5.2. A & B SR 08-12-2002 - Laserfiche WebLink

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The Indenture: The Authority will issue the Bonds pursuant to the Indenture, and the Indenture sets forth the rights and obligations of the Authority, the Trustee and the Bondholders. A Trustee is the agent of the Bondholders with fiduciary responsibility to hold funds on behalf of the Bondholders and act in the Bondholders interest as described in the Indenture. Financing these projects requires a bond issue in the amount of $1,695,000. The proposed Sources and Uses of Funds required to financing the Project are found in Exhibit 1.00. The actual sources and uses will change once the interest rates have been set on August 12th. Two footnotes should be highlighted to the sources and uses. First, the City is required to maintain a debt service reserve fund ("Reserve Fund") equal to approximately 125% of average annual debt service of the 1997 Bonds and Series 2002B Bonds. The Reserve Fund is intended to give bondholders a source of income in case the City does not appropriate sufficient funds for debt service. The Reserve Fund shall secure the payment of the 1997 Bonds, the Series 2002B Bonds, and all Additional Bonds, at the Reserve Requirement during any period of time that the Bonds are outstanding under the Indenture. The current Reserve Requirement for the 1997 Bonds is $229,500. Upon closing of the Series 2002B Bonds, bond proceeds in the estimated amount of $90,723 are to be deposited to the Reserve Fund to satisfy the Reserve Requirement. If the construction of the addition to City Hall were financed on a stand alone basis, the Reserve Fund would require approximately $136,000 in bond proceeds. Therefore, the Series 2002B Bonds are issuing $46,000 less in principal than if the 1997 Bonds were not included in the financing equation. Second, the City has agreed to pay for one year of capitalized interest for the Series 2002B Bonds because the construction schedule dictates that the City Hall expansion occur one year earlier than the Elk River Municipal Utilities would otherwise require. One year of capitalized interest is equal to approximately $70,500. Therefore, the City will actually be required to pay $24,500 in cash for the costs of the Project which is equal to the difference between $70,500 of capitalized interest and $46,000 of benefit that the City brings from the Reserve Fund from the 1997 Bonds. In 2011 the Reserve Fund requirement will decrease when the 1997 Bonds are paid off and the Series 2002B Bonds can utilize the remaining balance in the Reserve Fund to pay for the final payment in 2023. STRUCTURE AND REPAYMENT The Series 2002B Bonds are valid and binding special, limited revenue obligations of the Authority payable solely from a pledge of lease payments to be received required to be made to the Authority by the City pursuant to the Lease and are issued on a parity with the Authority's outstanding City Hall and Law Enforcement Facility Revenue Refunding Bonds, Series 1997, dated December 1, 1997 (the "1997 Bonds"). The Series 2002B Bonds do not constitute a general obligation of the Authority or the City and are not a charge against the general credit of the Authority and shall not constitute a charge, lien or encumbrance legal or equitable, upon any property of the Authority, except the interest of the Authority in the Lease. The City's obligation to make lease payments under the Lease is subject to its annual right to terminate the Lease at the end of any fiscal year by failure to appropriate the funds. Page 2