98-1146' - l'� � � Q C �Q —
� � ��a � 9q
RESOLUTION
CITY OF SAINT PAUL, MINNESOTA
Presented By
Referred To
Committee: Date
Council File # — tg "" ��_�
GreenSheet# lv//��
39
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
RESOLUTION APPROVING AND AUTHORIZING EXECUTION OF A FIRST
AMENDMENT TO ARENA LEASE, A FIRST AMENDMENT TO HOCKEY
PLAYING AGREEMENT AND A STATE LOAN AGREEMENT IN
CONNECTION WITH THE ARENA PROJECT
I:I;i�l a���
1. Pursuant to Laws of Minnesota, 1967, Chapter 459, as
amended, the Civic Center Authority (hereinafter referred to as
the "RiverCentre Authority") was created as an agency of the City
of Saint Paul (the "City"), and given the power to, among other
things, build, equip, maintain and operate a civic center
complex, now known as the RiverCentre Complex, which includes an
arena (the "Existing Arena").
2. The City, the RiverCer.tre Authority and Minnesota
Hockey Ventures Group, LP, a Minnesota limited partnership (the
"Tenant") have hereto entered into an Arena Lease dated as of
January 15, 1998 among the City, the RiverCentre Authority and
the Tenant (the "Arena Lease") which sets forth the rights and
obligations of the parties with respect to the demolition of the
Existing Arena, and the design, construction, financing and
operation of a new arena (the "Arena"), and (b) a Hockey Playing
Agreement by and between the City and the Tenant (the "Hockey
Playing Agreement") pursuant to which the Tenant agrees that the
Team will play all its NHL Home Games (as defined in the Hockey
Playing Agreement) at the Arena.
3. Pursuant to the Arena Lease, the Tenant agreed to
contribute at least $35,000,000 (the "Tenant Contribution") to
the costs of the demolishing the Existing Arena and constructing
and equipping the Arena (collectively, the "Project"), and the
City agreed to contribute $30,000,000 (the "City Contribution")
to the costs of the Project.
4. The City and the Tenant anticipated that the remaining
costs of the Project would be funded by a grant from the State of
Minnesota.
5. Pursuant to legislation
legislature, an appropriation was
interest free loan of $65,000,000
other legislation favorable to t
1998 legislature (collectively t
legislation required the Tenant t
City, which the Tenant agreed to
enacted by the 1998
made for the Project, for an
(the "State Loan"), and certain
he Project was enacted by the
he "1998 Legislation"), which
o make certain payments to the
make in lieu of the Tenant
1002941.3
Q�-���16��
1 Contribution, and the City agreed to increase the City
2 Contribution to $65,000,000.
3
4 6. The City and Tenant will submit an application to the
5 City at a future date with respect to the adoption of an
6 ordinance creating a special sign district covering the
7 RiverCentre Complex, and a public hearing will be held by the
8 Planning Commission and the City Council on the application.
10
li
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
7. Pursuant to legislation enacted by the 1998 legislature
Sections 30 through 32, and Sections 36 and 37 (the "Special
Law") which requires local approval in order to be effective,
which local approval will be given by the City Council in a
separate resolution, authorizes the City to issue its sales tax
revenue bonds (the "City Bonds") to finance the City Contribution
to the P_rena .
8. A financing plan describing the interest free State
Loan and the issuance and security for the City Bonds has been
prepared and is attached hereto as Exhibit A(the "Financing
Plan");_ provided that the implementation of the Financing Plan
and issuance of the City Bonds will require the City Council to
(a) consider a resolution at a future date approving various
financing documents, and (b) hold a public hearing on and approve
certain amendments to the Block 39/Arena Tax Increment Financing
Plan and request the Housing and Redevelopment Authority of the
City of Saint Paul to approve the same.
9. In order to obtain the State Loan and to implement the
provisions of the 1998 Legislation, the following documents have
been prepared and submitted to the City Council:
(a) a First Amendment to Arena Lease by and among the
City, the RiverCentre Authority and Tenant (the "First
Amendment to Arena Lease") which amends the Arena Lease in
certain respects;
(b) a First Amendment to Hockey Playing Agreement by
and between the City and Tenant (the "First Amendment to
Hockey Playing Agreement") which amends the Hockey Playing
Agreement in certain respects; -
(c) a State Loan Agreement by and between the City,
the State and the Tenant (the "State Loan Agreement")
setting forth the terms and conditions under which the State
Loan will be made and disbursed to the City to pay a portion
of the costs of the Project; and
(d) the Financing Plan.
1002941.3
q�-�►�6
1
2
3
4
5
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
RESOLVED:
1. The City Council hereby approves First Amendment to
Arena Lease, First Amendment to Hockey Playing Agreement and the
State Loan Agreement (collectively, the "Documents") in
substantially the forms submitted and authorizes the Mayor,
Clerk, Director, Department of Planning and Economic Development
and Director, Office of Financial Services (the "Authorized
Officers") to execute the Documents. Any other documents and
certificates necessary to the transaction described above shall
be executed by the Authorized Officers. In the event of the
disability or the resignation or other absence of any of the
Authorized Officers, such other officers who may act in their
behalf shall without further act or authorization of the City be
deemed for purposes of this Resolution as such Authorized
Officers and shall do all things and execute all instruments and
documents required to be done or to be executed by such absent or
disabled officials. The approval hereby given to the Documents
includes approval of such additional details therein as may be
necessary and appropriate and such modifications thereof,
deletions therefrom and additions thereto as may be necessary and
appropriate and approved by the Director, Department of Planning
and Economic Development and the City Attorney; and said
individuals are hereby authorized to approve said changes on
behalf of the City. The execution of any instrument by the
Authorized Officers of the City herein authorized shall be
conclusive evidence of the approval of such document in
accordance with the terms hereof.
2. The City Council hereby approves the Financing Plan;
provided that the issuance of the City Bonds as described in the
Financing Plan is contingent upon the holding of a public hearing
on and approval of certain amendments to the Block 39/Arena Tax
Increment Financing Plan, the adoption by the City Council of a
final resolution authorizing the issuance of the City Bonds, and
the adoption of a resolution approving certain financing
documents by the RiverCentre Authority.
That the
to the MinnesoCa "Corporate Welfare" Statute which now exists in the Amended
Lease.
1002941.3
a�-��y�
3
4
5
Requested by Department of:
Yeas Nays Absent ���� �
Benanav `�
Bostrom
ey:
�✓ I I I �`��
v�--
� t � �
Adopted by Council: Date
Adoption ertified by Council Sec tary
a , a— _ �...,�.� ,.�—
h
Approved by Mayor: D ����
By:
3002941.3
Q�p_��.��
DEPARTMENT/OfFlCFICAUNCLL DA'C6IMIIATED � � � �
PlanningandEconomicDevelopment 12-16-98 GREEN SHEET NO. 61153
iaoal��re �nnaioaie
COMACIPERSONkPHONE a DEPAAiMENlD�tEClOR � Q'IYCOUNm.
PamWheelock266-6628 �� � rnvnrrow��r 0 an'u.EEwc
MUSlBEONNIINm,AGENDABY(DA'1£) � O FIIJANOALSERVICESOIIt O FAI.SERNCESOFF/ACCfG
December23, 1998 Q Mwrox<oxnss�sv,� O a�wccaies�wr
TOTAL # OF SIGNATURE PAGES (CLIP ALL LOCATIONS FOR SIGNATURE)
ACIfpNRFQUFSIID
Approval of the Firs[ Amendment to Arena Lease
�co��nnoNS: wy�o.«a�o�x�a(rt) PERSONAL SERVICE CON7RACfS MUST ANSWF.R 7'HE FOLLOR'ING QUESTIONS:
r�axtuctcCOe,muss�ox 1_ ETac tLic pe�son/Srm ever wodced �mder a conhact for tLis deparmient?
�co�mwneE YES NO
_avaseav�� Connmss�ow 2. Has tltis pecsoNSrm everbeen a city emp]oyee?
Srqt'F 1'ES NO
3. Dces this pawdSnn posuss a sldll notnormally possesud by avy c�ment city employee?
YES NO
4. is this perso¢ / 5m a Eargeted veadoY! '
YES NO
(Explain all yes answers oo separate sheet aud attach to greev sheey
WITIA'LMG P20HLEM, ISSIIE, OPPoRTUNIN (Wlw. What �w. Whcrt, WhY)
The 1998 Minnesota state legislature appropriated $65,000,000 to the City of Saint Paul for the demolidon of the old arena and construction of the
new RiverCentre Arena. The legislarive appropriation contained several condirions that had to be met by the team and city in order for the city
to receive the $65,000,000. This resolution sarifies the conditions set by the legislature.
ADVANTAGESIFAPPROVEP
The City will receive $65,000,000 from the state to complete the financing plan for the new RiverCentre Axena.
