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Home My WebLink About[05] Bond Refinancingcrr~° of sT ~inrrN Council Agenda Item 5 MEETING DATE: August 20, 2009 AGENDA ITEM: Bond Refinancing- Monte Eastvold, Northland Securities SUBMITTED BY: Finance BOARD/COMMISSION/COMMITTEE RECOMMENDATION: None PREVIOUS COUNCIL ACTION: None BACKGROUND INFORMATION: Monte Eastvold, Northland Securities, has been watching the market rates to refund the 2002 Water Revenue Bonds that become callable on December 1, 2009. The 2002 bonds are eligible to be paid off ($455,000 principal + accrued interest); however, based on the current reserve balance in the water fund, staff is not recommending a payoff at this time. The Average Interest Rate of the 2002 bonds is 4.999'0. The Average Interest Rate of the proposed refunding bonds is estimated to be 2.259'0. This decrease in interest expense contributes to an overall reduction in future debt service payment s of approximately $20,692. This is a true savings figure in that all issuance-related expenses have been taken into account. Eastvold notes that a AAA rating is assumed. This rating would be attained by requesting by City Council Resolution participation in the State's Credit Enhancement Program (administered through the Public Facilities Authority). The PFA requires a $500 application fee (non-refundable) and evidence that the original bond proceeds were used for water-related improvements must accompany the application fee. Eastvold will discuss the program and financing analysis. BUDGET/FISCAL IMPACT: Reduction of approximately $20,000 in future debt payments ATTACHMENTS: Finance analysis, PFA Agreement, PFA Application, Resolution 2009-019 REQUESTED COUNCIL ACTION: Authorize Eastvold to complete the necessary process to refinance the 2002 Water Revenue Bonds. i Preliminary City of Saint Joseph, Minnesota G.O. Water Refunding Bonds of 2009 2002 (Assumes AAA Rates with an A Underlying) Refunding Summary Dated 11/01/2009 ~ Delivered 11101/2009 Sources Of Funds Par Amount of Bonds ~ $425,000.00 Total Sources _ 5425,000.00 ~ Uses Of Funds ~ Deposit to Currant Refunding Fund 404,915.69 Total Underwriter's Discount (2.250%) 9562.50 Costs of Issuance 8,000.00 Rounding Amount 2,521.81 Total Uses 5425,000.00 Flow of Funds Detail State and Local Government Series (BEGS) rates for Date of CJMP Candidates Current Refunding Escrow Solution Method Net Funded Total Cosl of Investments $404,915.69 Interest Earnings (a3 0.250% 84.31 Total Draws $405,000.00 Issues Refunded An Catl Dates 02waterold 1 210 7 /2009 PV Analysis Summary {Net to Net) Net PV Cashfiow Savings ~ 2.240%(Band Yield~__ 16,944.43 Contingency or Rounding Amount 2,521.81 Net Present Value Benefit $19,466.24 Nel PV Benefit / $405,000 Refunded Principal 4.806% Net PV Benefit 1 $425,000 Refunding Principal 4.580°k Bond Statistics Average Life _ 4.236 Years Average Coupon 2.2503008% Nel Interest Cost (NtC) 2.7814278% Bond Yield for Arbitrage Purposes 2.2398118% Truelnterest Cost (TIC) _ __ ~ 2.8114981% All Induslve Cost {AIC) ~ 3.30387fi5°k D2wa~eiref ~ SMGIE PURPOSE 18/10/20D9 J 12x04 PM Northland Securities Public Finance Paae 1 1 Preliminary City of Saint Joseph, Minnesota G.O. Water Refunding Bonds of 2009 2002 (Assumes AAA Rates with an A Underlying) Debt Service Comparison Date Total P+I Existing D1S Net New D1S Id Net S avings 12/0112009 - 59,981.25 57,459.44 59,981.25 p 2,521.81 12/0112010 63,967.29 - 63,867.29 68,062.50 4,095.21 12/01/2011 62,782.50 - 62,782.50 66,062.50 3,280.00 12/01/2012 67,012.50 - 67,012.50 68,987.50 1,975.00 12/01/2013 66,172.50 - 68,172.50 66,622.50 450.00 12!01/2014 64,942.50 - 64,942.50 69,175.00 4,232.50 12/01/2015 68,712.50 - 68,712.50 71,415.00 2,702.50 12/0112016 71,925.00 - 71,925.00 73,360.00 1,435.00 Total $465,514.79 $59,981.25 $522,974.23 $543,666.25 $20,692.02 PV Analysis Summary (Net to Net} Gross PV Debt Service Savings` .................... __ _ 16,944.43 Net PV Cashfbw Savings Q 2.240%(Bond Yield)..... _ 16.944.43 ContingencrLor Rounding Amount .................... _`._-___ __._ _-vw v 2,521.81 Nel Present Value Benefit _ __~___` $19,466.24 Net PV Benefit / $441,944.43 PV Refunded Debt Service ~~ 4.405°h Net PV 8enefil / $405000 Refunded Principal... __ , `_ 4.806% Net PV 8enefil / $425,000 Refunding Principal.. _ _ 4.580% Refunding Bond Information Refunding Dated_Date V- _!