HomeMy WebLinkAboutA008 - Council Action Form dated March 6, 2018 ITEM # 27
DATE: 03-06-18
COUNCIL ACTION FORM
SUBJECT: PUBLIC HEARING AND NOTICE OF INTENT TO ISSUE $8,525,000
ESSENTIAL AND ESSENTIAL CORPORATE PURPOSE GENERAL
OBLIGATION BONDS, AND ASSOCIATED TAX LEVY FOR DEBT
SERVICE
BACKGROUND:
The FY 2018/19 budget includes a number of General Obligation (G.O.) Bond-funded
capital improvements. A public hearing is required to authorize issuance of bonds and
the levy of property taxes for debt to be issued. The dollar amounts and corresponding
property tax levy for the planned G.O. bond issue are included as part of the FY
2018/19 budget. City Council set March 6, 2018 as the date of the public hearing for
issuance of the bonds.
The G.O. Bonds and debt service levy for the FY 2018/19 budget are based on projects
listed in the table below. Council authorization will be required at a later date to
authorize the sale of the bonds. Bonds are expected to be issued shortly after the start
of the new fiscal year.
Per the Iowa Code, the City may issue bonds both for "essential corporate purposes"
and "general corporate purposes". The types of projects that can be funded for "general"
or "essential" purposes are defined in the Iowa Code. Bonds issued for general
corporate purposes are limited to an annual issuance of $700,000 and are subject to a
reverse referendum. In past years, the City has rarely issued bonds for general
corporate purposes, the last instance was in 2011 for improvements to City Hall. With
the shifting of certain capital projects for City facilities away from Local Option Tax
funding to General Obligation bonds, issuance of bonds for general corporate purposes
will become more common. The current CIP includes bonds for general purposes in FY
20/21 and FY 22/23.
For the upcoming issue, the $137,000 Fire Station #1 Concrete Replacement project
falls into the general corporate purpose category. Council will actually hold two
hearings, one for the bonds to fund essential corporate purpose projects and one for
general corporate purpose projects. Once hearings are held, bonds are sold together in
a single offering.
Please note that in addition to the amount to fund the $7,987,000 in G.O. Bond-funded
capital projects, the not-to-exceed amount for the issuance includes a $538,000
($13,000 for general purposes and $525,000 for essential purposes) additional
authorization to allow for issuance costs and the option to sell our bonds at a premium
over the face value of bonds. This will allow the City to accept an optimum bid with face
value of bonds greater than the $7,987,000 needed to accomplish our projects. In any
case, debt will not be issued in an amount where debt service exceeds the property tax
levy included in the proposed budget. The proposed bond issue complies with the
Council approved debt policy.
The Capital Improvements Plan's 2018/19 G.O. Bond issue includes the following:
City-Wide Radio System $1,000,000
Grand Avenue Extension 3,700,000
Fire Station #1 Concrete Replacement Gen. Corp Purp. 137,000
Collector Street Pavement Improvements 1,750,000
Asphalt Street Improvements 1,400,000
Subtotal Tax Supported Bonds $ 7,987,000
Issuance Cost and Allowance for Premium 538,000
Grand Total —2018/19 G.O. Issue $ 8,525,000
ALTERNATIVES:
1. Hold public hearings to authorize the issuance of Essential Corporate Purpose
General Obligation Bonds in an amount not to exceed $8,375,000 and General
Corporate Purpose General Obligation bonds in an amount not to exceed $150,000.
After the public hearing and approval of the bond issuance totaling $8,525,000, a
property tax pre-levy resolution to pay principal and interest on the bonds is
required.
2. Reject the action to approve the bond issue and levy of taxes. Rejection of the bond
issue and levy of taxes will prevent the City from completing the bond-funded
projects reflected in the CIP.
MANAGER'S RECOMMENDED ACTION:
Prior to the issuance of debt, state law requires that a public hearing be held and that a
pre-levy resolution be adopted for bonds not yet issued to be repaid from the property
tax levy. This is a required step in order to accomplish the Council's approved capital
improvements for the upcoming fiscal year.
Therefore, it is the recommendation of the City Manager that the City Council adopt
Alternative No. 1, thereby after the public hearing, the council authorize the issuance of
Essential and General Corporate Purpose General Obligation Bonds and in an amount
not to exceed $8,525,000.
2