DISADVANTAGFS IF APPROVED
13one
DLSADVANfAGSSOFNOTAPPROVED
The City of Saint Paul would be responsible for $95,OOQ000 for the demolition of the old azena and construcrion of the new RiverCenh�e Arena
iOTALAMOUNTOFiRAN5ACC10H � COST/REVENUEeUDGEiE➢(CIXCLEONB) Y6S NO
FUNDINGSOURCE ACTIVI'IYNUAffiE2
FMANCIhL RJEORMATION� (Fa3LAIM
q�'-i►�&
.:,,:
FINANCING PLAN FOR RIVERCENTRE ARENA PROJECT
OVERVIEW
The following is the proposed Financing Plan for the RiverCentre Arena project. The bond resolution
authorizing the City bonds will be submitted to the City Council in January, 1999 for final approval.
The $130 million for the demolition of the existing Arena and construction of a new Arena relies on an
interest-free loan from the State of Minnesota in the amount of $65 million (with required repayment of $48
million), and on the issuance of Sales Tax Revenue Bonds su�cient to provide the remaining $65 million
for the project.
The $48 million repayment to the State of Minnesota is solely from rent payments from the operation of the
Arena by the NHL Team. The debt service for the $65 million in revenue bonds is predominantly fmanced
by NHL Team rent payments, PILOT (taY) payments made by the NI�, Team, and Half Cent Sales Tax
proceeds dedicated solely for use at the RiverCentre Arena.
The Team has agreed to go beyond the legal requirements of the state legislation and the previously enacted
Lease to help the City fmance the revenue bonds. The Team will post a I,etter of Credit ranging from $6 to
$8 million annually, which allows the City to fmance a bond reserve of $7.275 million which insure the debt
will be at investment grade. Without the Letter of Credit from the team the Ciry would be responsible for
funding the entire reserve.
The Financing Plan is consistent with respective obligations of the City and Team, as described in the
Amended Lease and State Loan Agreement. The Finance Plan reflects the reduced City Contribution from
$95 to $65 million and the Team paying Lease and Pilot payments totaling $1933 million dollazs through
2025 to the City.
Finally, this Financing Plan and Lease Revisions continues the obligation for the Team to: (1) fund all costs
in excess of $130 million necessary to complete the project, (2} to pay ongoing maintenance and capital
improvements to the Arena during the Lease term, and (3) to retire the outstanding City Bonds and State
Loan for early termination of the Lease.
FINANCING STRUCTURE
State Loan
The City will receive a$65 million interest free loan to be used for construction of the RiverCentre Arena.
The State Loan will not be a public debt of the City and will be repaid from a portion of Team payments.
The Loan payments (totaling $48 million due to foregiveness of $17 million) begin at $1,250,000 in the Yeaz
2003 and increase to a masimum of $4,750,000 in the Yeazs 2016 to 2020 (see Attachment III). The State
Loan will be secwed by a Letter of Credit provided by the Team in an amount equal to the following yeaz
payment due under the Agreement.
City Sales Tas Revenue Bonds
CiTy will issue approximately $72.75 million in Sales Tas Revenue Bonds in late January, which nets the
remaining $65 million necessary to fund construction of the Arena. This tasable debt will be investment
grade and insured by Financial Security Assurance ("Bond Insurer"). FSA is the current insurer of the
outstanding 1996 Sales Taac Refunding Bonds. The term will be for 27 years with the last payment in 2025.
a�
E%hibit A
Page Two
The annual debt service will range from approxirnately $5.1 to $93 million per yeaz (with average debt
service of $6.4 million per year.) The average tasable interest rate, if priced today, will be appro�mately
6.70 percent. The Series 1999 Bonds will be callable at paz in 2011.
SOIIRCES AND USES
See Attachment I, which provides a summary of the Sources and Uses for the RiverCentre Arena Project.
SERIES 1999 BOND SIZING
The Series 1999 Bonds will be sized to maYimize the use ofTeam Payments for debt service after repayment
of State Loan, minimize the use of the RiverCentre portion of the Sales Tax, and comply with a debt
coverage ratio of 1.20 required by the Bond Insurer.
On an average, 89% of the Series 1999 Bond's debt service is retired by Team Payments.
See Attachment IV, (Schedule of Available Revenue and Debt Service Coverage), which includes Team
Payments under the Lease, Sales Tvc from the RiverCentre's 40 Percent, and TaY Increments from Block
39/Arena DisVict.
SECURITY
The Series 1999 Bonds security will include the following:
Team Payments - Approximately $145 million of Team payments under the Amended Lease (see
Attachment II).
2. Sales Tax - The Series 1999 Bonds will have a first lien on the CiTy's Sales Tax and will be on
parity with 1996 Sales Tax Refunding Bonds. Beriveen 2003 and 2020, $15.6 million of Sales Taz
from the RiverCentre Account will be used to pay debt service on the new issue. This issue will be
structured so that the Neighborhood and Cultural Accounts of the Sales Tax is not expected to be
used for payment of debt on 1999 Series Bond. See Attachment V for Sales TaY Analysis of the
Neighborhood Cultural and RiverfrontAccounts. Bond Insurerwill underwrite a annua122 percent
inflation increase in sales tas which is half the annual historical growth rate.
3. Tas Increments - Taac increments between 2016 and 2025 from Block 39/Arena District will be
pledged on a first lien basis as an additional credit enhancement for the Bond Insurer. Tax
increments prior to this date are pledged on a subordinate basis to the Series 1999 Bonds.
4. Bond Reserve - A Reserve of approximately $7275 million (10 percent of the fmal bond size) will
be funded by:
a Letter of Credit ranging from $6 to $8 million per yeaz posted by the Team under the
Lease Amendment; and
a surety bond.
5. Euly,Termination of the Lease - The Team is obligated, under the Amended Lease and State Loan
Agreement, to pay offthe outstanding debt and any premium for eazly termination by the Team (See
Attachment VII).
°L�-i��6
Exhibit A
Page Three
FINANCING FZOW CHART
Attachment VI contains a detailed flow chart outlining the flow of funds of the Financing Plan
FINANCING TEAM
Attachment VII contains a list of the members of the City's Financing Team.
BENEFITS
Through the Amended lease, the City reduces the City Contribution from $95 million to $65 million.
2. City can take advantage of a$65 million interest-free loan from the State which is secured solely
by Team rent payments and only requires a repayment of $48 million.
3. The State Loan removes the concern raised by rating agency Standard and Poor when they changed
their outlook for the CiTy from stable to negative.
4. By issuing the Series 1999 Sales Tas Revenue Bonds, $33.5 million of General Obligation
Commercial Paper (which was used to fund most of the RiverCentre Arena Project construction
costs to date) will be retired. This reduction to the City's General Obligation Debt will be a positive
influence in the City's General Bond Rating deliberations in the year 1999.
5. City issues fixed rate debt neaz historic low interest rates.
6. Team provides $6 to $8 million in Letters of Credit for the Reserve Fund for the Series 1999 Bond
and for the State Loan.
SCHEDULE
December 16, 1998
December 23, 1998
December 26, 1998
January 13, 1999
Presentation to City Council
Consideration of changes to Amended Lease, State I,oan Agreement, Financing
Plan and Local Approval of Sales Tas changes by end of December
Request for commitment for Bond Insurance and Rating
Consideration of Series 1999 Bond Resolution
Public Heazing of modification of the Financing Plan for Block 39/Arena Tax
Increment District
January 29, 1999 Close on Series 1999 Bonds
��-f��s
ATTACHI��NTS
Attachment I
Attachment IB
Attaclunent II
Attachment III
Attachment IV
Attachment V
Attachment VI
Attachment VII
Attachment VIII
(Aevised 12/15/98 - I1:15)
Sources and Uses
Project Cost Summary
Team Lease and Pilot Payment
State I,oan Repayments
Schedule of All Available Revenues and Debt Service Coverage
Cash Flow of Sales Tax Trust Accounts
Financing Flow Chart
Early Terminarion Obligation
Financing Team
\�Ped�sys2\SHARED\GEURS�rivercentetplan.fin
Attachment I
Sources and Uses (RiverCentre Arena Project)
SOURCES OF FUNDS
Safes Tax Revenue Bond Proceeds, Series 1999
State Loan Proceeds
Credit Facility/Surety for Bond Reserve (from Team,FSA)
Interest Earning on Construction Fund
TOTALSOURCES
USE OF FUNDS
Project Construction Fund
Bond Reserve Fund (from Team,FSA)
Capitalized Interest Fund
Bond Insurance
Cost of Issuance
TOTALUSES
a�-i��
$72,725,000 (1),(2)
65,000,000
7,272,500 (3)
2,754,000
$147,751,500
$130,000,000
7,272,500
8,355,480
1,101,118
1,022,402
(4)
$147,751,500
Notes:
(1) Series 1999 Sales Tax Revenue Bond Proceeds will be used to retire $33.5 million dollars
of the City's General Obligation Commercial Paper issue, which along with the Team's
contribution, was used to fund construction costs to date of the RiverCentre Arena Project.
(2) Final Series 1999 bond sizing of $72.75 million dollars is dependent on interest rates
at pricing of the bonds which is estimated to in late January 1999.
(3) The Team will provide Letter(s) of Credit to secure the Series 1999 Bonds and the State
Loan, which is between $6 and $8 million during the term of the Lease. Since the amount
securing the State Loan is included in the total Team Letter of Credit requirements, the
difference needed for the Bond Reserve will be by a surety provided by FSA .
(4) The Team has obfigation to fund cost overuns above $130,000,000 to complete the Project.
See Attachment I-B for a Summary Cost breakdown of the Project.
12l15l98 File:arenafin.wk4
qY - ) i�ts
ATTAC��VIVIENT I -B
SAINT PAUL RIVERCENTRE ARENA
PROJECT COST SUMMARY
Foundation / Site Work
Structure
Enclosure I Roof
Interiors / Equipment
Conveying
Mechanical / Electrical
Existing Site Costs
Permits / Insurance
Furniture, Fi�tures & Equipment
Architect, Engineering and Construction Management
Other Costs
TOTAL PROJECT COSTS
$ 7,906,000
38,348,000
9,372,000
18,330,000
1,887,000
25,798,000
5,045,000
1,123,000
10,229,000
11,500,000
462,000
$ 130,000,000
NOTE: This cost breakdown summary is under revision. Individual line items are
subject to change until de[ivery of the Guaranteed Maximum Price. Team has
obligation to fund project cost overruns in excess of .SI30 million.
Attachment 11
The City of Saint Pauf, Minnesota
RiverCentre Arena Financing
Schedule of Team Payments
111 (2) (3)
�1�-11�6
Team Total
Year Lease PILOT Team
Ended Payment Payment Payments
9/1 /99 0 0 0
9/1 /00 0 0 0
9/1/01 3,500,000 2,500,000 6,000,000
9/1/02 3,500,000 2,504,250 6,004,250
9(1(03 3,500,000 2,524,462 6,024,462
9/1/04 3,500,000 2,545,686 6,045,686
9/1 /05 3,500,000 2,567,970 6,067,970
9/1/06 3,500,000 3,291,368 6,791,368
9/1(07 3,500,000 3,315,937 6,815,937
9/1/08 3,50Q,000 3,341,734 6,841,734
9/1 /09 3,500,000 3,368,820 6,868,820
9/1 /10 3,500,000 3,397,261 6,897,261
9/1/11 3,500,000 4,127,124 7,627,124
9!1/12 3,500,000 4,158,481 7,658,481
9/1/13 3,500,000 4,191,405 7,691,405
9/1/14 3,500,000 4,225,975 7,725,975
9/1/15 3,500,000 4,262,274 7,762,274
9/1/16 3,500,000 5,000,387 8,500,387
9/1/17 3,500,000 5,040,407 8,540,407
9i} i1 g 3,500,000 5,082,427 8,582,427
9/1/19 3,500,000 5,126,548 8,626,548
9/1l20 3,500,000 5,172,876 8,672,876
9/1/21 3,500,000 5,921,520 9,421,520
9/1 /22 3,500,000 5,972,596 9,472,596
9/1/23 3,500,000 6,026,225 9,526,225
9!1/24 3,500,000 6,082,537 9,582,537
9/1/25 3,500,000 6,141,663 9,641,663
Total: 87,500,000 105,889, 933 193,389,933
Attachment 111
The City of Saint Paul, Minnesota
RiverCentre Arena Financing
Schedule of State Loan Repayments
State
Loan
Date
8/15/99
8l15/00
8/15/01
8/15/02
8/15/03
8/15/04
8/15/05
8/15i06
8/15/07
8/15lO8
8/15/09
8/15/10
8/15/11
8/15/12
8/15/13
8/15/14
8/15/15
8/15/16
8/15/17
8/15/18
8(15/19
8/15(20
0
0
0
0
1,250,000
1,250,000
1,250,000
1,500,000
1, 500,000
1,500,000
1,500,000
1, 500,000
2,000,000
2,000,000
2,000,000
3,000,000
4,000,000
4,750,000
4,750,000
4,750,000
4,750,000
4,750,000
��'��`�
Total: 48,000,000
q�-i I�16
m
m ° p
u q
� o
N V
D �j
q O d
^ m d y
o a
> � ` ° o
>
G � K d m
d 3 % Q n
t a' F �
U C
�o .`_- = 3 ">
Q y w o ¢
p d � m
�,�ca
c A
v � � �
� O
a' S
u
a t
n y
f
x
O
F
�
d
>
0
�
>
¢
O
F
L
O
a y
C y
m '>
� N
> �
2 �
y mmie
U < V N
p j IA N t0
� � I� b K
u N mmof
- � a a a
w v v v v
0
d
o A
N
¢
e r m N M c- n u. n o o � n m c� h m o 0 0� o w r
�p rvwwnmw�ci e aa a a�o mwm �o��
N � � � � ��- �- � � � � � � � � r � � ��- �.^ � tV
O O f7 N[7 t'� N V t0 W � N f7 In � � ni N f0 f0 f0 N O h�
N W w m m Lo m m 0 0 O� G� m o� m O O^ � t'� n n
N � �-�- � � � � � � � � � � � N N N N N N N N N(7
D O O O O O O O O O O
0 0 0 0 0 0 0 0 0 0 0
O O O O O O O O O O O
`^ [�9 6�i O��� O� O m
m m <rw �or rv a�na
N N N m m �� � O O O
in�n o�n m mioninOin
�o�n o mn om moen
ma �o a � �<?N noo
iti [7 � t0 h n h�O t`i oi O
mm m inma w n wm
vamo�n�omv+�<e
e v aic oioiai doco
0 0� m o o m v�n o a
v
m O N t'� rD n C� tO
�- C t0 O� M N 1� (� �J
�� o � n m m m m
ui vi �i vi ui ui ui �i vi
O O O
° o ° o ° o
OO�n
< m v
N � �
N
m m m
m m o
(G I� P
ma in
O� in
m m �
m � m
O O O
m m o
C 0 �
o�no
< ? N
h N h
n a m
m�?�o
O O O
O O O
�o O �ti
inom
N l7 h
n ' H
tD N
o�nm
m � m
a�no
N tp 1�
n(o �
M N n
� O O
� o �
�O O f0
��o n
m � �
n b n
W O N
ui f? m
O O O
O O O
in O O
mmm
nn<o
� N �
moin
1� 1� N
o � m
ai ui m
�mm
m p) N
N N A
n m �n
� N N
m [o [y
N N CI
N OI Cl
t� [7 N
m m m
� O �[I O� i[1 ���� O O O b O
in e m n o ro a w n m m m N m m
a o �r.-.-�nin.-� m �m�oin
f7 N(O IA In O C IA (�f C N(O (O tO
m m m m m m m m m m m m m m m
e e v a a a v a e a v< a a a
<eee i.rea:vvvvee
m�c �nm m<v on nm �n� N
n� n�v o r o m c� v�� o� m
t7 @(7 �O m(� N In (� m � W � N O
oo�^'mmecnoeoinimm
v o n m o� r �� m o m
m c�a no an��oovn
� m N n n c0 W Oi m Oi O O � � O
� N N N N N
c m o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
E x
d o
E �
q O
r r
0 00 oN �o o mra o a.-�n�n
O�[f tD m �^ �D ['� c7 N tp ' 0 O n
e O N O fD � f7 m h 0 N V V�
� oa<inr-m mnnci�vi
0o nm e� m�om�+�n mN�
F� O O h h f0 N(7 t+i t7 N��D !�
m� e.raviinui ui�ri�ri 'in o
R
J
O
a
ci�z �.�
0000esgoaeaessss
00 oa0000000
O O O O O O O O O O O O
O O O O O O O O O O O O
in in o00 00 000 0
NN tv'��n� intnOOOO
`_ ___ � N N N t7
O O O O N� p O O n C O �« i n n
O tn (O 0 h tO l7 l�) N fp f OJ O h
O N< N W�� h 0 N V O N
o<a uir-^ oiri � co �ui
ooN a �om a�omrv inmr
In I[� In In N N(7 l7 (7 (7 �- � �
N N N N N(7 f7 (7 f7 [7 V Q Q V
�
J EI l 0 0 0 0 0°o�, o 0 0� o°I� ci ai ci
O O O O O O O O O
" n m � �
� G �- 1� b
h o 0 0] <
u�omn
o � � da�o+n
�- m oaioim
N O V U
2 d P
LL ~
. � m n
m m m
y m m m
In In N b In N IO
� T � Cl O N tO <
�N mtoo>O � m
1 V[O N Ot f� (� N
� m m m m m m m
a a a v a e v
;e v < v e < :
i� fnmmm��omammw
I OI N N O I� IP b N 1� In N
�t� 0O N�onn O 0to n
O m O � C) 1� l7 N a n �O in
' OJ O N r h t7 O� OI h O^�
iMmN�o �no�nm a �nc� w