_ _ 1110112009 Refunding Delivery Date _~~~_ _ 11/01/2009 02weterrel I SINGLE PURPOSE 1 817012009 1 12:04 PM Northland Securities Public Finance Paoe 2 Prelirnlnary Cit innesota .O. Water Refunding Bonds of 20 2002 (Assumes AAA Rates with an A Underlying) Debt Service Schedule Date Principal Coupon Interest Total P+I Fiscal Total 11/01/2009 - - ~ 06!0112010 - - 4,828.54 4,828.54 - 12/01/2010 55,000.00 0.900% 4,138.75 59,138.75 63,967.29 !, 06/01/2011 - - 3,891.25 3,891.25 - 1210/12011 55,000.00 1.400°k 3,891.25 58,891.25 62,782.50 ' 06101/2012 - - 3,506.25 3,506.25 - 12/01/2012 60,000.00 1.400°k 3,506.25 63,506.25 67,012.50 06/91/2913 - - 3,086.25 3,086.25 - 12l01/2013 60,000.00 2.050% 3,086.25 63,086.25 66,172.50 06/01/2014 - - 2,471.25 2,471.25 - 12/01/2014 60.000.00 2.05996 2,471.25 62,471.25 64,942.50 06/01/2015 - - 1,856.25 1;856.25 - 12lD1/2015 65,900.00 2.750% 1,856-25 66,856.25 68,712.50 06/01/2016 - - 962.50 962.50 - 12/01/2016 70,900.00 2.750°!0 962.50 70,962.50 71,925.00 Total 5425,000.00 - :40,514.79 =465,514.79 - Dated 11!01/2009 Delivery Date 11/01/2009 _ First Goupon Date 6101/2010 First available call date Cali Price _ Bond Year Dollars $1,800.42 Average Life 4.236 Years Averse Coupon 03008° Net Interest (NIC) y,7S1 True Interest Cost (TIC) 2.8114981°/, Bond Yield for Arbitrage Purposes 2.2398118°k Net Interest Cost 2.2503008% Weighted Average Maturity 4.236 Years 02wakrrel l SINGLE PURPOSE 18/10/2009 i 12:04 PM Northland Securities Public Finance Paae 3 ~_ ^ Preliminary City of Saint Jos h Minnes ota ater Refunding Bonds of 2002 Debt Service To Maturity And To Cali Refunded Date Bonds D!S To Call Principal Coupon Interest Refunded DIS Fiscal Total 11/01/2009 - - - - _ _ _ ~ 12!01/2009 405,000.00 405,000.00 - 3.800% - - _ O6f01/2010 - - - - 9.031.25 9,031.25 - 12101/2010 - 50,OD0.00 4.000% 9,D31.25 59,031.25 88,062.50 06!0112011 - - - - 8,031.25 8,031.25 - 12101/2011 - - 50,000.00 4.150°h 8,031.25 58,031.25 66,062.50 ', 06/01/2012 - - - - 6,993.75 6,993.75 ~, 12!0112012 - - 55,000.00 4.300% 6,993.75 61,993.75 68,987.50 06/01/2013 - - - - 5,611.25 5.811.25 - 12/01/2013 - - 55,000.00 4.450% 5,811.25 60,811.25 66,622.50 06/01!2014 - - - 4,587.50 4,587.50 - 12101!2014 80,000.00 4.60D°k 4,587.50 64,587.50 69,175.00 06/01/2015 - - - - 3,207.50 3,207.50 - 12/01/2015 - - 65,000,00 4.700% 3,207.50 68,207.50 71,415.00 06!01!2016 - - - - 1,880.00 1,680.00 - 12/01/2016 - - 70,OD0.00 4.800% 1,680.00 71,680.00 73,360.00 Total x405,000.00 ;403,000.00 $405,000.00 - $78,685.00 $483,685.00 Yield Statistics Average life 4.318 Years _ re a Maturi (Par Basis _ ~ 4.318 Years Avers a Coupon - - - _ _ ~~~ _ ~ 4.49949 Refunding Bond Information -- Refunding Dated Date 11!0112009 Refunding Delivery Dale 11/01/2009 02weterold I SINGLE PURPOSE 18110!2009 ~ 72:04 PM Northland Securities Public Finance Pace a MINNESOTA PUBLIC FACILITIES AUTHORITY CREDIT ENHANCEMENT PROGRAM AGREEMENT This Credit Enhancement Program Agreement, dated as of , ("the Agreement"), is made between the Minnesota Public Facilities Authority (the "Authority") and St. Joseph, Minnesota (the "Governmental Unit"), in order to comply with the requirements of Minnesota Statutes, Section 446A.086 (the "Act"). The Governmental Unit has passed a resolution dated Auuust 20, 2009, (the "Resolution) authorizing the issuance of its $425,000 G.O. Water Revenue Refunding Bonds, Series 2009C (the "Bonds"), the proceeds of which will be used to provide funds for refunding the Citv's G.O. Water Revenue Refixndin~ Bonds of 2002 which refunded G.O. Water Revenue Bonds of 1992 which on ig_nally financed the construction of a water storage facility in the Cif. The Governmental Unit represents that the Resolution authorizes the Governmental Unit to enter into this Agreement and obligates the Governmental Unit to be bound by the provisions of the Act. The Governmental Unit and the Authority agree as follows: Section 1. The Govennrrtental Unit will deposit with Northland Trust Services. Inc. (and any subsequent paying agent) (the "Paying Agent") three business days before the date on which each payment is due on the Bonds an amount sufficient to make that payment. Section 2. The Governmental Unit will notify the Authority not less than 15 business days prior to the date a payment is due on the Bonds if the Governmental Unit will be unable to make all or a portion of the payment. Notification shall be provided by faxing and mailing a completed and executed Notification of Potential Default form to the Authority. Section 3. The Governmental Unit will include a provision in its agreement with the Paying Agent for the Bonds that requires the Paying Agent to immediately inform the Minnesota Commissioner of Finance, with a copy to the Authority, if the Paying Agent becomes aware of a default or potential default in the payment of principal or interest on the Bonds or if, on the day two business days before the date a payment is due on the Bonds, there are insufficient funds on deposit with the Paying Agent to make the payment. For purposes of this paragraph and the Act, funds invested in a refunding escrow account established under Minnesota Statutes, Section. 475.67 that are to become available to the Paying Agent on a principal or interest payment date are deemed to be on deposit with the Paying Agent three business days before the payment date. Section 4. The provisions of this Agreement are binding with respect to the Bonds as long as the Bonds remain outstanding. Section 5. According to its terms, the Act is a contract with bondholders and may not be amended or repealed for the covered bonds so long as the covered bonds are outstanding. Section 6. The Governmental Unit agrees to provide the Authority with a copy of the final debt service schedule for the Bonds within 30 days of the closing date and an estimate of the interest savings that will be achieved by participation in the program. CE Program Agreement Page 1 of 3 (rev. 05/09) Section 7. The Authority has reviewed the application of the Governmental Unit dated August 20, 2009, and, based solely upon the application, the opinion of bond counsel and the provisions of this Agreement, verifies that the Bonds are participating in the Credit Enhancement Program established pursuant to the Act, and that if the Governmental Unit is unable to make any portion of the payment on the Bonds on or before the date due, the State of Minnesota, acting through the Authority, shall make such payment in its place pursuant to the Act, providing that funds are available in the State General Fund. The obligation to make a payment under the Act is not a general obligation of the State of Minnesota. The Act does not obligate the legislature to provide for the availability of funds in the General Fund for this purpose. Section 8. The Authority will provide to the Governmental Unit upon request, or to its duly authorized agent, any information which the State of Minnesota files with the Nationally Recognized Municipal Securities Information Repositories pursuant to the State's obligations under rule 15c2-12. Section 9. The Governmental Unit agrees to notify the Authority if the Paying Agent is replaced by a subsequent paying agent and to provide to the Authority a certification by the subsequent paying agent in the form set forth for the original paying agent below. IN WITNESS WHEREOF, the Authority and the Governmental Unit acknowledge their assent to this Agreement and agree to be bound by its terms and the terms of the Act through their signatures entered below. 