102411 EDACITY OF NEW HOPE
EDA MEETING
City Hall, 4401 Xylon Avenue North
October 24, 2011
EDA Meeting will commence upon
adjournment of the City Council Meeting
President Kathi Hemken
Commissioner John Elder
Commissioner Andy Hoffe
Commissioner Eric Lammle
Commissioner Daniel Stauner
Call to order
2. Roll call
3. Approval of regular meeting minutes of May 9, 2011
4. Resolution relating to taxable lease revenue bonds, series 2011A (city of New Hope
annual appropriation lease obligations) (qualified energy conservation bonds —
direct payment to issuer); authorizing the sale thereof, fixing the form and details,
providing for the execution and delivery thereof and security therefor
5. Adjournment
CITY OF NEW HOPE
4401 XYLON AVENUE NORTH
NEW HOPE, MINNESOTA 55428
EDA Minutes May 9, 2011
Regular Meeting City Hall
CALL TO ORDER President Hernken called the meeting of the Economic Development
Authority to order at 7:33 p.m.
ROLL CALL Present: Kathi Hemken, President
John Elder, Commissioner
Andy Hoffe, Commissioner
Eric Lammle, Commissioner
Daniel Stauner, Commissioner
Staff Present: Kirk McDonald, City Manager
Shari French, Director of Parks and Recreation
Curtis Jacobsen, Director of Community Development
Guy Johnson, Director of Public Works
Rich Johnson, Human Resources Manager
Valerie Leone, City Clerk
Jason Quisberg, City Engineer
Susan Rader, Recreation Supervisor
Steve Sondrall, City Attorney
APPROVE MINUTES Motion was made by Commissioner Elder, seconded by Commissioner Hoffe,
to approve the Regular Meeting Minutes of June 28, 2010. All present voted
in favor. Motion carried
TIF DISTRICTS President Hemken introduced for discussion Item 4, A resolution modifying
Item 4 the restated redevelopment plan and tax increment financing plans for
redevelopment project no. 1 and tax increment financing districts nos. 85 -1,
85 -2, 86 -1, 02 -1, 03- 1(special law), 04- 1(special law), 04 -2, 08 -1 and 08 -1a
(hazardous substance subdistrict); creating tax increment financing district no.
11 -1 (special law), and adopting a tax increment financing plan relating
thereto.
EDA RESOLUTION Commissioner Elder introduced the following resolution and moved its
2011 -01 adoption: "RESOLUTION MODIFYING THE RESTATED
Item 4 REDEVELOPMENT PLAN AND TAX INCREMENT FINANCING PLANS
FOR REDEVELOPMENT PROJECT NO, 1 AND TAX INCREMENT
FINANCING DISTRICTS NOS. 85 -1, 85 -2, 86 -1, 02 -1, 03- 1(SPECIAL LAW),
04- 1(SPECIAL LAW), 04 -2, 08 -1 AND 08 -1A (HAZARDOUS SUBSTANCE
SUBDISTRICT); CREATING TAX INCREMENT FINANCING DISTRICT
NO. 11 -1 (SPECIAL LAW), AND ADOPTING A TAX INCREMENT
FINANCING PLAN RELATING THERETO ". The motion for the adoption
of the foregoing resolution was seconded by Commissioner Hoffe, and upon
vote being taken thereon, the following voted in favor thereof: Hemken,
Elder, Hoffe, Lammle, Stauner; and the following voted against the same:
EDA Meeting
Pagel May 9, 2011
None; Abstained: None; Absent: None; whereupon the resolution was
declared duly passed and adopted, signed by the president which was
attested to by the executive director.
ADJOURNMENT Motion was made by Commissioner Lammle, seconded by Commissioner
Elder, to adjourn the meeting. All present voted in favor. Motion carried The
New Hope EDA adjourned at 7:35 p.m.
Respectfully submitted,
Valerie Leone, City Clerk
EDA Meeting
Page 2 May 9, 2011
Request for Action
Originating Department
Approved for Agenda
Agenda Section
City Manager
October 24, 2011
EDA
Item No.
By: Kirk McDonald, City Manager
By: Kirk McDonald
4
Resolution relating to taxable lease revenue bonds, (city of New Hope annual appropriation lease obligations)
(qualified energy conservation bonds — direct payment to issuer), series 2011A; authorizing the sale thereof, fixing
the form and details, providing for the execution and delivery thereof and security therefor
Requested Action
Staff recommends the Economic Development Authority (EDA) approve this resolution relating to taxable lease
revenue bonds, series 2011A (city of New Hope annual appropriation lease obligations) (qualified energy
conservation bonds — direct payment to issuer), series 2011A; authorizing the sale thereof, fixing the form and
details, providing for the execution and delivery thereof and security therefor. As the EDA is aware, staff has been
coordinating with the city's financial consultants from Ehlers, AEM, and Dorsey & Whitney on the bond sale to
execute the Qualified Energy Conservation Bond (QECB) award from the State of Minnesota to implement energy
conservation improvements at the New Hope Ice Arena and other city facilities. This resolution authorizes the
execution of the necessary documents to proceed with the improvements. Dorsey & Whitney has prepared the
resolutions necessary to implement this action and has provided the attached correspondence explaining the
resolutions. Bruce Kimmel from Ehlers has coordinated on the official statement and bond sale, and will be in
attendance for a presentation. A related resolution needs to be approved by the City Council and will be considered
during the regular council meeting prior to this EDA meeting. Staff and AEM recommend approval of the
resolutions.
Policy /Past Practice
The city has sold bonds in the past to finance improvements under the guidance and advice from the city's financial
advisors. These improvements will help to achieve several important goals for the city: upgrading the ice arena
facility and implementing energy conservation improvements at all facilities and reducing the carbon footprint for
city operations.
Background
At the September 12, 2011 Council Meeting, the City Council approved a resolution authorizing preparation for
issuance of lease revenue bonds, series 2011A; establishing compliance with reimbursement bond regulations under
the Internal Revenue Code. The Council was informed that bonds must be issued for the city to receive the QECB
low interest financing from Minnesota Management & Budget. The city's financial advisors recommended the bonds
be issued by the EDA as Lease Revenue Bonds, with the city leasing the ice arena to the EDA under a ground lease.