' N N(7 M O1 O O O�- ��- ^ N
1 N N N N N t7 f7 M M N N N N
O O O O O O O O
0 0 0 0 0 o O o
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0�
� � � � � � �
a a a a e a a v
rrromo�inn
O N K h N T N fy
P O In Ol In In N In
O N(O N � N!O N
A C! 1� N N h N 0
nmmm e q�n �
mci�m ammoi
0 0 0 0
O O O O
0 0 0 0
Vl Ifl IA N
n n n n
: ? = p
Gm
0 o O
n n 0 tD O t� �n 1� c>
O N C' h N Ol N(7 (p
C< �q 0� 1[J N tn tO
O N tp N � N t0 N
e w N � N r N m a
O O m T o o �
In In 1� In In In t0 N tO
O O O O O O O O O O O O O
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 o c o
O O O O O O O O�
� � � b � � � �
C> t7 th M t7 [� nl M Cl
m�a vn.-wanmmnwr�o�o n wmm�mwmt+mm�a�em in
1� t0 m t0 N O�� O N h N N Q O n O m 0 1� IA m W N tp 1� IA N �
t7 Ot O � N V O f0 O O[O �D N Cl b n N h m N � t9 O IO N f7 � W tD h
O O h Gl 1� � 0 N N m N t7 � 1� O � O 1� C) h GI r � O Ol t� �O I[1
a o�oM.-oe�m mo <n in n a--om m ���cov o� �+
m � m�oma v n oa n om n oan�inmH �� �nmv mm nw
�riNNnirinmvvviciinin�o�6�nrnmcioimaioo_ _ r+
� � � � � � � � � � � � � � � � N[V tV N N
o�w� v in�nmmo-�+m<�n�o�mmo ��vma �m m� mm
O O O O O O O O O O �^ � �^^^ �^^ N N N N N N ry N N N
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N
�
O
N
N
9
C
0
0
N
0
c
�
c
m
�
� o
G
> E
Q O
V
d C
m C
C � �
E � t
c �
E o v
a, >
< < m
� 9
X y
a
� -
� o
3 �
N E
C y "
T
_ �
o ; v
�
� o o .�
c q
m � E �o
C Of � �"
d x N ° u E
� � c 2
� C y C V
L
v - 3 r �
r a o m o
w `� " H
o '
o � m . y H
� m �
� � d m d E
� o �_ �,�d
d V Z R C
m N E V y �:%
m � 0 6 v�
oj � m ° > 5
m� H W L N� I' �
� 9 �
=@ � O U N J O D 6
N O ¢ > •-
q O H O X> E L�
�a «�u�i d r¢ 3� �
7 C p O� W� N y X ry O C V
� o c v a - r r E
� N L (O 41 v� '^ � C
� O d Q�
7 U � O�� N� � N O C;
o m`m N« ' g m' o
�� C � O M � W m�� � y 3 m
n n C N O �>� m p'n
n m c.-w= 'o'n U [ y�
n�� a N v o
_' n@ � � � q `r' E G " i
w c U c m E E Q o o°� m
T O� m Q U C V S C` U` N.
� � ° ` _ .> ° _ `
$ v� �`c o° o: N E a � m
� o��� y N y c ' =° v
O 9 '
m� � C_ y W N d O� N i u
y V J N C�� N> D � O O O
n �
- = - � Q
� � a a a� x� d y w� w w
¢¢a aaw _ -
_ _ O � N m
_ _ _ _ C N !O n OJ N _ _ _
� O G O O l'1 0 6 O� 17 1n 0 O � q 0 m f7 b N 0' N � ^ O 1n O tV N 6�
OI � N N d ry n O f7 � m f7 f0 011� O O� 1�' Iti m
C C� OI N p� IA T O 1'� 1� 0 m m O(D N 0 m n Q n m fO N
V U� N m�0 bNOt�i� OO�N� O�n0000 nNd �O �
N n fD b In V^ O fp � N fp N N � � N 0 O O m f0 N�- O
NI ('1 < b�O W 0 O � Cl c1 O m 0 0 0 0 0 O h O1 O N n OI
V a G �� � � �.. �uivi�0 oiN oimeDm
� n=m'ma000000000000000000000000000
N 0 V � 0 0 17 Q
b5 m Quf� Om
� j O N O N N�
U tV N N �
n O O O O O O O O O O O O O O O O O O O O O O O O O D O O O O
¢
� � O
my o
�O
U —
mm�mmwonmp�nm�in n mmminmm�wnnm�
m nmo�ti <(DmDO W mmmNmm� meV �mo�� ��-mmn
O O t� N n � � 0 N N iv [V t� � 1� O � O f� � h N^ O O+ h 0 N
O O O ID t7 ^ O N m W O � O 1� � 1f1 1� P� O A W^ C! 40 O Q O 1� b
O m N N N N 17 f7 l7 O O Q N�� m m m h 1� N 6J 0 N OI 01 O O � � N
. . . . . . . � . . . . . . � . . . . . . .
� ��. �� � ��- � � � �- � � � � � � � � � � ��. CI [V N N N
m m� Q 0' � m 0 N a ro v� n n m e a Cl O 1O O � 0 0 0 N� LLf
m �<NtntO�01n00<�tOO�in� Nm �mbn 0 � nm t�m
� OOt�O,tOON00� N� 9N [01� N0m�00f �bOO
N p O� 17 O m A m O N t7 10 0 0 O N l7 b 1� N � Ci N n Of N V Q f0 �
N N�p�Omrorotp0nn t�nhn tOmmO W mN NO� W O10000�
�
C
E
U
Q
e o
a �
.. m c
� u m
0
m � a` �
» a e m
i
L � m Q
� � E m
K o m
� F t m
q 9
6 d 6 `
F
`m H °� N
y m
� m O
O „ � �
« � �p p
�j ? m
. ui
W � n
U � tV
V w
O =
Y U
m �
x u
w N
N �
�°- O
A �
�a
mo
N
� Q OI l�l I(�] 0 N Ill O V O d th m�(O l�l f0 N fO N� N O� O Cl � O Ifl m
< V n n! N pi 1t� W tV � O t� N 0 � m m O 0 N(O tD 1� d h N tO �(O N
. . . _ . . . . . . . . . . . . .
A IA � N N W N Ip 1p N O C) � O OI � N O d< O N V C! O N
��pnnnau�imn
_ . . . . . . . . . . . . . . . . .
�� .�� ����.-ninmmmwmmm
<�mo--mmu+n wnvinar+mcimmoe�e � aammin
nmoNmu
Nri�e.�rvn mrioi�n ri uin m e�cui vi O o�m ^�=oiG' <ri`cui
em n u+' m�n om nmin.v �no ninm �o m m� v�
t� Q 1�1 O N N b m l�l (D W N IA S N � fl N h A MI I� N N I[I I� N
t0 n OCInm00)mOi0iT010000 �^ N�Nmn� �N �.-� N
� N N N N N N
pN�fON °omrvou"imoennmmnao°mm�mmn no�n�0000
rv.cu�ma�o<u�� naaoov+mmau�mma inonao.-nin
N V C N t'� �(p 1� h h tp N� O O+ O O � N 1'1 1� N �0 I� h t� N N t7 fp
m m m m m.-M�nmrv Nn rvmmm� a �mm � m��o �n m�n
e e v e e w O� m m n w a e�n n m m m o c�in m m � m m w w
�����mO?+?+�OOOOOOOOOOOOOOONNNmOi
_ "_--�-------"---"—
0 o m S o o m v n o a v� a m� m N�O O�O N IA � N N n O O O O
w�mo-r�nmc moo�no�<.� �onme m�e��n
oic cioi m �rimemv vai n<NOi�mnrci ri �o
e m w� a n n m a w n m r�m m � fo m m � N m n n
l7 I(1 O � f�i m(O OI N O N 17 Q 17 Ill (O f0 O N V{V M 17 N N
_____�___m0m1�I±���liN
m t'�t'��n O binO ✓�ONNNNin�OOONOY�ONb�n�nN�If�nOOOOOO
O< N N tO N P 0 N O 1O < f7 l7 {7 m iD N N l7 � V A� 1�J < N fO V
m V b N IA A O O 17 N N N � fp {p N A{p N 1� N N T 17 0 O 0
�� 1� 1f1 V d N f7 1V fO I[l IA d N V b Cl V[V fD lC 0 N 17 V N N 0 10 0� N
y Y � Of N Q� O� W Of Oi O� Ol O� Of A C� Ol O� Of T W O� q N A Cl O+ N A OI T W
O 0 N< d V O V< O Y< Q e a a v a a e a a a e e e v a e v a e
m h a_________g__ageee ___V_V_____
N
OI W iD Yf Cl OI N � O N 1� f� � M N 6l fC (O f'1 N 0 OI m � 0 Ol V D m N
b' OJ 1� 1H ' N O 0 N 0 f0 b O Cl � Q d fO 1� 1� N N O In N h N N �
W � mo�'+m mn v�nm�nm oN�mmo�+n o�<�nt� o�mmr
rir nmcoi.oai� cn�immecaivii:rvmmnc aviri ti n(6vi
�� N l7 Q1 0^ O � N O 1�l fO � m N O m b d M q N 0 0{! O Cl O] h O M b
0 W � f N 61 � 0 N N 0 N 1� � N m N 17 V m f7 M IO � 0 Ol Q b l9 1� N
Q G�OOJn'mOlOi'OiO
� � t V N N N t V N N N N N N N M 1'1 t � M N N N N
�
S m
�
m
O
° E
=m
¢ 'f
m c
� V 0
m ¢ `m
- a=
( ° n m
O
O O O O O O O O O O O O O O O O O� g� O g� Q� O O� O O O
s a°
ae00000sso�:
N 10 b b N N 4f N Yf b N
t� d V Y O Y C O O Q M1
