HomeMy WebLinkAboutItem 6
City of Lakeville
Finance Department
Memorandum
To: Mayor and Council
Justin Miller, City Administrator
From: Jerilyn Erickson, Finance Director
Date: April 27, 2020
Subject: 2020 Bond Issuance
Staff is presenting two debt issuances (2020A and 2020B) for your consideration.
2020A Bond Issuance
The following projects are included in the 2020A bond issuance:
#20-02 - 2020 Street Reconstruction
#20-04 – 170th Street
#20-08 – 179th Street (Cedar – Flagstaff)
#22-03 – 210th Street – Engineering Fees (Holyoke – Cedar)
Ames Arena Parking Lot
Various Water Projects
The 2020A bond issuance is estimated to be $15,645,000. It reflects the following:
1) Bond Structure – The term of the bonds is 10 years. The structure of the 2020A bonds
is compliant with the City’s Debt Policy such that the total maturity length is equal to
or less than 20 years and at least 50% of the principal will be retired within 10 years.
2) Special Assessments – The terms of the assessments follow the Special Assessment
Policy.
3) Alternative Structure – Special assessments are all shown with a 15-year term.
The City’s municipal advisor, Northland Securities, has prepared the attached Finance Plan for
the 2020A bond issuance.
2020B Bond Issuance - Energy Savings Improvement Project
The 2020B bond issuance would include the Lakeville Arenas energy savings improvement
project. This project includes the design phase and construction phases as presented in the
contract with APEX that was approved by the City Council on April 6, 2020. The City Council
has contemplated including this project in a park referendum vote. If the park referendum
vote is delayed, staff recommends moving forward with the issuance of debt later in 2020 to
fund this project.
Northland Securities has also prepared the attached Summary of Scenarios and calendar of
events for a possible 2020B debt issuance.
Staff anticipates entering into an agreement with ISD#194 to fund half of the debt service.
This agreement would need to be in place by May/June 2020 in order for ISD#194 to
incorporate the expenditure in their 2021 budget.
Financial Impacts
Based on the current bond estimate, the following chart shows the estimated annual
contributions that would be needed to fund the debt payments:
Debt Service Tax Levy $930k . . . $1,063k
Water Operating Fund $361k . . . $366k
Abatement Levy-Parking Lot $7k . . . $21k
Abatement Levy-Energy Savings Project Varies depending on financing
The 2021 debt service levy is estimated to be as follows:
2020 Debt Service Levy $7,340,365
Levy Adjustment for Existing Debt $247,304
Levy for New 2020A Bond Issue 929,805
Levy for New 2020B Debt Issue 270,443
Subtotal 1,447,552
Estimated 2020 Debt Service Levy $8,787,917
The $1,447,552 increase in debt service levy represents a 4.52% increase based on the total
2020 property tax levy. The 2021 total tax levy will also be impacted by other adjustments to
revenues and expenditures, service levels, project funding, etc.
Staff will be evaluating cash balances in the debt services funds to see if there are further
opportunities to reduce the 2021 debt service levy.
City staff and Northland had discussed recommending the City request a rating from S&P
Global Ratings for the 2020A Bonds. A rating from S&P was being considered in addition to a
rating from Moody’s Investors Service. The City’s general obligation debt is currently rated
"Aa1”by Moody’s. S&P and Moody’s have similar, but different rating methodology and areas
of emphasis in their ratings. The strong, well established, financial management practices of
the City were anticipated to be a positive factor in a rating from S&P. Based on further
discussions with Northland, the City will not be requesting a rating from S&P for the 2020A
Bonds. The uncertainty surrounding COVID-19 is a factor and we believe that it is not the right
time to undertake a second rating review process.
Council Direction
Staff is seeking feedback regarding the 2020A and 2020B debt issuance.
Attachments: 1) Finance Plan – General Obligation Bonds, Series 2020A
2) Summary of Scenarios and Calendar – 2020B Debt Issuance
Finance Plan
City of Lakeville, Minnesota
$15,645,000
General Obligation Bonds, Series 2020A
April 27, 2020
150 South 5th Street, Suite 3300
Minneapolis, MN 55402
612-851-5900 800-851-2920
www.northlandsecurities.com
Member FINRA and SIPC | Registered MSRB and SEC
NorthlandSecurities,Inc.Page2
Contents
Executive Summary...........................................................................................................................................................3
Issue Overview ....................................................................................................................................................................4
Purpose ................................................................................................................................................................4
Authority .............................................................................................................................................................4
Structure ..............................................................................................................................................................5
Security and Source of Repayment ........................................................................................................5
Plan Rationale ...................................................................................................................................................6
Issuing Process .................................................................................................................................................6
Attachment 1 – Preliminary Debt Service Schedules........................................................................................7
Total Combined 2020A Bonds ..................................................................................................................7
Improvement Portion....................................................................................................................................8
Water Portion ....................................................................................................................................................9
Abatement Portion .......................................................................................................................................10
Attachment 2 – Estimated Levy Schedules...........................................................................................................11
Improvement Portion..................................................................................................................................11
Improvement Portion – Alternate Scenario*....................................................................................11
Abatement Portion .......................................................................................................................................12
Attachment 3 – Related Considerations ................................................................................................................13
Not Bank Qualified ..............................................................................................................................13
Arbitrage Compliance.........................................................................................................................13
Continuing Disclosure ........................................................................................................................13
Premiums ..................................................................................................................................................13
Rating ..........................................................................................................................................................14
Attachment 4 – Calendar of Events ..........................................................................................................................15
Attachment 5 - Risk Factors .........................................................................................................................................17
NorthlandSecurities,Inc.Page3
Executive Summary
The following is a summary of the recommended terms for the issuance of $15,645,000 General
Obligation Bonds, Series 2020A (the “Bonds”). Additional information on the proposed finance
plan and issuing process can be found after the Executive Summary, in the Issue Overview and
Attachment 3 – Related Considerations.
