ITEM 5.2 Northland SecuritiesOt Tom/ F O
MINNESOTA V
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT:
REQUESTOR:
MEETING DATE:
Administration
Adam Flaherty, Finance Director
September 12, 2016
PRESENTER(s):
REVIEWED BY:
ITEM #:
Adam Flaherty, Finance Director
City Administrator Johnson
5.2
AGENDA ITEM DETAILS
RECOMMENDATION:
It is recommended by staff that the City Council review the option of achieving interest savings by
issuing an advance refunding bond that will result in the defeasance of the series 2009A bond.
ARE YOU SEEKING APPROVAL OF A CONTRACT? IS A PUBLIC HEARING REQUIRED?
No I No
BACKGROUND/JUSTIFICATION:
The City originally financed much of the current -day water and sanitary sewer plants and infrastructure
with bond issues intended to be repaid with utility access and connection charges. During the last
recession, the intended revenues decreased with the slowed new home construction. Given that
environment, the City issued refunding bonds, where the principal repayments were strategically
structured with future cash flows in mind.
One of the current outstanding issues, the 2009A, has $6,360,000 in principal outstanding. The structure
does not provide for any principal repayment until 2024, with only interest payments until then. The
opportunity exists for the City to refund this bond again, and structure the new issue with accelerated
principal payments. The new structure would provide for principal repayments beginning in 2017
(compared to 2024) and will provide for interest savings. The extent of savings will be determined by
which structure the Council is most comfortable with. Two structure options are attached for review.
If the Council agrees with accelerating debt service payments to achieve interest savings, the City
ultimately has two options for actually issuing the bonds. 1) Negotiated Sale —The City works with
Northland Securities who would act as the underwriter and would purchase the bonds directly from the
City. 2) Competitive Sale —The City solicits bids from interested parties in the open market.
Jessica Green of Northland Securities is present for the meeting tonight and will further explain the
City's options for structuring and issuing the bond.
SUPPORTING DOCUMENTS: 39 ATTACHED NONE
• Refunding Summary #1— Level Debt Service
• Refunding Summary #2 — Gradually Increase in Debt Service
• Proposed Schedule of Events
POSSIBLE MOTION
Please word motion as you would like it to appear in the minutes.
-Motion to direct staff to prepare a resolution that authorizes Northland Securities to set the sale for
the issuance of a refunding bond through: A) Negotiated Sale — OR — B) Competitive Sale.
BUDGET INFORMATION
FUNDING: BUDGETED:
n/a I n/a
Preliminary
City of Otsego, Minnesota
Taxable G.O. Water And Sewer Refunding Bonds, Series 2016
Full Net Defeasance Advance Refunding of Series 2009A
Level Debt Service
Refunding Summary
Dated 12101/20161 Delivered 12/01/2016
Sources Of Funds
Par Amount of Bonds
$7,105,000.00
Total Sources
$7,105,000.00
Uses Of Funds
Deposit to Net Cash Escrow Fund
—6,987,571.28
Costs of Issuance
117,400,00
_- -
Rounding Amount
_ 28.72
Total Uses
$7,105,000.00
Flow of Funds Detail
State and Local Government Series (SLGS) rates for
-- - - ...... _..__
9/04/2012
- -
-.... - -- -
Date of OMP Candidates
Net Cash Escrow Fund Solution Method
Net Funded
Total Cost of Investments
$6,987,571.28
- a
Interest Earnings @ 0.764 /o
154,258.72
Total Draws
$7,141,830.00
Issues Refunded And Call Dates
09aold
12/01/2019
PV Analysis Summary (Net to Net)
Net PV Cashflow Savings @ 1.995%o(Bond Yield)
450,574.24
-
Contingency or Rounding Amount _
28.72
Net Present Value Benefit
$450,602.96
Net PV Benefit ! $6,360,000 Refunded Principal
7.085%
Net PV Benefit / $7,105,000 Refunding Principal
6.342%
Bond Statistics
Average Life
- 6.163 Years
Average Coupon
2.0064398%
Net Interest Cost (NIC)
2.0064398%
Bond Yield for Arbitrage Purposes
- 1.9954344%
True Interest Cost (TIC) .... - ......__
1,9954344%
-- -- -._...--
----._ _..— . __........- ----- -- .
All Inclusive Cost (AIC)
2.2879211%
09aref I SINGLE PURPOSE 1 8/ 5/2016 ( 7:40 AM
Northland Securities Inc.
