Item 1. Capital Improvement Plan Bonds - City Campus ProjectMEMORANDUM
To: Mayor Stockamp and Council Members, City of Otsego
Adam Flaherty, City Administrator
From: Jessica Green, Managing Director
Date: March 27, 2023
Re: Capital Improvement Plan Bonds Discussion
Introduction
As the City Council continues to consider major facility improvements, we have prepared
preliminary information related to the potential issuance of General Obligation Capital
Improvement Plan (CIP) Bonds. The CIP process is unique and requires certain statutory
proceedings to occur prior to the issuance of bonds. With that in mind, the documents included
in your packets focus on process and confirming certain assumptions prior to the commencement
of next steps.
Proceedings
Prior to the issuance of CIP Bonds, a city must hold a public hearing to allow for comment from
the community. As with most public hearings, a hearing notice must be published in the city’s
newspaper of record. The hearing notice needs to be published only once, at least 14 days prior
to the public hearing but not more than 28 days. Additionally, the hearing notice will be posted
on the City website for an equal amount of time as the newspaper publication. Following the
public hearing, the City Council may then consider the adoption of a 5‐year Capital Improvement
Plan. For the Council’s review, we have prepared draft versions of the Public Hearing Notice and
the 2023‐2027 Capital Improvement Plan (the “Plan”) to familiarize the Council with these
documents. As shown within the Plan, statute identifies eight areas that must be examined for
projects proposed to be financed with bond proceeds. Both the hearing notice and Plan identify
a not‐to‐exceed amount of bonds that the City may issue during the 5‐year timeframe for which
the Plan is approved.
Assumptions
For the purposes of the Plan, we have assumed the City will proceed with a 2‐phased approach
to the facility improvements, with the construction of a new City Hall and Public Works facilities
(new cold‐storage building and an addition to the current Public Works facility to allow for
warm‐storage and workshop spaces), renovation of staff spaces and completion of deferred
maintenance and site upgrade projects, to occur in the near‐term (2023‐2026), and longer term
projects (renovation to Parks and Recreation spaces and the addition of mechanic’s bays within
Public Works) to occur in future years. These later projects are not contemplated within the scope
of the Plan, as drafted, as it falls outside of the Plan’s 5‐year timeframe.
Item 1.
City of Otsego, CIP Discussion
March 27, 2023
Page 2
For planning purposes, we have assumed the City would issue bonds in 2023 and that the bonds
would be structured over a 20‐year term. Additionally, we have assumed the City would finance
the entirety of the Phase 1 improvements with bond proceeds, though the City may wish to
contribute cash to the project to lessen the amount of financing. The cost estimate associated with
Phase 1 improvements is $29,897,250. Estimated bond sizing (including costs of issuance) is
currently $30,340,000. The Plan and hearing notice reference a not‐to‐exceed amount of
$32,000,000 to allow for flexibility should bids come in higher than expected. The City may issue
less than the amount noted within the Plan but may not exceed the threshold without an
amendment to the Plan. The bonds may be issued in a single or separate series, depending on
timing of construction and other bond market considerations, so long as the City issues no more
than $32,000,000 through December 31, 2027.
The issuance of CIP Bonds assumes the City does not receive a petition during the reverse
referendum period. This period begins following the public hearing and adoption of the Plan and
runs for 30 days. During that time, if a petition containing signatures equal to 5% of the votes cast
in the municipality in the last municipal general election, the City may:
Elect to stop the process; municipality may not propose the issuance of bonds for the same
purpose and the same amount for 365 days.
Submit the question to voters
o Majority approval allows for the issuance of bonds,
o If not approved, the City may not propose the issuance of bonds for the same
purpose and same amount for 180 days.
Next Steps
A potential benefit to starting the CIP process early‐on is moving beyond the reverse‐referendum
period. Assuming the City does not receive a petition during the 30‐day window, the City is then
able to issue Capital Improvement Plan Bonds when appropriate. We understand the City is
currently in the design process for the projects under consideration. Clearing the reverse
referendum period earlier in the process may save the City from incurring additional design
costs, and/or keep the City from going through the bidding process should the community not
be in favor of the projects.