Purpose Proceeds from the Bonds will be used to finance the 2020 street
improvement projects, water projects, a parking lot project at
Ames Arena, and to pay the costs associated with the issuance
of the Bonds.
Security The Bonds will be a general obligation of the City. The City
will pledge special assessments collected from benefitted
properties for payment of the Improvement Portion of the
Bonds, net water revenues of the City’s Municipal Water
Utility for payment of the Water Portion of the Bonds, and an
abatement levy for payment of the Abatement Portion of the
Bonds.In addition, the Bonds will be secured by ad valorem
taxes.
Repayment Term The Bonds will mature annually each February 1 in the years
2021 through 2031. Interest on the Bonds will be payable on
February 1, 2021 and semiannually thereafter on each February
1 and August 1.
Estimated Interest Rate Average coupon: 2.27%
True interest cost (TIC): 2.41%
Prepayment Option Bonds maturing on and after February 1, 2030 will be subject to
redemption on February 1, 2029 and any day thereafter at a
price of par plus accrued interest.
Rating A rating will be requested from Moody’s. The City’s general
obligation debt is currently rated "Aa1”by Moody’s.
Tax Status The Bonds will be tax-exempt, non- bank qualified obligations.
Risk Factors There are certain risks associated with all debt. Risk factors
related to the Bonds are discussed in Attachment 5.
Type of Bond Sale Public Sale – Competitive Bids
Proposals Received Monday, July 20 @ 10:00 A.M.
Council Consideration Monday, July 20 @ 6:30 P.M.
Northland Securities, Inc.Page 4
Issue Overview
Purpose
Proceeds from the Bonds will be used to finance the following projects (together, the “Projects”):
the street improvement projects which includes the 2020 Street Reconstruction, 170th
Street, 179th Street, and 210th Street (the “Improvement Portion”),
the 2020 water projects (the “Water Portion”), and
a parking lot improvement project for the AMES Arena (the “Abatement Portion”).
Proceeds will also be used to pay costs associated with issuing the Bonds. The Bonds have been
sized based on estimates provided by City staff. The table below contains the sources and uses
of funds for the bond issue.
Authority
The Bonds will be issued pursuant to the authority of Minnesota Statutes, Sections 469.1812
through 469.1815 and Chapters 429, 444, and 475.
Sections 469.1812 through 469.1815 do not authorize the actual “abatement of taxes.” Instead,
the City has the ability to levy a property tax (an abatement levy) that is equivalent to taxes that
could be abated. The City will certify a property tax abatement levy to pay the debt service on
the Bonds. A public hearing will be held on June 15, 2020 and following the hearing the City
Council will consider adoption of a resolution approving the property tax abatement for this
purpose.
The maximum amount of abated taxes to be approved for the Bonds is expected to be
approximately $85,000, which is less than the total amount of abated taxes the City may
approve pursuant to State Law. Based on the City’s 2020 net tax capacity, the City has authority
to approve a total maximum annual amount of $9,227,665. The City does not currently have
any other bonds secured by an abatement levy. The City does have an internal financing
outstanding in connection with a tax abatement for MOM Brands Company, LLC (Post). The
abatement for the Bonds combined with the tax abatement assistance for Post is within the
maximum allowed.
Improvement
Portion Water Portion
Tax
Abatement
Portion
Issue
Summary
Sources Of Funds
Par Amount of Bonds $11,600,000.00 $3,275,000.00 $770,000.00 $15,645,000.00
Planned Issuer Equity contribution --7,736.17 7,736.17
Total Sources $11,600,000.00 $3,275,000.00 $777,736.17 $15,652,736.17
Uses Of Funds
Deposit to Project Construction Fund 11,328,287.00 3,231,750.00 761,174.00 15,321,211.00
Total Underwriter's Discount (0.800%)92,800.00 26,200.00 6,160.00 125,160.00
Deposit to Capitalized Interest (CIF) Fund 116,483.50 --116,483.50
Costs of Issuance 59,473.78 16,791.09 3,947.83 80,212.70
Deposit to Debt Service Fund --7,736.17 7,736.17
Rounding Amount 2,955.72 258.91 (1,281.83)1,932.80
Total Uses $11,600,000.00 $3,275,000.00 $777,736.17 $15,652,736.17
Northland Securities, Inc.Page 5
Under Chapter 429, an Improvement means any type of improvement made under authority
granted by section 429.021, which includes, but is not limited to, improvements to streets and
sidewalks, storm and sanitary sewer systems, and street lighting systems.
Before issuing bonds under Chapter 429, the City must hold a public hearing on the
Improvements and the proposed bonds, and must then pass a resolution ordering the
improvements by at least a 4/5 majority. The public hearing has been held for the Improvement
Portion and all corresponding resolutions have passed with a 4/5 majority.
Under Chapter 444, general obligation utility revenue bonds may be issued to build, construct,
reconstruct, repair, enlarge, improve, or in any other manner obtain sanitary sewer, water and
storm sewer facilities, and maintain and operate the facilities inside or outside a city’s corporate
limits
Structure
The Improvement Portion of the Bonds and the Abatement Portion of the Bonds have been
structured over 10 years, with relatively level annual debt service payments beginning on
February 1, 2022. The Water Portion of the bonds has been structured over 10 years, with
relatively level annual debt service payments beginning on February 1, 2021.
The proposed structure for the bond issue and preliminary debt service projections for each
portion of the issue are illustrated in Attachment 1 and the estimated levies are illustrated in
Attachment 2. An alternate scenario is included in Attachment 2 for the Improvement Portion.
The city is considering certifying assessments pledged to the Bonds over a 15-year term versus a
portion over 10 years and another portion over 15 years. The Improvement Portion of the
Bonds would remain structured over 10 years.
