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<br />AUTHORITY AND PURPOSE <br /> <br />The Bonds are being issued pursuant to Minnesota Statutes, Chapters 475 and 429. Proceeds <br />of the Bonds and City cash will be used to refund in advance of maturity the 2002 through 2011 <br />maturities of the City's $3,495,000 General Obligation Improvement Bonds, Series 1994A (the <br />"Series 1994A Bonds"), dated June 1, 1994. The refunding is being conducted to utilize <br />$1,150,000 of accumulated prepayments of assessements currently held in the debt service <br />fund for the Series 1994A Bonds. The. composition of the Issue is as follows: <br /> <br />Deposit to Escrow Fund <br />Cost of Issuance <br />Underwriter's Discount <br /> <br />Subtotal <br /> <br />$1,695,864 <br />25,131 <br />5.175 <br /> <br />$1,726,170 <br /> <br />Less: <br /> <br />Accrued Interest <br />Issuer Cash Contribution <br /> <br />(1,170) <br />(1.150.000) <br />$ 575.000 <br /> <br />Total Bond Issue <br /> <br />This type of refunding is known as a "crossover" refunding, in which the proceeds of the Bonds <br />and the City's cash contribution of $1,150,000 are placed in an escrow account with a major <br />bank and invested in government securities. These securities and their earnings are structured <br />in such a way as to pay the interest on the Bonds until the call date of the Series 1994A Bonds <br />on February 1, 2001. On the call date, the securities in the escrow account will mature and will <br />cross over to prepay the refunded maturities of the Series 1994A Bonds. The City will continue <br />to pay the original debt service on the Series 1994A Bonds until the call date. Beginning with <br />the August 1, 2001 interest payment, the City will cross over and begin to make the reduced <br />debt service payments on this Issue. <br /> <br />In addition, the City is also in the process of using excess cash to defease its $1,550,000 <br />General Obligation Improvement Bonds, Series 1994E. <br /> <br />SECURITY AND FINANCING <br /> <br />In addition to its general obligation pledge, the City also pledges special assessments pledged <br />to payment of the Series 1994A Bonds. The escrow account, established with the proceeds of <br />the Issue and the accumulated prepayments currently on deposit in the debt service fund for the <br />Series 1994A Bonds, will pay the debt service on the Bonds through February 1, 2001. <br />Thereafter the Bond, will be paid from special assessments originally pledged to the Series <br />1994A Bonds. <br /> <br />FUTURE FINANCING <br /> <br />The City has no further borrowing authorized or anticipated for at least the next 90 days,except <br />for placement of $150,000 in equipment certificates with a local bank. <br /> <br />-4- <br />