Minutes - Council Work Session - 02/14/2012

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Councilmember Strommen stated she wants to assure the conclusions address the whole and not individual answers since there seems to be some conflict between the points. Councilmember McGlone agreed. Councilmember Backous noted the real intentions will be flushed out during debate but the concern is valid in how much work to do up front to gather information so it can be discussed at a Work Session. He agreed that while the process is not perfect, it is a start. The consensus of the City Council was to direct staff to prepare a work plan for City Council consideration. 2) Review 2013 Budget Options Proiections for Refinancine Scenarios on th Municival Center Debt Paul Donna, Northland Securities Finance Consultant, stated the consideration is whether to refund the Series 2005A Bonds issued under the Lease Purchase Statute, to eliminate the existing bond and issue new G.O. Refunding Bonds. He explained this process would gain additional credit quality for the City and take advantage of the current market, resulting in significant savings. Mr. Donna stated he understands the overall objective is not only on savings but to better match the City's budget resources to pay back the debt. He presented the following scenarios: Scenario A , replacing current 4.4% rates with new rates estimated at 2 -2.25% but not extending or shortening the debt. Scenario B , matching resources of the City by targeting a new payment going from $1.475 million/year to $1.1 million/year and extending the debt by five years. It was noted the present value benefit of capturing savings of one -half a million dollars; however, the annual savings may not meet the City's budget objective. Scenario C , bringing payments down in the first five years to $1 million and then leveling off payments. This results in larger savings the first few years and extending the debt by five years. The present value savings would be just over $500,000. Scenario D , resulting in lowering payments from the current $1.475 million/year to $1 million/year and extending the debt by nine years, resulting in a savings of over $100,000. Finance Officer Lund advised that Scenario C was used in the budget analysis. Mayor Ramsey asked whether Scenario C results in paying an additional $800,000. Finance Officer Lund explained Scenario C gets the levy down to about $1 million for the next few years instead of the current $1.5 million, and anticipates additional growth in the future years. Mr. Donna stated the calculation is based on the IRS requirements for refinancing based on a current bond yield of 2.47 %; however, this will change over time as interest fluctuates. Mayor Ramsey stated his understanding the law has changed so the City does not need to hold a referendum. City Council Work Session / February 14, 2012 Page 3 of 10