ITEM 4.1 Resolution 16-77IV
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MINNESOTA V
DEPARTMENT INFORMATION
Request for
City Council Action
ORIGINATING DEPARTMENT:
REQUESTOR:
MEETING DATE:
Administration
Adam Flaherty, Finance Director
September 26, 2016
PRESENTER(s):
REVIEWED BY:
ITEM #:
Adam Flaherty, Finance Director
City Administrator Johnson
4.1
AGENDA ITEM DETAILS
RECOMMENDATION:
It is recommended by staff that the City Council review the option of achieving interest savings and debt
restructuring by issuing an advance refunding bond that will result in the defeasance of the series 2009A
bond.
ARE YOU SEEKING APPROVAL OF A CONTRACT?
No
IS A PUBLIC HEARING REQUIRED?
No
BACKGROUND/JUSTIFICATION:
At the September 12, 2016 meeting, the City Council reviewed the option to issue an advance refunding
bond that would result in the defeasance of the series 2009A bond. Staff presented options to the City
Council on two aspects of the potential bond issue:
Repayment Structure
The City Council reviewed two options for the structure of the repayment: 1) Level Debt Service —
Annual principal and interest payments will be amortized almost equally throughout the repayment
term. 2) Gradual Increase — Principal payments would start at a lower annual amount ($200k) and would
gradually increase throughout the repayment term.
It was the understanding of City staff that the City Council preferred the gradually increasing option.
Type of Issuance
The City Council reviewed two options'for issuing the bond: 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, with
Northland serving as the municipal advisor to the City.
It was the understanding of City staff that the City Council approved of the negotiated sale method.
Action
Just as a reminder, the City is merely exploring the option of issuing a refunding bond at this point, and
there is no obligation to move forward.
If the City Council is comfortable with moving forward and issuing an advance refunding bond, the City
Council can approve the attached resolution.
Resolution Options
The attached resolution is often called a "trigger" resolution. Essentially, the City Council will determine
that a refunding bond will be issued when a pre -determined amount of total net present value benefit
(NPVB) savings are achieved. This "trigger" amount can be set at the Council's discretion, as long as it
exceeds the minimum amount of NPVB savings set forth by Minnesota Statute (3%). For reference, the
minimum amount of savings the City must achieve is $219,761. The NPVB savings that would be
achieved in the two scenarios reviewed by the Council so far would be:
Level Repayment $450,602.96 (Gross Savings of $956,933.72)
Gradual Increase $341,663.35 (Gross Savings of $607,828.72)
Jessica Green and Rusty Fifield of Northland Securities will be present for the meeting tonight and will
be available for any questions.
SUPPORTING DOCUMENTS: ATTACHED NONE
• Chart— REC's Required to Meet Debt Obligations
• Chart — Combined WAC & SAC Projected Cash Balances
• Resolution 2016-77
POSSIBLE MOTION
-Motion to approve Resolution 2016-77, approving the issuance of Taxable G.O. Water and Sewer
Revenue Refunding Bonds, Series 2016A, provided the total net present value benefit savings is at least
BUDGET INFORMATION
FUNDING: BUDGETED:
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CERTIFICATION OF MINUTES
RELATING TO TAXABLE GENERAL OBLIGATION WATER AND SEWER
REVENUE REFUNDING BONDS, SERIES 2016A
ISSUER: City of Otsego, Minnesota
BODY: City Council
KIND, DATE, TIME AND PLACE OF MEETING:
A regular meeting held on Monday, September 26, 2016, at 7:00 p.m., in the City Offices
MEMBERS PRESENT:
MEMBERS ABSENT:
Documents Attached: Extract of Minutes of said meeting.
RESOLUTION 2016-77
APPROVING THE ISSUANCE OF
TAXABLE GENERAL OBLIGATION WATER AND SEWER REVENUE REFUNDING
BONDS, SERIES 2016A
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 September 26, 2016.
