Agenda Packet Cc - regular meeting 11/27/1989

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JOINT MEETING OF COUNCIL AND PLANNING COMMISSION HELD NOVEMBER 8, 1989 million we would have enough cash on hand to do that. A second way to do that was to go for general obligation bonds, which would require a referendum and the third way which is addressed in the memo is the lease purchase and a variation of that which is the installment purchase contract. The advantages to those are that if you have the cash that you can make money during 10, 15 or 20 years which you have bonded, you can actually make about a percent or a percent and half on your money in a decreasing amount, if you are bonding at 6 1/2, 7 or 7 1/2% and you are investing at 8 or 8 1/2% so you actually make some money. This would also give you some flexibility with that money, if you have some up and down years you still have money available to you. Edward Brown asked if the building cost $2 1/2 million cind the City had $2 1/2 million in a building fund, is there any reason not to take the $2 1/2 million to build the building and not pay any interest. Bernhardson indicated that if you could invest the money at a greater rate than what you are borrowing it does two things, you make money over the life of the bond and secondl it does give you flexibility to borrow from that and pay it bac if you have an economic downturn in two or three years. Mayor Grabek stated this is a philosophical question. If you've got only $2 1/2 or 3 million in cash you need to keep a buffer. Nettles asked if the amount in our reserves affected the city's bond rating. Carolyn Durde stated that Moody's basic philosophy is "more is better and it should be more than last year". Stating it is very difficult to pin them down as to philosophy as to what the fund balance should be. They do not like to see a fund balance lower than the previous year. They look at everything from a planning standpoint. Nettles said assuming that we are going to bond part and pay off part out of the reserves, what would be your suggestion be as to how much of each, would you say 50 - 50 or what. Durde stated that we should take a look at other things that the City will be doing, more of an analysis would need to be done to see what you may need money for. In the overall scheme of things in Minnesota your borrowing ability is relatively flexible, but there is a limited number of things that you can borrow money for. A new city facilitie possibility was brought to Moody's attention prior to the city't> AA-1 rating assignment, so this would not be a surpirse, they are aware that this is coming up. Ed Cohen stated assuming that a site has been selected, is this site paid for? Grabek stated that the only site paid for were the Crystal Bay site and the Orono sewer plant. Cohen asked if a study had been done as to what the City would receive for these , sites when sold. Bernhardson stated there is some off set for selling the Crystal Bay site and part of the sewer plant site. Kelley stated thac leasing makes more sense, but it is hard to tell without more economic information. One of the attractions