1988-12-13 CC SpecialSPECIAL COUNCIL MEETING
MINUTES
DECEMBER 13, 1988
A special meeting of the Council was called to order byy Mayor Loretta
Roden. Members present included Don Cornelius, Donatus Vetscrl and Bob Braun
who arrived late. Others present included Maureen Andrews, Brad Farnham
and Marty Mc Dougna. The minutes should note that, Bob Braun was not
Fresent for the approval of the bond sale so that they coincide with the
bond documentation.
The urpose of the meeting was to review the results of the bid
opening held earlier in the day at Juran and Moody"s office for the Advance
Refunding and Im rovement Bonds and to discuss alternatives for financing
essential service Buildings for the City.
The Council was informed that there had been three bids received for
the sale of $510,000.00 G.O. Bonds for the Albertville sale which came in
as follows:
UDDER
Dain Bosworth,
Inc..
Piper, Jaffray
Hopwood, Inc.
American National
a
$502 , 860.00
$502,860.00
$502 , 503 .00
NET INTEREST
COST
$208 , 095 . 83
$208 , 222.08
$211, 494.3:3
NET INTEREST
RATE
7.2
7.24%
7.35%
Dain Bosworth, Inc. was the low bidder and therefore Juran and Moody
recommended to the Council that they award the bid to the same. Prior to
the approve of the resolution, Brad discussed with the Council some of the
details of the sale. The following points were raised as part of that
discussion.
The principal payment was reduced from $455,000.00 to $395,000.00.
The Debt Service payment was reduced from $791,946.79 to
$538,409.17 which resulted in a debt service reduction of
$233,555.62.
The Net Present Value of the Reduction amounted to $18,854.69.
Brad pointed out that within the last 24 hours prior to the sale
there was a shift in the interest rate that could have severely
effected the sale of the bonds, because the "window" in which the
project was workable, narrowed considerably. The Council was
informed that if the American bid had been the lowest bid that the
refunding would not have worked and all the bids would have had to
be rejected, noting that, the difference between the low and the
high bid was .12 of a percentage point.
The Council then reviewed the Bond Buyers Index (BBI) and saw that,
actual interest, rates for the month of December have moved contrary
to the trends in recent years. Brad stated that this was unusual
since the month of December tends to be a slow month in the bond
industry and that this typically 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 change in the trend.
The question was raised why the actual purchaserice was siightly
lower man the bid price"? Brad explained the the Bbonds were offered
with a. bond discount, which Dain Bosworth Inc. used which reduced
the purchase price from $502,860.00 to $491,930.00,
There was some discussion: regarding that the fart that the Savitski
Sunrise Commercial Park receive rethe benefit, of the refunding as
did the refunding of the 420 project.
The last point that Brad made was that because of the structuring
of the bond, available excess funds had to be used to reduce the
size of the issue from $510,000.00 to $505,000.00.
After hearing no other discussion, Brad informed the Council that, it
was Juran and Moody's recommendation that the City of Albertville accept
the Dain Bosworth, Inc. bid and award the sale to the same.
A motion was made by Don Cornelius and seconded by Donatus Vetsch to
approve the following resolution:
RESOLUTION ACCEPTING BID ON SALE OF $505,000.00 GENERAL
^ OBLIGATION ADVANCE REFUNDING AND IMPROVEMENT BONDS OF
1988, PROVIDING FOR THEIR ISSUANCE AND DETERMINING THE
FORM AND DETAILS THEREOF
All were in favor and the motion carried. The Council was informed
that the bond should be closed on December 29, 1988 so that the old issues
will be off the books for the 1989 Audit.
The Council was next informed that Juran and Moody is currently
looking at 4 possible defeasance candidates and that Brad will be returning
on Monday evening to inform the Council whether or not these bonds are good
candidates. If the schedules show that these issues work it would mean that
the City's bonded indebtness would be further reduced which could result in
Albertville considering applying for a bond rating from Moody's in New
York.
Donatus asked if there was a way for the City of Albertville to be
relieved of the debt directly attributable to tFie Joint Power's Water
Board. Brad stated that it was highly unlikely that there would be any way
to shift the debt from one government entity to another.
It was pointed out that in the event that the EDA (holding the bond)
ever presented cities with the option to refinance their debt in the same
manner as Farmer's Home Administration did this past summer that at that
time it might be possible to shift the debt, to someone else. There was also
some discussion that in the event that Albertville would ever refinance
this issue that the City could charge for any administrative expenses
associated with the refunding.