Clerk
EXTRACT OF MINUTES OF A MEETING
OF THE CITY COUNCIL OF THE CITY OF OTSEGO, STATE OF MINNESOTA
HELD: Monday, September 26, 2016
Pursuant to due call and notice thereof, a regular meeting of the City Council of the City
of Otsego, State of Minnesota, was duly held on Monday, September 26, 2016 at 7:00 p.m.
Member introduced the following resolution and moved its
adoption:
RESOLUTION 2016-77 APPROVING TBE ISSUANCE OF
TAXABLE GENERAL OBLIGATION WATER AND SEWER REVENUE REFUNDING
BONDS, SERIES 2016A
BE IT RESOLVED by the City Council of the City of Otsego, State of Minnesota
(herein, the "City"), as follows:
The City Council hereby finds and declares that it is necessary and expedient for the City
to sell and issue its fully registered taxable general obligation water and sewer revenue
refunding bonds in the total aggregate principal amount not to exceed $7,200,000 (herein,
the "Bonds"). The proceeds of the Bonds will be used, together with any additional
funds of the City which might be required for (i) a full net advance refunding of all or a
portion of the December 1, 2024 through 2027 maturities, aggregating up to $6,360,000
in principal amount, of the City's General Obligation Water and Sewer Revenue
Refunding Bonds, Series 2009A, dated December 1, 2009 as date of original issue, and
(ii) to pay the costs associated with issuing the Bonds.
2. The City Council desires to proceed with the sale of the Bonds by direct negotiation with
Northland Securities, Inc. ("NSI"). NSI will purchase the Bonds in an arm's-length
commercial transaction with the City.
The Mayor and the Administrator are hereby authorized to approve the sale of the Bonds
in an aggregate principal amount not to exceed $7,200,000 and to execute a bond
purchase agreement for the purchase of the Bonds with NSI, provided the total net
savings is at least $ and the savings meet the 3% savings test as set forth in
Minnesota Statutes 475.67, subdivision 12.
4. Upon approval of the sale of the Bonds by the Mayor and the Administrator, the City
Council will take action at its next regularly scheduled or special meeting thereafter to
adopt the necessary approving resolutions as prepared by the City's bond counsel.
5. NSI is authorized to prepare an Official Statement related to the sale of the Bonds.
6. If the Mayor and Administrator have not approved the sale of the bonds to NSI and
executed the related bond purchase agreement by January 31, 2017, this resolution shall
expire.
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.
Bond Buyer's Index 2000 to Present
6.25%
6.00% —
5.75%
5.50%
5.25%
5.00%
w
Q� 4.75% kA
O 4.50% �i A I AA 4.
`m
i 4.25%
0
N
4.00% - -
3.75% ------
Series 2009A
3.50%
Series 2010C
3.25%
3.00%
2.75% - --- -
o
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N N N N N N
Source: Data compiled by Northland Securities from published Bond Buyer's GO20-Bond Index
Northland Securities, Inc.
45 South 7th Street, Suite 2000, Minneapolis, MN 55402
NORTHLAND Toll Free 1-800 851ands Main s.com 1-5900
www.northlandsecurities.com
SECURITIES Member FINRA and SIPC
Chart for illustration only. This is not an offer to buy or sell securities.
Based on sources believed to be reliable, but not warranted or guaranteed by Northland Securities, Inc. (RC 16-17)
5.25%
4.75%
v
�o
4.25%
O
0
M
ai
0
N 3.75%
3.25%
2.75%
Bond Buyer's Index Trends
2016
---2015
— — 2014
2013
2012
2011
w
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Ol
Source: Data compiled by Northland Securities from published Bond Buyer's Index
Northland Securities, Inc.
45 South 7th Street, Suite 2000, Minneapolis, MN 55402
NORTHLAND Toll Free 1-800-851-2920 Main 612-851-5900
www.northlandsecurities.com
SECURITIES Member FINRA and SIPC
Chart for illustration only. This is not an offer to buy or sell securities .
Based on sources believed to be reliable, but not warranted or guaranteed by Northland Securities, Inc. (RC 16-18)