.BURTON MARK F. ENGEBRETSON
JERRY W.SNIDER JAMES A O'NEAL
HENDRIK DE JONG RICHARD T. THOMSON
STEPHEN ROSHOLT
FRANK B.BUTLER
G ORDON B.CON N,JR.
BRUCE A.ACKERMAN
MICHAEL H.HARPER,JR.
Mr. Duane McCarty, Mayor
Members of the City Council
City of Mounds View
City Hall
2401 Highway 10
St. Paul, MN 55112
Re: Proposed Home Rule Charter
Dear Sirs:
At your request we have examined the copy of the
proposed Home Rule Charter, dated October 11, 1979, to
consider the effect which the Charter, if adopted, would
have on future bond financing by the City.
In general, the Charter provides more complex
procedures than the procedures provided by Minnesota law for
statutory cities. This will inevitably cause some increase
in the time and effort and therefore the expense involved in
following and establishing compliance with the procedures to
the satisfaction of bond counsel. In addition, until Minnesota
municipal bond dealers become familiar with the City' s new
procedures, some educational effort will be required to
fully explain these procedures to the satisfaction of bond
dealers so that they will not hesitate to bid on the City' s
bonds under the new Charter.
However, subject to certain specific problems
mentioned below, we think in most instances the City will be
able to obtain financing and sell its bonds on the market
and the City' s bond counsel will be able to provide the
necessary approving legal opinion under the procedures of
the new Charter if it is approved by the voters. In particular,
the procedures required for public improvements and special
Mr. Duane McCarty
Page 2
October 30, 1979
assessments under Chapter 8 of the Charter are not much
different from the procedures required by South Dakota
state law for special assessment bonds except for the some-
what longer periods of time established by the Charter.
However, there are certain specific problems which
may arise (and in other places have arisen) under the
Charter language, including the following:
1. Section 7. 05 requires a long term financial
plan. The plan must be adopted after public hearing, apparently
annually, by ordinance. The Charter does not indicate
whether failure to include a capital project in the long
term financial plan will prohibit the construction and
financing of that project during the year pursuant to a bond
election or special assessment proceedings, nor does it
indicate whether the plan can be amended during the year.
This problem could be a source of concern to your bond
counsel and may need to be resolved by litigation if the
situation arises.
2 . Similarly, Section 7 . 07 prohibits the incurring
of any obligations of the City unless an appropriation has
been made in the budget resolution and there is a sufficient
unexpended balance. The Charter does not say that this
prohibition is limited to obligations incurred in anticipation
of collection of taxes or other ordinary revenues. Arguably,
it could apply to obligations to be paid from bond proceeds,
and unless bond proceeds are appropriated in the budget
resolution itself, it might be contended that the Charter
would be violated. If bond proceeds cannot be spent for the
purpose for which they were voted or otherwise authorized,
bond counsel would hesitate to approve the issuance of the
bonds. While Section 7. 08 may provide the basis for supplementary •
capital appropriations, on the grounds the bond proceeds
are "actual receipts [which] exceeds the estimate" , the
conclusion is not self evident and would require careful
research and analysis.
3. Under Section 5. 07 any ordinance or resolution
may be subjected to referendum by petition " [p] rior to the
date when an ordinance or resolution takes effect" . If a
bond election has been called and held and the bonds approved
by the voters, the question arises whether a resolution to
sell the bonds or to let a contract for the project to be
funded from bond proceeds may be subjected to referendum.
Unlike ordinances, most resolutions take effect immediately,
and it may therefore be that the Charter provision would
have no particular effect on such a resolution. On the
other hand, it may be contended that a literal interpretation
Mr. Duane McCarty
Page 3
October 31, 1979
of the quoted phrase affects the fundamental purpose of the
Section and a referendum petition should be allowed some
reasonable time after the effective date of the resolution so
long as the City has not entered into a contract that would
be impaired by the referendum. As a practical matter, in
most cases no one will want to file a referendum petition
under the circumstances I describe and the bonds may be
issued or a contract let upon a certificate by the City
Clerk that no petition for referendum has been filed. But
if a referendum petition is filed under these circumstances,
the correct solution is not obvious.
4. Section 8. 04 , Subd. 1 provides for petitions
and counter-petitions by certain percentages "in number of
the benefited property owners" and "owners proposed to be
assessed for such improvement at least equal to the number
of those who petition for the improvement" . These phrases
are ambiguous in that they do not tell the reader how to
compute the number of owners of a lot which is held jointly
by or by tenants in common of two or more persons.
