274493 WHITE - CITV CLERK COIl/1CII
PINK - FINANCE G I TY O�F SA I NT PA LT L
CANARV - DEPARTMENT File NO. � 44�3
BL�CJr - MAVOR
Co�ncil Resolution
Presented By
Referred To Committee: Date
Out of Committee By Date
RESOL'C7@IQl�i MEMORIALIZING THE LEGISLATURE
OF THE NEED TO REVISE THE MAXIMUM INTEREST
RATE ON GENERAL OBLIGATION BOND ISSUES AND
ENDORSING SENATE FILE NO. 1911
WHEREAS, pursuant to Council authorization sealed bids were to
be received by the Director of Finance and Management Services on
the sale of $10,500,000 of City of Saint Paul General Obligation
Bonds, rated AA and aa, on February 26, 1980 at 11:00 a.m. , at
which time no- bids were received; and
WHEREAS, the Director advises that interest rates on long-
term bond obligations in this week' s market exceed 7$ per annum,
and that [znder Minnesota law this amount is the maximum legal
interest which may be paid on such obligations; and
WHEREAS, the City' s Fiscal Consultant advises that market
interest rates will probably continue to increase for the fore-
seeable future, and that it is not pos��bl� to predict at what
percentage such rates will stsbilize; and
WHEREAS, the implemei�tation of the public improvement projects
to have been funded with this 1980 Capital Improvement and Water
Pollution Abatement Bond issue, are of critical importance to the
welfare of the City.
NOW THEREFORE, BE �T RESOLVED that the eouncil of the City of
Sai�t Paul hereby memorializes the Legislature of the State of
Minnesota of the need to expeditiously revise t}�e interest
limitation contained in Minnesota Statutes, Se�tion 475.55, Sub-
division 1, and advises the Legislature of its support for Senate
COUNCILMEN Requested by Department of:
Yeas Nays • f� �
Butler �-�ta�oc��G"K'�( "u�°�
Hozza In Favor
Hunt
Levine _ Against BY
Maddox
Showalter
Tedesco Form Approved by City Attorney
Adopted by Council: Date
Certitied Yassed by Council Secretary BY
By
fApproved by :Navor: Date Approved by Mayor for Submission to Council
By� - - -- BY
�NH17E - C�TY GLERK
PINK ° - FINANCE GITY OF SAINT PAUL Council //��
GlSNARY - DEPARTMENT �-ijJJ
BLUE `MAVOR File NO. �����
Council Resolution
Presented By
Referred To Committee: Date
Out of Committee By Date
-2-
File No. 1911, which provides that interest on obligations sold
at public sale shall not be subject to a general maximum rate,
but would be fixed by public bidding in the market place, as the
most practical solution to this problem in light of the unpre-
dictable nature of the present long term bond market.
COUNCILMEN
Yeas �cMAHON Nays Requested by Department of:
-�L" p In Favor
Hozza
Hunt
Levine _ � __ Against BY
A4e�de�
Showalter
Tedesco ��g 2 6 t� Form Approved by 'ty Attorney �
Adopted by il: Date �
Certi Pa: d b ouncil �cret y l BY � �����
/ � � �
!#pp v by Mavor: D te Approved by Mayor for Submission to Council
By BY
�li�.iStifD MAR 8 1980
r' �c.�,� �`�1�L
;�� . - � � � �� 3
CITY OF SAINT PAUL
°"' °' DEPARTMENT OF FINANCE AND MANAGEMENT SERVICES
i.y~ i
Y
��----'~ ' BERNARD J. CARLSON, DIRECTOR
+� - �
113 City Hall, Saint Paul, Minnesota 55102
(612) 298-4637
GEORGE LATIMER
Mayor
February 25, 1980
The Honorable George Latimer
Mayor of the City of Saint Paul �
Joaiuie Showalter, President,
� and Members of the Council
of the City of Saint Paul
__
ij
� We have a $10,500,000 General Obligation Bond Sale scheduled for tomorrow,
February 26, 1980. At the present time, we do not expect to receive any
bids on this bond sale, because of the current state of the bond market and
a Minnesota state law which places a ceiling of 7$ on interest for our bonds.