Motion by ( Second by
To: f
EDA
Request for Action, Page 2
October 24, 2011
The EDA would issue the bonds to finance the improvements and lease the ice arena back to the city. Because the
bonds will be QECBs, they would be issued as taxable bonds and the EDA would be eligible to receive payments
from the federal government to reduce the interest of the bonds. Per Ehlers, the federal credit is in lieu of the
traditional benefit provided with tax exemption and is so significant that the city's net interest rate for the bonds was
estimated at 0.56 %. Due to the unique nature of the project and the QECB financing, Ehlers recommended the city
offer the bonds through a negotiated sale with an underwriting firm of our choosing instead of the traditional
competitive sale method. The underwriter would tell the "bond story" and convey the city's general credit worthiness
to investors. The City Council was informed that if the resolution was approved on September 12, Ehlers would ask
the EDA /Council to consider a bond "parameters resolution" on October 24, with the bond proceeds being received in
mid - November.
Subsequent to the September 12 Council Meeting, the Council has been kept updated on the progress of the bond sale
through the weekly Friday memo. On October 7, Ehlers provided a memo describing the underwriting proposals that
were received, the "bullet bond" scenario and the selection of Dougherty & Company as the bond underwriting
company. Staff has also been coordinating with Ehlers on the "official statement", and a bond rating call with
Standard & Poor's is being scheduled the week of October 24.
Bruce Kimmel has prepared the attached October 24 memo providing another update on the issuance of Qualified
Energy Conservation Bonds. He states that the City /EDA will be negotiating the QECB issue with Dougherty &
Company, and the bonds will be structured with a single "bullet" maturity in 2028. He indicates that current market
and federal subsidy rates still point to a highly favorable City /EDA outcome. He states "the City Council and EDA
will be asked to consider resolutions approving the lease arrangement underlying the EDA Lease Revenue Bond
transaction, and the EDA resolution also authorizes the EDA President and Executive Director to approve the bond
transaction on the EDA's behalf within prescribed parameters. The two resolutions to be considered are common with
negotiated bond issues, and I would simply emphasize that the maximum interest rate in the EDA resolution is only
to allow for the possibility of market movement between October 24 and the expected bond pricing on November 9. It
does not indicate that we (or Dougherty) think the rate will be at this level. Finally, the city's financing team has
concluded that engaging U.S. Bank as the corporate trustee to maintain the bond sinking fund through 2028 will be
useful to the city, helpful in marketing the bonds to potential investors, and cost - effective (annual expense of $500).
We are on track to complete the bond issue on the schedule outlined in our October 7 memo, with marketing
commencing the week of October 31, pricing occurring on /about November 9, and closing happening on /about
December 1:'
Also enclosed is correspondence from the city's bond counsel at Dorsey & Whitney stating that "the City Council and
the New Hope Economic Development Authority will be considering separate resolutions authorizing the issuance
and negotiated sale by the EDA of Taxable lease Revenue Bonds, the proceeds of which will be used to finance
improvements to the New Hope Ice Arena. The resolutions approve the terms of the bonds subject to parameters as to
the maximum principal amount, term and interest rate, and authorize the mayor and city manager to approve the
final terms of the bonds subject to these parameters. A parameters resolution is typically used in a situation where the
sale of the bonds is being negotiated, and provides flexibility as to timing in the marketing the bonds to the public.
Our office has prepared the resolutions to be considered by the City Council and EDA and they are in appropriate
form for adoption by the City Council and EDA. I would recommend the City Council approve its resolution prior to
the consideration by the EDA of its resolution. Our office will also be preparing the Ground Lease between the city
and EDA, Lease Agreement between the city and EDA, and the Trust Indenture between the EDA as issuer of the
bonds, and U.S. Bank, as trustee. The Trust Indenture will contain the final terms of the bonds once the sale details are
finalized and approved."
Staff recommends approval of the City Council /EDA resolutions.
EDA
Request for Action, Page 3
October 24, 2011
Attachments
EDA Resolution
October 24 Ehlers Memo
October 20 Dorsey & Whitney correspondence
October 7 Ehlers memo
September 12 Ehlers memo
QECB allocation
CERTIFICATION OF MINUTES RELATING TO
TAXABLE LEASE REVENUE BONDS
(CITY OF NEW HOPE ANNUAL APPROPRIATION LEASE OBLIGATIONS)
(QUALIFIED ENERGY CONSERVATION BONDS — DIRECT PAYMENT TO ISSUER)
SERIES 2011 A
Issuer: New Hope Economic Development Authority
Governing Body: Board of Commissioners
Kind, date, time and place of meeting: A regular meeting held on October 24, 2011, at 7:00
p.m., at the City Hall, New Hope, Minnesota.
Members present:
Members absent:
Documents Attached:
Minutes of said meeting (including):
RESOLUTION RELATING TO TAXABLE LEASE REVENUE
BONDS (CITY OF NEW HOPE ANNUAL APPROPRIATION
LEASE OBLIGATIONS) (QUALIFIED ENERGY
CONSERVATION BONDS — DIRECT PAYMENT TO ISSUER),
SERIES 2011 A; AUTHORIZING THE SALE THEREOF,
FIXING THE FORM AND DETAILS, PROVIDING FOR THE
EXECUTION AND DELIVERY THEREOF AND SECURITY
THEREFOR
I, the undersigned, being the duly qualified and acting recording officer of the public
corporation issuing the Bonds referred to in the title of this certificate, certify that the documents
attached hereto, as described above, have been carefully compared with the original records of
said corporation in my legal custody, from which they have been transcribed; that said
documents are a correct and complete transcript of the minutes of a meeting of the governing
body of said corporation, and correct and complete copies of all resolutions and other actions
taken and of all documents approved by the governing body at said meeting, so far as they relate
to said Bonds; and that said meeting was duly held by the governing body at the time and place
and was attended throughout by the members indicated above, pursuant to call and notice of such
meeting given as required by law.
WITNESS my hand officially as such recording officer on October _, 2011.