Security and Source of Repayment
The Bonds will be general obligations of the City. The finance plan relies on the following
assumptions for the revenues used to pay debt service, as provided by City staff:
Special Assessments. The City is expected to levy special assessments against benefited
properties in the amount of $3,349,825 for the Improvement Portion of the Bonds.
$1,672,050 of the assessments will be payable over 10 years and $1,677,775 of the
assessments will be payable over 15 years. The assessments are structured for level
annual payments of principal with interest charged at a rate that is 2% over the True
Interest Cost of the Improvement Portion of the bonds (currently estimated to be 4.40%).
The plan assumes that the assessments will be levied in 2020 for initial payment in 2021.
Tax Abatements. The total amount of the City taxes on the parcels to be included within
the abatement area will be sufficient to pay annual principal over the 10-year term of the
Abatement Portion of the Bonds. The City will use payments from Lakeville Arenas,
Lakeville Hockey Association and the Heritage Figure Skating Club to cancel a portion of
the levy. The remaining levy (net of other payments) will be for the City’s proportionate
share of the project cost. The annual abatement levy is spread over the City’s entire
general tax base (net tax capacity) the same as the general fund levy. Property within the
abatement area will pay the same amount of City taxes as property outside of the
abatement area. There is no different impact on individual property tax statements for
property within the abatement area compared to other property within the City as a
whole.
Utility Revenues. Net revenues of the City’s water utility (operating fund) will be
pledged for payment of the Water Portion of the Bonds. The City will covenant to adopt
water rates and charges that are sufficient to produce net revenues equal to at least 105%
Northland Securities, Inc.Page 6
of the debt service requirements on the Water Portion of the Bonds. In the event there is a
deficiency in the amount of net revenues available for payment of debt service, the City
may levy taxes to cover the insufficiency, but only on a temporary basis until rates are
adjusted.
Property Taxes. The remaining revenues needed to pay debt service on the Bonds are
expected to come from property tax levies. The initial projections show an annual tax
levy ranging from $950,072 to $1,069,572 is needed to produce the statutory requirement
of 105% of debt service, after accounting for assessments, abatement revenues, and utility
revenues. The levy may be adjusted annually based on actual special assessment
collections and additional monies in the debt service fund. The initial tax levy will be
made in 2020 for taxes payable in 2021.
Given the timing of the initial revenue from the tax levy, special assessments and
abatement levy, the structure includes capitalized interest for the Improvement Portion of
the Bonds and a cash contribution from the City of approximately $7,736 for the
Abatement Portion of the Bonds to cover the first interest payment due on February 1,
2021, before the first tax collections are received. Revenues from the City’s Water Utility
will be used to cover the first principal and interest payment due on February 1, 2021.
Plan Rationale
The Finance Plan recommended in this report is based on a variety of factors and information
provided by the City related to the financed project and City objectives, Northland’s knowledge
of the City and our experience in working with similar cities and projects. The issuance of
General Obligation Bonds provides the best means of achieving the City’s objectives and cost-
effective financing. The City has successfully issued and managed this type of debt for previous
projects.
COVID-19 is having a significant impact on the municipal bond market. The Finance Plan is
based on preliminary “Aa1” rates as of April 9, 2020, plus 0.50%. Due to the volatility in the
bond market, the potential bids from underwriters to purchase the Bonds may vary from the
Finance Plan more significantly than what Northland would anticipate in less volatile times.
Issuing Process
Northland will receive bids to purchase the Bonds on Monday, July 20, 2020 at 10:00 AM.
Market conditions and the marketability of the Bonds support issuance through a competitive
sale. This process has been chosen as it is intended to produce the lowest combination of
interest expense and underwriting expense on the date and time set to receive bids. The
calendar of events for the issuing process can be found in Attachment 4.
Municipal Advisor:Northland Securities, Inc., Minneapolis, Minnesota
Bond Counsel:Dorsey & Whitney LLC, Minneapolis, Minnesota
Paying Agent:US Bank, National Association, St. Paul, Minnesota
Northland Securities, Inc.Page 7
Attachment 1 – Preliminary Debt Service Schedules
Total Combined 2020A Bonds
Date Principal Coupon Interest Total P+I Fiscal Total
08/13/2020 -----
02/01/2021 335,000.00 1.700%155,632.17 490,632.17 490,632.17
08/01/2021 --163,901.25 163,901.25 -
02/01/2022 1,430,000.00 1.750%163,901.25 1,593,901.25 1,757,802.50
08/01/2022 --151,388.75 151,388.75 -
02/01/2023 1,460,000.00 1.800%151,388.75 1,611,388.75 1,762,777.50
08/01/2023 --138,248.75 138,248.75 -
02/01/2024 1,490,000.00 1.900%138,248.75 1,628,248.75 1,766,497.50
08/01/2024 --124,093.75 124,093.75 -
02/01/2025 1,515,000.00 1.950%124,093.75 1,639,093.75 1,763,187.50
08/01/2025 --109,322.50 109,322.50 -
02/01/2026 1,540,000.00 2.050%109,322.50 1,649,322.50 1,758,645.00