OOOON00m�VO�V.�Ntn<hnnmO00Nhtn0000
N(D 0 1� m CI l7 N 0 N m O n n m O N O N lV W N Cl 0
wa mmmm�ma.-eam l'lCONmbbNlAO
Q O V 1[l h � N � OJ 1� N 0 � I[I N O O N(O N � N m N �
8 pt�0! A�<tppNNqNOlNAt7/�NNhNO V
o n n m�r m n n w� m�o m n n n �. m m m e o in vi 'p
o m< e e ui ai ui ui ui vi ui ui a vi ei ei vi ri ri ei oi oi ei oi
n000000000000000000000000000000000
N In N� If1 N N Y) I[I 1[1 In N In I[I N N N N N N N 1A In I[I N I[] iA Ill
nnnnnnnnnnnnnrrnnnnnnnnnnnnn
Nma
w
IOOA W 0�00t[I� t�1NC11'1C1NN1�MfONN OIT(OOSN O�N10C1(OC 6lOf Ifl
y m��p �{7n�n �p�pON OOlbON1�OJN OOhOmmhb 0mn� 01� NN �
q� � N N In0t700�NC 0(000(pMt00NNm1�0N�tpO�Nl'i� W(pN
V D tO0i00 �n001�0�1�� �ol NaV ONt�.�n0�0'nn0���.� Ome� •Cw
xtp p� I� O)NOOfOn�0010T0.-<n��n�h' O W pa.-t�b O V Ol��n
O� Q� (7 n p(� m �{7 0 A N O i� O d h O l7 1� O< N N A N fp � 1[f N V m Cl N ry
`p°�V[OO+OI N
q m �' ^ � � � � � �Y N N N N
Z O f
LL
In f0 n 0 Of O � N 17 V N(O n m W O^ N 17 O I[f 0 N 0 N O � tV �< N Ip h m N
CI m N A O1 O O O O O O O O O O N N N N ry N N N N N
N m m Of N o 0 0 o O O O O O O O A O O O O O O O O O O O O O O O O O N
� � N N N �V N N N�Y N N N N N N N N tV fV N N N N N N N ry M N N
a �-i,�s
T
Q
N
� � r' f �
a
a
a
�
R � h
b a d
C O� O
C '+ L
'� �, m 0.
v
> > uj � C
L �¢ 3
v � N Q �i
,� � o � O
m
. f/J � y p
Q O = C �'
�"' U
>
U a d
w >_
. F � ix
F `"
u
�
9
e
[z
e
e
V
L
O
U
a
a
u
L
a
�
O
n
H
a
C
o C
ti a
N �
H
�
�
i
G
4
O C
v e
m ^
N
H �
H
c
O V
J Q
9 C
9 N �
C � O
� D U
R� ¢
�
O P
V
= Q O
v
� u e
°' °' w
C � m
m p c
� � T
�
u
°= z
9
{y ` u
e U
V V
� '>
U
�
e
v
u
.�.
m
F
u y
O
`c
a` p
F "
a
�
m
u °-'
� A
u �
u �
a °
w
� c
C
n
�
{z
S
m
a
m
U
C
y
�
c
O
c
V O
Q y
� a
s �
o �
m '
U
d
c
V
�
F
u
F
�
a
U
a
�
�
d
:
�
c
S
w
o T F
^ n A
m � F
o A d
� E �
m
q y a�
? y �
�' � O
�' E y
m
c u n
_ � �
c
eo -
c
'$ q u
60 m
O � C
.�� �
2 � e
0
o m M
� F� U
��s
� A �
a
� € a
�+ 9 �
A
� � 9
c � y u v
L @ U
"' O
A p R
G N �
a .;: F
. N
E � =
v�F-m
� N �n
Attachment VII - Team Termination Obiigations a0 ����
Cky of Saint Paul, Minnesota
Taxabie Parity First Lien Saies Tax Revenue Bonds, Series '1999
(Minnesota Wild Arena Project)
Schedule of Outstanding Debt and Prepayment Premium
(tl 121 13) 14) 15) (61 f7)
Series 1999 Outstanding Series 1999 Prepayment Total City Outstanding Totai
November 1 Principal Series 1999 Prepayment Premium Prepayment State Loan Prepayment
Year Payment Principai Premium Amount Amount Balance Amount
2/1/99 72,725,000 N/A N/A N/A 48,000,000 N/A
1999 0 72,725,000 N/A N/A N/A 48,000,000 NtA
2000 0 72,725,000 N/A N/A N!A 48,000,000 N/A
2001 545,000 72,180,000 N/A N/A N/A 48,000,000 N/A
2002 795,000 71,385,000 N/A N/A N/A 48,000,000 N/A
2003 360,000 77,025,000 N/A N/A N/A 46,750,000 N/A
2004 510,000 70,515,000 N/A N/A N/A 45,500,000 N/A
2005 680,000 69,835,000 103% ' 2,095,D50 71,930,050 44,250,000 716,180,050
2006 1,215,000 68,620,000 103°k " 2,058.600 70,678,600 42,750,000 113,428,600
2007 1,335,000 67,285,000 103% • 2,018,550 69,303,550 41,250,000 110,553,550
2008 1,470,000 65,815,000 103% 1,974,450 67,789,450 39,750,000 107,539,450
2009 1,610,000 64,205,000 102% 7,284,100 65,489,100 38,250,000 103,739,100
2010 1,765,000 62,440,000 101°h 624,400 63,064,400 36,750,000 99,814,400
2011 2,115,000 60,325,000 100% 0 60,325,000 34,750,000 95,075,000
2012 2,330,000 57,995,000 100°� 0 57,995,000 32,750,000 90,745,000
2013 2,565,000 55,430,000 100% 0 55,430,000 30,750,000 86,180,000
2014 2,650,000 52,780,000 100°k 0 52,780,000 27,750,000 80,530,000
2015 2,005,000 50,775,000 100°/a 0 50,775,000 23,750,000 74,525,000
2016 2,275,000 48,500,000 100% 0 48,500,000 19,000,000 67,500,000
2077 2,670,000 45,890,000 100% 0 45,890,000 14,250,000 60,740,000
2078 2,975,000 42,915,000 100°� 0 42,915,000 9,500,000 52,475,000
2019 3,375,000 39,540,000 t00% 0 39,540,000 4,750,000 44,290,000
2020 3,800,000 35,740,000 100% 0 35,740,000 0 35,740,000
2021 5,845,000 29,895,000 100°h 0 29,895,000 29,895,000
2022 6,305,000 23,590,000 100% 0 23,590,000 23,590,000
2023 6,800,000 16,790,000 100°� 0 16,790,000 16,790,000
2024 8,100,000 8,690,000 100°h 0 8,690,000 8,690,000
2025 8,690,000 0 100% 0 0 0
Totai: 72,725,000
(1) Estimated annual principal payments based on the total par amount shown
at the bottom of the co�um�. This amount is preliminary and subject to change.
(2) Represents the total amount outstanding after giving effect to the payment
show� in column one on November 1 of each year.
(3) The Bonds are subject to Extraordinary Redemption in the event of an early
termination of the Team Lease, but in no event earlier than November 1, 2005
{indicated by the ` next to the premium). Tfie Bonds are atso subject to
Optiona� Redemption beginning on Novemberl, 2008 at 103%, deciining to
100% as shown in the column. These cali premiums are preliminary and
subject to a successful marketing of the Bonds.
(41 Equal to the premium over and above the par amount of Bonds outstanding
(51 Equal to the total of columns (21 and (41.
161 Represents the remaining unpaid balance of the State Loan as of August 15 of
the year shown.
(7) Equal to the total of Column (5) and column t6).
Note: Prior to 11lt/2005 the Bonds cou�d be defeased with an escrow of U.S.
Treasury securities in sufficient amounts to pay the de6t service to the 11/1 /2005
call date. The cost of such an escrow is dependant on interest rates at the time
the escrow is purchased.
q�-1
Bond Counsel
ATTACHl��NT VIII
FINANCING TEAM
Briggs and Morgan
a
Underwriter Counsel
City's Legal Counsel
City's Financial Adviser
Bond Insurer
Underwriters
Rating Agency
Trustee
Kennedy and Graven
City Attorney's Office
Springstead
Financial Security Assurance
Miller & Schroeder, U S Bancorp Piper
Jaffray, Dougherty Summit, Dain
Rauscher
Standard and Poor
Nonvest Corporate Trust
.
