Agenda - Economic Development Authority - 05/10/2012

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Economic Development Authority (EDA) Meeting Date: 05/10/2012 Submitted For: Kurt Ulrich By: Amy Dietl, Administrative Services 4. 1. Title: Authorization of Termination of Lease Agreement, Ground Lease Agreement and Authorizing Execution of an Escrow Agreement Relating to the Issuance by the City of Ramsey of its $16,875,000 General Obligation Capital Improvement Plan Bonds, Series 2012A. Background: In 2005 bonds were issued in the amount of $19,200,000 for the construction of the municipal center and that portion of the municipal center parking ramp that pertained to employee parking. Lease Revenue Bonds, via a lease agreement with the EDA, were issued. As part of the 2003 legislative session, Governmental units were allowed to issue what is termed "Capital Improvement Plan (CIP) Bonds" to fund municipal projects such as city halls, fire station, police stations, etc. The issuance of CIP bond allows the City to attain a lower interest rate on the debt. As the city will be refunding the Lease Revenue Bond with General Obligation Captital Improvement Plan Bonds, the lease agreement that is between the city and the EDA needs to be terminated. As provided in Section 4.6 of the Lease Agreement between the City and the EDA, dated as of June 1, 2005 (the "Lease ") to prepay the Purchase Option Price, which is an amount equal to the outstanding principal and interest on the original $19,200,000 Public Project Lease Revenue Bonds, Series 2005A, the Authority hereby determines and declares that upon the issuance of the Bonds and the funding of an Escrow Deposit as provided in the Escrow Agreement, the Lease, and the Ground Lease shall be terminated and the Authority shall have no further right, tirle or interest in and to the facilities. The city is refinancing the debt of the municipal center earlier than the December 2014 call feature on the original 2005 bond issue. The city wants to not only take advantage of the interest rate savings, but to bring the annual debt levy to a more manageable level of $1.1M versus the current $1.5M. A public hearing was held on March 13, 2012 and a resolution passed that approved the issuance of General Obligation Capital Improvement Plan Bonds. The bonds were originally scheduled to be sold on March 20, 2012 and brought back to the City Council for acceptance at its regular meeting of March 27, 2012. Due to a change in market conditions, long -term interest rates increased significantly and our finance consultant advised the city to hold back on the sale until market conditions were once again favorable. Within the last couple of weeks, interest rates have turned favorable and a positive present value, comparable to what was originally presented to council was achievable. To take advantage of these factors, the bonds were sold on Monday, April 30, 2012 and the authorization for approval of the sale was on the city council's regular agenda of May 8, 2012. Observations: Funding Source: Staff Recommendation: EDA Action: