09.02A Trailside Park Master Plan Project - Phase I Cost Estimates & Financing

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base of the City. This will work like a regular tax levy in all respects except in name. Nothing untoward will occur with the identified parcels. A political subdivision may"abate"all or a portion of its current or prospective property tax by contract or othen�vise on a parcel of property,for economic development purposes,subject to a duration limit and a limit on the amount of abatements.The"abatemenY'can be: 1. Rebate of property taxes to the property owner; 2. Reallocation of taxes to pay bondholders 3. Reallocation of taxes to pay for public infrastructure costs;or 4. Deferment of property taxes. Pursuant to Minnesota Statutes,Section 469.1813,subdivision 8,the total amount of Tax Abatement in any given year may not exceed ten percent of the City's net tax capacity or$200,000,whichever is r� eater. In Pequot Lakes,the current net tax capacity is 2,871,222. By law,the City has$287,122 of capacity available for abatements.The City's capacity for Tax Abatements is illustrated below: Maximum Allowable Abatement 287,122 Less: ExistingAbatement (16,000) Less: Proposed 2018Abatement (175,000) RemainingTax Abatement Capacity 96,122 Pavment and Revenue Requirements The following sources are being pledged to the payment of the bond: Abatement Lew/Tax Lew: The abatement levy must be for the principal amount of the bonds issued.The principal portion of this bond is projected to average approximately$175,000 per year over the 20-year amortization of the bond. The City will also pledge additional tax levy to cover the interest associated with the Trailside Park portion of the project,which is estimated to average$59,800 per year. Coupled with the abatement levy,total levy increase for 2019 is estimated at 13%. With all projects undertaken in 2018,the City's projected tax rate for 2019 is estimated at 66%(Pay 2018 tax rate is 57.510%). Utilitv Revenues: The City will also pledge utility revenues to cover the interest portion associated with the street and utility improvement project,which is estimated at$27,700 per yea r. $3,500.000 General Obli�ation Tax Abatement Bonds We recommend this bond be sold through a competitive, rated sale process as opposed to a negotiated sales process.A competitive sale is the best way to ensure the lowest overall cost of borrowing. Key elements of this financing would be: • Twenty-year term—the City has the ability to borrow up to 20 years due to the lack of a County policy to participate in tax abatements. • A call date of 2/1/2026.After this date,the City is free to prepay or refinance these bonds. • Offer up to 1.25%discount allowance.