Agenda - Economic Development Authority - 10/28/1999

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Economic Development Authority of the City of Ramsey, Minnesota October 21, 1999 DISCUSSION The Bonds will be issued pursuant to an Indenture of Trust between the Authority and a trustee. Proceeds of the Bonds will be used to finance a fire station on behalf of the City. The Authority will lease the facility to the City pursuant to a financing lease requiring minimum rental payments equal to the debt service on the Bonds. The City will acquire title to the facility at the end of the Lease term. Since the amount of the issue is greater than $1 million, the principal amount of the issue will count against the City's net debt limit. The sources and uses of Bond proceeds is shown on Page 5. The Bonds are not general obligations of either the Authority or the City. Under State law, the City must budget the lease payments annually as an operating expenditure. The City has the right, under the Lease, to make the decision not to appropriate the lease payments in any year. Such non-appropriation would terminate the Lease. In the event the City terminates the lease, the Trustee, as assignee of the Authority's rights and interest in the project, would be required to find alternative users to occupy the facility. While the City has the right not to appropriate funds, the City should be entering into the Lease with the full understanding that adequate appropriations will always be made. Failure to appropriate funds would harm the City's ability to finance future capital projects through the issuance of public securities. Levies to make annual appropriateion lease payments are outside the legislated levy limits. Because of the less secure nature of this obligation in the eyes of potential purchasers, a Debt Service Reserve Fund of approximately $147,950 (maximum annual debt service on the Bonds) is included in the Bond proceeds and will be pledged to the payment of debt service requirements on the Bonds (for up to one full year) in the event the City fails to make an appropriation. Investment earnings on the Reserve will be applied to the payment of debt service on an ongoing basis. Pursuant to the Trust Indenture, the Trustee will hold the Debt Service Fund, the Debt Service Reserve Fund, and other Bond proceeds and rental payments received from the City. Our recommended principal structure and the estimated debt service schedule for the Bonds is shown on Page 6. Annual debt service payments of approximately $145,770 have been structured to be substantially even over 19 years. Estimated Debt Service Reserve Fund earnings and net debt service on the Bonds are also shown on Page 6. It is assumed that the Debt Service Reserve Fund will be applied toward the final year's debt service payments. Respectfully submitted, PRINGSTED Incorporated jam Provided to Staff: a) Summary of Continuing Disclosure Requirements b) Continuing Disclosure Contract Page 4