Secretary
Commissioner introduced the following resolution and moved its
adoption, which motion was seconded by Commissioner
RESOLUTION RELATING TO TAXABLE LEASE REVENUE
BONDS (CITY OF NEW HOPE ANNUAL APPROPRIATION
LEASE OBLIGATIONS) (QUALIFIED ENERGY
CONSERVATION BONDS — DIRECT PAYMENT TO ISSUER),
SERIES 2011 A; AUTHORIZING THE SALE THEREOF,
FIXING THE FORM AND DETAILS, PROVIDING FOR THE
EXECUTION AND DELIVERY THEREOF AND SECURITY
�.
BE IT RESOLVED by the Board of Commissioners of the New Hope Economic
Development Authority (the "Authority "), as follows:
Section 1. AUTHORIZATION AND SALE
1.01. Authorization The City of New Hope, Minnesota (the "City ") desires to make
energy conservation improvements to the New Hope Ice Arena and has determined that the most
efficient way to do so is to lease - purchase the facilities pursuant to the authority granted by
Minnesota Statutes, Section 465.71. Acting pursuant to the provisions of Minnesota Statutes,
Section 469.012, subdivision 1(7), the Authority has the power to acquire real property, by lease
or otherwise, and construct the proposed facilities for lease to the City. Pursuant to Minnesota
Statutes, Section 469.033, and Chapter 475, the Authority further has the power to issue revenue
bonds to provide the funds necessary for the acquisition, construction, remodeling, renovation
and furnishing of the facilities. Pursuant to the foregoing authority, the Authority proposes to
undertake the acquisition, construction and furnishing of a portion of the New Hope Ice Arena as
more fully described in the plans and specifications therefor (herein the "Facilities ") and to
finance the cost thereof by the issuance of its Taxable Lease Revenue Bonds (City of New Hope
Annual Appropriation Lease Obligations) (Qualified Energy Conservation Bonds — Direct
Payment to Issuer), Series 2011 A (the "Bonds ") under this Resolution and a Trust Indenture, to
be dated as of December 1, 2011 (the "Indenture "), between the City and U.S. Bank National
Association, in St. Paul, Minnesota, as trustee (the "Trustee "). The Facilities will be located on
land a portion of which will be ground leased by the City to the Authority pursuant to a Ground
Lease, to be dated as of December 1, 2011 (the "Ground Lease "). The Authority proposes to
lease the Facilities subject to the Ground Lease to the City pursuant to a Lease Agreement, to be
dated as of December 1, 2011 (the "Lease "), between the Authority, as lessor, and the City, as
lessee. All bonds issued pursuant to this Resolution and the Indenture will be secured solely by
rental payments to be made by the City pursuant to the Lease, and funds held by the Trustee
under the Indenture, and said bonds and the interest on said bonds shall be payable solely from
the revenue pledged therefor under the Indenture and no such bonds shall constitute a debt of the
Authority or the City within the meaning of any constitutional or statutory limitation nor shall
constitute nor give rise to a pecuniary liability of the Authority or City or a charge against their
general credit or taxing powers and shall not constitute a charge, lien, or encumbrance, legal or
equitable, upon any property of the Authority or City, other than the revenues pledged to the
payment of the bonds under the Indenture.
Under the Lease, and subject to the right of termination by the City at the end of each
fiscal year of the City as provided in the Lease, the City is to pay to the Authority sufficient
money each year to pay the principal of, premium, if any, and interest on the Bonds issued under
this Resolution and the Indenture, and the City is to provide the cost of maintaining the Facilities
in good repair, the cost of keeping the Facilities properly insured, and any payments required for
taxes and any expenses incurred by the Authority in connection with the Facilities.
1.02. Qualified Energy Conservation Bonds The Bonds are hereby designated as
"Qualified Energy Conservation Bonds" for purposes of Section 54D of the Internal Revenue
Code of 1986 (the "Code "). The Authority finds that the Bonds will be "specified tax credit
bonds" within the meaning of Section 6431(f)(3) of the Code and irrevocably elects to have
Section 6431(f) of the Code apply to the Bonds, with the result that the Authority shall be
entitled to the credit provided in Section 6431 of the Code.
1.03. Sale of Bonds Ehlers & Associates, Inc. is hereby authorized, pursuant to
Minnesota Statutes, Section 475.60, Subdivision 2, paragraph (9), to solicit proposals for the
Bonds on behalf of the Authority on a negotiated basis. The President and the Executive
Director of the Authority are hereby authorized to approve:
(i) the aggregate principal amount of the Bonds, provided that such principal amount is
not in excess of $3,505,000;
(ii) the maturity schedule of the Bonds, provided that the Bonds mature at any time or
times in such amount or amounts no later than December 1, 2030;
(iii) the provisions for prepayment and redemption of the Bonds prior to their stated
maturity;
(iv) the interest rates for the Bonds, provided that the interest rate for any Bond not
exceed 5.375% per annum;
(v) the purchase price paid by the purchaser for the Bonds equals or exceeds 98% of the
principal amount thereof (exclusive of any portion representing original issue discount).
The President and the Executive Director are hereby authorized and directed to execute a
contract on the part of the Authority for the sale of the Bonds with the purchaser of the Bonds
and the approval by the President and Executive Director of the terms of the Bonds shall be
conclusively evidenced by the execution of such contract.
Section 2. BOND TERMS; REGISTRATION; EXECUTION AND DELIVERY.
2.01. Terms of the Bonds The Bonds shall be designated "Taxable Lease Revenue
Bonds (City of New Hope Annual Appropriation Lease Obligations) (Qualified Energy
Conservation Bonds — Direct Payment to Issuer), Series 2011 A." The terms of the Bonds,
including without limitation, the date of original issue, interest payment dates, maturity dates and
principal amounts, interest rates, redemption provisions, and provisions for registration and
exchange shall be as set forth in the Indenture.
-2-
2.02. Execution, Authentication and Delivery The Bonds shall be executed by the
Authority, and authenticated and delivered by the Trustee, in accordance with the applicable
provisions of the Indenture.
2.03. Form of Bonds The Bonds shall be printed in substantially the form set forth in
the Indenture.
