2009-06-24 CC Packet - Laserfiche WebLink

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City of Centerville, Minnesota $3,715,000 General Obligation Improvement Bonds, Series 2009A Financin~ Overview: The Bonds will be issued pursuant to Minnesota Statutes, Chapter 429 to finance the 2009 Street Improvements and the Peltier Lake Drive Street and Utility Improvements. The Bonds will be structured with a I5-year term. The City will utilize two main revenue sources for the repayment of the bonds - special assessments on benefitting property owners (approximately 33% of the principal amount of the bonds will be assessed) and a debt service tax levy. Northland Securities is recommending that the City solicit bids for a tax-exempt and taxable bond offering. The financing structure that bond underwriters will bid on will be the same for both options. An overview of the two types of bond issues follows: Traditional tax-exempt bonds - Traditionally, most municipal bond issues have been done tax-exempt. A tax-exempt bond may be issued for any governmental purpose that provides a public benefit. In Minnesota interest payments on a tax-exempt bond are not subject to federal or state income tax. Build America Bonds (BABs) - The American Recovery and Reinvestment Act of 2009 created BABs as a means of lowering the cost of state and local government debt. A municipality may issue a BAB for any governmental purpose that could be issued tax-exempt. BABs are issued taxable. The benefit of BABs is that the issuer will receive a direct federal reimbursement for 35% of the interest expense on a bond issue. Under current law, the ability for a municipality to issue BABs ends on December 31, 2010. Based upon the current bond market, the issuance of BABs may result in a debt service savings over the term of the bonds when compared to tax-exempt bonds. Page 2 NORTHLAND'SECU RITlES 33