08/01/2026 --93,537.50 93,537.50 -
02/01/2027 1,570,000.00 2.150%93,537.50 1,663,537.50 1,757,075.00
08/01/2027 --76,660.00 76,660.00 -
02/01/2028 1,610,000.00 2.250%76,660.00 1,686,660.00 1,763,320.00
08/01/2028 --58,547.50 58,547.50 -
02/01/2029 1,645,000.00 2.400%58,547.50 1,703,547.50 1,762,095.00
08/01/2029 --38,807.50 38,807.50 -
02/01/2030 1,685,000.00 2.500%38,807.50 1,723,807.50 1,762,615.00
08/01/2030 --17,745.00 17,745.00 -
02/01/2031 1,365,000.00 2.600%17,745.00 1,382,745.00 1,400,490.00
Total $15,645,000.00 - $2,100,137.17 $17,745,137.17 -
Date And Term Structure
Dated 8/13/2020
Delivery Date 8/13/2020
First available call date 2/01/2029
Call Price 100.000%
YieldStatistics
Bond Year Dollars $92,546.00
Average Life 5.915 Years
Average Coupon 2.2692901%
Net Interest Cost (NIC)2.4045309%
True Interest Cost (TIC)2.4103053%
All Inclusive Cost (AIC)2.5059340%
Northland Securities, Inc.Page 8
Improvement Portion
Date Principal Coupon Interest Total P+I Fiscal Total
08/13/2020 -----
02/01/2021 --116,483.50 116,483.50 116,483.50
08/01/2021 --124,803.75 124,803.75 -
02/01/2022 1,060,000.00 1.750%124,803.75 1,184,803.75 1,309,607.50
08/01/2022 --115,528.75 115,528.75 -
02/01/2023 1,080,000.00 1.800%115,528.75 1,195,528.75 1,311,057.50
08/01/2023 --105,808.75 105,808.75 -
02/01/2024 1,100,000.00 1.900%105,808.75 1,205,808.75 1,311,617.50
08/01/2024 --95,358.75 95,358.75 -
02/01/2025 1,120,000.00 1.950%95,358.75 1,215,358.75 1,310,717.50
08/01/2025 --84,438.75 84,438.75 -
02/01/2026 1,140,000.00 2.050%84,438.75 1,224,438.75 1,308,877.50
08/01/2026 --72,753.75 72,753.75 -
02/01/2027 1,165,000.00 2.150%72,753.75 1,237,753.75 1,310,507.50
08/01/2027 --60,230.00 60,230.00 -
02/01/2028 1,190,000.00 2.250%60,230.00 1,250,230.00 1,310,460.00
08/01/2028 --46,842.50 46,842.50 -
02/01/2029 1,220,000.00 2.400%46,842.50 1,266,842.50 1,313,685.00
08/01/2029 --32,202.50 32,202.50 -
02/01/2030 1,245,000.00 2.500%32,202.50 1,277,202.50 1,309,405.00
08/01/2030 --16,640.00 16,640.00 -
02/01/2031 1,280,000.00 2.600%16,640.00 1,296,640.00 1,313,280.00
Total $11,600,000.00 - $1,625,698.50 $13,225,698.50 -
Date And Term Structure
Dated 8/13/2020
Delivery Date 8/13/2020
First available call date 2/01/2029
Call Price 100.000%
YieldStatistics
Bond Year Dollars $71,198.33
Average Life 6.138 Years
Average Coupon 2.2833379%
Net Interest Cost (NIC)2.4136780%
True Interest Cost (TIC)2.4191218%
All Inclusive Cost (AIC)2.5114409%
Northland Securities, Inc.Page 9
Water Portion
Date Principal Coupon Interest Total P+I Fiscal Total
08/13/2020 -----
02/01/2021 335,000.00 1.700%31,412.50 366,412.50 366,412.50
08/01/2021 --30,808.75 30,808.75 -
02/01/2022 300,000.00 1.750%30,808.75 330,808.75 361,617.50
08/01/2022 --28,183.75 28,183.75 -
02/01/2023 310,000.00 1.800%28,183.75 338,183.75 366,367.50
08/01/2023 --25,393.75 25,393.75 -
02/01/2024 315,000.00 1.900%25,393.75 340,393.75 365,787.50
08/01/2024 --22,401.25 22,401.25 -
02/01/2025 320,000.00 1.950%22,401.25 342,401.25 364,802.50
08/01/2025 --19,281.25 19,281.25 -
02/01/2026 325,000.00 2.050%19,281.25 344,281.25 363,562.50
08/01/2026 --15,950.00 15,950.00 -
02/01/2027 330,000.00 2.150%15,950.00 345,950.00 361,900.00
08/01/2027 --12,402.50 12,402.50 -
02/01/2028 340,000.00 2.250%12,402.50 352,402.50 364,805.00
08/01/2028 --8,577.50 8,577.50 -
02/01/2029 345,000.00 2.400%8,577.50 353,577.50 362,155.00
08/01/2029 --4,437.50 4,437.50 -
02/01/2030 355,000.00 2.500%4,437.50 359,437.50 363,875.00
Total $3,275,000.00 - $366,285.00 $3,641,285.00 -
Date And Term Structure
Dated 8/13/2020
Delivery Date 8/13/2020
First available call date 2/01/2029
Call Price 100.000%
YieldStatistics
Bond Year Dollars $16,613.33
Average Life 5.073 Years
Average Coupon 2.2047652%
Net Interest Cost (NIC)2.3624699%
True Interest Cost (TIC)2.3700722%
All Inclusive Cost (AIC)2.4807523%
Northland Securities, Inc.Page 10
Abatement Portion
Date Principal Coupon Interest Total P+I Fiscal Total
08/13/2020 -----
02/01/2021 --7,736.17 7,736.17 7,736.17
08/01/2021 --8,288.75 8,288.75 -
02/01/2022 70,000.00 1.750%8,288.75 78,288.75 86,577.50
08/01/2022 --7,676.25 7,676.25 -
02/01/2023 70,000.00 1.800%7,676.25 77,676.25 85,352.50
08/01/2023 --7,046.25 7,046.25 -
02/01/2024 75,000.00 1.900%7,046.25 82,046.25 89,092.50
08/01/2024 --6,333.75 6,333.75 -
02/01/2025 75,000.00 1.950%6,333.75 81,333.75 87,667.50
08/01/2025 --5,602.50 5,602.50 -
02/01/2026 75,000.00 2.050%5,602.50 80,602.50 86,205.00
08/01/2026 --4,833.75 4,833.75 -
02/01/2027 75,000.00 2.150%4,833.75 79,833.75 84,667.50
08/01/2027 --4,027.50 4,027.50 -
02/01/2028 80,000.00 2.250%4,027.50 84,027.50 88,055.00
08/01/2028 --3,127.50 3,127.50 -
02/01/2029 80,000.00 2.400%3,127.50 83,127.50 86,255.00
08/01/2029 --2,167.50 2,167.50 -
02/01/2030 85,000.00 2.500%2,167.50 87,167.50 89,335.00
08/01/2030 --1,105.00 1,105.00 -
02/01/2031 85,000.00 2.600%1,105.00 86,105.00 87,210.00
Total $770,000.00 - $108,153.67 $878,153.67 -
Date And Term Structure
Dated 8/13/2020
Delivery Date 8/13/2020
First available call date 2/01/2029
Call Price 100.000%
YieldStatistics
Bond Year Dollars $4,734.33
Average Life 6.148 Years
Average Coupon 2.2844541%
Net Interest Cost (NIC)2.4145674%
True Interest Cost (TIC)2.4200028%
All Inclusive Cost (AIC)2.5121747%
Northland Securities, Inc.Page 11
Attachment 2 – Estimated Levy Schedules
Improvement Portion
Improvement Portion – Alternate Scenario*
*The City is considering an option to certify all special assessments levied over a 15-year term. The
structure of the Bonds would remain at 10 years.
Date Total P+I CIF 105%Levy
Less: Special
Assessment
Revenue
Collected
Over 10
years*
Less: Special
Assessment
Revenue
Collected
Over 15
years** Net Levy Levy Year
Collection
Year
02/01/2021 116,483.50 (116,483.50)----
02/01/2022 1,309,607.50 -1,375,087.88 250,175.84 195,106.59 929,805.45 2020 2021
02/01/2023 1,311,057.50 -1,376,610.38 233,418.18 180,752.29 962,439.91 2021 2022
02/01/2024 1,311,617.50 -1,377,198.38 226,061.16 175,830.83 975,306.39 2022 2023
02/01/2025 1,310,717.50 -1,376,253.38 218,704.14 170,909.35 986,639.89 2023 2024
02/01/2026 1,308,877.50 -1,374,321.38 211,347.12 165,987.87 996,986.39 2024 2025
02/01/2027 1,310,507.50 -1,376,032.88 203,990.10 161,066.41 1,010,976.37 2025 2026
02/01/2028 1,310,460.00 -1,375,983.00 196,633.08 156,144.93 1,023,204.99 2026 2027
02/01/2029 1,313,685.00 -1,379,369.25 189,276.06 151,223.45 1,038,869.74 2027 2028
02/01/2030 1,309,405.00 -1,374,875.25 181,919.04 146,301.99 1,046,654.22 2028 2029
02/01/2031 1,313,280.00 -1,378,944.00 174,562.02 141,380.51 1,063,001.47 2029 2030
02/01/2032 ----136,459.02 -2030 2031
02/01/2033 ----131,537.56 -2031 2032
02/01/2034 ----126,616.08 -2032 2033
02/01/2035 ----121,694.60 -2033 2034
02/01/2036 ----116,773.14 -2034 2035
Total $13,225,698.50 (116,483.50) $13,764,675.75 $2,086,086.74 $2,277,784.62 $10,033,884.79
*Specialassessment revenue is based on assessments totaling $1,672,050, spread in equalprincipalpayments over10years and
assessed at a rate of 4.40% (2.00% over the True Interest Cost).
**Specialassessment revenue is based on assessments totaling $1,677,775, spread in equalprincipalpayments over 15years and
assessed at a rate of 4.40% (2.00% over the True Interest Cost).
Date Total P+I CIF 105%Levy
Less: Special
Assessment
Revenue*
Less: Special
Assessment
Revenue** Net Levy Levy Year
Collection
Year
02/01/2021 116,483.50 (116,483.50)----
02/01/2022 1,309,607.50 -1,375,087.88 194,440.84 195,106.59 985,540.45 2020 2021
02/01/2023 1,311,057.50 -1,376,610.38 180,135.52 180,752.29 1,015,722.57 2021 2022
02/01/2024 1,311,617.50 -1,377,198.38 175,230.84 175,830.83 1,026,136.71 2022 2023
02/01/2025 1,310,717.50 -1,376,253.38 170,326.16 170,909.35 1,035,017.87 2023 2024
02/01/2026 1,308,877.50 -1,374,321.38 165,421.48 165,987.87 1,042,912.03 2024 2025
02/01/2027 1,310,507.50 -1,376,032.88 160,516.80 161,066.41 1,054,449.67 2025 2026
02/01/2028 1,310,460.00 -1,375,983.00 155,612.12 156,144.93 1,064,225.95 2026 2027
02/01/2029 1,313,685.00 -1,379,369.25 150,707.44 151,223.45 1,077,438.36 2027 2028
02/01/2030 1,309,405.00 -1,374,875.25 145,802.76 146,301.99 1,082,770.50 2028 2029
02/01/2031 1,313,280.00 -1,378,944.00 140,898.08 141,380.51 1,096,665.41 2029 2030
02/01/2032 ---135,993.40 136,459.02 -2030 2031
02/01/2033 ---131,088.72 131,537.56 -2031 2032
02/01/2034 ---126,184.04 126,616.08 -2032 2033
02/01/2035 ---121,279.36 121,694.60 -2033 2034
02/01/2036 ---116,374.68 116,773.14 -2034 2035
Total $13,225,698.50 (116,483.50) $13,764,675.75 $2,277,784.62 $2,277,784.62 $10,480,879.49
*Specialassessment revenue is based on assessments totaling $1,672,050, spread in equalprincipalpayments over15years and
assessed at a rate of4.40% (2.00% overthe True Interest Cost).