SECTION 3. APPROVAL OF GROUND LEASE; LEASE AGREEMENT;
INDENTURE The President and Executive Director are hereby authorized and directed to
negotiate, execute, and deliver the Ground Lease, the Lease Agreement, and the Indenture in the
name and on behalf of the Authority in such forms as the President and Executive Director shall
approve, which approval shall be conclusively presumed by the execution and delivery of said
documents by the President and Executive Director.
SECTION 4. REGISTRATION OF BONDS The Secretary is hereby authorized and
directed to file a certified copy of this resolution with the County Auditor of Hennepin County,
together with such additional information as required, and to obtain from the County Auditor a
certificate that the Bonds have been duly entered upon the County Auditor's bond register.
SECTION 5. AUTHENTICATION OF TRANSCRIPT The officers of the Authority
are hereby authorized and directed to prepare and furnish to the purchaser, and to Dorsey &
Whitney LLP, the attorneys rendering an opinion as to the legality thereof, certified copies of all
proceedings and records relating to the Bonds and such other affidavits, certificates and
information as may be required to show the facts relating to the legality and marketability of the
Bonds, as the same appear from the books and records in their custody and control or as
otherwise known to them, and all such certified copies, affidavits and certificates, including any
heretofore furnished, shall be deemed representations of the Authority as to the correctness of all
statements contained therein.
SECTION 6. PRELIMINARY OFFICIAL STATEMENT AND OFFICIAL
STATEMENT The Authority hereby approves the form of Preliminary Official Statement
related to the Bonds prepared by Ehlers & Associates, Inc. (the "Preliminary Official
Statement ") a draft of which has been submitted to and received by the Authority and hereby
authorizes its use and distribution to intended purchasers of the Bonds with such changes and
revisions approved by the Executive Director. Ehlers & Associates, Inc. is hereby authorized on
behalf of the Authority to prepare and distribute to the purchaser of the Bonds an Official
Statement, in substantially the same form as the Preliminary Official Statement, listing the
offering price, the interest rates, selling compensation, delivery date, the underwriters and such
other information relating to the Bonds required to be included in the Official Statement by Rule
15c2 -12 adopted by the Securities and Exchange Commission under the Securities Act of 1934.
The officers of the Authority are hereby authorized and directed to execute such certificates as
may be appropriate concerning the accuracy, completeness and sufficiency thereof.
-3-
Section 7. TAX MATTERS
7.01. Covenant Related to Qualified Energy Conservation Bonds Status The Authority
covenants and agrees with the registered owners from time to time of the Bonds that it will not
take or permit to be taken by any of its officers, employees or agents any action which would
cause the Bonds to lose their status as Qualified Energy Conservation Bonds under the Code and
applicable Treasury Regulations (the "Regulations "), and covenants to take any and all actions
within its powers to ensure that the Bonds will not lose their status as Qualified Energy
Conservation Bonds under the Code and the Regulations.
7.02. Certification The President and Executive Director, being the officers of the
Authority charged with the responsibility for issuing the Bonds pursuant to this Resolution, are
authorized and directed to execute and deliver to the purchaser a certificate in accordance with
Sections 148 and 54A of the Code, and applicable Regulations, stating the facts, estimates and
circumstances in existence on the date of issue and delivery of the Bonds which make it
reasonable to expect that the proceeds of the Bonds will not be used in a manner that would
cause the Bonds to be "arbitrage bonds" within the meaning of the Code and Regulations.
7.03. Arbitrage Rebate It is hereby found that the City has general taxing powers, that
no Bond is a "private activity bond" within the meaning of Section 141 of the Code, that 95% or
more of the net proceeds of the Bonds are to be used for local governmental activities of the
City, and that the aggregate face amount of all tax- exempt obligations (other than private activity
bonds) issued by the City and all subordinate entities thereof during the year 2011 is not
reasonably expected to exceed $5,000,000. Therefore, pursuant to Section 148(f)(4)(D) of the
Code, the City shall not be required to comply with the arbitrage rebate requirements of
paragraphs (2) and (3) of Section 148(f) of the Code.
If, however, the arbitrage rebate provisions of Section 148(f) of the Code, as modified by
the provisions of Section 54A of the Code, apply to the Bonds, the City hereby covenants and
agrees to make the determinations, retain records and rebate to the United States the amounts at
the times and in the manner required by said Section 148(f) and applicable Regulations.
7.04. No Designation as Qualified Tax - Exempt Obligations The Bonds are not
designated as "qualified tax - exempt obligations" for purposes of Section 265(b)(3) of the Code.
IM
COUNTY AUDITOR'S CERTIFICATE
AS TO REGISTRATION
The undersigned, being the duly qualified and acting County Auditor of Hennepin
County, Minnesota, hereby certifies that there has been filed in my office a certified copy of a
resolution duly adopted on October 24, 2011, by the Board of Commissioners of the New Hope
Economic Development Authority, setting forth the form and details of an issue of $3,505,000
Taxable Public Project Revenue Bonds (City of New Hope Annual Appropriation Lease
Obligations) (Qualified Energy Conservation Bonds — Direct Payment to Issuer), Series 2011 A,
dated as of December 1, 2011.
I further certify that said Bonds have been entered on my bond register, as required
by Minnesota Statutes, Sections 475.61 to 475.63.
WITNESS my hand and official seal this day of 3 2009.
County Auditor
(SEAL)
To: Kirk McDonald, City of New Hope
From: Bruce Kimmel
Date: October 24, 2011
Subject: Update on EDA Issuance of Qualified Energy Conservation Bonds
This memo summarizes progress made to -date on the proposed negotiated sale of EDA
Lease Revenue Bonds with the Qualified Energy Conservative Bond (QECB) feature.
As described in our October 7 memo, the City /EDA will be negotiating the QECB issue with
Dougherty & Company, and the bonds will be structured with a single "bullet" maturity in
2028. Although there has not been a bond schedule update since the October 7 memo,
current market and federal subsidy rates still point to a highly favorable City /EDA outcome.
