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HomeMy WebLinkAboutItem 7 City of Lakeville Finance Department Memorandum To: Mayor and Council Justin Miller, City Administrator From: Jerilyn Erickson, Finance Director Date: May 26, 2020 Subject: 2020 Bond Issuance Update Staff and Northland Securities presented two debt issuances (2020A and 2020B) at the April 27, 2020 council workshop. During that meeting, the City Council affirmed that special assessment terms should follow the current policy and that the bond term should stay at ten years for the 2020A bonds. The Council expressed concern with the increase in the debt service levy and requested that staff bring back an alternative levy option. Previously, the 2021 debt service levy was estimated 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 2021 Debt Service Levy $8,787,917 The $1,447,552 increase in debt service levy represented a 4.52% increase based on the total 2020 property tax levy. Northland Securities has provided a scenario in which the 2021 levy for the 2020A bonds is reduced from $930,000 to $548,000. Additionally, cash balances in the debt service funds have been reviewed and reductions made to the existing debt levies for 2021. No changes were made to the estimated 2020B debt levy. Based on the above changes, the 2021 debt service levy is estimated as follows: 2020 Debt Service Levy $7,340,365 Levy Adjustment for Existing Debt $ 1,376 Levy for New 2020A Bond Issue 548,212 Levy for New 2020B Debt Issue 270,443 Subtotal 820,031 Estimated 2021 Debt Service Levy $8,160,396 The $820,031 increase in debt service levy represents a 2.56% increase based on the total 2020 property tax levy. 2020A Bond Issuance – Timing and Process On June 15, 2020, the Council will consider the approval of a resolution authorizing the issuance of general obligation bonds. Also on June 15, 2020, the Council will hold a public hearing on the proposal that the City abate property taxes levied by the City on properties within an abatement area such that the City taxes on the parcels in this area would be sufficient to pay annual principal over the 10- year term of the Abatement Portion of the bonds. The Abatement Portion of the bonds will fund the Ames Arena parking lot improvement. The City doesn’t actually “abate the taxes.” Instead, the City has the ability to levy a property tax (an abatement levy) that is equivalent to taxes that could be abated. This step is a requirement for using tax abatement authority to issue tax abatement bonds. The properties identified for the abatement area are all commercial properties that have close proximity to the Ames Arena. It is reasonable to assume that the customers at the Arena would potentially generate business at each of the five properties. COMMON NAME TAXPIN FULLNAME Cub 223202701010 EREP HERITAGE COMMONS I LLC Teresa's 223202601010 EREP HERITAGE COMMONS I LLC Car Wash 223202801010 STAK PROPERTIES LLC Kwik Trip 220290032031 CONVENIENCE STORE INVESTMENTS McDonalds 228195001031 MCDONALDS CORP For more information regarding the 2020A debt issuance, please refer to the April 27, 2020 council workshop packet. 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. This project would potentially use tax abatement authority to issue bonds, as well. Like the 2020A bond process, parcels would need to be identified by mid-June and a public hearing held on July 20. Staff will be working with the City Attorney and ISD#194 staff to prepare an agreement whereby the ISD#194 will fund half of the debt service. Staff anticipates finalizing this agreement in June 2020 so ISD#194 can incorporate the expenditure in their 2021 levy. Council Direction Staff is seeking feedback regarding the 2020A and 2020B debt issuances.