1988-12-13 Special Bid Review
A a~eial meeti~ of the~Oounoil was called to order by Mayor Loretta
Roden. Members present included Don Cornelius~ Donatus Vetsch and Bob Braun
~ho arrived late. Others present included Maureen Andrews, Brad Farnham
and Mart~ Hc Doaana. The ml~tes should note that Bob Braun was not
present ror the approval of the bond sale so that they ~oincide with the
bond documentation. ,
The purpose of the it~ was to review the results of the bid
QPeni~ held earlier, in th~ at Juran and Moody's office for the Advance
Refund1&g and I.pr.ev~.ent ds and to discuss alternatives for financine
essential service buildings ~ the'City.
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The Council ~$ tnfo~.d that there had been three bids rece1ved for
the sale of $5113~",*,.08 G.O. $onds fO'r the Albertv1l1e sale which calle in
as follows: - ~-
': . IlIDDIlIl ~~llII ~ICIl
t>ain Bosworth ~ '.2,860.. "'"
Inc. I
Piper~ Jaffray $511.86&."
nopwood. Inc. I
American Natioaal $5e2,513.00 $211,494.33 7.35%
Bain Bosworth, Inc. was the low bidder ~d therefore Juran and Moody
recommended to the Counci~ that theI award the bid to the same. Prior to
the approve of the resolutioDL Br.d d scussed with the Council some of the
details of the sale. The ~ollowine points were raised as part of that
discussion.
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SPECIAL COUMC~ MEETING
MINUTES
DEOIMBIB 13, 1988
NET INTEREST
COpT
$2138.1395.83
NET INTEREST
RATE
7.23%
~
$2138,222.138
7.24%
*
*
The prinpipal-~a~.t
Th. Debt Service
$538~409.17 which
$233.555.62..
The Net Present Value of the Reduction amounted to $18,854.69.
Brad pointed out th.t within the last 24 hours prior to the sale
there was . shift in ~be interest rate that could have severely
effected tile sale 9f "tbe bonds-\ because the "-window" in which the
project was workabLel__narrowea oonsiderably. The Council was
informed that if the A8ericaa bid had been the lowest bid that the
refundtng would no~~.av~ worked and all the pids would have had to
be rejeo:ted It noti1fj:' tha.! tbe dlff~rence between 'the low and the
hieb bid was ..12 of a ~rO'.ntage Pf? nt.
wN*reduoed from $455,000.00 to $395.000.00.
pa~nt was reduced from $791-\946.79 to
resulted in a debt service reauction of
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* The Counoil then revl~wed~the Bond Buyers Index (BBI) and saw that
aotual i6'erest rates for the month of December have moved oontrary
to the trends in recent Years. Brad stated that this wae unusual
sinoe the month of December tends to be a slow month in the bond
industry and that, this typioallY lowers the rate
* Brad noted that even though the national BBI shows a significant
increase in the interest rates that Minnesota has not seen as great
of c~e in the trflnd.
* The qUesti! was raised why the actual purchase price was Sli!htlY
lower than e bid price? Brad explained the the bonde were of ered
v1tn a bon discount whioh Daln Bosvorth~ Inc. used which re uced
the purchase price from $502,860.00 to $49(,930.00. ,
* Thete was some discU8Siop regarding that the fact that the Savitski
Sunrise Commercial Park received the benefit of the refunding as
did the refunding of the 428 project.
* The last pOint that Brad made was that beoause of the structuring
of the bond, availab19. excess funds had to be used to reduce the
size of the issue fro. '~10,B00.00 to '505,008.00.
After hearing no otber disQussion1 Brad informed the CounCil that ~t
was Juran and MOQdy's ~oommendation ~hat the City of Albertvi Ie accept
the Dain Bosworth, Inc. bid and aW4rd the sale to 'the same.