CITY OF SAINT PALTL
Norm Co[eman, Mayor
OFFICE OF THE MAYOR �� ����
FINANCIAL SERVICES OFFICE. Budge[ Sectian
Joseph Reid, Dtreaor of Financial Services
240 Ciry Ha[I Telephane: (612J 266-8.i43
IS West Kellogg Boulevard Facsimile: (612) 26G&547
Sainz Pau1, Minnesota 55102-763I
MEMORAI3DUM
To: Council President Dan Bostrom
Council Members
From: 7oe Reid, Financial Services Dire�
Pam Wheelock, Director, PED
f•7�
Date:
Additional Briefing Material for Resolution 98-1146 and tl�e financing plan for
the Arena Lease.
December 22, 1998
Four items aze attached for your information:
1. Present value of the teams's annual rent payment of $3,500,000 compared to the
present value of the team's original $35,000,000 construction payment.
2. A memo from Martha Larson, Chief Financial Officer for the Minnesota Wild, that
responds to several questions raised by Councilmember Benanav.
3. A memo from Springsted, Public Finance Advisors, the City's Financial Advisor,
regazding the financing plan.
4. A copy of Projections of Local Sales and Use Taz Revenues by Anton and Associates,
Inc. and the monthly collections of the half cent sales tax through October, 1998.
This attachment was printed off the City's web page. The financing plan, and the
comparison of the original to the amended lease are also available there as of Tuesday,
December 22.
If you have additional questions on these subjects, please contact Joe at 266-8553 or Pam
at 266-6628.
����
s„a o�� a�i��s
The City of Saint Paul, Minnesota
RiverCentre Arena Financing
Comparison of Team Payments Due Under the Amended vs. Original L.eases
8.00%
Team Present
P_ayments
Value
6.60%
City Present
Value
Payments
ginal Lease
8.00%
Team Present
Value
6.60°/a
City Present
Value
A) Under the Amended Lease the Team s payments will be 2.5 times [hose required under the Original Lease.
B) Since the timing of the payments varies between the rivo lease agreements, the time value of money (interest) must be
considered. The interes[ rate chosen will have significant unpact on [he results. This analysis uses two interest rate
scenarios. All present values are calculated as of 2/1/99.
C) The Team Present Values assume an 8% interest rate. This isthe same rate used in the Team's pro foanas and reflects
the risk associated with typical sports financing issues. Under this assumption the cost [o the Team is appro�mately
$600,000 greater under the Amended Lease.
D) The City Present Values assutne a 6.6% interest rate. This is an estimate of the taxable revenue borrowing rate. Under
this assumption the wst to the Team is approximately $5.5 million geater under the Amended Lease.
E) The payments under the Original Lease are assumed to follow the current construction schedule.
� This analysis assigns no value to the Team s Letters of Credit of $6 -$8 million under the Amended Lease.
G) This analysis assumes that the PILOT payments under the Amended Lease net against the revenues (ticket surcharge
and mazquee revenue) in the Original Lease.
12/2�/98 12:51 FA% 651 222 1055
To:
From:
Date:
Re:
MINNESOTA WILD
,
Joc Reid, Director ofFinancial Sec�ices,
Pam Wheelock, Directos of Pl n� and Ecoaomic Development
Maitha Larson, Chief Financial Officer��.�j�._,�,L
' LJ '
December 23, 1998
Responses to Council Inquiries.
Here is the information you tequested to assist in responding to a number of inqiriries
from the City Council, regazding their review of the lease amendment, State loan
ad eement and related documents. � '
Timin� of A�rorovals
The NHL is currently reviewi�g Yhe lease amendment and State loan agreement, aad I
anticipate rceeiving their coxnments next week. Our objective is to secure their appsoval
prior to the City Council meetinn on 7anuary 6, 1999. .
In their meetir�g fhis moming, our Boazd approyed execurion of the City lease
amendmenf and the State loan agre.ement.
Team Pavments for Acauisition of the NHI, Franchise
As you lmow, the team has already remitted its frrst eamest money paymene of $10
miliion to the IVfIG. The final payment of $70 million is due by Apri12000.
Team Ownershiu
There has been no change in the ownership of the team since ttie equity investrnent
transactions were closed in December 1997. ,� .
Cc: , Jac.Spezlin�, CEO
444 CedarSC,S�ite900oSYPaul,MN53i01aPhone657-222•WILD�Far651-122-1055aWebwww.wliG.com �'ic =�;' � "
f� 001/001
12/23/98 16:28 FAS 6 SPRINGS INC.
85 E. SfVENIH PIACE SUf1�E 100
$qIMT PAUL, MN 55101-2143
672.223->OW FA..Y:672-223.300
��
SPRINGSTED
Pu61it Finann Advisors
December 23, 1998
Mr. Joe Reid
Director of Financial Services
City of Saint Paul
�5 West Kellogg Blvd.
Saint Paul, MN 55102
s
1
s�
RE: Arena Project-Taxable Sales Tax Revenue Bonds (the "Bonds")
Response to City Questions on This Financing
Dear Mr. Reid:
� oo2iooa
��-l� ��
The City has asked Springsted, as its financial advisor, to respond to two questions relating to
this financing. The first question relates to the City's general obligation rating and the second
relates to the revenue sources available for debt service. Our intention here is to be summary
in nature, but we would be available to expand upon eitfier response upon request.
1. "Nas the City, with this issue, improved its reVative position witfi the credit rating agencies
from that of the original arena financing?"
Response: In January 1998, S&P, while not changing the City's `AA+ "rating, did change their
rating outiook to negative from stable. In targe part this outlook change was the result of the
numerous unknowns then existing relating to the project. In January the tWO othe� rating
agencies, Moody s and Fitch, noted the Arena project but me�tioned no major concerns at that
time. For S&P in particular given the absence of a definitive State commitment as to their $65.0
million participation and the City's conYracEual commitment to buiid the facility, their position was
that the City potentially would need to finance up to $95.0 million of project costs, with a
possible totai bond issue approaching $105.0 million with construction interest and issuance
costs. At that time the City's authority to issue debt may have piaced considerable reliance on
a"generai obtigation" borrowing. One additional facEor was fhe presence and form of the State
participation, then thought to be a grant or a loan for $65.0 million. The overa0 situation was in
part embodied by the $33.5 million Generai Obligation Commerciat Paper issue, which is a
short-term financing vehicle used here to permR time to pass to resoive outstanding items.
Today, the bond financing unknowns present in January have been defined. l"he City intends
to issue approximately $72.7 million in Sales Tax Revenue Bonds, yieiding $65.0 in project
financing, and the State will loan the City $65.0 million, of which $48•0 million is to be fepaid.
From January the dynamics and amounts of the debt structure have changed. The City's debt
profile has now changed to include; a) the team participation rether than the State's; (b) a
reduction in direct debt to the $72.7 miilion of sales tax bonds from the potential $95.0 million,
(c) a change in the character of the debt from a potentially predominate general obligation
backing to saies tax; and the State's participation now defined as a loan.
SAW7v,aUL.MN • MINNEnPOLS,MN • eRO0I�1D.W • O�EKUNDP.iRK,KS ' W'ASFiAIGTOrv,DC • iOWAUTI;iq
12/23/98 16:29 FAS 6122 2J3002 SPRINGSTED INC. f� 003/004
�� -� I ��
City of Saint Paul
December 23, 1998
Page 2
For those factors listed above which are positive and the comments below, from a credif rating
perspec6ve, this financing package is on balance favorabie as compared with the January
situation. The agencies view this as a sales tax transaction (see response to question two}.
Over time the team's historicat financial performance may play a limited role in the agencies'
determination of the impact on the sales tax revenue stream. A net positive credit rating factor
is that the financing pian is now defined, as compared to January. We expect the agencies will
have limited questions on the fundamental change in the dynamics of the fransaction from the
City potentially funding their own share and the State's share to the City funding their own share
and the team's share (a legislative requirement to secure the State loan).
It should be noted that although this transadion is a sales tax revenue bond, without a pVedge
of the City's general obligation property taxing powers, it will stiil be considered by the rating
agencies in their determination of the City's debt burden relative to the City's genesal obligation
rating. Historicalty, the City has considered the use of a general obligation sales tax revenue
bond for certain projeds, but has not used this option. Three crfteria have historicaliy been
discussed. One, the credit rating impact is presented above. Second, the policy position would
be to ultimately pledge the property taxing authority of the City to tfie given project. The third
factor is the cost differential in terms of interest rates between the City's general obligation "AA"
rating and an insured revenue bond and the impact on the given project's cashflow. In the
cuRent market a broad estimate is that there is no significant interesf rate differential between
the taxabie insured sales tax revenue bond versus the taxable "AA" general obligation issue.
On a tax-exempt basis in a future market the answer may be different.
