09.d5a Ehlers Bonding PresentationScandia Street Reconstruction Financing
City of Scandia –February 20, 2024
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Street Reconstruction Financing Options
Street Reconstruction Plan Bonds
Crack Filling and Sealing Financing Options
Tax Abatement Bonds
Next Steps
Overview
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•All G.O. borrowing requires statutory authority to issue bonds
without a referendum. For street reconstruction, typically:
✓MN Statutes 429 –Improvement bonds (requires 20% assessments)
✓MN Statutes 475.58 Subd.3b –Street Reconstruction and Bituminous
Overlays (Street Reconstruction Plan Bonds)
➢Best fit for Scandia’s current project
➢Same authority used for 2018 project
✓MN Statutes 469.1812 -469.1815 –Tax Abatement
➢Often used when the first two will not work
Street Reconstruction Financing Options
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•Must prepare and approve a separate 5-year Street Reconstruction
Plan that establishes the City’s authority to issue bonds without a
referendum
✓City can then finance street reconstruction and bituminous overlays
✓Crack filling and sealing are not eligible project costs
•Requires a public hearing to solicit any input on the Plan
•Must be approved by a 2/3 majority of the Council members present
at the meeting
•Subject to 30-day reverse referendum period
Street Reconstruction Plan Bonds
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•Internal loan from another City fund –repay yourself
•Bond for some future expense that you intended to pay for with
cash. That expense may have more clear borrowing authority.
Then use cash for crack sealing instead
•Reimburse yourself for some prior expenditure that has clear legal
borrowing authority. (need intent to bond declarations in order)
•Use Tax Abatement Bonds
Crack Filling and Sealing Financing Options
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•Using tax abatement only as the authority for issuance of G.O. debt
✓Not being used in an economic development context
✓No individual parcels are impacted
✓There will just be a tax levy that shows it can be supported by identified
parcels
•Requires a public hearing, identification of parcels to “abate”, and
passage of a resolution
✓Establishes legal authority to issue bonds without a referendum
Tax Abatement Requirements
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Tax Abatement Requirements
•Must identify parcels with enough city tax to show coverage for
105% of the average annual bond principal payments
•Taxes are not actually “abated”, rather they are just showing
adequate coverage and authority to issue the bonds
•Identification of these parcels does NOT impact that taxes paid by
these parcels in any way
✓Need to include properties benefiting from the improvements but it does
not affect their taxes in any way
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Next Steps –Tentative Schedule
•February 28, 2024 -Publish public hearing notice
•March 19, 2024 –Council holds public hearing, approves street
reconstruction plan and reviews proposed bond details
•April 18, 2024 –Reverse referendum period ends
•May 1, 2024 –Council approves sale of the bonds
•Ma 22, 2024 –closing (receipt of funds)
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AQ
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