05. Resolution 5559 - Authorizing Refinancing of General Obligation BondsCharles A. Harball Office of City Attorney
City Attorney 201 First Avenue East
P.O. Box 1997
Kalispell, MT 59903-1997
TO: Mayor Tammi Fisher
and Kalispell City Council
FROM: Charles Harball, Interim City Manager
Tel 406.758.7709
Fax 406.758.7771
charball@kalispell.com
SUBJECT: Resolution No. 5559 — A Resolution Authorizing the
Refinancing of the City's General Obligation Bonds
MEETING DATE: May 7, 2012 — Regular Council Meeting
BACKGROUND: The City of Kalispell previously issued debt for the construction of the
Woodland Park pool facility as well as for the north end fire station. Currently the
market rate for debt is appreciably lower than the rate the City is paying on its existing
bonds. Resolution No. 5559 authorizes a committee consisting of the mayor, the city
manager and the finance director, with the advice of bond counsel, to investigate and
negotiate the refinancing of the existing bonds. The parameters set by the resolution
ensure that any refinancing shall result in a significant reduction to the City in its cost of
debt and will result in a tax savings to the City tax payer.
RECOMMENDATION: City Council should give consideration to and pass Resolution
No. 5559.
FISCAL IMPACTS: This resolution authorizes the investigation and negotiation for the
refinancing of existing debt with parameters clearly delineated. If the parameters are
met the Council will then be presented with a final resolution to approve the refinanced
debt. At that time it will be possible to itemize the tax savings to the City tax payers.
Respectfully submitted,
C
Charles Harball, Interim City Manager
WHEREAS, the City of Kalispell, Montana (the "City") previously issued its (i) General
Obligation Bonds, Series 2002 (the "Series 2002 Bonds"), in the original aggregate principal
amount of $3,675,000 and (ii) General Obligation Bonds, Series 2005 (the "Series 2005 Bonds"
and together with the Series 2002 Bonds, the "Prior Bonds"), in the original aggregate principal
amount of $3,000,000; and
WHEREAS, the proceeds of the Series 2002 Bonds were used by the City to (i) finance
the costs of constructing a recreational facility including a swimming pool, bathhouse,
concessions, skate park and related site development and improvements, and (ii) pay costs of
issuance of the Series 2002 Bonds; and
WHEREAS, the proceeds of the Series 2005 Bonds were used by the City to (i) finance
the design, construction and equipping of the North Fire Sub -Station, and (ii) pay costs of
issuance of the 2005 Bonds; and
WHEREAS, the July 1, 2013 through July 1, 2022 maturities of the Series 2002 Bonds
are callable on or after July 1, 2012 for redemption without a premium and the July 1, 2013
through July 1, 2020 maturities of the Series 2005 Bonds are callable for redemption without a
premium on January 1, 2013; and
WHEREAS, City finance staff has determined that it is advantageous to proceed with a
refinancing of the Prior Bonds in order to provide for future interest cost savings and reduce the
annual debt service associated with the Prior Bonds.
RESOLVEDNOW THEREFORE BE IT O
KALISPELL,
Section 1. Authorization and Sale; Recitals.
1.01. Statutory Authority. The City is authorized by Montana Code Annotated, Title 7,
Chapter 7, Parts 42-43, as amended (the "Act"), to issue general obligation bonds to finance an
undertaking that is duly approved by the electors of the City. The City is also authorized to issue
refunding general obligation bonds to refinance outstanding general obligation bonds of the City
to achieve debt service savings.
1.02. Authorization and Delegation to Award Committee. At a regular election held on
November 6, 2001 the electors of the City gave their approval to the issuance by the City of the
Series 2002 Bonds. At a regular election held on November 2, 2004 the electors of the City gave
their approval for the issuance by the City of the Series 2005 Bonds. The City Council hereby
approves the issuance and sale of its General Obligation Refunding Bonds, Series 2012 (the
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"Bonds") for the purpose of. (i) refunding the Series 2002 Bonds on a current basis and
refunding the Series 2005 Bonds on an advance basis; and (ii) paying the costs of issuance of the
Bonds.