Should the City Council wish to move ahead with the CIP process, we have prepared a
preliminary calendar outlining the publication, public hearing, reverse referendum period, and
issuance process. Additional steps – i.e. open‐house meetings, etc., can be incorporated into a
revised calendar at the direction of the Council.
2023 through 2027
Five-Year Capital Improvement Plan for the
City of Otsego, Minnesota
Draft for Public Hearing: May 8, 2023
Prepared by:
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CITY OF HASTINGS
FIVE-YEAR CAPITAL IMPROVEMENT PLAN
2023 THROUGH 2027
I. INTRODUCTION
In 2003, the Minnesota State Legislature adopted a statute that generally exempts city and town
general obligation bonds issued under a capital improvement plan from the referendum
requirements usually required for city halls, public works, public safety facilities and libraries.
The statute on general obligation capital improvement plan bonds is Minnesota Statutes,
Section 475.521 (the “Act”).
II. PURPOSE
Under the Act, a capital improvement is a major expenditure of City funds for the acquisition
or betterment to public lands, buildings, or other improvements used as a city hall, town hall,
library, public safety, or public works facility, which has a useful life of five years or more.
Under the Act, capital improvements do not include light rail transit or related activities, parks,
road/bridges, administrative buildings other than a city hall or town hall, or land for those
facilities. A Capital Improvement Plan (“CIP” or “Plan”) is a document designed to anticipate
capital improvement expenditures and schedule them over a five-year period so that they may
be purchased in the most efficient and cost-effective method possible. A CIP allows the
matching of expenditures with anticipated income. As potential expenditures are reviewed, the
City considers the benefits, costs, alternatives and impact on operating expenditures.
Before issuing bonds under a CIP, the City must hold a public hearing on the CIP and the
proposed bonds and must then approve the CIP and authorize the issuance of the bonds by a
majority of at least three-fifths.
If a petition signed by voters equal to at least 5% of the votes cast in the last general City
election requesting a vote on the issuance of bonds is received by the municipal clerk within
30 days after the public hearing, then the bonds may not be issued unless approved by the voters
at an election.
The statute has established certain criteria that must be considered for each project to be
undertaken pursuant to this Plan (the “Project”). These criteria are:
1. Condition of the City’s existing infrastructure and projected need for repair or replacement
2. Demand for the improvement
3. Cost of the improvement
4. Availability of public resources
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5. Level of overlapping debt
6. Cost/benefits of alternative uses of funds
7. Operating costs of the proposed improvements
8. Alternatives for providing services most efficiently through shared facilities with other
municipalities or local governments
The Plan is designed to be updated on an annual basis. In this manner, it becomes an ongoing
fiscal planning tool that continually anticipates future capital expenditures and funding sources.
III. PLAN SUMMARY
This Plan is intended to describe and analyze the need for the Project in accordance with the
Act. The City may modify this Plan from year to year as authorized by the Act.
Following is a summary of estimated expenditures for the Project:
2023 Expenditures
The City intends to construct a new City Hall and Public Works Cold Storage Building,
construct an addition to the Public Works facility, and renovated staff spaces. Total project
costs are estimated to be $32,000,000.
2024 Expenditures
None anticipated at this time.
2025 Expenditures
None anticipated at this time.
2026 Expenditures
None anticipated at this time.
2027 Expenditures
None anticipated at this time.
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Analysis
The City has analyzed the eight points required by the Act for the Project on an individual basis
and as a whole. The findings are as follows:
1. Conditions of City Infrastructure, Including the Projected Need for Repair or
Replacement and Need for the Project
The City recently completed a space needs study to assess current and future facility
needs necessary to provide essential City services. The study identified the following
improvements for the betterment of the City: construction of a new City Hall,
construction of a new cold-storage facility for Public Works, construction of an
addition to the Public Works facility for heated workshop and vehicle storage spaces,
renovations to City staff spaces, and miscellaneous deferred maintenance projects and
site upgrades. Given the City’s growth since incorporation in 1990 and providing public utility
services in the early 2000’s, the City has reached capacity at all current facilities. Current
conditions necessitate the reorganization, renovation, or construction of current and new spaces
to accommodate City staff and property.
2. Likely Demand for the Project
The new facility will allow safe and effective spaces that protect City staff and property
in an open and engaging climate that encourages flexibility, efficiency and
collaboration. In addition, the City will implement technology and sustainability
practices within the Project, where appropriate.
