Working Session

Mayor and City Council Work Session
February 9, 2005 – 5:00 p.m.
A101

Council Members Present: Bob Brooks, Doug Christensen (joined meeting in progress), Hal Gershman, Gerald Hamerlik, Curt Kreun.
Council Members Absent: Eliot Glassheim, Dorette Kerian.
Others Present: Al Grasser, Todd Feland, Don Shields, Maureen Storstad, Al Morken, Dennis Potter, John Packett, Mike Flermoen.

Gershman called the meeting to order at 5:00 p.m.

1) Discussion on Potential for Bond Restructuring.

John Schmisek, Director of Finance and Administrative Services, stated that with him at the meeting today was Al Erickson, Springsted, Inc., who serves as financial advisor for the city. He stated that the purpose of the meeting today was to inform the group of the potential savings to the City by advance refunding Sales Tax Revenue Refunding Bonds, Series 1997A, which had been sold to fund the construction of the Alerus Center. He explained that these bonds have a call date of 2007, but there is a one time allowance to advance refund the issue prior to the original call date. He stated that he and Mr. Erickson have been closely monitoring the market changes to see if an opportunity would develop in the market whereby the City could exercise this advance refunding option and save the City some debt service cost.

Erickson continued that this issue was originally sold at a very good rate, but that due to market changes, the rates of today are even better. He added that if Council approved the advance refunding at this time, the City could reap a net savings of about $3.9 million. Erickson stated that he would recommend that the City use the original underwriter, Dain Rauscher for the refunding and that the item would move forward on a fast track so as to accomplish the transaction before the market changes again. Erickson stated that he would recommend that Lyn Endorf, Dorsey & Whitney, bond counsel for the City, be contacted to draft a resolution that could be approved at a Council Meeting on Monday evening. He continued that this timeline would allow for the transaction to close by March 15th.

Hamerlik inquired whether there is any legal requirement that needs to be met to select the underwriter. Schmisek stated that he has been in contact with Mr. Endorf and he has concurred that since the original bond underwriter position was negotiated, we would have the ability to negotiate with Dain Rauscher to handle the advanced refunding. He added that when the initial selection of underwriter took place there was an extensive selection process that was used and he feels comfortable with continuing to have them handle this issue.

(Christensen joins meeting.)

Gershman stated that from page 2 of the handout he notes an annual saving of over $200,000 and inquired what uses those funds could be applied to. Schmisek stated that they can be used for a number of things, including capital expenditures and operational expenses. The group discussed the potential benefits that the advance refunding could have for the City.

Schmisek stated that he would recommend that Council would agree to hear this item at the COW meeting on Monday, which would be followed by a Special City Council meeting at which he would recommend passage of a resolution to proceed with this item.

Hamerlik stated that he would be in favor of proceeding, but would request that the notice of the Special Council meeting be sent out as soon as possible to allow for proper public notice.

Other.

Mel Carsen, City Assessor stated that he was there to inform the group regarding annual valuation increases that will be going out in the mail. He stated that base on the annual sales study which his department has just completed the average increase in the residential market is at 13%, with a range of 8-22% across the City. He explained that this range of increases will keep the City at the current level of 97% which they have held in the past years. He stated that by law we are required to notify property owners of any valuation increase that is 15% or more, but that as a policy we notify all homeowners that will be receiving an increase of 7% or more and that such notices will be going out in the mail in the near future. Carsen also briefed the committee on how any appeals of the valuation are handled, in that they would be heard at the Board of Equalization which under code must meet the second Tuesday of April, with final certification to the County in June of the valuation for the City.

The group discussed the effect this may have on homeowners overall tax bills. The group noted that since the City’s part of the overall bill is a relatively small portion, approximately 23%, it is very important for City officials to begin talking with other officials at the School District (which receives 53% of the tax bill), the County and the Park District in an effort to enlist their support for trying to keep the overall increase for homeowners to a reasonable amount.

The group discussed the effect of this increase on the 2006 budget. Schmisek stated that as the group moves into the 2006 budget process, departments will continue to be looking at ways to continue their efforts to be effective and efficient with their budgets. He continued that as a part of the budget process they will also be looking at capital needs of the City, and will need to be mindful of some of the needs that have been deferred in previous years. He added that the Council will also again be reviewing City services and which and at what levels they want to provide those services. He stated that as in the past, all involved in the budget will move forward with the intent of providing City services and to mitigate tax impacts for citizens.

Gershman adjourned the meeting at 6:00 p.m.

Respectfully submitted,

Sherie Lundmark
Admin Spec Sr.