03-30-2020 Council Packet - Laserfiche WebLink

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AGENDA ITEM Item No.: Date: March 30, 2020 Item Description: Refunding Outstanding 2010A Bonds Presenter: Ron Olson Agenda Consent Agenda Finance Director Section: 1. Purpose. The purpose of this agenda item is to authorize the refunding of a portion of the City's outstanding debt. 2. Background. The City currently has three outstanding bond issues totaling $5,990,000. They are as follows: Bond Issue Amount Outstanding Interest Rate Final Payment Series 2010A $1,425,000 3.00% - 3.75% 2/1/2026 Series 2014A $3,045,000 2.00% - 3.00% 2/1/2029 Series 2016A $1,520,000 2.00% 2/1/2023 Staff has been working with our financial consultants, Ehlers Financial Advisors, to explore the possibility of refunding bonds due to falling interest rates. The 2016A bonds are non-refundable and the 2014A bonds are not refundable until 2023. Because of this, the bonds being considered for refunding are only the 2010A bonds. These bonds were used for the reconstruction of Orono Orchard Road and Willow Drive. The Willow Drive portion of the bonds are being paid by MSA funds. In the past, when outstanding bonds have been refunded, the City has issued bonds to provide the funding. Based on the attached information, issuing refunding bonds would result in a net savings of around $60,000 over the remaining life of the bonds. If the Council wishes to pursue this option, staff would prepare a resolution authorizing the issuance of General Obligation Refunding Bonds for approval at the next council meeting. Another option would be for the City to use funds on hand to pay for the refunding. By using existing funds, the total savings would be approximately $160,000. The City currently has an investment portfolio of $12,080,000. An additional $1,000,000 is expected to be received from our MSA funds at the State of Minnesota for the OCB road project. This option frees up $130,000 of tax levy annually for the years 2021 through 2025. The MSA portion of the bonds would require an inter -fund loan that would be repaid as the MSA funds are received. This is the option that Staff is recommending. The City does have the option of refunding only the City portion of the bonds. This would result in an estimated net savings of $106,000 over the life of the bonds. It has the advantage of only requiring the City to pay $640,000 in up front expenditures which has less of an impact on cash flow. The total interest savings would be less would be Prepared By: %J(9 Reviewed By: _1V Approved By: -TV