05.01 - Presentation of Project Financing Options

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�1_ Springsted MEMORANDUM DATE: May 31, 2011 TO: Pequot Lakes City Council FROM: Paul Steinman, Vice President/Client Representative SUBJECT: Financing Options for Government Drive Springsted Incorporated 380 Jackson Street, Suite 300 Saint Paul, MN 55101 -2887 Tel: 651 - 223 -3000 Fax: 651- 223 -3002 www.spdngsted.com Minnesota Statutes provide a number of options to municipalities for the financing of street improvements. This memorandum will discuss some of the more prevalently used statutory provisions that are available. MS 475, General Obligation Bonds Statutory cities have a wide range of projects for which they are authorized to issue bonds, and streets are among those purposes authorized. Unless specifically provided for otherwise, if a city intends to secure repayment of bonds with its general taxing powers, the issuance of the bonds is subject to authorization by referendum. Elections for street bonds are seldom held due to the additional, non - referendum authorizations that cities have to issue debt for street improvements. MS 429, Improvement Bonds Under the provisions of Chapter 429, a city can issue bonds to fund public improvements where all or part of the cost is assessed against benefited properties. The statute details a specific process for proceeding with this type of project and filing assessments. Unless a petition of 100% of the benefited properties is received, the process includes several public hearings which allow for input on the project itself and the amount of the assessments estimated to be levied against each benefiting property. Bonds which are paid in whole or in part from assessments against benefited property do not fall under the city's general debt limit. Provided that at least 20% of the cost of the improvement is being assessed against benefited property, no election is needed to use the city's general obligation pledge to provide credit for the bonds. The general obligation pledge provides for the least interest cost for any type of borrowing. MS 475.58, Street Reconstruction Bonds A city can issue street reconstruction bonds for utility replacement and relocation and other activities incidental to the street reconstruction, turn lanes and other improvements having a substantial public safety function, realignments, other modifications to intersect with state and county roads, and the local share of state and county road projects. Except in the case of turn lanes, safety improvements, realignments, intersection modifications, and the local share Public Sector Advisors