1. ST. JOSEPH, MINNESOTA: By: _ Title: Date: By: _ Title: Date: 2. PUBLIC FACILITIES AUTHORITY: By (auth. signature): Title: Date: 3. COMMISSIONER OF ADMINISTRATION: As delegated to By (auth. signature): Date: CE Program Agreement Page 2 of 3 (rev. 05/09) PAYING AGENT CERTIFICATION The undersigned Paying Agent for the bonds of St. Joseuh ,Minnesota in the original principal amount of $ 425,000 referred to in the Agreement to which this certification is attached acknowledges, understands, and agrees to be bound by the procedures contained in Minnesota Statutes, Section 446A.086 and the Agreement which, in part, requires that the Paying Agent notify the Minnesota Commissioner of Finance, with a copy to the Minnesota Public Facilities Authority if it becomes aware of a default or a potential default in the payment of principal or interest on those debt obligations, or if, on the day two business days prior to the date a payment is due on those debt obligations, there are insufficient funds to make the payment on deposit with the Paying Agent. Notification shall be provided by faxing and mailing a completed and executed Paying Agent Notification of Potential Default form to the Commissioner of Finance and the Authority. I, Lori A. Giamnaolo, do hereby certify that I am a Chief Operatins; Officer/ Cashier duly appointed and acting as such, of the Paying Agent, and am authorized to execute this Certificate on behalf of the Paying Agent. By: Signature -Paying Agent Authorized Representative Date: TO BE COMPLETED BY THE PAYING AGENT Name of Paying Agent Northland Trust Services, Inc. Address City State Zip 45 South 7th Street, Suite 2000 Minneapolis MN 55402 Paying Agent Contact Person Title Telephone Number Fax Number Lori A. Giampaolo Chief Operating Officer/Cashier 612-851-4932 612-851-4933 Paying Agent's Name of Bank Paying Agent's Bank Account Name Wells Fargo Bank, National Association Northland Trust Services, Inc. Bank Association Number Paying Agent Bank Account Number 121000248 143-6412710 Paying Agent Federal Tax ID State Tax ID 20-1369079 7134229 CE Program Agreement Page 3 of 3 (rev. 05/09) CREDIT MN Public Facilities Authority ENHANCEMENT APPLICATION FOR 15'NatlBankBldg,SuiteE200 PARTICIPATION ~i'A 332 Minnesota Street PROGRAM St. Paul, MN 55101-1351 GENERAL INFORMATION AND INSTRUCTIONS: Minnesota Statutes, Section 446A.086 provides a procedure for the State to preclude default on general obligation bonds issued by cities and counties for certain specified purposes. The governmental unit must enter into an agreement with the Public Facilities Authority under which it covenants and obligates itself to be bound by this statute prior to the issuance of debt obligations in order to participate in this program. The purpose of this application is to: (1) inform the Minnesota Public Facilities Authority ("PFA") that participation in the program is desired, (2) request that the PFA execute the Credit Enhancement Program Agreement. TO BE COMPLETED BY THE GOVERNM ENTAL UNIT Name of Governmental Unit Address City Zip Code St. Joseph P.O. Box 668 St. Joseph 56374 Name of City/County Contact Person Title Telephone Number Fax Number Judy Weyrens Administrator 320-363-7201 320-363-0342 Title/Description of Bonds Total Amount to be Issued: G.O. Water Revenue Refunding Bonds, Series 2009C $ 425,000 BOND Purpose for which bonds are being issued: To refund the City's G.O. Water Revenue Refunding Bonds of 2002, which refunded G.O. Water Revenue Bonds of ISSUE 1992, which on inall financed the construction of a water stora a facili in the Ci INFORMATION Dated