A motion Wa$ .ade hI Don Cornelius and seconded by Donatus Vetsch to
approve the folloWiDa reso ~_i4n:
31SIiY&Xti81 t~Ia~"vDA~RaSthH Y~pI8~iA~' ~NB~N~~AL
. 1. 8, PROVIDIN8 ~Rom ISSUANCE AND nl'fERMINING THE
eO AND DETAILS THcRBO
All Wer~ in favor anddthe _otion carried. The Council was informed
that the bond should be ol~e o~ December 29, 1988 so that the old issues
will be off the bOoks ~or tbe .1989 Audit.
The Council was next informed that Juran ~nd Moody is currently
looking at. 4 possible def..s~ce candidates and that Brad will be returning
on MonclA7 pvening to infortt 'the Council whe'ther or not these bonds are good
oandidates. If the' schedules show that these issues work it would mean that
the City.! bonded indebtneas would be further reduced which could result in
Alber'tv11 e oonstd$rtDg applYina for a bond rating from Moody's in New
York. _
Donatu8 ~k~ 'if Here was a way for th6 City of Albertville to be
relieved of the debt rectl~ attribptable to the Joint Power's Water
Board'f Brahd ~t~tedf that was Aighly ualikely that there would be any way
to shi t t e deb't roe one .&overnment entity 1:.0 another.
It vas pointed out that in the ~ent that the EDA (holding the bond)
ever pre8~~\ed oitie~ with the option to Iefinance their debt in the same
manner as Farmer.s -~Q~ Adain1etration d d this past summer that at that
time it might be P9ssible to shift the debt to someone else. There w~s also
some discussion that 1,~tbe event that Albertville would ever re~inance
this 1s8ue that - the 'C~7 could oharee for any administrative expenses
associ_ted with the refun~tac.
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There was a180 so.. discussion wbether or not Joint Power's should
have finanoed the ~t ~n8ion to the S7Sm through the traditional
financing sources ( d1:if) i.stead of thro a private loan from the
bahnit. tI~ wa4 Point 0 ~that.~here l~ not e tutory authority to issue
t s y~~ or <!ebt and lIat th. Bank. as the greate15t exposure for loss
,. ,.aeoiau8~ the debt 1a not.-,ce-PAIIY an 0 ligated debt of the cities or the
.. .., nt Power's. -~-
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It was pointed out that ~e ~oint Powers Board needs to consider the
need to undertake a ratinc 8~udy needs to establish clear policy and
auidellnes regarding the financing of future expansio~, and most
1.portantl~ straighten ort..-the agreelllents under which the Board operates.
The final poi~~ of discussion for the evening was the matter of
building needs and financing options for any construction that the City
might undertake. ~
The Council ~~~ i~formed that the City has two strong options for
financi~ neN construction. The first being the traditional Bond
RElt'eren um'h Whioh WOUld."";'"require 11 speci"l ~leotign ..at which time the
residen save an o~P9~vun!ty to vo~e yes or no on the proposal.
Secondly, the Citr ha~ ~n. qption to enter into a lease agreement t'or which
certificates are a~ed ~ finance construction instead ot' bonds. This type
of finanoing doea ~ftot re4uire the need for a vote of confidence by the
residents. , ,
As part of the disousslon1 the Council discussed the merit of what
type of buildina should 'be bu 1t and how it should be presented to the
pUblic: It was ~~at~d out that t~pica11y the public perceives fire
department exp&u19flt as. belna .18Ore o:f a necessity then any other t~pe of
munioipal buiJ.di.na.. 'Ud tberefore is. of 'ten the easiest 'type ot' city
expansion to finance. -
The Oounqil me~rs $<<reed that there is a definite problem with space
back in the fire barn/maintenance department and that something would have
to be done rather lLiOklY $o:.eeve the shor~e of space. It wa~ pointed
out that by 1I0vi the fire artaent out of the existing bu:l.ldiq that
maintenanoe would ve eno wroom to store all the equipment inside and
that the recent oonf1i~ be~w... the two departments would be eliminated.
