2021.08.02 CC Packet - Laserfiche WebLink

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14669 Fitzgerald Avenue North, Hugo, MN 55038 • (651) 762‐6300 • www.ci.hugo.mn.us TO: Honorable Mayor Tom Weidt and Members of the City Council FROM: Anna Wobse, Interim Finance Director SUBJECT: Issuance of General Obligation Tax Abatement Bonds for Lions Park and Related Improvements DATE: For the City Council Meeting of August 2, 2021 DESIRED COUNCIL ACTION Adopt Resolution Providing for the Sale of $8,380,000 General Obligation Tax Abatement Bonds, Series 2021A and authorize staff to accept the amount of reoffering premium necessary to fully fund the project construction fund. BACKGROUND At the June 21 and July 19, 2021 City Council meetings, Council accepted bids and proposals for the Lions Park pavilion, site improvements, phase one and phase two playgrounds and related improvements. At the June 21 meeting, Council called for a public hearing on tax abatement to be held on July 19, 2021 in preparation for considering the sale of tax abatement bonds to pay for the improvements. The tax abatement public hearing was held on July 19 at the regularly scheduled City Council meeting and no public comments were received. Council approved the tax abetment district and the resolution approving the property tax abatements thus allowing the City to issue tax abatement bonds to finance the Lions Park project and related public improvements. Staff expects the cost of the improvements to total $8,650,000. Staff has been working with Paul Steinman from Baker Tilly on a preliminary debt service schedule and staff is recommending the issuance of tax abatement bonds in the principal amount of $8,380,000. The preliminary debt service schedule shows an estimated net interest cost of 1.68% over a 20 year term with annual levy payments averaging $543,430. The remainder of the project construction funds will come from the reoffering premium that is generated when the bonds are sold. In the current bond market, bonds are sold at a premium and generate a reoffering premium; issuers cannot choose whether or not their bonds sell at a premium. These bonds offer a greater yield for the investor but they also come with higher coupons (the interest rate the issuer pays). When a premium is generated it shows in the sources and uses as another source of funds. The reoffering premium can be used to reduce the principal amount of the bond or the premium can be added to the project construction fund. Baker Tilly is projecting that the bond sale will bring a large enough reoffering premium which can be added to the project construction fund to fully fund the cost of the improvements at $8,650,000. If the reoffering premium comes in under or over the projected amount, the principal amount of the bond will need to be increased or decreased on the day of the sale. The decision on how to handle the reoffering premium needs to be made within an hour of the actual sale time on the day of the bond sale and thus staff is seeking Council authorization to accept the amount of reoffering premium that is necessary to fully fund the project construction fund at $8,650,000 on the morning of the sale. An official statement will be assembled and the bonds will be rated by Standard & Poors. Bids for the sale of the bonds will be received and tabulated at 11:00am on Tuesday, September 7, 2021. Consideration for award of the bonds will be by the City Council at its 7:00pm meeting on Tuesday, September 7, 2021.