Public
Preliminary
City of Otsego, Minnesota
Taxable G.O. Water And Sewer Refunding Bonds, Series 2016
Full Net Defeasance Advance Refunding
of Series 2009A
Level Debt Service
Debt Service Comparison
Date Total P+I
Net New D/S
Old Net D/S
Savings
12/01/2016 -
(28.72)
-
28.72
12/01/2017 723,637.50
723,637.50
260,610.00
(463,027.50)
12/01/2018 728,237.50
728,237.50
260,610.00
(467,627.50)
12/01/2019 727,13T50
727,137.50
260,610.00
(466,527.50)
12/01/2020 724,757.50
724,757.50
260,610.00 _
(464,147.50)
12/01/2021 726,077.50
726,077.50
260,610.00
(465,467.50)
12/01/2022 725,997.50
725,997.50
260,610.00
(465,387.50)
12/01/2023 724,797.50
724,797.50
260,610.00
(464,187.50)
12/01/2024 727,447.50
727,447.50
1,010,610.00
283,162.50
12/01/2025 723,815.00
723,815.00
1,805,610.00
1,081,795.00
_
12/01/2026 723,965.00
723,965.00
1,801,035.00
1,077,070.00
12/01/2027 727,750.00
727,750.00
2,499,000.00
1,771,250.00
Total $7,983,620.00
$7,983,591.28
$8,940,525.00
$956,933.72
PV Analysis Summary (Net to Net)
Gross PV Debt Service Savings .....................
450,574.24
Net PV Cashflow Savings @ 1.995%(Bond Yield) .....
450,574,24
Contingency or Rounding Amount ....................
28.72
Net Present Value Benefit
$450,602.96
Net PV Benefit / $7,555,574.24 PV Refunded Debt Service
5.964%
Net PV Benefit / $6,360,000 Refunded Principal...
7.085%
Net PV Benefit / $7,105,000 Refunding Principal-
6.342%
Refunding Bond Information
Refunding Dated Date
_ 12/01/2016
Refunding Delivery Date
12/01/2016
09aref I SINGLE PURPOSE 1 8/ 5/2016 i 7:40 AM
Northland Securities Inc.
Preliminary
City of Otsego, Minnesota
Taxable G.O. Water And Sewer Refunding Bonds, Series 2016
Full Net Defeasance Advance Refunding of Series 2009A
Level Debt Service
Debt Service Schedule
Date Principal
Coupon
Interest
Total P+I
Fiscal Total
12/01/2016 -
-
-
06/01/2017 -
-
61,818.75
61,818.75
-
12/01/2017 600,000.00
0.900%
61,818.75
661,818.75
723,637.50
06/01/2018 -
-
59,118.75
59,118.75
-
12/01/2018 610,000.00
1.000%
59,118.75
669,118.75
728,237.50
06/01/2019 -
-
56,068.75
56,068.75
-
12/01/2019 615,000,00
1.200%
56,068.75
671,068.75
727,137,50
06/01/2020 -
-
52,378.75
52,378.75
-
12/01/2020 620,000.00
1.400%
52,378.75
672,378.75
724,757.50
06/01/2021
48,038.75
48,038.75
12/01/2021 630,000.00
1.600%
48,038.75
678,038.75
726,077.50
06/01/2022 -
-
42,998.75
42,998.75
-
12/01/2022 640,000.00
1.750%
42,998.75
682,998.75
725,997.50
06/01/2023 -
-
37,398.75
37,398.75
-
12/01/2023 650,000.00
1.900%
37,398.75
687,398.75
724,797.50
06/01/2024 -
-
31,223.75
31,223.75
-
12/01/2024 665,000.00
2.050%
31,223.75
696,223.75
727,447.50
06/01/2025 -
-
24,407.50
24,407.50
-
12/01/2025 675;MOM
2.200%
24,407.50
699,407.50
723,815.00
06/01/2026 -
-
16,982.50
_ 16,982.50
-
12/01/2026 690,000.00
2.350%
16,982.50
706,982.50
723,965.00
06/01/2027 -
-
8,875.00
8,875.00
-
12/01/2027 710,000.00
2.500%
8,875.00
718,875.00
727,750.00
Total $7,105,000.00
-
$878,620.00
$7,983,620.00
-
Date And Term Structure
Dated
12/01/2016
Delivery Date
12/01/2016
First Coupon Date
6/01/2017
First available call date
Call Price
Yield Statistics
Bond Year Dollars
$43,790.00
Average Life
6.163 Years
Average Coupon _
2.0064398%
Net Interest Cost (NIC)
2.0064398%
True Interest Cost (TIC)
1.9954344%
All Inclusive Cost (AIC)
2.2879211%
IRS Form 8038
Net Interest Cost
2.0064398%
Weighted Average Maturity
6.163 Years
Bond Yield for Arbitrage Purposes
1.9954344%
09aref I SINGLE PURPOSE 1 8/ 5/2016 1 7:40 AM
Northland Securities Inc.
