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

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The City and the Elk River Municipal Utilities will enter into an agreement in which the Utilities will agree to make payments from revenues of the Utilities to the City in an amount sufficient to pay principal and interest when due on the Bonds. In addition to this revenue source, the City may levy ad valorem taxes, if necessary to provide revenues sufficient to make lease payments. The levy for this purpose is currently not subject to any statutory limit as to rate or amount. The 2002B Bonds are subject to the City's general obligation debt limit. The City's current debt limit is 2% of market value or approximately $20,000,000 and all debt subject to the limit, including this issue, is approximately $9,700,000. In the event the annual appropriation is not made, the Trustee is entitled to repossession and the right to re-lease the buildings, who on behalf of the owners of the Bonds will attempt to sell or sublease and operate the Project. There is no assurance that the Trustee will be able to re-lease the interest in the building(s) and land, or to do so for amounts that would pay all interest and principal on the Bonds. If the City were to non-appropriate, other consequences would likely be realized including a significant drop in the City's bond rating. The Bonds would be sold August 12, 2002 and be dated September 1, 2002. The first interest payment on the Bonds will be February 1, 2003, and semiannually thereafter. Principal on the Bonds will be due on in the years 2004 through 2023. The projected debt service and flow of funds can be found in Exhibit 1. OTHER CONSIDERATIONS Following is a summary of key factors in the finance plan: · We recommend the following call feature: Bonds maturing February 1, 2014 and thereafter will be subject to prepayment at the discretion of the EDA on February 1, 2013.. Moody's Investors Service will be asked to rate this issue. The EDA currently has no outstanding rating on any of its outstanding debt. The City currently has an "A3" rating on its outstanding general obligation bonds. We expect that these lease purchase revenue bonds will be rated at a "Baal" level from Moody's if the City's underlying rating does not change. The staff and consultants did hold discussions with the bond insurance companies about the potential for bond insurance on the Series 2002 Bonds, but insurance was denied because the 1997 Bonds were not insured. We anticipate that the EDA will not issue more than a total of $10,000,000 in tax-exempt debt during this calendar year. This will allow the Bonds to be designated as bank qualified. Bank qualified status broadens the market and achieves lower interest rates. Any City debt, however, for 2002 would be non-bank qualified. Page 3