3. Estimated Cost of the Project
The estimated cost, including architectural/engineering, contingency, legal and bonding, of the
Project to be undertaken in 2023 (the only Project for which bond authorization is requested)
is $32,000,000. The improvements planned for any given year may be constructed and bonded
for in any other year of the CIP, if the total planned improvements and maximum bonding
authority do not change.
4. Available Public Resources
The City may choose to use reserves (cash) for finance a portion of the Project. Remaining
project costs will be financed with bond proceeds. The City currently intends to issue bonds in
an amount not to exceed $30,340,000; however, this document has been drafted to allow the
City the authority to bond for up to the total project cost, estimated at $32,000,000.
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5. Level of Overlapping Debt in the City
As of October 2, 2022, the level of overlapping debt in the City is provided in the table below:
Issuer 2021/2022
Tax
Capacity
Value(1)
2021/2022
Tax
Capacity
Value
in City(1)
Percentage
Applicable
in City
Outstanding
General
Obligation
Debt(2)
Taxpayers’
Share
of Debt
Wright County $ 199,120,589 $24,852,871 12.48% $85,995,000 $ 10,732,176
ISD No. 728, Elk
River
108,587,944 21,572,468 19.87 288,640,000 57,352,768
ISD No. 882,
Monticello
43,102,295
1,782,893
4.14
43,215,000
1,789,101
ISD No. 885, St.
Michael -
Albertville
28,814,085
1,497,510
5.20
137,470,000
7,148,440
Total Indirect Debt:$ 77,022,485
6. Relative Benefits and Costs of Alternative Uses of the Funds
The proposed Project could potentially be financed through the issuance of lease-revenue
bonds. However, costs of issuance and overall debt service payments would be more expensive
since lease-revenue bonds are not general obligation debt and are therefore not as attractive to
potential purchasers. The issuance of general obligation capital improvement plan bonds
represents the most cost-efficient way to finance the proposed Project.
7. Operating Costs of the Proposed Project
Increased operating costs are expected to include utility services such as electricity,
natural gas, water, and sanitary sewer services, with other services representative of a
public facility such as cleaning services, repairs and maintenance, professional
contracted services such as pest control, HVAC, security system and fire alarms.
The City is working diligently with their Architectural, Engineering, and Construction
Management partners to design and build facilities that will be energy efficient and lessen the
impacts on climate to the extent feasible and within budget.
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8. Alternatives for Providing Services Most Efficiently Through Shared Facilities with
Other Municipalities or Local Government Units
Partnering with other municipalities or local units of government is not a feasible
option. Locating the Project outside of the City of Otsego would increase response and
travel times, causing levels of service and efficiencies to decrease.
IV. FINANCING THE CAPITAL IMPROVEMENT PLAN
The total amount of requested expenditures under the CIP is expected not-to-exceed
$32,000,000. These expenditures are to be funded, in part, by the sale of the City’s general
obligation capital improvement plan bonds in the maximum amount of $32,000,000. The City
intends to use reserve funds (cash) to pay project costs in excess of net bond proceeds. It is the
City’s intent to issue bonds in 2023 for the Project listed under the 2023 Expenditures.
However, the improvements planned for any given year may be constructed and bonded for in
any other year of the CIP, as long as the total planned improvements and maximum bonding
authority do not change.
In the financing of the CIP, two statutory limitations apply. Under Minnesota Statutes, Chapter
475, as amended, with few exceptions, a municipality cannot incur debt in excess of 3% of the
assessor’s Estimated Market Value (“EMV”) for the municipality. In the case of a municipality
with a population of 2,500 or less, the bonds are not subject to the net debt limits. The City’s
estimated 2022 population was 21,289. Therefore, the proposed general obligation capital
improvement plan bonds to be issued in the years 2023 through 2027 would be subject to the
debt limit. The City’s 2022 EMV is $2,467,755,200. 3% of EMV = $74,032,656. As of
December 2, 2022, as reported in the Official Statement for the City’s 2022A Bonds, the City’s
has no outstanding bond issues applicable to the legal debt limit.
Another limitation on bonding under the Act is that without referendum, the total amount that
can be used for principal and interest in any one year for CIP debt cannot exceed 0.16% of the
EMV for the City. The maximum annual principal and interest for the City is $3,948,408 based
upon the City’s 2022 EMV ($2,467,755,200 x .0016).