Parameters Resolution
On October 24, the City Council and EDA Board will be asked to consider resolutions
approving the lease arrangement underlying the EDA Lease Revenue Bond transaction,
and the EDA resolution also authorizes the EDA President and Executive Director to
approve the bond transaction on the EDA's behalf within prescribed parameters. Please
see the Dorsey & Whitney letter accompanying the two resolutions for more details.
The two resolutions to be considered are common with negotiated bond issues, and 1 would
simply emphasize that the maximum interest rate in the EDA resolution is only to allow for
the possibility of market movement between October 24 and the expected bond pricing on
November 9. It does not indicate that we (or Dougherty) think the rate will be at this level.
Finally, the City's financing team has concluded that engaging U.S. Bank as the corporate
trustee to maintain the bond sinking fund through 2028 will be useful to the City, helpful in
marketing the bonds to potential investors, and cost - effective (annual expense of $500).
Timeframe
We are on track to complete the bond issue on the schedule outlined in our October 7
memo, with marketing commencing the week of October 31, pricing occurring on /about
November 9, and closing happening on /about December 1.
Please contact me at (651) 695 -8572 or bkimmel @ehlers- inc.com with any questions about
this memo, and thank you for the opportunity to be of assistance to the City of New Hope.
www,ehlers- inc.com
EHLERS
LEADERS IN PUBLIC FINANCE
Minnesota phone 651 - 697 -8500 3060 Centre Pointe Drive
Offices also in Wisconsin and Illinois fax 651- 697 -8555 Roseville, MN 55113 -1122
toll free 800- 552 -1171
DORSEY & WHITNEY LLP
JEROME P. GILLIGAN
(612) 340 -2962
FAX (612) 677 -3391
gilligan.jerome@dorsey.com
October 20, 2011
Mr. Kirk McDonald
City Manager
City of New Hope
4401 Xylon Avenue North
New Hope, MN 55428
Re: EDA Taxable Lease Revenue Bonds, Series 2011A
Dear Mr. McDonald:
On October 24, the City Council and the New Hope Economic Development Authority
(the "EDA ") will be considering separate resolutions authorizing the issuance and negotiated
sale by the EDA of Taxable Lease Revenue Bonds, Series 2011A (the "Bonds "), the proceeds
of which will be used to finance improvements to the New Hope Ice Arena. The resolutions
approve the terms of the Bonds subject to parameters as to the maximum principal amount,
term and interest rate, and authorize the Mayor and City Manager to approve the final terms of
the Bonds subject to these parameters. A parameters resolution is typically used in a situation
where the sale of the Bonds is being negotiated, and provides flexibility as to timing in the
marketing the Bonds to the public.
Our office has prepared the resolutions to be considered by the City Council and EDA
and they are in appropriate form for adoption by the City Council and EDA. I would recommend
that the City Council approve its resolution prior to the consideration by the EDA of its
resolution. Our office will also be preparing the Ground Lease between the City and EDA,
Lease Agreement between the City and EDA, and the Trust Indenture between the EDA as
issuer of the Bonds, and U.S. Bank, as trustee. The Trust Indenture will contain the final terms
of the Bonds once the sale details are finalized and approved. Representatives from Ehlers and
Associates, the City's financial advisor for the Bonds, will be in attendance at the October 24
meeting to present further details concerning the proposed terms of the Bonds and the issuance
process..
If you have any questions, please call me.
Yours Truly
droeP. Gilligan
0
DORSEY & WHITNEY LLP • WWW•DORSEY.COM - T 612.340,2600 • F 612.340.2868
SUITE 1500 • 50 SOUTH SIXTH STREET • MINNEAPOLIS, MINNESOTA 55402 -1498
USA CANADA EUROPE ASIA- PACIFIC
i
To: Kirk McDonald, City of New Hope
From: Bruce Kimmel
Date: October 7, 2011
Subject: Update on EDA Issuance of Qualified Energy Conservation Bonds
At its September 12 meeting, the City Council voted to move ahead with the proposed
negotiated sale of EDA Lease Revenue Bonds with the Qualified Energy Conservative
Bond (QECB) feature, to finance energy improvements at the New Hope Ice Arena. This
memo summarizes progress made on the Bond issue in the weeks since, and the now -
anticipated timeline to City's receipt of bond proceeds.
Underwriting Proposals and Bullet Bond Scenario
As described in our September 7 memo to you, Ehlers solicited proposed from bond
underwriting companies and.received three submittals, from Dougherty, Oppenheimer, and
Piper Jaffray. The Dougherty proposal offered the lowest projected interest rate. (both as a
nominal figure and as a spread over Treasury.rates) and.the lowest underwriting fee.
The Oppenheimer and Piper Jaffray proposals were not as strong on interest rates or fees
but presented an interesting alternative to the expected serial or term bond approach: that
is, to issue a "bullet' maturity in 2028 with no principal paid to bondholders until 2028. The
City, through the EDA, would still be required to make annual principal payments but these
amounts would be invested in an interest- bearing "sinking fund" until 2028. Dougherty
subsequently confirmed that it could execute either the term bond or bullet bond option.
After discussing the merits of the three underwriting proposals and the two bond options,
the City's financing team agreed to proceed with Dougherty and the bullet bond structure.
The. attached bond schedule illustrates the proposed QECB issue, with the- estimated:
• Debt service payment dates of May 1 and November 1 annually;
• Principal payments to the bond sinking fund balance;
• Sinking fund investment earnings at 2 %;
• Bond coupon of 4.24% (taxable interest rate);
• Semi - annual "gross" interest due of $74,306;
® Semi - annual QECB interest credit of $57,535;
• Application of sinking fund investment earnings; and
• Net annual debt service increasing from $182,558 to $249,043 over time.
wmehlers- inc,Coll"
IrEHLERS Minnesota phone 651.697 -8500. 3066 Centre Pointe Drive
LEADERS IN PUBLIC FINANCE Offices also in Wisconsin and Illinois fax 651 -697-8555 Roseville, MN 5 5113-1 1 2 2
.toll free 800. 552 -1171
City of New Hope, Minnesota
Update on EDA Issuance of QECBs
October 7, 2011
Page 2 of 2
The QECB subsidy and sinking fund earnings combine to offset most of the projected Bond
interest, so that total net interest is only $77,800 (average of $4,600 / year) through 2028.