Just last week the State of Ohio sold AA.A-rated General Obli�ation Bonds with a
term of approximately 10 years at a rate of 7.30$. This issue was sold at .3$
above the ceiling of 7$ for our AA-rated bonds. No one se�ms to foresee hope for
any substantial market improvement. In line with inflation in other areas of the
economy, it appears a new floor has been established for tax-exempt rates.
Z4ao bills now in the Mi�esota Senate would raise or remove the 7$ ceiling. Senate
File 1910 would raise the rate limi.t to 100, while Senate File 1911 would abolish
any rate .limit for bonds sold at public sale but would limit the ceiling to 10$
for negotiated issues. To the best of my knowledge, at present 'there has not
been a companion bill introduced in the House.
II The timing of this bond sale is critical for a number of factors. Four million
dollars of the bond sale is Water Pollution Abatement Bonds, for continuing the
i Thomas-Dale sewer construction. We opened two sewer construction bids on January
� � 19 and 26 which gave us the amaunt of bonds we had to sell for this phase of the
' sewar. We have only 90 days to award those bids, so if we are unable to award by
� April 19 and 26, we will end up having to rebid at most probably substantially higher
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costs. The remaining part of the bond sale, the $6,500,000 CIB Bonds, would of
course delay all of those related projects and impede our ability to bid early
in the spring at r.elatively lower costs.
Assuming that we do not receive any bids as we expect, it is my intention to
submit two additional resolutions:
1) A resolution which would allow the Finance Director to proceed
with reoffering the bonds as soon as the market conditions
aZlow or the State law increasing or eliminating the interest rate
ceiling is changed.
2) A resolution indicating the City's support for a change by the
legislature in the State law setting the 7$ ceiling.
If you would like any more information on this matter, please call.
Sincerely,
/ ��
� �l����
BERNARD J. , SON
Director o� Finance and
Management Services
BJC/ja
cc: Richard Broeker
Peter Hames
Peg O'Keefe
Steve Wellington
Shelley Wright
Legislative Aides
Dept. Heads & Office Directors
James Hart
SPRINGSTED � � ��� j
INCORPORATED
PUBLIC FINANCE
ADVISORS
MEMO
TO: Bernard J. Carlson, Director
Department of Finance and Management Services
City of Saint Paul
FROM: Osmon R. Springsted, Chairman
Springsted Incorporated
Financial Advisor to the City of Saint Paul
RE: Review of Tax-Exempt Market
DATED: February 26, 1980
Last Thursday the Bond Buyer Index, a national index of tax-exempt rates jumped
7 I basis points to 8.46% - both are records.
Seven syndicates submitted blank bid forms and/or good faith checks for the City's
offerings today. When called this morning each said they could not bid within the
7°�0 limit. Citibank of New York advised us it was not even looking at 8% offerings.
The last sale in Minnesota was a $230,000 "A" rated City of Rosemount issue with
an average of 3.87 years. One bid was received at 6.9990. Since then offerings at
Chisholm, Morris, Champlin and Tracy have had no offers. On the 13th the Adrian
School District received no bids for its "A" rated general obligations.
Yesterday an "Aa" rated general obligation offering of King County, Washington
with a final maturity of 2009 did not receive an offer within an 8% limit imposed
by the issuer. (The state has no statutory limit.)
A week ago the Salt Lake City School District received no offer for its "Aaa" rated
general obligation bonds for which the issuer had a 7% limit.
Last night the City of Brandon, Wisconsin received no offer for its revenue bonds
for which there was no rate limit.
On Thursday of last week the State of New York paid a net interest rate of 8.78%
for its general obligation bonds going out to 2010.
Next month the Minnesota communities of Golden Valley, Washington County,
Clarkfield, Red Wing, Big Lake, Glencoe and Wadena are scheduled to have
offerings. We do not foresee any of them being able to market their bonds within
the 7% limit. Neither do we see any evidence in the market or economy to support
optimism for improved market conditions in at least the near-term. At yesterday's
auction of 91-day Treasury Bills the average rate was 13.70% with a bond
equivalent yield of 14.43% which is 1.73% over the beginning of the year and .59%
over the level of the previous week.
800 Osborn Building, Saint Paul, Minnesota 55102 (612) 222-4241