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Mark Casey Refinancing of 2006 TIF Revenue Bonds – Silver Lake Village Commercial October 23, 2015 Page 2 backed solely by TIF revenue generated from the project. If revenues were not sufficient to pay principal and interest on the bonds, the City was not required to levy taxes to make up the shortfall. In addition, the bonds were issued with 120% debt service coverage. To date, the bonds have performed well. The TIF generated has always been in excess of what is needed for debt service and in fact, since 2006 has generated an additional $630,000 to the TIF fund that is available for use by the City. In 2014 the coverage on the bonds was approximately 102% and for 2015 it is expected to be approximately 100%. The assessed market values of the commercial property have remained unchanged for the past few years and I anticipate they won’t change for the next several. Since the original bonds were issued with the assumption of a 1% inflation on property valuations over the term of the bonds, I anticipate that if they are not refinanced, that the TIF generated will not be adequate to pay the debt service on the bonds and thus the City will need to utilize the existing TIF fund balance to make payments. The call date on these bonds is August 1, 2016. However, we can refinance the bonds today as an advance refunding, meaning we are refunding them more than 90-days prior to the call date. We have been discussing the possible refinancing with Dougherty who issued the original bonds for the City/HRA. Since these bonds are not currently meeting the 120% debt service requirement, they cannot be sold as revenue bonds in the market today. Therefore, based upon discussions with staff, we are recommending issuing them as general obligation bonds (like we did for the refinancing of the 2007 TIF revenue bonds in 2014). Based upon the attached bond analysis, the annual savings, inclusive of costs of issuance, will be approximately $70,000 or $1,100,823 over the term of the bonds (present value of $945,000 or approximately 23% of the refunded principal). More importantly, if we assume the same amount of TIF that is generated today through the remaining term of the bond, there will always be more TIF generated than is needed to pay debt service on the bonds, thus continuing to provide additional TIF revenue for the City to utilize on other projects (projected to be approximately $1.2 million). Please contact me at 651-697-8506 with any questions. 10