2. "Would Springsted comment on the security and repayment of this financing?"
Response: This transaction should be viewed from fwo perspectives, a) the bond market and
bond investors, and b) the City. To the bond market this transaction is a sales tax revenue
financing, for which the City has pledged att annual sales tax revenues from the %s cent
dedicated sales tax. Other sources of revenues are also pledged such as team revenues a�d
certain TIF revenues from Biock 39. The bond market focuses on the total dedicated sales tax
collections as their primary source of repayment.
To the City the potential use of sales tax revenues is diminished because of the contractual
payments under the lease with the feam. The estimates of revenues and expenditures show
that over the short- and intermediate terms team lease payments and the 40% portion of the
dedicated sales tax for the Civic Center shoufd be adequate 4o meet debt service for this issue
and the outstanding 1996 sales tax revenue bond issue. The sales tax estimates include a
2.2°/a compounded inflator over the term of the issue, with such inflator being approximately
5�% of recent City experience. Shouid the team not make their contractual paymenis on a
timely basis, the City will have in place a reserve to fund debt service for one year. tf the
difficulty with the contractuai payments is not resolved in this one-year time period, then the City
has pledged total dedicated sales tax collections for debt service. TF�e estimates o4 total sales
tax collections show the abiiity to make timely payment of debt service on both this issue and
the 1996 transaction. In the later years of the issue, 2016 and beyond, T1F revenues from the
Block 39 p�oject are estimated to be availabie to fund in paR debt service if required.
, 12/zJ/98 16:29 FA% 6122233002 SPRINGSTED INC.
City of Saint Paul
December 23, 1998
Page 3
C� 004/004
ag-���
As previously noted these are summary comments, which may require additional discussion at
the City's direction. We trust these responses address fhe questions posed to us. Piease feel
free to contract us 'rf we can be of any further assistance.
Respectfuliy,
��J �_
David N. MacGillivray, Principai
Client Representative
dmf
a �-i ���
SALES TAX STATUS
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Total - City Actual Estimates
Percent change from previous year
Actuaf
1995
841,230
684,422
668,953
758,190
688,302
764,829
487,350
1,043,013
722,945
867,643
743,344
697 944
Actual
1996
874,113
650,602
728,683
781,596
716,765
843,786
370,242
1,240,117
796,101
901,303
708,498
787 9 5
. •.: .. _ �
Actuai
1997
958,205
726,710
675,962
848,254
583,751
749,932
544,843
1,268,343
865,185
874,367
765,154
913 S34
�
4.0%
Actua! ( (Est. *)
1998
1,004,620
751,022
1,090,879
860,059
815,397
844,314
441,365
1,348,896
832,750
921,438
765,154 '
913 834 '
� :•
8.3%
Office of Financial Services - Budget Section H:\USERS\SUDGEll123\STAXFMSM.WK 12/23l98
q g -ll ��
City of Saint Paul
Projections af
Local Sales and Use Tax Revenues
June, 1998
Anton & Associates, Inc.
256 First Avenue North, Suite 250
M'inneapolis, Minnesota 55401
�g-����
I. Issues and Objectives
This study is a follow-up to and extension of an earlier study prepared in April, 1993 before the
local option sales taac for the City of Saint Paul was implemented. That earlier study, entitled
"City of Saint Paul: Sales Taac Estimates and Projections," included projections of the amount of
revenue the city could expect to raise with the haif-cent locat option sales t� which became
effective in October, 1993.
Though they were done in 1993, those projections were based on final data on Minnesota sales
taY collections for the year 1990 and preliminary data for the year 1991 because those were the
most recent data available at the time. In addition, as explained in that report, state information
about sales ta3c collections in individual cities overstates the amount of actual sales within the
cities' boundaries. Therefore, substantial adjustments had to be made to the 1990 and 1991 state
data to estimate the actuai taac base for the City of Saint Paul.
Since the city has been collecting the tax, its information about both its sales tax base and about
individual sales tax payers is vastly improved over what was available in 1993. Therefore, it is
appropriate to develop a new set of projections at this time. However, there are several additional
and more compelling reasons for doing a detailed analysis of the sales tax and other possible local
excise taxes at this time.
First, the city has committed to buiiding a new azena wkuch will house the National Hockey
r.League franchise which will begin to play in Saint Paul in the year 2000. As the city frames the
financial strategies necessary to carry out this plan, it is more impoRant than ever that the most
accurate possible projections be used to ensure not only the success of this plan but also the
continued fiscal heaith of the city. In addition, the success o£the hockey team and other
economic development initiatives may be transformative for the downtown business district,
thereby impacting future tax coliections.
Second, the city will have to modify its local option tax to include a use tax. This tax, chazged on
any equipment or goods which individuals or businesses purchase outside of Minnesota and brin�
across the state border for use in Minnesota, is currently part of the statewide sales tax. Saint
Paul officials chose not to include a local use tax in the tax proposal implemented in 1993.
However, recent legisiation in the State of Minnesota now requires cities to bring their local
option sales taxes into close conformity with state's sales and use tax. Therefore, the city of Saint
Paul must be�in to collect a half-cent local use tax within its boundaries by the year 2000. So it
makes sense to develop estimates of the additional revenue which will be raised as result of this
change mandated by the state.
Finally, the city also is now in a position to evaluate whether or not there would be a substantial
financial retum to undertaking an initiative to increase compliance with its local option sales taY.
Although there was an outreach and education pro�ram conducted by the Minnesota Department
of Revenue at the time the tax was implemented, the exact de�ree of compliance with the tax is
not known. Almost certainly there are some businesses who should be collecting and paying the
Saint Paul tax who are not doing so, but whether the number of such businesses and the lost
�g-�i��
revenues are substantial is unknown at this time. Given the information to which the city now has
access and recent improvements in the computer system at the Department of Revenue, it may
now be possible to frame an effective strategy for raisin� compliance and to make at least some
estimates of the likely financial return from such action.
The succeeding sections of this report will include
• a brief examination of city sales taa� receipts throu�h calendar 1997 in comparison to both
the initia11993 projections and to the growth in statewide sales tax revenues;
• projections of overall sales tas revenues for the years 1998 through 2002, together with a
breakdown of expected receipts by major industries;
• estimates of the amount of use tax collections for the years 2000 throu�h 2002; and
• a discussion of a collection strategy designed to raise additional sales tax revenues through
greater compliance.
II. Past Sales Tax Receipts
Actual sales tas receipts for the Saint Paul local option tax have grown each year. As Table 1
shows, receipts were slightly below ei�ht and one-half million dollars in 1994 and grew to over
nine and three-quarter million in 1997.
Table 1
Actual Sales Tax Revenues
Receipts Net of State Administrative Charges
Year
1994
1995
1996
1997
Receipts
$8,417,037.72
$8,968,16634
$9,399,710.47
$9,774,539.91
Annual
Growth Rate
6.5%
4.8%
4.0%
The growth rate of tax receipts has declined over the last three years. It may be true that the
growth of 6.5 percent in 1995 was artificially high if some companies only found out about the tax
with a time lag and, therefore, only be�an to collect it during that year. However, it is impossible
to estimate the precise impact of this possible effect.
�g �r��
Of greater potential concem for future revenue growth is the fact that receipts slowed to a 4.0
percent growth rate in 1997, a year of stron� national and regional economic growth. City budget
officials were especially concemed in mid- to late-1997 when year-to-date growth was runnin� at
the rate of azound 2.5%. However, detailed analysis of individual tax retums indicates that the
growth in revenues for 1997 was unduly impacted by the retums of one large corporation.
In particular, a large utility company filed amended sales tax returns in May, 1997 to correct for
its overpayment of the Saint Paul tas from October, 1993 through that date. This filin' resulted
in a refund to the utility of approximately $149,000 paid in May of last year. Since the state acts
merely as conduit for the cash receipts due the city, the effect of these amended returns was to
reduce the cash received by the city in May, 1997 by the fuil amount of the refund.
The quantitative effect of this refund on the growth of overall city sales tax receipts for the year
was substantial. If this refund had not been claimed by the utility company, revenues would have
risen by 5.5% in 1997, an amount more in line with the vibrancy of the local and national
economies.
When compared to overail state sales tax revenues, Saint Paul's sales tax receipts have grown
somewhat more slowly as the data in Table 2 indicate. Even in 1995 when city revenue growth
might have been overstated because of some startup effects, state revenue growth has been
greater than Saint Paul's rate of increase.
Table 2
Actual Sales Tax Revenues
City Growth Complred to Stnte
City St�te
Year Growth Rate Growth Rate
1995 6.5%
1996 4.8%
1997 4.0%
7.3 %
6.5%
6.0%
1997 5.5% 6.0%
(adjusted)
On the other hand, when the 1997 growth rate is adjusted for the effect of the refund discussed
above, a somewhat different comparison emer�es. Based on the adjusted tax data, it appears as
though city collections accelerated their growth in 1997 at the same time that state collections
slowed their rate of increase. Furthermore, the city's growth rate in 1997 came into much closer
�8 ����
conformity with the state's rate of increase. Criven the increasin�ly constructive posture of the
city with regard to economic development, it is likely that this trend will continue in future years.