Public Finance
g'
Preliminary
City of Otsego, Minnesota
Taxable G.O. Water And Sewer Refunding Bonds, Series 2016
Full Net Defeasance Advance Refunding of Series 2009A
Gradual Increase
Refunding Summary
Dated 12/01/2016 1 Delivered 12/01/2016
Sources Of Funds
Par Amount of Bonds
—$7,105,000.00
Total Sources
$7,105,000.00
Uses Of Funds
Deposit to Net Cash Escrow Fund
6,987,571.28
Costs of Issuance
117,400.00
Rounding Amount
28.72
Total Uses
$7,105,000.00
Flow of Funds Detail
State and Local Government Series (SLGS) rates for
9/04/2012
Date of OMP Candidates
Net Cash Escrow Fund Solution Method
Net Funded
Total Cost of Investments --
$6,987,571.28
o-
Interest Earnings 0.764 /o
1.54,258.72
Total Draws
$7,141,830.00
Issues Refunded And Call Dates
09aold
12/01/2019
PV Analysis Summary (Net to Net)
Net PV Cashfiow Savings @ 2_ 170%(Bond Yield)
341,634,63
Contingency or Rounding Amount
28.72
Net Present Value Benefit
—$341,663.35
Net PV Benefit / $6,360,000 Refunded Principal
5.372%
Net PV Benefit / $7,105,000 Refunding Principal
4.809%
Bond Statistics
Average Life
7.935 Years
Average Coupon
2.1775896%
Net Interest Cost (NIC)
2.1775896%
Bond Yield for Arbitrage Purposes
2,1703589%
_
True Interest Cost (TIC)
2.1703589%
All Inclusive Cost (AIC)
2.4019726%
09aref I SINGLE PURPOSE 1 9/7/2016 1 11:47AM
Preliminary
City of Otsego, Minnesota
Taxable G.O. Water And Sewer Refunding Bonds, Series 2016
Full Net Defeasance Advance Refunding
of Series 2009A
Gradual Increase
Debt Service Comparison
Date Total P+l
Net New D/S
Old Net D/S
Savings
12/01/2016 -
(28.72)
-
28.72
12/01/2017 344,025.00
344,025.00
260,610.00
(83,415.00)
12/01/2018 367,225.00
367,225.00
260,610.00
(106,615.00)
12/01/2019 389,975.00
389,975.00
260,610.00
(129,365.00)
12/01/2020 436,975.00
436,975.00
260,610.00 —
(176,365.00)
12/01/2021 507,775.00
507,775.00
260,610.00
(247,165.00)
12/01/2022 626,775.00
626,775.00
260,610.00
(366,165.00)
12/01/2023 818,025,00
818,025.00
260,610.00
(557,415.00)
12/01/2024 1,004,725.00
1,004,725.00
1,010,610.00
5,885.00
12/01/2025 1,186,275.00
1,186,275.00
1,805,610.00
619,335.00
12/01/2026 T 1,262,075.00
1,262,075.00
1,801,035.00
538,960.00
12/01/2027 1,388,875.00
1,388,875.00
2,499,000.00
1,110,125.00
Total $8,332,725.00
$8,332,696.28
$8,940,525.00
$607,828.72
PV Analysis Summary (Net to Net)
Gross PV Debt Service Savings .....................
341,634.63
Net PV Cashflow Savings @ 2.170%(Bond Yield)...,.
341,634.63
Contingency or Rounding Amount ....................
28.72
Net Present Value Benefit
$341,663.35
Net PV Benefit / $7,446,634.63 PV Refunded Debt Service
4.588%
Net PV Benefit / $6,360,000 Refunded Principal..