Date Expected Sale/Pricing Date Final Maturity Date 10!01109 09117/09 12101 / 16 if this is a REFUNDING issue, were the original bonds in the Credit Enhancement Program? REFUNDING: ®No ^ Yes if YES, Dated Date of original bonds: Provide a schedule of debt service the issuer remains res nsible to a after the refundin . BOND COUNSE L INFORMATION Bond Counsel Firm Address Briggs and Morgan, P.A. 332 Minnesota Street, 2200 First National Bank Building City State Zip Code St. Paul MN 55101 Bond Counsel Contact Petson Telephone Number Fax Number Mary Ippel 651-808-6620 651-808-6450 Application Submittal Date: 8/20/09 * This date should be at least two weeks prior to expected sale/pricing date. If less time, please contact the PFA. THIS COMPLETED APPLICATION FORM MUST BE ACCOMPANIED BY: 1. A nonrefundable application fee of $500 in the form of a check made payable to the Minnesota Public Facilities Authority. 2. Four copies of the fully completed Credit Enhancement Program Agreement, executed with original signatures by the Governmental Unit and the Paying Agent. The form of agreement provided by the Public Facilities Authority must not be altered. 3. An opinion of bond counsel in the form required. 4. Copy of resolution authorizing the govemmental unit to enter into the Credit Enhancement Program Agreement and obligating the governmental unit to be bound by the provisions of Minnesota Statutes Section 446A.086. PLEASE RETURN TO: Minnesota Public Facilities Authority 1 S` National Bank Building, Suite E200 332 Minnesota Street St. Paul, MN 55101-1351 Attn: Jeff Freeman Phone: 651-259-7465 Fax: 651-296-8833 5-09 Resolution 2009-019 EXTRACT OF MINUTES OF A MEETING OF THE CITY COUNCIL OF THE CITY OF ST. JOSEPH, STATE OF MINNESOTA HELD: Thursday, August 20, 2009 Pursuant to due call and notice thereof, a regular or special meeting of the City Council of the City of St. Joseph, State of Minnesota, was duly held on Thursday, August 20, 2009 at 7:00 p.m. Member adoption: introduced the following resolution and moved its RESOLUTION RELATING TO THE ISSUANCE OF GENERAL OBLIGATION WATER REVENUE REFUNDING BONDS, SERIES 2009A; COVENANTING AND OBLIGATING THE CITY TO BE BOUND BY AND TO USE THE PROVISIONS OF MINNESOTA STATUTES, SECTION 446A.086 TO GUARANTEE THE PAYMENT OF THE PRINCIPAL AND INTEREST ON THE BONDS BE IT RESOLVED by the City Council of the City of St. Joseph, State of Minnesota (herein, the "City"), as follows: 1. The City Council hereby finds and declares that it is necessary and expedient for the City to sell and issue its fully registered general obligation water revenue refunding bonds in the total aggregate principal amount of approximately $425,000 (herein, the "Bonds"). The proceeds of the Bonds will be used, together with any additional funds of the City which might be required, to current refund General Obligation Water Revenue Refunding Bonds of 2002, which refunded G.O. Water Revenue Bonds of 1992, which originally financed the construction of a water storage facility in the City; and (ii) to pay the costs associated with issuing the Series 2009C Bonds. 2. Minnesota Public Facilities Authority Credit Enhancement Program The following documents have been submitted to the Council and are on file in the office of the City Administrator: A. Form of Minnesota Public Facilities Authority (the "PFA") Credit Enhancement Program Agreement (the "Agreement"); and B. Application for Participation in the PFA Credit Enhancement Program (the "Application"). The Agreement and the Application are authorized and approved in substantially the forms presented to the Council. Submission of the Application to the PFA and payment of related fees are approved. The Agreement shall be prepared for execution in accordance with the approved forms and shall be signed by the manual signature of the Mayor and attested by the manual signature of the City