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Paul Donna, Bond Counsel with Northland Securities, presented the finance plan summary based <br />on the City's estimated needs of $630,000 of CEC. The maximum term is a ten -year issuance so <br />what is being financed has to have a useful life of longer than ten years to meet that requirement. <br />Mr. Donna projected an estimated all- inclusive cost of 3.65% but it could change since the bonds <br />will not be issued until early August. The average coupon would be 2.6 %, an attractive rate. <br />Mr. Donna stated in the past, the City has gone through a private bank placement and with this <br />size and length of term, it can be done efficiently. However, with the potential bond issue by the <br />PACT Charter School, these CEC bonds would be non -bank qualified so a local placement is not <br />an option. These CEC would be issued on the open market so the rates have been adjusted <br />accordingly (one - quarter percent interest impact). It was noted the City has a policy in place to <br />be reimbursed for that additional cost. <br />Finance Director Lund stated Mr. Donna is able to answer questions on conduit debt. She noted <br />the one - quarter percent interest impact would equal about $9,000. <br />Mr. Donna stated a federal statute requires a non - profit borrower that wants to enjoy a tax - <br />exempt bond to find a sponsor, such as a municipality. For the Charter School bond, Ramsey <br />would be the issuer and the Charter School would be the borrower. If issued, it would not impact <br />the City's bond rating or debt level. In addition, the Charter School would indemnify the City <br />against all liability. <br />Finance Director Lund stated the Charter School was going to bring it forward the end of July or <br />beginning of August but because of the spike of interest rates, may decide to not refinance. <br />However, the Charter School would still be responsible for paying the additional cost to the City <br />in the bonds being non -bank qualified. <br />Mr. Donna explained the Charter School is reevaluating and it is likely to be delayed, possibly <br />indefinitely, but since the Charter School declared it could issue the bonds, it causes the City's <br />bonds to be non -bank qualified. He stated he received a call from the Charter School asking <br />when the City would like to be paid for the impact, at the close of this CEC bond issue or when <br />the school's bonds are issued. Mr. Donna stated he would recommend the earlier of when their <br />bonds are issued or the end of the year rather than leaving it open ended to whenever the bonds <br />are issued, if ever. <br />Finance Director Lund stated she prefers by the end of the 2013 calendar year so it is <br />accomplished within the same time period. <br />Councilmember Riley asked if it is only a one -year impact on the City's rating. <br />Mr. Donna clarified it does not impact the City's rating but results in the City's bond issue being <br />non -bank qualified. The impact is during that calendar year. <br />Councilmember Kuzma asked if a motion is needed on this matter. <br />Acting Mayor Backous stated a motion is not needed and asked if there is consensus to accept <br />the reimbursement at the earlier of the bond issue or end of the calendar year. <br />City Council Work Session / July 9, 2013 <br />Page 2 of 7 <br />