Under this Plan, the City may issue up to $32,000,000 in general obligation capital
improvement plan bonds in the years 2023 through 2027 to finance the Project. The bonds are
intended to be structured with a not-to-exceed term of 10 years. Principal payments will begin
on February 1, 2025. The principal and interest payments for the proposed bonds are estimated
to be $2,301,000 in calendar years 2025 through 2044. This is estimated based on the estimated
par amount of $30,340,000 of bonds to be issued pursuant to the CIP Plan, over a term of 20
years.
Expected debt service on the proposed bonds for the Project to be financed in 2023 is within
the statutory limits.
Annual Review of the Capital Improvement Plan
The City Council, using the process outlined in this Plan, may review this Plan annually, taking
into account proposed expenditures, making priority decisions and seeking funding for those
expenditures it deems necessary for the City. If deemed appropriate, the City Council will
prepare an update or amendment to this Plan.
EXTRACT OF MINUTES OF A MEETING OF THE
CITY COUNCIL OF THE CITY OF OTSEGO, MINNESOTA
HELD: APRIL 10, 2023
Pursuant to due call and notice thereof, a regular or special meeting of the City Council of
City of Otsego, Wright County, Minnesota, was duly called and held at the Prairie Center on April
10, 2023, at 7:00 P.M. for the purpose, in part, of calling a public hearing on the intention to issue
general obligation capital improvement plan bonds and the proposal to adopt a capital improvement
plan therefor.
The following members were present:
And the following were absent:
Member _________________ introduced the following resolution and moved its adoption:
RESOLUTION NO. _____________
RESOLUTION CALLING PUBLIC HEARING ON THE INTENTION TO ISSUE GENERAL
OBLIGATION CAPITAL IMPROVEMENT PLAN BONDS AND THE PROPOSAL TO ADOPT
A CAPITAL IMPROVEMENT PLAN THEREFOR
A. WHEREAS, pursuant to Minnesota Statutes, Section 475.521 the City of Otsego,
Minnesota (the "City") may issue bonds to finance capital expenditures under its capital
improvement plan (the "Plan") without an election provided that, among other things, prior to
issuing general obligation capital improvement plan bonds (the "Bonds") the City adopts the Plan
after holding a public hearing thereon and publishing a notice of its intention to issue the Bonds
and the date and time of a hearing to obtain public comment on the issuance of the Bonds and
adoption of the Plan; and
B. WHEREAS, the City Council will hold a public hearing on May 8, 2023 on its
intention to issue the Bonds and to adopt the Plan; and
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Otsego,
Minnesota, that the City Council hereby calls for a public hearing on its intent to issue the Bonds
and to adopt the Plan, the public hearing to be held on the date and time set forth in Exhibit A
attached hereto. The City Clerk is hereby directed to cause the notice of public hearing to be
published at least 14 but not more than 28 days before the date of the public hearing in the official
newspaper of the City or a newspaper of general circulation in the City.
The motion for the adoption of the foregoing resolution was duly seconded by member
___________________ and, after full discussion thereof and upon a vote being taken thereon, the
following voted in favor thereof:
and the following voted against the same:
Whereupon the resolution was declared duly passed and adopted.
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STATE OF MINNESOTA
COUNTY OF WRIGHT
CITY OF OTSEGO
I, the undersigned, being duly qualified and acting City Clerk of the City of Otsego,
Minnesota, DO HEREBY CERTIFY that I have compared the attached and foregoing extract of
minutes with the original thereof on file in my office, and that the same is a full, true and complete
transcript of the minutes of a meeting of the City Council, duly called and held on the date therein
indicated, insofar as such minutes relate to the City Council calling a public hearing on the
intention to issue general obligation capital improvement plan bonds and the proposal to adopt a
capital improvement plan therefor.
WITNESS my hand on ____________________, 2023.
______________________________________
City Clerk
EXHIBIT A
CITY OF OTSEGO, MINNESOTA
NOTICE OF PUBLIC HEARING ON INTENTION TO ISSUE
GENERAL OBLIGATION CAPITAL IMPROVEMENT PLAN BONDS
AND THE PROPOSAL TO ADOPT A CAPITAL IMPROVEMENT PLAN THEREFOR
NOTICE IS HEREBY GIVEN, that the City Council of the City of Otsego, Minnesota (the
"City") will meet at the Prairie Center, 8899 Nashua Avenue NE, in the City, at 7:00 P.M. on
Monday, May 8, 2022, for the purpose of conducting a public hearing on (a) the intention to issue
general obligation capital improvement plan bonds in an amount not to exceed $32,000,000 and (b)
the proposal to adopt a capital improvement plan therefor. The proceeds of the bonds will be used
to finance the construction of a City Hall, Public Works facilities, and renovation of facility spaces
for the City within the City pursuant to Minnesota Statutes, Section 475.521.
All interested persons may appear and be heard at the time and place set forth above.
If a petition requesting a vote on the issuance of the bonds is signed by voters equal to five
percent of the votes cast in the City in the last general election and is filed with the City within
thirty days after the public hearing, the bonds may only be issued upon obtaining the approval of
the majority of the voters voting on the question of issuing the bonds.
If you have questions or comments and wish to be heard, you may present them in writing
by mail addressed to the City Clerk at City Hall at 13400 90th Street NE, Otsego, MN 55330, or
email the City Clerk at aetzel@ci.otsego.mn.us, or call and leave a message at (763) 441-4414, no
later than noon on May 8, 2023. Written comments must be received prior to the public hearing.
Please visit the City's website at www.ci.otsego.mn.us.gov for additional information on an
opportunity to be heard at this meeting.
BY ORDER OF THE CITY COUNCIL OF THE
CITY OF OTSEGO, MINNESOTA
/s/ Audra Etzel, City Clerk
CITY OF OTSEGO, MINNESOTA
GENERAL OBLIGATION CAPITAL IMPROVEMENT PLAN BONDS, SERIES 2023A
PROPOSED SCHEDULE OF EVENTS
AS OF MARCH 27, 2023
The following checklist of items denotes each milestone activity as well as the members of the
finance team who will have the responsibility to complete it. Please note this proposed timetable
assumes regularly scheduled City Council meetings.
Date Action Responsible Party
March 31 City to Provide Details to Include in CIP Document City
April 6 Northland to Provide Draft CIP to City Northland
April 14 Final Comments due from City to Northland City, Northland
April 17 Public Hearing Notice Provided to City by Bond
Counsel
Bond Counsel
April 18 City to Submit Notice to Star News for Publication on
Saturday, April 8th
City
April 22 Publication of Public Hearing Notice Star News, City
May 8 Public Hearing – Resolution Approving the CIP City Council Action,
Bond Counsel,
Northland
June 8 30-day Referendum Period Over
August 2023 September 2023
Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 1 2
6 7 8 9 10 11 12 3 4 5 6 7 8 9
13 14 15 16 17 18 19 10 11 12 13 14 15 16
20 21 22 23 24 25 26 17 18 19 20 21 22 23
27 28 29 30 31 24 25 26 27 28 29 30
October 2023 November 2023
Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6 7 1 2 3 4
8 9 10 11 12 13 14 5 6 7 8 9 10 11
15 16 17 18 19 20 21 12 13 14 15 16 17 18
22 23 24 25 26 27 28 19 20 21 22 23 24 25
29 30 31 26 27 28 29 30
Holiday
Important Date
City of Otsego, MN
Schedule of Events
Page 2
Date Action Responsible Party
August 7 Set Sale Resolution Sent to City for Council Packets
Finance Plan Sent to the City
Northland, Bond
Counsel
August 14 Set Sale Resolution for Bonds Adopted
Review of Finance Plan
City Council Action,
Bond Counsel
August 22 Preliminary Official Statement Sent to City for Sign Off
and to Rating Agency
Northland, City Staff
Week of September
11
Rating Conference Call Northland, City Staff,
Rating Agency
October 13 Rating Received Rating Agency, City
Staff, Northland
October 16 Awarding Resolution sent to the City Northland, Bond
Counsel
October 23 Bond Sale 10:00 a.m.
Awarding Resolution Adopted – 7:00 p.m.
City Council Action,
Northland, Bond
Counsel
November 28 Closing on the Bonds (proceeds available) City Staff, Northland,
Bond Counsel