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<br /> [I] JURAN & MOODY, INC,
<br /> Investment Securities Since 1939
<br />. Minnesota Mutual Life Center
<br /> 400 North Robert Street - Suite 800
<br /> Saint Paul, MilW8sota 55101-2091
<br /> May 27,1992 1elephvne 6121224-1500
<br /> Toll Free 1-800.950-4666
<br /> Telecopier 6~2/224-5124
<br /> Terry Post
<br /> Accountant
<br /> City Hall
<br /> Arden Hills, Mi"l 55112
<br /> RE: CITY HALUCOM,MUNITY CENTER FINANCING ALTERNA'DVES
<br /> CITY OF Al,-;);2N HIllS, MINt-.'ESOTA
<br /> Dear Terry:
<br /> As per your request, the following is a detailed explanation of financing municipal building
<br /> prnjects via general obligation bonds and lease-purchase agreements, I hope this provides you
<br /> with the infonnation desired.
<br /> Traditionally, municipal building projects have been financed through the issuance of
<br /> general o\1ligatjo)TI ix:lmis. While this method can provide cost effective finan~iJlg, there are several
<br /> rules that general obligation bonds must adhere to. First, a voter referendum is required with
<br />. bonds hdng issued only if the majority voting is in favor ofthe project Second, if the referendum
<br /> fails, 2.:1other election for a "like" project cannot be held for six months. Third, if the second
<br /> ,'lrct;op is ri'je.:ott'.d, one year from thai date must elapse befo)'"it may be attempted again. Founh,
<br /> munici;a:il:cS must obey the net debt test which mean:; that Arden Hills CimnOt have general
<br /> obligatk~{l D-,..tr,ds OU~~Ll1Jlding. payable solely-fronlpro}Y:rty t~xes, thfiJ e~~xc;cds 2o/r. .)f thc InHTkf;.t
<br /> value of the community. With a 1992 markct value of $466,100,000, the City of ,^erd:,;;] I-Iil1s
<br /> could not h&>l gCl!C;.al GbJigation oumanding in an amount which exceeds $9,:.22.,000, The City
<br /> i:; well within this constraint. Fifth, the C'ity of Arden Hills must comply with the per capita test.
<br /> Thls test ,tates that in :i:1y given year, a municipality cannot exceed a levy af $319.1-4 (applic2bk
<br /> for :9(2) times the last census count, The 1990 census shows a population of 'j,;J2 tl;::~$
<br /> $31 Y.14 el:jl]als $2,908,004, Sin.:e the $319.14 figure changes annually, the cwrent Vti cap;;"
<br /> !~W 5l'tLC:S that AJ'den Hills could not have a total levy for ail purposes in excess of $2,90S,0''}1.
<br /> Tk DIY of Arde,-, Hills compJ.ies will" this mandate as well.
<br /> AnC'thcr method of financing municipal buildings is tl1.J'Ough llluni.:ipal lease'.purchasc
<br /> agreements. Munic;ipal1.<::ases avoid the stringent requirements established for general obligation
<br /> bonds, F0. to"-"J:iple, 1bmesota Sii!l~tes does not view municipal leases as debt since they may Ut
<br /> rcrrr::il;;;cd '";11 ;11 r../t!1val basis thi(i.!gh 11. non (ipproprid~io)n r.lausc. Very SiIl1ply, a Cjty Council
<br /> c''.dd dt"jd:c ~IOlt(; appropnatc r.lonks to satisfy the lease payment for the following year ther~~y
<br /> severing il-,;:. City's repayment obligatio1l. This non appropriation clause therefore elimi!Jlcc"s th~
<br /> voter referendum and all other general (',blig,tjnn requirements listed above with the eXl'~;lljon of
<br /> ih? per capita test. Munisip:tileases arc typically structured as financing leases "_' t;I",' :.l r;::~
<br /> maturitv the mu"'!kil'J.litv can purGhase thi fac;;\t.. from the lessor for one dDlia;-, I.-e;::",~ :lrt
<br /> extremely t1exible <Iud can accommcxlace "II} lena, ~paYl1lent schedule and caj] p10\'i:'~l.m u,;,,,"~.
<br />. Recently, the Cities of Baypo:t ;;.r.d Appk Valley each proceeded with publ;c worb
<br /> buildings and detennint"d which fin?ndng method was most appropriate. The following pr,j';j.-J,^,;
<br /> the basis for their decisions.
<br /> Saint Paul, MN - MinneapOlis. MN - Houston, TX - Clearwater, FL
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