^' ~ It was also pointod odt that by leaving maintenance in the existing
uilding that as property becomes more valuable that public oonsent will
nitiate the relocation 'of the departMent to a site that is not as
commercially prime.
It was acreed that batere th&City eou1d go forward with any plans
that the City wouli need to find out wha~ the School District's plans are
to de~l with the S om aile of olass room space. It was a general concensus
that 1f the Schoo ~d elects to move :forward on a bond issue that the
City would have a i ficult time to structure and sale an additional
referendum for the constru~ion of a city owned building
Brad pointed oat that instead of bonding for any construction that the
City does have the option to~4o a Tax Exem~ Lease Agreement. which would
allow the City to~but1dLwt~h6Ut 10ing forward with the referendum. It was
pointed out that if tne Qity as a revenue source to support the lease
-agreement that the impact of t e tax oap~city could be minimal. He also
stated that the lea8e'~eeaen~ 1. a st~ng :financing tool that would allow
the City to deal with the space .roblem at a time when there are not ideal
funds available for cQnst~ction purposes.
The Council was 1nfor-.q ~hat before an~ plans are made that the City
should undertake a teview ~f t~ds to see it' there are revenues available
to support the cOft8truc~1on 0% a new building, generate schedules to
determine what th~ lm~et on p.operty ~ax will be, and sell the idea to the
residents in A1bert~lle. In addit~on it was suggested that before any
plans are prepaxed r ardtnc aQtua1 construction that it may be advantages
to hire a oons~ t~t 0 d~-. needs ..s.esement so that the City i~ build1ng
a building that will meet the immediate needs of the City as well as some
of the future needs.
Br~d pointed out tha~ typically a lease aa~eement 1s structured for
about 20 lears but if .\rpo~ured for a shorter ~ime period tb~t the City
EU1d be ikely ~o e6~ better savinas on the proposal. It was also
15tned that, the C1~Y _QUId o.n the building from day one, but that the
ertifioate holders will bOld ~he exposure of the outstanding debt
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Some additional points ,that were raised included the following:
* Would tbe Cttbbe te~vi~ some of the space problems by building
the warminl use f~ion at the park or would it in fact only
serve as a ban -aid" eo ution to a lone tara p..-oblem.
* Regardless to what the City ultimately decides to do that it would
be best ~bat the Counoil have public consent for a project of this
magnitude.
* That it i1l impo"~n' 'to have the ~r~ies that will share in the
inter~st Oft tie bUt lag (i.eh, fire 'eDar~meDt) invohlved with the
planning aJ1 t e sel p& of t e propo.e.~. uut that t e city should
not lose OOb ro Qver the management of the project.
* If other pa~loipa~.s beoQme involved that the City should keep in
mind that the purPQae of the construction is to reduce a prOblem
that eXists with m~lo1pal space and that this should be tbe most
prevalent aspect ~f,1;.he Qonstruc~lon.
* That a buildina ebou~ be designed and land should be purchased
which would .1 ow~lor ."ansion. '
After some addLtional diacuseion it ap~ared that there was agreement
that if th~ City ~ aoina to 89 forward with a buildi~ that it Sbould be
through a lease ~..~~t aDd tbat there was a general consensus of those
>>resent that tbekCity sbould take some formal action to move this ~rocess
forward. Brad alreed to run eome schedules on different size certificates
and bring back to,the Council for r.view.
The' only other tr1D disCU::3d was that Don had come across a sidewalk
~hat had been ra. and n s to be fixed. The location of the flawed
eotion is in iron of the sohool and that it should fixed as soon as
ossible because of the City's liability resarding maintenance of
sidewa ks. J
He.rina no c~her bueiBeSs ~he meetina was adjourned. A motion was made
by Don COrnelius and aecon4ed by Bob Braun. All were in favor and the
motion carried. .
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