The City Council hereby delegates to the Mayor, City Attorney/Acting City Manager,
and the City Finance Director (collectively, the "Award Committee") the authority to accept the
sale of the Bonds to D.A. Davidson & Co., Bozeman, Montana (the "Underwriter"), on behalf of
the City if the following criteria are met: (i) the purchase price of the Bonds shall not be less
than 99.10% nor exceed 105% of the par amount of the Bonds (plus accrued interest, if any to
the date of issuance), (ii) the average coupon rate on the Bonds shall not exceed 2.75% percent
(which would mean a reduction in average interest cost of at least an estimated 1.75% with the
refunding) provided that the original aggregate principal amount of Bonds does not exceed
$4,200,000 and the Bonds do not have a final maturity later than July 1, 2022, and (iii) the
combined interest rate on the Bonds is more than one-half of one percent (0.5%) less than the
combined interest rate on the Prior Bonds as required by the Act and the net present value
savings of debt service on the Prior Bonds is greater than or equal to 5%. The Award Committee
is hereby authorized to determine the maturity dates, principal amounts of the stated maturities of
the Bonds, mandatory redemption provisions with respect to the Bonds, and such other terms of
the Bonds as the Award Committee deems most appropriate and in the best interests of the City.
The appropriate members of the Award Committee are hereby authorized to execute and deliver
a bond purchase agreement with the Underwriter for the sale of the Bonds. The final bond
resolution will be approved by the City Council after the execution of the bond purchase
agreement by the Award Committee.
1.03. Debt Limitations. All acts, conditions and things required by the Constitution and
laws of the State of Montana, including the Act, in order to make the Bonds valid and binding
general obligations in accordance with their terms and in accordance with the terms of this
resolution have been done, do exist, have happened and have been performed in regular and due
fon i, time, and manner as so required. The indebtedness to be evidenced by the Bonds and all
other indebtedness of the City does not exceed the limitation set forth in Section 7-7-4201 of the
Act. The City has full power and authority to issue the Bonds and refund the Prior Bonds.
1.04 Refunding Findings. It is hereby found and determined that based upon
information presently available from the Underwriter, that the issuance of the Bonds will result
in a reduction of debt service cost to the City on the Prior Bonds, such that the combined interest
rate on the Bonds is more than one-half of one percent (0.5%) less than the combined interest
rate on the Prior Bonds and the present value of such debt service or interest cost savings (the
"Reduction") is at least three percent (3.00%). The Reduction, after inclusion of all authorized
expenses of refunding in the computation of the effective interest rate on the Bonds is adequate
to authorize the issuance of the Bonds as provided by Title 7, Chapter 7, Section 4304 of the Act.
Section 2. General Terms of the Bonds. Pursuant to the Act and Montana law, the City
Council hereby authorizes the issuance and sale of the Bonds. The Bonds will be denominated
"General Obligation Refunding Bonds, Series 2012," of the City for the purposes of
(i) refinancing the Prior Bonds, and (ii) paying the costs of issuance for the Bonds. The Bonds
shall be dated, as originally issued, and shall bear interest payable semiannually on January 1 and
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July 1 of each year, commencing January 1, 2013, at a rate or rates designated by Underwriter
and approved by this City Council in the Bond Resolution. The Bonds are expected to mature on
July 1 of each of the years from 2013 through 2022 which will approximately level debt service
payments, as adjusted in the final bond resolution.
The Bonds will be issued in minimum denominations of $5,000 each or any integral
multiple thereof of single maturities. The maturity schedule of the Bonds may provide for a
combination of serial bonds and term bonds, provided that no serial bond may mature on or after
the first mandatory sinking fund redemption date of any term bond. All term bonds, if any, shall
be subject to mandatory sinking fund redemption at a price of par plus accrued interest to the
date of redemption.
The Bonds are to be issued in "book entry" form as fully registered bonds and shall be
executed by the manual or facsimile signatures of the Mayor, the City Clerk, and the City
Finance Director.
Section 3. Official Statement. The Underwriter and the City Finance Director and other
officers and employees of the City, in cooperation with Kennedy & Graven, Chartered, P.C., as
Bond Counsel, are hereby authorized and directed to prepare on behalf of the City an official
statement relating to the Bonds. Such official statement shall contain information as shall be
advisable and necessary to describe accurately the City and the security for, and terms and
conditions of, the Bonds.
PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF
THE CITY OF KALISPELL,DAY OF i
Judi Funk
Deputy City Clerk
Tammi Fisher
Mayor
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