5.372%
Net PV Benefit / $7,105,000 Refunding Principal-
4.809%
Refunding Bond Information
Refunding Dated Date
_
12/01/2016
Refunding Delivery Date
12/01/2016
09aref I SINGLE PURPOSE 1 9/7/2016 1 11:47AM
Northland
Public
Preliminary
City of Otsego, Minnesota
Taxable G.O. Water And Sewer Refunding Bonds,
Series 2016
Full Net Defeasance Advance Refunding of Series
2009A
Gradual Increase
Debt Service Schedule
Date Principal
Coupon
Interest
Total P+I
Fiscal Total
12/01/2016
-
-
-
06/01/2017 -
-
72,012.50
72,012.50
-
12/01/2017 200,000.00
0.900%
72,012.50
272,012.50
344,025.00
06/01 /2018 -
-
71,112.50
71,112.50
-
12/01/2018 225,000.00
1.000%
71,112.50
296,112.50
367,225.00
06/01/2019 -
-
69,987.50
69,987.50
12/01/2019 250,000,00
1.200%
69,987.50
319,987.50
389,975.00
06/01/2020 -
-
68,487.50
68,487.50
-
12/01/2020 300,000.00
1.400%
68,487.50
368,487.50
436,975.00
06/01/2021 -
66,387,50
_ 66,387.50
-
12/01/2021 375,000.00
1.600%
66,387.50
441,387.50
507,775.00
06/01/2022 -
-
63,387.50
63,387.50
-
12/01/2022 500,000.00
1.750%
63,387.50
563,387.50
626,775.00
06/01/2023 -
-
59,012.50
59,012.50
-
12/01/2023 700,000.00
1.900%
59,012.50
759,012.50
818,025.00
06/01/2024 -
-
52,362.50
52,362.50
12/01/2024 900,000.00
2.050%
52,362.50
952,362.50
1,004,725.00
06/01/2025 -
-
43,137.50
43,137.50
12/01/2025 1,100,000.00
2.200%
43,137.50
1,143,137.50
1,186,275.00
06/01/2026
-
31,037.50
31,037.50
12/01/2026 1,200,000.00
2.350%
31,037.50
1,231,037.50
1,262,075.00
06/01/2027
-
16,937.50
16,937.50
12/01/2027 1,355,000.00
2.500%
16,937.50
1,371,937.50
1,388,875.00
Total $7,105,000.00
-
$1,227,725.00
$8,332,725.00
-
Date And Term Structure
Dated
12/01/2016
Delivery Date
.....
_...... - _
.....-
12/01/2016
- -------....-- — -
First Coupon Date
6/01/2017
First available call date
_
Call Price
_
_
-
Yield Statistics
Bond Year Dollars
$56,380,00
Average Life
7.935 Years
— - ........
Average Coupon
_
_
2_1775896%0
Net Interest Cost (NIC)
----...-------....----
2.1775896%
True Interest Cost (TIC)
2.1703589%
—
All Inclusive Cost (AIC)
2.4019726%
IRS Form 8038
Net Interest Cost
_
2.1775896%
Weighted Average Maturity J
_
—_ _
_
7.935 Years
Bond Yield for Arbitrage Purposes
2.1703589%
09a,ef I SINGLE PURPOSE 1 9/7/2016 1 11:47AM
Northland
CITY OF OTSEGO, MINNESOTA
TAXABLE GENERAL OBLIGATION WATER AND SEWER REVENUE
REFUNDING BONDS, SERIES 2016A
PROPOSED SCHEDULE OF EVENTS
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. Items in red indicate tasks for a competitive sale and
items in green indicate tasks for a negotiated sale.
Sun
Mon
Tue Wed
0.
Thu
Fri
Sat
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Sun
Mon
Noveinber
Tue Wed
2016
Thu
Fri
Sat
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
Sun
Mon
October
Tue
2016
We
Thu
Fri
Sat
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
Sun
Mon
December
Tue
2016
Wed Thu
Fri
Sat
1
2
3
4
5
6
7
8
9
10
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31
Date
Action
Responsible Party
September 1211,
City Council discussion to determine structure and
City, Northland
type of sale
September 19th
Trigger Resolution Sent to City for Council Packets
Northland, Bond Counsel
Set Sale Resolution Sent to City for Council Packets
Finance Plan Sent to the City
September 20th
Preliminary Official Statement Sent to City for Sign
Northland, City
Off and to Rating Agency
September 261h
Trigger Resolution for Bonds Adopted
City Council Action,
Set Sale Resolution for Bonds Adopted
Northland, Bond Counsel
Week of October 3ra
Rating Conference Call
Northland, City, Rating
A enc
October 14th
Rating Received
Rating Agency, City,
Northland
October 20th
Bond Pricing
Northland, City
Bond Purchase Contract Signed
October 24th
Bond Sale -10:30 a.m.
City Council Action,
Authorizing Resolution Adopted - 7:00 p.m.
Northland, Bond Counsel
November 17th
Closing on the Bonds (Proceeds available)
Northland, City Staff,
Bond Counsel
NORTHLAND
SECURITIES