Administrator. The City hereby covenants and obligates itself to be bound by the provisions of Minnesota Statutes, Section 446A.086, as it may be amended from time to time (the "Credit Enhancement Act"). The City understands that as a result of its covenant to be bound by the provisions of the Credit Enhancement Act, the provisions of the Credit Enhancement Act shall be binding as long as any Bonds of this issue remain outstanding. The City further covenants to comply with all procedures now or hereafter established pursuant to the Credit Enhancement Act by the PFA and otherwise to take such actions as necessary to comply with the Credit Enhancement Act. The Mayor or Administrator is authorized to execute any applicable PFA forms and to provide for the payment of the City's application fee of $500.00 payable to the Authority, which fee is required to be submitted with the executed forms. The motion for the adoption of the foregoing resolution was duly seconded by Member and upon vote being taken thereon, the following voted in favor thereof: and the following voted against the same: Whereupon said resolution was declared duly passed and adopted. CERTIFICATION OF MINUTES RELATING TO GENERAL OBLIGATION WATER REVENUE REFUNDING BONDS, SERIES 2009C; COVENANTING AND OBLIGATING THE CITY TO BE BOUND BY AND TO USE THE PROVISIONS OF MINNESOTA STATUTES, SECTION 446A.086 TO GUARANTEE THE PAYMENT OF THE PRINCIPAL AND INTEREST ON THE BONDS ISSUER: City of St. Joseph, Minnesota BODY: City Council KIND, DATE, TIME AND PLACE OF MEETING: A regular meeting held on Thursday, August 20, 2009, at 7:00 p.m., in the City Offices MEMBERS PRESENT: MEMBERS ABSENT: Documents Attached: Extract of Minutes of said meeting. RESOLUTION RELATING TO THE ISSUANCE OF GENERAL OBLIGATION WATER REVENUE REFUNDING BONDS, SERIES 2009C; COVENANTING AND OBLIGATING THE CITY TO BE BOUND BY AND TO USE THE PROVISIONS OF MINNESOTA STATUTES, SECTION 446A.086 TO GUARANTEE THE PAYMENT OF THE PRINCIPAL AND INTEREST ON THE BONDS I, the undersigned, being the duly qualified and acting recording officer of the public corporation issuing the obligations referred to in the title of this certificate, certify that the documents attached hereto, as described above, have been carefully compared with the original records of said corporation in my legal custody, from which they have been transcribed; that said documents are a correct and complete transcript of the minutes of a meeting of the governing body of said corporation, and correct and complete copies of all resolutions and other actions taken and of all documents approved by the governing body at said meeting, so far as they relate to said obligations; and that said meeting was duly held by the governing body at the time and place and was attended throughout by the members indicated above, pursuant to call and notice of such meeting given as required by law. WITNESS MY HAND officially as such recording officer on August 20, 2009. Administrator 4s South 7"` Street Suite 2000 NORTHLAND SECURITIES Minneapolis, MN ss4o2 (800) 851-2920 (612) 8s1-s904 Fax (612) 8s1-s917 E X T E R N A L M E M O R A N D U M DATE: August 20, 2009 TO: Mayor & City Council City of St. Joseph, MN FROM: Monte Eastvold, Vice President /~l% Northland Securities I RE: Debt Service Payment Reductions via Refinancing of City Bonds At the City Council's August 6th meeting, Councilman Frank asked about the total amount of savings the City has enjoyed by way of refinancing bond issues in 2009. To date, three bond , issues have been refinanced, with the resulting savings: ~ f ~'~ S ~`J G.O. Sewer Revenue Crossover Refunding Bonds of 2009-A $36,274 V f C ~' G.O. Improvement Crossover Refunding Bonds of 2009-A $102,600 N G.O. Capital Improvement Plan Refunding Bonds of 2009-B $25,443 Total $164,317 If you have questions regarding this information, please call. Thanks