07-26-1999 Council Packet - Laserfiche WebLink

Home Browse Search

CITY OF ORONO, MINNESOTA Notes to Financial Statements (continued) December 31,1998 NOTE 5 - LONG-TF^M DEBT (CONTINUED) D. Descriptions and Restrictions of Long-Term Debt 1. General Long-Term Debt ° General Obligation Bonds -* These bonds were issued to finance various improvements and will be repaid from taxes and special assessments. ° Public Facilities Bonds ofl991 - These bonds were issued by the Housing and Redevelopment Authority of Orono for the purpose of financing the construction of facilities for a City meeting hall, City offices, police offices, detention and processing, public works office space, storage, maintenance, and repair of machinery and equipment, and a cold storage building. Pursuant to Minnesota Statutes § 469.103a, lease-purchase contracts between the Authority and the City and a Trust Indenture between the Authority and American National Bank and Trust Company have been established. The bonds are special obligations of the City as issuer and owner of the land and buildings. The City has pledged rental payments in amounts equal to the debt service requirements and plans to annually appropriate City funds available for this purpose. As required by bond covenant, a reserve account has been established with a trustee which is to be used to pay principal and interest on the bonds in the event that other available resources are inadequate to do so. In addition, Minnesota Statutes § 475.50, Subd. 5(e) allows cities to make a special levy (outside of levy limits) to pay principal and interest on bonds of another political subdivision. The Minnesota Department of Revenue has determined that because a Housing and Redevelopment Authority is a political subdivision of the state, a levy to pay principal and interest on the bonds would be outside the City ’s levy limits. ° Public Facilities Revenue Refunding Bonds of 1998 - In April 1998, the City issued $2,400,000 of Public Facilities Revenue Refunding Bonds of 1998 to advance refund $2,335,000 of the City ’s Public Facilities Revenue Bonds of 1991. Pending the call of the bonds to be refunded in 2001, the proceeds were deposited in an escrow account. Principal and interest on the 1991 bonds will continue to be paid by the City until the call date. Interest payments on the 1998 issue will be paid from proceeds of the escrow account until the call date, after which time interest and principal will be paid by the City. This advance refunding was undertaken to reduce total debt service payments by $121,265. Although the transaction did not result in an accounting gain or loss, it did result in an economic gain (difference between present value of the debt service payments of the refunded and refunding bonds) of $89,917. ° Vacation and Severance Benefits Payable - This liability represents vested benefits earned by employees other than Proprietary Fund employees through the end of the year (other than the current portion paid within 60 days), which will be paid or used in future periods. The liability for Proprietary Fund employees is included in the accrued liabilities of those funds. -40-