There was also some discussion whether or not Joint Power's should
have financed the last expansion to the system through the traditional
financini sources (bonding) instead of through a private loan from the
bank, I was ppointed out that there is not statutory authority to issue
this type of debt and that the Bank has the greatest exposure for loss
because the debt is not, generally an obligated debt of the cities or the
.Dint Power's.
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It was pointed out that, the Joint Powers Board needs to consider the
need to undertake a rating study, needs to establish clear policy and
guidelines regarding the financing of future expansion, and most
importantly straighten out the agreements under which the Board operates.
The final point of discussion for the evening was the matter of
building needs and financing options for any construction that the City
might undertake.
The Council was informed that the City has two strong options for
financing new construction. The first being the traditional Bond
Referendum, which would require a s eci�el
ection lection awhich time the
residents have an opportunity to vo"e yes" or no on
on the roposal.
Secondly, the City has the option to enter into a lease agreement �or which
certificates are issued to finance construction instead of bonds. This typpe
of financing: does not require the need for a vote of confidence by tree
residents.
As part of the discussion, the Council discussed the merit of what
ty e of building should be built, and 'row it should be presented to the
public. It was pointed out that typically the public perceives fire
department mansions as being more of a necessity then any rather type of
municipal bui ding and therefore is often the easiest type of city
expansion to finance.
The Council members agreed that there is a definite problem with space
back in the fire barn/maintenance department and that something would have
to be done rather quickly to relieve the shortage of space. It was pointed
out that by moving the fire department out of the existing building that
maintenance would have enough room to store all the equipment inside and
that the recent conflict between the two departments would be eliminated.
It was also pointed out that by leaving maintenance in the existin
building that as property becomes more valuable that public consent, will
initiate the relocation of the department to a site that is not as
commercially prime.
It was agreed that before the City r_ould go forward with any plans
that the City would need to find out what the Sr_hool District's plans are
to deal with the shortage of class room space. It was a general concensus
that if the School Board elects to move forward on a bond issue that, the
City would have a difficult time to structure and sale an additional
referendum for the construction of a city owned building.
Brad pointed out, that instead of bonding for any construction that the
City does have the option to do a Tax Exempt Lease Agreement, which would
allow the Cityy to build without going forward with the referendum. It was
pointed out treat if the City has a revenue source to support the lease
agreement that the impact of the tax capacity could be minimal. He also
stated that the lease agreement is a strong financing tool that would allow
the City to deal with the space problem at a time when there are not ideal
funds available for construction purposes.
The Council was informed that before any plans are made that. the City
should undertake a review of funds to see if there are revenues available
to support, the construction of a new building, generate schedules to
determine what the impact on !roperty tax will be, and sell the idea to the
residents in Albertville. n addition, it was suggested that before any
plans are prepared regarding actual construction that it may be advantages
to hire a consultant to do a needs assessment so that the City is building
a building that will meet the immediate needs of the City as well as some
of the future needs.
Brad pointed out that typically a lease agreement is structured for
about 20 years but if structured for a shorter time period that the City
mould be likely to get better savings on the proposal. It was also
xpl.ained that the City would own the building from day one but that the
certificate holders will hold the exposure of the outstanding debt.
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Some additional points that were raised included the following:
Would the City be relieving some of the space problems by building
the warming house addition at the park or would it in fact only
serve as a band -aid" solution to a long term problem.
Regardless to what the City ultimately decides to do that it would
be best treat, the Council have public consent for a project of this
magnitude.
That it is important to have the parties that, will share in the
interest of the building i.e. fire department) involved with the
planning and the selling o the proposal, but that the City should
not lose control over the management of the project.
if other participates become involved that the City should keep in
mind that the ppurpose of the construction is to reduce a ror�lem
treat, exists witrI municipal space and treat this should be tat most,
prevalent aspect of the construction.
That a building should be designed and land should be purchased
which would allow for expansion.
After some additional discussion it appeared that there was agreement
that if the City is going to go forward with a building that it should be
through a lease a reement and that there was a general consensus of those
present that the City should take some formal action to move this pror_ess
forward. Brad agreed to run some schedules on different size certificates
and brink; back to the Council for review.
The only other item discussed was that Don had come across a sidewalk
---that had been raised and needs to be fixed. The location of the flawed
.ection is in front of the school and that it should fixed as soon as
possible because of the City`s liability regarding maintenance of
sidewalks.
Hearing no other business the meetinwas adjourned. A motion was made
by Don Cornelius and seconded by Bog
Braun. All were in favor and the
motion carried.
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