5. Section 8. 04 , Subd. 3 provides that no contract
may be let "in the event that the current proposed contract
exceeds the estimated cost by more than 10%Y Subdivisions
1 and 2 refer to the estimated cost of an improvement, not
to the contract portion of the improvement. The question
then becomes whether the contract limit is 110% of the
estimated cost of the improvement (which includes engineering,
legal, fiscal and miscellaneous costs as well as contract
costs) or is 110% of the contract portion of the total
estimated cost. More serious is, however, the fact that
the quoted provision will probably require the City to let
all contracts for an improvement simultaneously; otherwise,
the City may find itself in a position where it has let a
contract for some portion of the work, for example, sewer
installation, and cannot let another contract to complete
the work, for example, street resurfacing.
I am certain there will be other questions of
interpretation which may cause difficulty, and no one can
visualize all the possible problems or weigh the seriousness
of the problems.
If we can be of any further assistance to you or
clarify any of the foregoing, please let us know.
Very truly yours,
FAEGRE & BENSON
cc: Mr. Jeff Nelson 13/y/A_ >40jR7/-;451L
Mr. Don Bragger
Mr. Richard Meyers
EHLERS AND ASSOCIATES, INC.
FINANCIAL SPECIALISTS
FIRST NATIONAL-SOO LINE CONCOURSE 507 MARQUETTE AVE. MINNEAPOLIS, MINNESOTA 55402 339-8291 [AREA CODE 612)
•
November 28, 1979 ��'1\(lc), t•
� yLr
r )
Mr. Jeff Nelson 1,% 1s"
City Administrator
2401 Highway 10
St.- Paul, Minnesota 55112
Dear Mr. Nelson:
•
You have asked us to comment further on the proposed city charter and our
previous letter.
I modified my view that each resolution might be subject to referendum.
Mr. Loeding points •out that a resolution which is effective immediately
is not subject to referendum.
However, it is still my view (and that of the charter commission, I believe)
that it will be much more difficult, time consuming and costly to undertake
local improvements. What with the time required for petitions, counter
petitions and counter-counter petitions plus the possibility of referenda
on resolutions held in suspense during the petition times, there are apt
to be huge delays, maybe even missed construction seasons. In an inflation
economy, every month costs 1 to lZ% or,on a million dollars project, up
to $15,000 (plus costs for added legal work) .
Following discussion with the council and members of the charter commission
it appears that five year capital improvement budgets must be by ordinance
(subject to refereridhm) and to change it by adding a project requires another
ordinance (also subject to referendum) .
It appears to be a stated objective to make it more difficult to undertake
and finance local improvements, particularly those which are not 100%
assessed to "benefitted" property. In this the charter should prove very
effective. Had it been in the being at the time of incorporation the city
probably would net now have a sanitary sewer or a water system. These improve-
ments, not 100% assessed, were very controversial. Only a minority have water 41
in their basements or have contaminated wells at a particular moment. Sometime,
as the city develops, surface water will become a severe problem for some
homeowners (probably a minority) who may be unable to get relief under the
charter.
Very truly yours,
EHLERS AND . 8S0 IA
�o.:-r hl s
EHLERS AND ASSOCIATES, INC.
FINANCIAL SPECIALISTS
FIRST NATIONAL-SOD LINE CONCOURSE 507 MARQUETTE AVE. MINNEAPOLIS, MINNESOTA 55402 339-8291 (AREA CODE 612)
i
fr
November 5, 1979 ' ..qv /'J
X 4 0,1S
Np
rp'
Mr. Duane McCarty g, 1. "-
Mayor, City of Mounds View t�I tt
City Hall `E'' �,�et�,- 'fit'' .
2401 Highway 10 —s.:5 www'
St. Paul , Minnesota 55112 Y' 'L)ERZ
RE: Proposed Charter; Financing
We have been asked to comment on the proposed city charter, particularly with
reference to financing measures.
Referendum: Under Chapter 5, fifteen percent of the electors (last presidential
election) may petition for a referendum of any council adopted measure. As to
financing local improvements, which typically involve a number of council
resolutions, the procedure could become very cumbersome if each resolution is
subject to, and must wait 30 days for a possible challenge. Referenda, coupled
with the delays and counter petition measures provided in Section 8, could mean
that a majority of those voting could deny vitally needed local (special assess-
ment) improvements to areas of the city. If local improvements are to be subject
to challenge (referenda) we suggest that such challenges apply only to the
resolution ordering the improvement.
One hundred and twenty days, four months, to the next election, on top of a 30 day
referenda petition period, on top of 60 days after a preliminary hearing for
petitions in opposition may cause a vital local improvement to lose a whole
construction season. No financing could take place until all the times for
petitions, for referenda, referenda themselves and times for counter petitions
against improvements have been exhausted.