Dougherty's scenario, while only an estimate based on market conditions in late September
and not a guarantee of actual Bond pricing results, compares favorably to Ehlers' previous
estimate of $146,100 in total net interest.
Clearly, the ultimate performance of the bullet bond structure will be decided by the rate(s)
at which the City /EDA can invest its principal sinking fund deposits over time. The flat 2%
rate assumed here should prove to be a conservative estimate because it is a proxy for the
current 10 -year Treasury yield of 1.99 %, which is essentially at an all -time low. History
would indicate that investment rates should increase over the next 17 years, and the City
will be purchasing a new Treasury Bond or similar investment with each year's deposit.
Of course, it is possible (if not probable) that Treasury rates could drop and stay lower than
today's rate. However, even with a 1 % average investment rate, the bullet net debt service
would still be lower than the term bond net debt service. Finally, the City's financing team is
exploring the cost/benefit of engaging a corporate trustee (e.g. U.S. Bank, Wells Fargo) to
maintain the sinking fund through 2028, instead of having this as a City responsibility.
Timeframe
The Bond issuance process was slowed slightly by the City's need to consider the bullet
bond option. Our timing expectations are now as follows:
• Week of October 17: deliver draft preliminary official statement to Standard & Poor's
for rating review; deliver proposed parameters resolution for Council packets;
• October 24: EDA and Council consider parameters resolution authorizing a bond
pricing committee (likely you, AEM, and Ehlers) to negotiate and agree to the final
bond pricing with Dougherty;
• Week of October 31: Receive S &P rating, distribute preliminary official statement,
and market bonds to potential investors;
On /about November 9: Price bonds and sign bond purchase agreement;
November 14: Report results at EDA / Council meeting (no action required); and
• On /about December 1: Close bonds and receive proceeds.
Please contact me at (651) 695 -8572 or bkimmel @ehlers- inc.com with any questions about
this memo, and thank you for the opportunity to be of assistance to the City of New Hope.
511/2012
-
4.24%
68,527
(52,740)
1I/1l2012
I5Q000
150,000
4.24%
74,306
292,833
(57,535)
182,558
5/1/2013
150,000
1,500
4,24%
74,306
(57,535)
(1,500)
11/1/2013
150,000
300,000
1,500
4:24 %0
74,306
298,612
(57,535)
(1,500)
180,543
5/1/2014
-
300,000
3,000
4;24%
74,306
(57,535)
(3,000)
11/1/2014
155,000
455,000
3,000
4.24%
74,306
303,612
(57,535)
(3,000)
182,543
5/1/2015
-
455,000
4,550
4:24%
74,306
(57,535)
(4,550)
11/1/2015
165,000
620,000
4,550
4.24%
74,306
313,612
(57,535)
(4,550)
189,443
5/1/2016
620,000
6,200
4.24%
74,306
(57,535)
(6,200)
11/1/2016
170,000
790,000
6,200
4.24%
74,306
318,612
(57,535)
(6,200)
191,143
5/1/2017
790,000
7,900
4,24%
74,306
(57,535)
(7,900)
11/1/2017
175,000
965,000
7,900
4,24%
74,306
323,612
(57,535)
(7,900)
192,743
5/1/2018
965,000
9,650
4,24%
74,306
(57,535)
(9,650)
111112018
185,000
1,150,000
9,650
4.24%
74,306
333,612
(57,535)
(9,650)
199,243
5/1/2019
1,150,000
11,500
4,24%
74,306
(57,535)
(11,500)
11!1/2019
195,000
1,345,000
11,500
4,24%
74,306
343,612
(57,535)
(11,500)
205,543
5/1/2020
1,345,000
13,450
4.24%
74,306
(57,535)
(13,450) .
H/l/2020
200,000
1,545,000
13,450
4.24%
74,306
348,612
(57,535)
(13,450)
206,643
5/1/2021
1,545,000
15,450
4.24%
74,306
(57,535)
(15,450)
11/1/2021
210,000
1,755,000
15,450
4.24%
74,306
358,612
(57,535)
(15,450)
212,643
5/1/2022
1,755,000
17,550
4.24%
74,306
(57,535)
(17,550)
11/1/2022
220,000
1,975,000
17,550
4,24%
74,306
368,612
(57,535)
(17,550)
218,443
5/]/1023
1,975,000
19,750
4;24%
74,306
(57,535)
(19,750)
1.111/2023
230,000
2,205,000
19,750
4,24%
74,306
378,612
(57,535)
(19,750)
224,043
S/1/2024
2,205,000
22,050
4
74,306
(57,535)
(22,050)
1I/1/2024
240,000
2,445,000
22,050
4,24%
74,306
388,612
(57,535)
(22,050)
229,443
5/1/2025
2
24,450
4;24%
74,306
(57,535)
(24,450)
11/1/2025
250,000
2,695,000
24,450
4.24%
74,306
398,612
(57,535)
(24,450)
234,643
511/2026
2,695,000
26,950
4,24%
74,306
(57,535)
(26,950)
11/1/2026
260,000
2,955,000
26,950
4.24%
74,306
408,612
(57,535)
(26,950)
239,643
511/2027
2,955,000
29,550
4;24%
74,306
(57,535)
(29,550)
11/10-027
270,000
3,225,000
29,550
4,24%
74,306
418,612
(57,535)
(29,550)
244,443
5/1/2028
3,225,000
32,250
4.24%
74,306
(57,535)
(32,250)
11/1/2028
280,000
3,505,000
32,250
4.24%
74,306
428.612
(57.535)
(32,250)
249,043
Total
$3,505,000
491,500
$2,520,625
$6,025,625
(1,951,381)
(491,500)
$3,582,744
City of New Hope Economic Development Authority
Qualified Energy Conservation Bonds
Series 2011
Bullet Structure - Conservative Investment Rate Scenario
To: Kirk McDonald, City of New Hope
From: Bruce Kimmel.
Date: September 12, 2011
Subject: Proposed Issuance of Qualified Energy Conservation Bonds
This memo complements AEM's memo describing the overall proposed financing plan for
energy conservation improvements at the New Hope Ice Arena and other City facilities, as
well as Dorsey and Whitney's letter describing the legal aspects of the proposed EDA
Lease Revenue Bonds with the Qualified Energy Conservative Bond (QECB) feature.