**Specialassessment revenue is based on assessments totaling $1,677,775, spread in equalprincipalpayments over15years and
assessed at a rate of4.40% (2.00% overthe True Interest Cost).
Northland Securities, Inc.Page 12
Abatement Portion
Date Total P+I
Less: Cash
Contribution 105%Levy
Less:
Abatement
Levy* Net Levy Levy Year
Collection
Year
02/01/2021 7,736.17 7,736.17 ---
02/01/2022 86,577.50 -90,906.38 70,000.00 20,906.38 2020 2021
02/01/2023 85,352.50 -89,620.13 70,000.00 19,620.13 2021 2022
02/01/2024 89,092.50 -93,547.13 75,000.00 18,547.13 2022 2023
02/01/2025 87,667.50 -92,050.88 75,000.00 17,050.88 2023 2024
02/01/2026 86,205.00 -90,515.25 75,000.00 15,515.25 2024 2025
02/01/2027 84,667.50 -88,900.88 75,000.00 13,900.88 2025 2026
02/01/2028 88,055.00 -92,457.75 80,000.00 12,457.75 2026 2027
02/01/2029 86,255.00 -90,567.75 80,000.00 10,567.75 2027 2028
02/01/2030 89,335.00 -93,801.75 85,000.00 8,801.75 2028 2029
02/01/2031 87,210.00 -91,570.50 85,000.00 6,570.50 2029 2030
Total $878,153.67 $7,736.17 $913,938.38 $922,061.35 $143,938.38
*The City anticipatees it willreceive lease revenue of approximately $80,000 annually that it plans to use to cancela portion of the
Levy. The lease revenue is not pledged to the TaxAbatement Bonds. The Abatement Levy shown in the schedule is equalto the
principalpayments on the TaxAbatement Bonds.
Northland Securities, Inc.Page 13
Attachment 3 – Related Considerations
Not Bank Qualified
We understand the City (in combination with any subordinate taxing jurisdictions or debt
issued in the City’s name by 501(c)3 corporations) anticipates issuing more than $10,000,000 in
tax-exempt debt during this calendar year. Therefore, the Bonds will not be designated as
“bank qualified” obligations pursuant to Federal Tax Law.
Arbitrage Compliance
Project/Construction Fund. All tax-exempt bond issues are subject to federal rebate
requirements which require all arbitrage earned to be rebated to the U.S. Treasury. A rebate
exemption the City expects to qualify for is the “24-month exemption.”
Debt Service Fund. The City must maintain a bona fide debt service fund for the Bonds or be
subject to yield restriction in the debt service fund. A bona fide debt service fund involves an
equal matching of revenues to debt service expense with a balance forward permitted equal to
the greater of the investment earnings in the fund during that year or 1/12 of the debt service of
that year.
The City should become familiar with the various Arbitrage Compliance requirements for this
bond issue. The Resolution for the Bonds prepared by Bond Counsel explains the requirements
in greater detail.
Continuing Disclosure
Type: Full
Dissemination Agent: Northland Securities
The requirements for continuing disclosure are governed by SEC Rule 15c2-12. The primary
requirements of Rule 15c2-12 actually fall on underwriters. The Rule sets forth due diligence
needed prior to the underwriter’s purchase of municipal securities. Part of this requirement is
obtaining commitment from the issuer to provide continuing disclosure. The document
describing the continuing disclosure commitments (the “Undertaking”) is contained in the
Official Statement that will be prepared to offer the Bonds to investors.
The City has more than $10,000,000 of outstanding debt and is required to undertake “full”
continuing disclosure. Full disclosure requires annual posting of the audit and a separate
continuing disclosure report, as well as the reporting of certain “material events.” Material
events set forth in the Rule, including, but not limited to, bond rating changes, call notices, and
issuance of “financial obligations” (such as USDA loans, Public Finance Authority loans and
lease agreements) must be reported within ten days of occurrence. Northland currently serves
as dissemination agent for the City. We will assist with getting your annual report filed in
compliance with full continuing disclosure regulations.
Premiums
In the current market environment, it is likely that bids received from underwriters will include
premiums. A premium bid occurs when the purchaser pays the City an amount in excess of the
par amount of a maturity in exchange for a higher coupon (interest rate). The use of premiums
reflects the bidder’s view on future market conditions, tax considerations for investors and
other factors. Ultimately, the true interest cost (“TIC”) calculation will determine the lowest bid,
regardless of premium.
Northland Securities, Inc.Page 14
A premium bid produces additional funds that can be used in several ways:
The premium means that the City needs less bond proceeds and can reduce the size of
the issue by the amount of the premium.
The premium can be deposited in the Construction Fund and used to pay additional
project costs, rather than used to reduce the size of the issue.
The premium can be deposited in the Debt Service Fund and used to pay principal and
interest.
Northland will work with City staff prior to the sale day to determine use of premium (if any).
A consideration for use of premium is the bank qualification of the Bonds.
Rating
A rating will be requested from Moody’s. The City’s general obligation debt is currently rated
"Aa1" by Moody’s. The rating process will include a conference call with the rating analyst from
Moody’s. Northland will assist City staff in preparing for and conducting the rating calls.
Northland Securities, Inc.Page 15
Attachment 4 – Calendar of Events
The following checklist of items denotes each milestone activity as well as the members of the
finance team who will have the responsibility to complete it.Please note this proposed timetable
assumes regularly scheduled City Council meetings.
