09.02A Rasmusstn Road & South Washington Avenue Improvement Project - Set Sale Date of General Obligation Bond Issuance

Home Browse Search

repayment of this portion of the bonds...no tax levies. This authority also does not require any public hearings nor does it count against net debt limits. The road costs will be covered with cash contributions from the City's 2020 budget (roughly$50,000) and the 402 Funds—Highway 371 Turnback dollars ($893,000). We bifurcated this issue as described above because in our prior planning we identified taxes as a significant source of revenue and therefore needed to allocate sanitary sewer costs to the Chapter 115 authority. Payment and Revenue Requirements: We have identified the following revenue source to fund bond payments: Tax Lew: The average annual tax levy for this debt is estimated at$86,100. Budgeting for this project began with the 2020 budget,allocating$50,000 to this project. The City will need to increase its 2021 levy for the additional debt associated with this project. Levy increases have been planned with the project and is consistent with the City's capital financial plan. Utilitv Revenues: The Water and Sewer Funds will need to generate roughly$84,400/year, beginning in 2021 for this debt. With the City's capital financial plan,the water and sewer rates are incorporated for this project. Current market conditions would likely yield a net effective rate on the borrowing of 2.29%. Due to the size of the bond,along with the fifteen-year term,this bond is sensitive to interest rate movement. If rates move up prior to the official sales date by%:of a percentage point,the interest expense would increase approximately$93,800 over the life of the bond. Please refer to the attached exhibit for bond details. $2,115,000 General Obligation Permanent Improvement Revolving Bonds: If the Council chooses to finance this project as detailed in the attached exhibits, David Drown Associates, Inc. recommends the project costs be financed through the issuance of competitively sold$2,115,000 of General Obligation Disposal System & Utility Revenue Bonds. Other recommended key elements of this financing would be: • Approximate 15-year term which is consistent with the City's capital financial plan. • Callable any time after 2/1/2029 @ par plus accrued interest. • Offer up to 1.25%discount allowance. • Standard& Poor's Rating(cost of rating more than offset by interest rate savings) • Limited Continuing Disclosure Options Considered In addition to the recommended competitive,conventional sale as noted above, I considered other options before coming to that conclusion. For instance, I looked at intergovernmental funding options (USDA, PFA,etc.) and MN Rural Water Association programs. These options were discarded for a variety of factors including, but not limited to: • Eligibility of programs • Application process,time delays and uncertainty of funding