Ehlers' focus here is to describe the proposed bond issue, our recommended method of
sale, and the estimated timeframe to the City's receipt of bond proceeds.
Bond Issue Details
With the QECB feature, the U.S. Treasury sends the City a semi- annual payment to
compensate you for the taxable interest rates on the proposed bonds. This federal credit is
in lieu of the traditional benefit provided with tax exemption and is so significant that the
City's net interest rate for these bonds is estimated at 0.56 %. In comparison, we estimate
the interest rate on a traditional, tax - exempt issue would be in the ballpark of 2.75 — 3.00 %.
The first page of the attached exhibit shows the $3,505,000 EDA Lease Revenue
Bonds (the maximum QECB amount authorized by the State) and the overall
sources and uses of funds totaling $4,823,671, as discussed in AEM's memo.
• The second page illustrates the 17 -year bond term (maximum duration for QECB
issues), with taxable coupon rates estimated to range from 0.90% in 2012 to 4.6% in
2028. The bonds will be structured for level annual debt service before factoring in
the semi - annual QECB interest rate credit to the City.
Because the QECB subsidy is calculated on the bond amount outstanding at six
month intervals, the credit decreases as bond principal is paid. This means the
City's net debt service will increase over time, starting at an estimated 35,172 in
2012 to reflect only partial energy savings that first year and ending at $283,472 in
2028. These projections do not reflect City interest earnings on the debt service
reserve fund or the City using the reserve fund to make the final payments in 2028.
• The final page shows how the QECB subsidy is calculated at 70% of the current
published federal "credit rate" of 4.80 %.
49 EHLERS
LEADERS IN PUBLIC FINANCE
ehlers -inc, com
Minnesota Phone 651 -697 -8500 3060 Centre Pointe Drive
Offices also in Wisconsin and Illinois fax 651 -697 -8555 Roseville, MN 55113 -1122
toll free 800 -552 -1171
City of New Hope, Minnesota
Proposed Issuance of Qualified Energy Conservation Bonds
September 12, 2011
Page 2 of 2
Looking again at the estimated debt service schedule, it is noteworthy that the QECB
subsidy covers roughly 89% of the total bond interest expense over 17 years, leaving the
City with approximately $146,100 of net interest expense.
Method of Sale
The City of New Hope typically issues bonds via competitive sale in which underwriters
submit bids, at a specified date and time, to purchase the offered series of bonds. This
sale method is proven to deliver the best results for General Obligation Bonds, and has
worked well for the City. The proposed QECBs, however, are a different breed of bond.
To date, the QECB feature has not been utilized often in Minnesota but is highly similar to
the Build America Bond mechanism that was prevalent in 2009 -2010, and so should not
present a marketing concern with potential buyers. The primary challenge is with the EDA
lease revenue aspect of the bonds, particularly since the financed improvements are mostly
for the Ice Arena, which rating agencies and investors view as a "non - essential" purpose,
as opposed to a city hall, public works building, or public safety facility.
Barring a major market event, we believe the bonds will attract investor demand and
interest rates similar to our estimates, but the lease revenue credit and non - essential
purpose make for what market participants call a "story bond ". In this instance, given the
issue's relative complexity and lack of a General Obligation pledge for investors to take at
face value, we believe the City should offer the bonds - through a negotiated sale with an
underwriting firm of its choosing. The underwriter will tell the bond story and tout the City's
general creditworthiness to investors, and use the feedback it receives to develop.a pricing
proposal that is the basis for negotiation. By contrast, the potential bidder in a competitive
sale has little incentive to "pre- sell" a story bond that it may or may not win, increasing the
chances of an unsuccessful sale (i.e. few bids and /or high interest rates).
Ehlers takes a proactive approach in advising clients throughout a negotiated bond sale,
starting with selecting the underwriter via a competitive RFP, proceeding to marketing and
rating the bonds, and continuing through the bond pricing and closing. We have advised
numerous clients, including Brooklyn Park and Coon Rapids, on similar EDA similar lease
revenue transactions as well as many other negotiated bond sales.
Temeframe
Assuming the City Council authorizes the bond issue at its September 12 meeting, we
believe the underwriter section could be completed by the end of the month, the bond issue
priced and sold in late October, and proceeds received in mid - November. We anticipate
asking the EDA / Council to consider a bond "parameters resolution" on October 24, which
would authorize a pricing committee (likely including you, AEM, and Ehlers) to finalize the
bond pricing negotiation shortly thereafter. If the sale process is delayed, we would target
November 14 for EDA / Council approval of the proposed bond parameters.
Please contact me at (651) 695 -8572 or bkimmel @ ehlers- inc.com with any questions about
this memo, and thank you for the opportunity to be of assistance to the City of New Hope.
August 18, 2011
Mr. Kirk McDonald
City Manager
4401 Xylon Avenue N
New Hope, MN 55428
RE: Qualified Energy Conservation Bond Allocation
Dear Mr. McDonald:
I am pleased to announce that the State of Minnesota has completed its review of your application for
reallocation of Qualified Energy Conservation Bond (QECB) authority and has awarded your project
an allocation of $3,505,000.
As bonds are issued, MMB requests that you complete the "Notice of Issue" form on our website at
httiD://www.mmb.state.mn.us/mmb- b and return it to our offices. In the event that y are unab le to
issue bonds, or find that you do not need the full allocation, please return the unused allocation to
MMB so that we may continue to assist other projects from the state pool. To return allocations simply,
send MMB a letter indicating the original award and the amount of allocation being returned.
Should you have any questions regardin
8079 or via email at g, the allocations, please contact Jacob Brown at (651) 201-
jaco� b.brown(cr�,state.mn us
Congratulations on your award and best of luck as your project moves forward!