Date Action Responsible Party
April 6 Construction bid award– 6:30 p.m. City Staff, Dorsey &
Whitney, Northland
April 15 Final project costs and sources of repayment provided
to Northland
City Staff
April 21 Finance Plan sent to City Northland
April 27 Council Workshop – Review of Finance Plan City Staff, Northland
May 4 General Information Certificate relating to the Bonds
sent to City for completion
Northland
May 15 City confirms parcels to be included in the Tax
Abatement Area
City Staff
May 22 City returns General Information Certificate to
Northland
City Staff
April 2020 May 2020
Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 1 2
5 6 7 8 9 10 11 3 4 5 6 7 8 9
12 13 14 15 16 17 18 10 11 12 13 14 15 16
19 20 21 22 23 24 25 17 18 19 20 21 22 23
26 27 28 29 30 24 25 26 27 28 29 30
31
June 2020 July 2020
Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6 1 2 3 4
7 8 9 10 11 12 13 5 6 7 8 9 10 11
14 15 16 17 18 19 20 12 13 14 15 16 17 18
21 22 23 24 25 26 27 19 20 21 22 23 24 25
28 29 30 26 27 28 29 30 31
August 2020 September 2020
Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat
1 1 2 3 4 5
2 3 4 5 6 7 8 6 7 8 9 10 11 12
9 10 11 12 13 14 15 13 14 15 16 17 18 19
16 17 18 19 20 21 22 20 21 22 23 24 25 26
23 24 25 26 27 28 29 27 28 29 30
30 31
Northland Securities, Inc.Page 16
Date Action Responsible Party
June 2 (by 12:00 p.m.
noon)
Notice of Tax Abatement Hearing submitted for
publication no later than this date in order to be
published no later than June 5.
City Staff
June 8 Preliminary Official Statement sent to City for sign off,
sent to Rating Agency to initiate rating processes, and
sent to Dorsey & Whitney for review
Muni Road Show Presentation sent to City for review
Northland
June 9 Set Sale Resolution and Resolution Authorizing the
Issuance of Tax Abatement Bonds sent to City for
meeting packets
Dorsey & Whitney,
Northland
June 15 City hold Public Hearing relating to the Parking Lot
Abatement Project and adopt Resolution Authorizing
the Issuance of Tax Abatement Bonds.
Set Sale Resolution adopted – 6:30 p.m.
City Council Action,
Northland, Dorsey &
Whitney
June 17 Meeting to prepare for rating calls – 9:00 a.m. City Staff, Northland
Week of June 22 Rating calls with Moody’s City Staff, Northland,
Rating Agency
June 23 City comments on Muni Road Show Presentation and
sign off on Preliminary Official Statement due to
Northland
City Staff
June 29 Rating Received City Staff, Northland,
Rating Agency
July 1 Distribution of Muni Road Show Presentation and
Official Statement to potential bidders
Northland
July 14 Authorizing Resolution sent to City Dorsey & Whitney,
Northland
July 20 Bond Sale – 10:00 A.M.
Bond Purchase Agreement Signed -6:30 p.m.
Authorizing Resolution Adopted
City Council Action,
Northland, Dorsey &
Whitney
July 24 Distribution of Final Official Statement (City will
receive a copy in the final Transcript)
Northland
July 27 Closing Documents Distributed Dorsey & Whitney
August 13 Closing on the Bonds (Proceeds Available) Northland, City Staff,
Dorsey & Whitney
Northland Securities, Inc.Page 17
Attachment 5 - Risk Factors
Property Taxes: Property tax levies shown in this Finance Plan are based on projected debt
service and other revenues. Final levies will be set based on the results of sale. Levies should be
reviewed annually and adjusted as needed. The debt service levy must be included in the
preliminary levy for annual Truth in Taxation hearings. Future Legislative changes in the
property tax system, including the imposition of levy limits and changes in calculation of
property values, would affect plans for payment of debt service. Delinquent payment of
property taxes would reduce revenues available to pay debt service.
Special Assessments: Special assessments for the financed projects have not been levied at this
time. This Finance Plan is based on the assumptions listed earlier in this report. Changes in the
terms and timing for the actual assessments will alter the projected flow of funds for payment of
debt service on the Improvement Portion of the Bonds. Also, special assessments may be
prepaid. It is likely that the income earned on the investment of prepaid assessments will be less
than the interest paid if the assessments remained outstanding. Delinquencies in assessment
collections would reduce revenues needed to pay debt service. The collection of deferred
assessments, if any, has not been included in the revenue projections. Projected assessment
income should be reviewed annually and adjusted as needed.
Utility Revenues: The City pledges the net revenues of the water utility to the payment of
principal and interest on the Water Portion of the Bonds. The failure to adjust rates and charges
as needed and the loss of significant customers will affect available net revenues. If the net
revenues are insufficient, the City is required to levy property taxes or use other revenues to
cover the deficiency. Property taxes can only be used on a temporary basis and may not be an
ongoing source of revenue to pay debt service.
Tax Abatement: The tax abatement levy needs to be calculated annually in accordance with the
abatement resolution. The abatement levy must be included in the preliminary levy used for
annual Truth in Taxation hearings. A tax abatement levy was authorized as a special levy (not
subject to levy limits) under the most recent legislation. Levy limits are not currently enacted.
The status of a tax abatement levy under future levy limitations (if any) cannot be predicted.
General: In addition to the risks described above, there are certain general risks associated with
the issuance of bonds. These risks include, but are not limited to:
Failure to comply with covenants in bond resolution.
Failure to comply with Undertaking for continuing disclosure.
Failure to comply with IRS regulations, including regulations related to use of the proceeds
and arbitrage/rebate. The IRS regulations govern the ability of the City to issue its bonds as
tax-exempt securities and failure to comply with the IRS regulations may lead to loss of tax-
exemption.
