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Proposed Issue: Up to $7,450,000 Taxable GO Tax Increment Bonds, Series 2012 Authority: The TIF Bonds are being issued pursuant to Minnesota Statues, Chapter 469 and 475. The Bonds will be general obligations of the City, for which its full faith, credit and taxing powers are pledged. Because tax increment from TIF District #14 is expected to equal not less than 20% of the principal amount of the Bonds, the Bonds can be a general obligation without a referendum and will not count against the City's debt limit. Pur oses /Fundin Sources: p g The Bonds are being issued to pay for certain qualified costs related to the construction of the COR Apartments which will consist of approximately 230 rental units. The Bonds will be paid by tax increment generated by the project and payments to be made by the developer or the parent of the developer pursuant to the Loan Agreement, Note and Development Agreement. Discussion Issues Due to extremely low rates in the bond market, staff and Ehlers would like to have the flexibility to determine if the City should issue a 3 year temporary bond or issue a longer term bond with a short call (payoff or refinance) date of 3 years. Staff and Ehlers would continue to monitor the market and as the sale date of April 24, 2012 gets closer, inform the Council on financial implications of each option and recommended way to proceed. If the City issued a 3 year temporary Bond, the principal amount of the bonds would be $7,125,000 and would have capitalized interest in the amount of approximately $207,33 8 to pay interest payments through August 1, 2014. It is anticipated that at the end of the 3 year term, the developer will have secured permanent financing to pay the Bonds in their entirety on June 1, 2015. If the developer is unable to secure financing to pay the entire outstanding principal on the Bonds, then the City has the option to issue another 3 year temporary bond for the unpaid portion and /or issue a long -term bond to be paid from tax increment. These options would have increased costs due to expenses associated with issuing another bond (financial advisor, bond counsel, rating, county, underwriters discount, etc.) and possible increased interest costs at the time of issuance. The City could issue a 10 year Bond, with a 3 year call date (pay off /refinance) like the temporary bonds. If the City did this, the principal amount of the Bonds would be $7,415,000 and would include capitalized interest in the amount of approximately $450,339 to pay interest payments through August 1, 2014. Like the 3 year temporary Bond, it is anticipated that the developer will have secured Executive Summary of Proposed Debt Debt Issuance Services Presale Report City of Ramsey, Minnesota February 28 Page 1