Sincerely,
Kristin A. Hanson
Assistant Commissioner
cc: Greg Ackerson, McKinstry Consulting
Enclosure
400 Centennial Building • 658 Cedar Street • St. Paul, Minnesota 55155
Voice: (651) 201 -8000 • Fax: (651) 296 -8685 • TTY: 1- 800 - 627 -3529
An Equal Opportunity Employer
STATE OF MINNESOTA QECB
f•___.: '• DEPARTMENT OF MINNESOTA MANAGEMENT & BUDGET Certificate
TREASURY DIVISION September 2010
QUALIFIED ENERGY CONSERVATION BONDS
CERTIFICATE OF ALLOCATION
Number
Pursuant to Minnesota Statutes Chapter 474A as amended 6
NAME OF ISSUER: City of New Hope
TITLE OF PROPOSED ISSUE: New Hope Ice Arena and Building Improvements
AMOUNT OF ALLOCATION: $3,505,000
Three million five hundred and five thousand dollars
This Certificate of Allocation for the Qualified Energy Conservation Bonds is not transferable.
Please submit a NOTICE OF ISSUE FORM within five days of issuance of the obligations. A notice of
issue is required for each series of obligations if issued in series. "Notice of Issue" forms are available
on the Department's website at http: / /www.mmb state mn us /mmb -gecb
August 18, 2011
Date of Certificate
For further information, please contact:
Minnesota Management & Budget
400 Centennial Building
658 Cedar Street
Saint Paul, Minnesota 55155
(651) 201 -8046
Jim Schowalter, Commissioner
Department of Minnesota Management & Budget
11l�1;
lwr.r.rr. ac�«►wro.
REQUEST FOR REALLOCATION OF
QUALIFIED ENERGY t; ;,' i A i c i
Pursuant to Laws 0 2009, Chapter 88, Article 6, Section 11
INSTRUCT ►ONS
Applicants must complete all required sections in order to be considered for a reallocation award.
All applications for QECB reallocations awards must be submitted no later than 4:30om on Friday. Seotember
1-0, 2010 Materials may be submitted in either hard copy or electronic format, and should be sent to:
Minnesota Management & Budget
Attn: Jacob Brown — Treasury Division
658 Cedar Street, 4 Floor
Saint Paul, MN 55155
(651) 201 -8079
lacob.browniEstate mn us
City /County/Tribal Government Applicant: City of New Hone
Name of Business (if applicable):
Amount of QECB Authority Requested: $ 3,505,909
1. This project is (check one):
A government project
❑ A private activity
2. Describe how your project meets one or more of the following priorities for allocation selection:
® Promote or expand economic opportunities, including job creation
® Meet critical energy needs and /or statewide energy conservation goals
❑ Demonstrate readiness and feasibility
® Enhances the public good and general welfare of the Commonwealth
3. Check the category or categories into which your project fits (per QECB legislation):
® Capital expenditures Incurred for purposes of (indicate one)
® Reducing energy consumption in publicly owned buildings by at least 20%
❑ Implementing community -based green programs (including the use of loans, grants, or
other repayment mechanisms to implement such programs)
❑ Rural development involving the production of electricity from renewable energy sources
400 Centennial Building - 658 Cedar Street • St. Pahl, Minnesota 551SS
Voice: (651) 201 -8000 . Fax: (65 0 296 -8685 - TFY: 1 -500- 627 -3529
An Equal Opportuniq Employer
❑ Any facility eligible for the production tax credit under Section 45 of the IRS Code. Please
describe:
❑ Expenditures with respect to facilities or grants that support research in (indicate one or more)
❑ Development of cellulosic ethanol or other non - fossil fuels
❑ Technologies for the capture and sequestration of carbon dioxide produced through the
use of fossil fuels
❑ Increasing the efficiency of existing technologies for producing non - fossil fuels
❑ Automobile battery technologies and other technologies to reduce fossil fuel consumption
in transportation
Technologies to reduce energy use in buildings
❑ Mass commuting facilities and related facilities that reduce the consumption of energy, including
expenditures to reduce pollution from vehicles used for mass commuting
❑ Demonstration projects designed to promote the commercialization of (check one or more)
❑ Green building technology
❑ Conversion of agricultural waste for use in the production of fuel or otherwise
❑ Advanced battery manufacturing technologies
❑ Technologies to reduce peak use of electricity
❑ Technologies for the capture and sequestration of carbon dioxide emitted from
combusting fossil fuels in order to produce electricity
❑Public education campaigns to promote energy efficiency.
Project narrative (Please describe the project proposed including the scope, purpose, benefits, processes to be
followed, timeline and anticipated impact. Please provide the physical address of the project site and identify
the community to be served. Please be complete.):
See Attached
Project viability (Please provide applicable feasibility studies, site analysis, audits /assessments, design
documents, construction schedule, etc., to support the viability of the proposed project. Forproposed
renewable energy projects, please provide documentation demonstrating the availability of the renewable
resource identified in this application. For example, if you are pursuing a wind project, please provide relevant
analysis that supports the siting of wind in the location identified [e.g., wind map info, tower data, etc.]):
Please refer to the attached Stevens Ice Arena Energy AnIlLsis McKinstry Audit and construction
schedule for explanation of evaluations conducted and solutions considered
It is intended that we will perform this construction work using a design build approach Actual construction
documents will be completed and submitted for state review upon execution of the proposed construction
contract. —
Projected energy impact (Please provide, as applicable, the projected reductions in annual energy
consumption and cost, or the annual energy production projected for a renewable energy facility; provide
assumptions and calculations to support your projections):
See Attached
Projected economic development benefit (Please provide evidence of job creation, job retention, market
transformation or other economic development benefits associated with this project):
MN OEM Reallocation Request
Page 2
Certification
The above information is true and correct to the best knowledge of the undersigned
Name: Kirk McDonald Title: City Manager
Phone: 17631531 -5112 Email: kmcdonald@ cl.new - hoye.mn.us
Address: 4401 XV X -10n Avanue North New Hoe MN 55428
Signature! '�`� ��( zs
Please send original copy to:
Minnesota Management & Budget
Attn: Jacob Brown— Treasury Division
658 Cedar Street, 4` Floor
Saint Paul, MN 55155
For questions, please call (651) 201 -8079 or email lacob.brown@state.mmus
y Date:
MNQECB Reallocation Request
Page 4