ScenariosDescription Sale Method Total Par
Amount
Cost of
Issuance 3, 4
Debt Service
Reserve Fund
Term
(Years)1
Total Interest
Life of Bonds
Average
Rate /
Coupon 2
Years
Principal Due
(February 1)
First
Interest
Payment
Date
Average Annual
Debt Service
Payment
A EDA Lease Revenue
Bonds, Tax Exempt
Private
Placement $8,610,000 $31,200 $680,000 20 $4,553,028 4.41% 2023-2041 8/1/2021 $659,151
B
G.O. Tax
Abatement Loan,
Tax Exempt
Private
Placement $7,930,000 $25,200 $0 20 $3,194,762 3.41% 2023-2041 8/1/2021 $556,238
C
G.O. Tax
Abatement Bonds,
Tax Exempt
Competitive
Bond Sale $8,055,000 $119,089 $0 20 $2,762,731 2.91% 2022-2041 8/1/2021 $540,886
Notes:
1
2
3
4
5
Scenarios A and B assume a draw-down provision. Preliminary estimate is for draw-down on Oct-2020 for capitalized interest fund and Phase I project costs, Aug-2020
for Phase II project costs, and Aug-2022 for Phase III project costs.
Scenarios A and B include fixed interest rate for term of bonds or loan. This will be subject to final terms with bank. It may be possible to term bonds or the loan
payments with different interest rates.
Term (Years) refers to the total number of principal payments. Issuance date is assumed to be 10/1/2020.
Estimated interest rate for Scenario C is based on 'Aa1" Non-BQ rates as of April 16, 2020 plus 0.50%. This is for planning purposes only. Rates for Scenarios A and B are
estimated based on private placement. Final rates will vary and be based on market conditions at time of issuance of the bonds.
For Scenario C, cost of issuance includes rating fee for Moody's and underwriter's discount fee for competitively sold bonds. Cost of issuance is included in the par
amount for Scenario C. For Scenarios A and B it is assumed that cost of issuance will be paid with cash.
City of Lakeville
Summary of Scenarios
Financing Energy Saving Improvements at Arenas
Scenarios for Preliminary Planning Purposes Only 1
4/20/2020
2020B
DATED AS OF APRIL 23,2020
CITY OF LAKEVILLE,MINNESOTA
GENERAL OBLIGATION TAX ABATEMENT BONDS,SERIES 2020B
PROPOSED SCHEDULE OF EVENTS
The following checklist of items denotes each milestone activity as well as the members of the
finance team who will have the responsibility to complete it.Please note this proposed timetable
assumes regularly scheduled City Council meetings.
Date Action Responsible Party
TBD Final project costs provided to Northland City Staff
TBD Finance Plan sent to City Northland
TBD Council Workshop – Review of Finance Plan City Staff, Northland
June 15 City confirms parcels to be included in the Tax
Abatement Area
City Staff
June 2020 July 2020
Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat
1 2 3 4 5 6 1 2 3 4
7 8 9 10 11 12 13 5 6 7 8 9 10 11
14 15 16 17 18 19 20 12 13 14 15 16 17 18
21 22 23 24 25 26 27 19 20 21 22 23 24 25
28 29 30 26 27 28 29 30 31
August 2020 September 2020
Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat
1 1 2 3 4 5
2 3 4 5 6 7 8 6 7 8 9 10 11 12
9 10 11 12 13 14 15 13 14 15 16 17 18 19
16 17 18 19 20 21 22 20 21 22 23 24 25 26
23 24 25 26 27 28 29 27 28 29 30
30 31
October 2020 November 2020
Sun Mon Tue Wed Thu Fri Sat Sun Mon Tue Wed Thu Fri Sat
1 2 3 1 2 3 4 5 6 7
4 5 6 7 8 9 10 8 9 10 11 12 13 14
11 12 13 14 15 16 17 15 16 17 18 19 20 21
18 19 20 21 22 23 24 22 23 24 25 26 27 28
25 26 27 28 29 30 31 29 30
Page 2
City of Lakeville
Date Action Responsible Party
TBD City, Lakeville School District, and Lakeville Arenas, to
approve Agreement providing for sharing of costs
between parties
*Calendar will need to be updated to add meeting
dates for the Lakeville School District and the Lakeville
Arenas to approve the Agreement.
*The School Board meets on the 2nd and 4th Tuesday of
each month at 7pm at Lakeville City Hall. Meeting
dates for Lakeville Arenas needs to be confirmed and
added to calendar. The Lakeville Arenas Board meets
on the 3rd Wednesday of each month.
* Agreement to include language that the Lakeville
School District declines to participate in the Tax
Abatement (to meet requirements of MS 469.1813,
Subd. 6) allowing the City to issue Bonds for term of 20
years
City Staff, School
District Staff
July 7 (noon) Notice of Tax Abatement Hearing submitted to local
paper no later than this date to be published no later
than July 10
City Staff
July 15 Resolution Authorizing the Issuance of Tax Abatement
Bonds sent to City for meeting packets
Dorsey & Whitney,
Northland
July 20 City holds Public Hearing for TEFRA and relating to
the Arena Energy Savings Improvements Abatement
Project and adopts Resolution Authorizing the
Issuance of Tax Abatement Bonds.
City adopts Resolution approving Agreement with
Lakeville School District and Lakeville Arenas
*Notice for hearing to notice for both TEFRA and Tax
Abatement
City Council Action,
Northland, Dorsey &
Whitney
July 21 Offering Document sent to City for sign off, sent to
Rating Agency to initiate rating processes, and sent to
Dorsey & Whitney for review
Northland
Week of August 3 Meeting to prepare for rating call City Staff, Northland
Week of August 10 Rating call with Moody’s City Staff, Northland,
Rating Agency
August 24 City comments and sign off on Offering Document due
to Northland
City Staff
August 25 Rating Received City Staff, Northland,
Rating Agency
Page 3
City of Lakeville
Date Action Responsible Party
September 1 Distribution of Offering Document Northland
September 16 Authorizing Resolution sent to City Dorsey & Whitney,
Northland
September 21 Bond Purchase Agreement Signed -6:30 p.m.
Authorizing Resolution Adopted
City Council Action,
Northland, Dorsey &
Whitney
September 28 Closing Documents Distributed Dorsey & Whitney
October 21 Closing on the Bonds (Proceeds Available) Northland, City Staff,
Dorsey & Whitney