5.8. SR 06-19-1995 - Laserfiche WebLink

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**ITEM 5.8.** MEMORANDUM of _i. River TO: Mayor & City Council FROM: Lori Johnson, Assistant City Administrator DATE: June 19, 1995 SUBJECT: Resolution Calling for the Early Redemption of $1,975,000 General Obligation Improvement Bond, Series 1986A The 1986A General Obligation Improvement Bond became subject to call on February 1, 1995. Because of uncertainties in the action that the Legislature was proposing at that time, the bond issue was not called on February 1. Since none of the proposed action was approved by the Legislature, it is now appropriate to prepay a portion of the principal outstanding on this issue. There is currently principal outstanding in the amount of $900,000. Of that, $135,000 is due in 1996, and $765,000 is due in years 1997 to 2003. The bond fund currently has a cash balance of $867,000. Therefore, not all of the • issue can be prepaid. The attached resolution calls for the prepayment of bonds outstanding in 1997-2003. Prepayment will result in an interest savings of $223,900. This bond issue was used to fund improvements in Deerfield III, Royal Oaks Ridge, Ridgewood, Simonet and 6th, and School Street. The Developer's Agreements for Deerfield III and Royal Oaks Ridge required that all of the assessments be paid within three years. This meant substantial prepayments resulting in a sizable cash balance in this bond fund. Unfortunately, the bond resolution did not allow for early redemption until February, 1995. The net interest rate on the bonds is 7.449 which is higher than the rate of return on investments in the 1990's. If the bond was not prepaid at this time, tax levies would be required to pay off this bond issue. Recommendation The Council is asked to approve the attached resolution calling for the early redemption of the 1986A General Obligation Improvement Bond. 13065 Orono Parkway • P.O. Box 490 • Elk River, MN 55330 • (612) 441-7420 • Fax: (612) 441-7425