ADMINISTRATION - Joe Huss, Finance Director
Title
CERTIFYING THE CITY OF BLAINE’S SHARE OF INDEBTEDNESS RELATED TO THE CITY OF SPRING LAKE PARK’S $1,090,000
GENERAL OBLIGATION EQUIPMENT CERTIFICATES OF INDEBTEDNESS, SERIES 2017A, THE PROCEEDS OF WHICH TO BE USED BY THE SPRING LAKE PARK FIRE DEPARTMENT, INC.
Background
On February 2, 2017 the City Council approved the third supplement to the SBM Joint Powers Agreement which authorized the City of Spring Lake Park to issue General Obligation Equipment Certificates of Indebtedness, Series 2017A pursuant to Minnesota Statutes, Section 412.301 for the purchase of a “Quint” Ladder Truck as well as a Grass unit and a Staff vehicle.
On Tuesday, February 21, 2017, bids were received and Spring Lake Park’s fiscal advisor, Northland Securities, provided a recommendation to accept the bid from United Bankers Bank for the purchase of the certificates. The amount to be issued is $1,090,000. The certificates are payable over a six-year term at a true interest cost (TIC) of 1.67%. Pursuant to the JPA and the formula agreed to therein, Blaine is responsible for about 75% of debt. The certificates are rated AA by Standard and Poor’s.
As is the case with any debt issued by Blaine, the City pledges its full faith and credit and it taxing authority for repayment of the debt. In this case, because the certificates were issued through the City of Spring Lake Park, the following resolution contains both the City’s full faith and credit pledge and its pledge to repay the City of Spring Lake Park for Blaine’s share of the debt.
Recommendation
By motion, approve the Resolution.
Body
BE IT RESOLVED By the City Council (the “Council”) of the City of Blaine, Minnesota (the “City”) as follows:
Section 1. Sale of Certificates.
1.01. Background.
(a) The City and the cities of Spring Lake Park and Mounds View (collectively, the “Cities”) jointly contract for fire protection and other public safety services pursuant to a Joint Powers Agreement For the Provision of Fire Protection Services, dated December 11, 1990 (the “Joint Powers Agreement”). The Joint Powers Agreement has been used in the past to finance the acquisition of various items of equipment for use by the Fire Company, and has been supplemented for a third time (the “Third Supplement”) to authorize the City of Spring Lake Park to issue general obligation equipment certificates of indebtedness to finance the following equipment (the “Equipment”), for use by the Spring Lake Park Fire Department, Inc., which is a Minnesota nonprofit corporation providing fire protection and other public safety services to the Cities: a 75-foot ladder truck equipped with an aerial ladder, fire pump, booster tank, hoses, ground ladders, a “Chief’s” passenger vehicle, and a truck for grass fires.
(b) Pursuant to Resolution No. 17-020, adopted by this Council on February 2, 2017, the City approved the Third Supplement. The City has been informed by the City of Spring Lake Park that on February 21, 2017 the City of Spring Lake Park sold its General Obligation Equipment Certificates of Indebtedness, Series 2017A, in the original aggregate principal amount of $1,090,000 (the “Certificates”), pursuant to Minnesota Statutes, Section 412.301 and Chapter 475, as amended (collectively, the “Act”). The purpose of this Resolution is to memorialize the sale of the Certificates and certify the City’s obligation to pay a portion of the debt service on the Certificates, pursuant to the payment formula found on Exhibit A to the Joint Powers Agreement (the “Formula”), as such Formula may change from time to time up to the final maturity date of the Certificates on February 1, 2023.
1.02. Interest Rates on the Certificates. As described on Exhibit A attached hereto, the Certificates were sold at a price of $1,144,323.15 (par amount of $1,090,000.00, plus original issue premium of $58,955.65, less underwriter’s discount of $4,632.50), for Certificates bearing interest as follows:
|
Year |
Interest Rate |
|
|
|
|
2019 |
3.000% |
|
2020 |
3.000 |
|
2021 |
3.000 |
|
2022 |
3.000 |
|
2023 |
3.000 |
1.03. Terms and Principal Amounts of the Certificates. The City of Spring Lake Park will forthwith issue and sell the Certificates pursuant to the Act in the total aggregate principal amount of $1,090,000, originally dated March 21, 2017, in the denomination of $5,000 each or any integral multiple thereof, numbered No. R-1, upward, bearing interest as above set forth, and maturing serially on February 1 in the years and amounts as follows:
|
YearAmount |
|
|
|
|
|
2019 |
$205,000 |
|
2020 |
210,000 |
|
2021 |
220,000 |
|
2022 |
225,000 |
|
2023 |
230,000 |
1.04. Optional Redemption. The Certificates are not subject to optional redemption or prepayment prior to maturity.
Section 2. Form of Blaine Certificate; Security.
2.01. Execution of the Blaine Certificate. Under the precepts of the Joint Powers Agreement and Third Supplement thereto, and to evidence its obligation to pay its proportionate share of debt service on the Certificates, this Council finds it is necessary and expedient to the sound financial management of the City to issue its own General Obligation Equipment Certificate of Indebtedness, Series 2017, pursuant to the Act in a principal amount anticipated not to exceed $850,000 (the “Blaine Certificate”). This Council understands and acknowledges that debt service on the Blaine Certificate will always be payable by the City in accordance with the final percentages fixed from time to time by the Formula. The Blaine Certificates will be in substantially the form as attached hereto as Exhibit B. Additionally, the City is responsible to pay to the City of Spring Lake Park the amount of $22,330.21 on February 1, 2018, which is an interest payment due on the Certificates on said date.
2.02. Security. The City of Spring Lake Park has pledged its full faith and credit and taxing powers to pay debt service on the Certificates. To reimburse the City of Spring Lake Park for the City’s portion of principal and interest on the Certificates, as evidenced through the Blaine Certificate, the City hereby irrevocably pledges the full faith and credit and taxing powers of the City, and the City shall levy ad valorem taxes on all taxable property, which taxes may be levied without limitation as to rate or amount. The City will pay principal and interest on the Blaine Certificate from the general fund of the City, and the general fund may be reimbursed for those advances out of the proceeds of the taxes levied hereto, when collected, and the proceeds of such ad valorem taxes levied are pledged to the payment of the Blaine Certificate. Taxes levied to pay debt service on the Blaine Certificate are in the years and amounts as provided for on Exhibit C hereto.
2.03. Changes in Formula. The City understands and acknowledges that, as of the date the Certificates were sold, the City’s share of debt service on the Certificates pursuant to the Formula is 75.526%. The City’s contribution to the debt service on the Certificates, as shown on Exhibit A hereto, is $966,067.23. The City further understands and acknowledges that the precise contribution amounts of the City under the Formula may change over time, and the City may be obligated to pay an additional amount, or a reduced amount, of debt service on the Blaine Certificate if the Formula changes accordingly. Any additional amount of debt service may be provided through the levy of ad valorem taxes, or through payments from the City’s general fund. Any changes in debt service payments under the Blaine Certificate that differ from the amount provided for in Exhibit A, or through the tax levy chart in Exhibit C, may be made administratively by the City, without further resolution of this Council.
2.04. Certificate as to Registration. The City Manager is directed to file a certified copy of this Resolution with the Anoka County Division of Property Records and Taxation and obtain the certificate required by Section 475.63 of the Act.
The foregoing resolution was passed and adopted by the City Council of the City of Blaine, Minnesota, this 2nd day of March, 2017.