Long-Term Financial Plan; Section 7.05: Good, if it is assumed that new facts
and needs may dictate modifications and that added local improvements may be
undertaken after the required hearings under Minnesota Statutes, Chapter 429
(or under Section 8 of the draft charter, should that section be adopted) .
Budget Enforcement; Section 7.07: As to debt service on bonds, it must be
assumed that these payments would be legitimate obligations whether or not included
in the budget. Otherwise, the city could suffer a bond default, lowered bond
ratings and higher interest cost.
Mr. Duane McCarty November 5, 1979
St. Paul , Minnesota Page 2
Special Assessments; Section 8.01: . . "No assessment shall exceed benefits
to the property." "Benefit" has been construed to mean increase in value. But
there is a growing concept that assessments should, in some cases, reflect a
property's contribution to the problem to be resolved, to the cost of the project.
Local Improvement Ordinance; Section 8.03: Minnesota Statutes, Chapter 429,
provides a time tested, court tested, uniform, workable code for undertaking
local improvements. Adoption of a new, novel ordinance might have to be retested.
We suggest that local improvements be carried out under Chapter 429 or other
applicable statutes.
Procedure; Section 8.04: While Section 8.03 says a comprehensive local improvement
ordinance shall be adopted, Section 8.04 itself actually lays out detailed
procedures (which, in many respects, closely follow Chapter 429) . In many
respects Section 8.04 and its detail renders another "comprehensive" ordinance
redundant. In fact, this detailed charter section very closely follows Minnesota
Statutes, Chapter 429, except that,because of the counter petition time and the
delays entailed in petitions for referenda on any council measures, it would make
it extremely difficult and time consuming to plan, finance and execute local
improvements, which may have several adverse effects on the city's development.
Having had a preliminary hearing with published and mailed notice, proceedings
must stop for 60 days during which time opponents may counter petition against
a project.
a. Dragging proceedings out will no doubt, in some cases, escalate
community problems and friction.
b. These delays (including possible petitions for referenda) may mean
higher costs (now about 1 to 1-1/2% per month) .
c. Extraordinary concern for the opposition will mean that the majority
may impose serious problems on the city and on minority property
owners and deny equitable solutions .
Comment: One wonders about the extraordinary blocks that the draft charter puts
up to prevent even extraordinary (4/5) majority decisions of an elected council .
It seems to say that local improvements are bad, that a representative governing
body does not work. While some decisions can always be questioned, representative
government has, overall , served the city well .
Respectfully submitted,
EHLERS ° P •SS2CIA IjAi 7
� .
'.. •rt L. Ehlers
'LE:sl
JURAN & MOODY , INC .
MUNICIPAL BONDS EXCLUSIVELY
114 EAST SEVENTH STREET
'
• SAINT PAUL, MINNESOTA 55101
P//
C: TELEPHONE 612/298-1500
4s: November 8, 1979
Mr. Jeff Nelson
City Administrator
City Hall
2401 Highway #10
P.O. St. Paul , MN 55112
RE: PROPOSED NEW CITY CHARTER
CITY OF MOUNDS VIEW, MINNESOTA
Dear Jeff:
As per our telephone conversation last week, I have received a copy of the City
of Mounds View proposed new City Charter and I have also received copies of
letters to Mr. McCarty from Faegre and Benson and the City financial consultant,
Mr. Bob Ehlers.
We, at Juran & Moody, Inc. , are both financial consultants and underwriters
of general obligation bonds not only within Minnesota but also on a national
basis, so I feel qualified to speak on the proposed new Charter. I have the
following comments:
1. The issuance of general obligation bonds under the new Charter
could be delayed at least six months due to petitions and appeals .
2. When the potential for appeals are much greater, due to a Charter,
than those of a statutory City, the 'underwriters would have a
possible tendency to shy away from a City with this type of a Charter
when the supply of bonds are adequate within the market place.
3. I believe that there is a possibility that this ordinance, as it
relates to Chapter 429,would have to be retested in court. This
initially could take a lengthy period of time.
4. The potential delays caused by the City Charter could increase
construction costs dramtically and increase the legal and
financial cost as well .
From a financial consultant standpoint, I would not recommend a Charter much
JURAN & MOODY, INC
Mr. Jeff Nelson
November 8, 1979
Page 2
like the one that is proposed at Mounds View for any of our municipal clients .
If you have any questions or if I can be of any further service, please do
not hesitate to call .
Very truly yours,
JURAN & MOODY; INC.
Steve' J . Mattson
Vi ce President
SJM/tld