The Park Rapids City Council took steps Tuesday to issue General Obligation Improvement Bonds Series 2019A, totaling approximately $1,150,000.
Jessica Green with Northland Securities, Inc. (NSI) provided a summary of the bond issue, which is intended to finance this year's U.S. Hwy. 71 frontage road and 11th St. improvement project.
According to the summary, the bond sale is to be a negotiated sale with NSI. As security, the city is to pledge special assessments from properties benefited by the improvements and debt service tax levy to repay the bonds. The tax-exempt, bank-qualified bonds will mature annually each Dec. 15 from 2020 to 2039, with interest payable each June 15 and Dec. 15 and a prepayment option to begin Dec. 15, 2027.
Based on current market rates, Green said, the estimated "true interest cost" (TIC) for the bonds is 2.99 percent, pending a rating by Standard & Poor's. She noted that S&P currently rates the city's general obligation debt as "AA-."
The pricing date for the bond sale is tentatively set for July 23, Green noted. "I would come to council that evening with the results of the sale for your consideration" and full ratification. If that date holds, proceeds would be available Aug. 15.
Green presented an optional "parameters resolution," also known as a "trigger resolution," agreeing to sell and issue the bonds at an earlier date with an aggregate principal not to exceed $1.2 million and at a TIC less than 4 percent. She described these figures as a "cushion" to accommodate market movement and S&P's rating.
"This resolution is not entirely necessary," said Green. "We include it to allow the city to gain some flexibility in the timing of the bond sale," for example, if a lot of Minnesota bond issues seem to be happening on July 23. "This ... allows the mayor and the city administrator to essentially execute the bond."
City Treasurer Angela Brumbaugh noted that the city has already paid for its share of the street improvement project "because the State of Minnesota wanted payment, so the general fund is taking care of this until we get our funds."
Responding to a concern voiced by council member Tom Conway about the difference between 2.99 and 4 percent, Brumbaugh said, "The bottom line is, if it goes to 4 percent, you really don't have a lot of choice, you guys. We need this money."
Green added that a resolution already on file allows the city to use tax-exempt proceeds to reimburse itself from costs already incurred for the project.
Conway moved to approve the resolution as presented. The motion passed unopposed.