Finally, it is also useful to compaze the ciry's actual revenues with the projections made in April,
1993. This is a fair comparison because economic conditions during the years in which the tas
has been in place have, by and lar�e, been in line with the economic assumptions which underlay
the baseline estimates in the earlier study. The foilowin� tabie shows revenue fiwres before
deduction of the state's administrative chazges since that was the quantiry bein� forecast in the
1943 report.
Table 3
Year
1994
1995
1996
1997
Sales Tax Revenues
Versus April, 1993 Projections
(Gross Revenues 6efore Administrative Charges)
($000)
Gross
Revenues
$8,597
$9,074
$9,506
$10,066
Projected
Revenues
$8,995
$9,248
$9,510
not projected
Dollar
Difference
$398
$174
$4
na
Percentage
Difference
4.63%
1.92%
0.04%
na
As the data in Table 3 indicate, the initial base line projections overestimated the tax base for the
year 1994 causing an overestimate of 4.6%. The projected rate of increase in the projections was
somewhat conservative by desi�n and the actual growth rate of revenues has been somewhat
higher than the projected rate. Therefore, revenues grew closer to the projected figures each year
until in 1996, the last year of the 1993 projections, actual revenues were virtually the same as the
revenues projected three years earlier. In 1993 no projections were made for calendar year 1997,
but, given the conservative growth assumptions used at that time, any such projections would
almost certainly have underestimated 1997 revenues.
Still the projections made in the earlier report should be considered successful from at least two
perspectives. First, they were made without the benefit of very timely data. Only final data were
available for 1990 and preliminary data were available for 1991. No state sales tax data were
available for calendar years 1992 or 1993 at the time the projections were made.
Second, and quantitatively more importantly, the adjustments made to reduce the tax base from
the overstated numbers in state reports were quite ciose to the mark. In particular, because of
R�-�r��
limitations in the data the state receives from tas filers, the Department of Revenue's report of
sales taxes collected in a particular city necessarily includes the data from the retums of some
businesses who list the city as their mailing address even thou�h they are technically located
outside of the city limits, sometimes in a Zipcode area which is totally outside of the city. At the
time the earlier projections were made, a literal reading ofthe state report for Saint Paul would
have implied that initial year sales taac receipts would have been approximately $13 million, over
40 percent higher than they turned out to be. Therefore, the 1993 adjustments were successful in
bringing expected revenues into a realistic ran�e for the city's financial planning and the issuance
of debt securities backed by sales ta;c receipts.
What can the City of Saint Paul expect for future salas tax revenues? That is the topic of the ne�ct
section.
III. Projected Future Snles Tax Revenues
The baseline projections of future sales tax revenue growth for the City of Saint Paul are based on
assumed continued economic expansion both nationally and regionally as weli as continued-
economic momentum in the city itself. The actual method for projecting city tax revenues
involves making projections for the growth of 21 different industries sectors which are important
collectors of the local sales tax and then adding those different industry forecasts together to
provide an overall estimate. In addition, adjustments are made for any special events occurring or
expected to occur in specific industry sectors.
Table 4
Baseline Projections of
Sates Tax Revenues
(Receipts Net of Stnte Administrative Charges)
Year
Receipts
($000)
Annual
Growth Rate
1994a
1995a
1996a
1997a
1998f
1999f
2000f
2001f
2002f
Source: Anton & Associates
$8,417
$8,968
$9,399
$9,774
$10,258
$10,653
$11,135
$11,698
$12,237
6.5%
4.8%
4.0%
4.9%
3.9%
4.5%
5.1%
4.6%
9� j���
As the data in Table 4 make clear, sales tax revenues are expected to grow at annual rates of
between 3.9% and 5.1% over the upcoming five yeazs. Again, it should be emphasized, that this
path is predicated on the absence of either a national economic recession or an economic calamity
with severe regional consequences. (A subsequent portion of this section of the report deals with
alternative economic scenarios.)
Revenue growth is projected to be 4.9% in 1998, an actual acceleration of growth over 1997's
pace. However, it should be noted that the 4.0% growth in revenues in 1997 was depressed by
1.5% due to the effect of the one-time refund discussed above, an event not likely to be repeated
with another entity of similar size. In fact, the 4.9% growth for 1998 represents a slowing from
the growth which would have otherwise been realized last year. In the detailed industry
projections contained in the appendix, growth in the affected industry sector (SIC Code 49) is
approacimately $154,000 in 1998 based on a normal year of industry receipts without any amended
returns.
In 1999, gowth is expected to slow to a 3.9% annual rate before startin� to accelerate in the
years 2000 and 2001. This latter acceleration is based on two factors, the expiicit stimulus
provided by the hockey team and the new arena and the general building of additional momentum
in the central business district based on redevelopment plans now underway or contemplated.
The hockeyfarena impact is concentrated in stadium concessions, bars and restaurants, sports
ticket sales, parking and lodging. The more general momentum produced by such events as the
relocation of Lawson Software has an impact on restaurants, parking, general merchandise
shopping; and business services among others.
The growth rate is highest in calendar year 2001, projected as the first fuli year of hockey piay
and arena operations. Crrowth is projected at 5.1% for that year before slowing to 4.6% in the
following year.
Of course, these multi-year projections do not factor in the effects of a national or regional
economic slowdown. Such events, especially if they were to occur in the early years of the
projection period could seriousiy derail financial plans grounded on this baseline forecast.
Therefore, additional perspective can be gained, and perhaps caution acquired, by examining what
the likely effects of such events would be on the stream of revenues to be expected from the city's
sales tax.
Conversely, it is possible, and indeed hoped, that the city will make even greater economic
progress than assumed in the construction of this baseline forecast. It would be useful to attempt
to quantify the effects of a more optimistic scenario on the city's expected sales tax collections.
Therefore, the next table includes projected revenue streams for two alternative economic
scenarios. The column labeled "Economic Slowdown" includes the projected revenue stream for
a scenario in which a"garden variety" recession hits the nation and Midwest proportionately
beginning eady in calendar year 1999. The recession includes two quarters of deciining real
Gross Domestic Product and another quarter of essentially no growth. The net effect of this
scenario is to depress the growth of local sales tax revenues to rates of growth of 1.5% and 3.5%
��-�� ��
in 1999 and 2000 respectively_ However, revenue growth rates are somewhat hi�her in the two
yeazs following the recession than they are in the baseline projections. The net impact of this
scenario is to produce a revenue shortfall (relative to baseline) which grows to $360,000 in the
yeaz 2000 and then declines modestly from there on.
This scenario is not meant as a prediction that there will be recession in 1999. The start date was
chosen to maximize the impact on prospective revenues. Obviously, a recession occurrin� in one
of the more outlying years would have a smaller impact on the expected revenue stream for the
city.
Table 5
Atternative Projections of
Sales Tax Revenues
Year
1998f
1999f
2000f
2001f
2002f
Economic Slowdown
$10,412
(1.5%)
$10,776
(3.5%)
$1•1,368
(5.5%)
$11,937
(5.0%)
Baseline Projection
$10,258
(4.9%)
$10,653
(3.9%)
$11,135
(4.5%)
$11,698
(5.1%)
$12,237
(4.6%)
Stronger NIomentum
Source: Anton & Associates
$11,238
(5.5%)
$11,969
(6.5%)
$12,746
(6.5%)
The column in Table 5 labeled "Stronger Momentum" is desi�ned to show the possible impact of
a more optimistic outlook for Saint Paul's local economic growth. The growth rate of sales t�
revenues in this scenario is distinctly higher than in the baseline case. Implicit in this scenario is
the assumption that national economic conditions are similar to those assumed in the baseline
projections.
While the increment in projected growth rates beginnin� in the year Z000 may stili seem
conservative relative to some people's visions of how dramatically economic momentum may
change if all of the possible economic initiatives undertaken or contemplated succeed, it should he
pointed out that this is a citywide growth rate. Higher growth rates for specific areas, especially
the central business district or targeted redevelopment areas, are certainly possible, but their force
would be somewhat diluted when considering citywide numbers.
Therefore, it is felt that this scenario gives a realistic scaling of the upside from succeeding in line
with the city's wildest dreams, if not necessarily beyond. The cumulative effect of the stronjer
q81t ��
growth which is assumed to begin in 2000 culminates in an additional $510,000 in sales ta�c
revenues for calendar year 2002.
It should be pointed out that these two scenarios are not intended to bracket the range of all
possible outcomes. In particulaz, the first scenario assumes national weakness combined with
local conditions otherwise similar to the baseline case. The second scenario assumes the same
national conditions as the baseline scenario with stronger local economic momentum
superimposed. Obviously, if the national economy were to exceed baseline assumptions while
local initiatives were as successful as assumed in this second case, revenues could be even higher.
Likewise, less happy local outcomes combined with a weaker national economy could push
revenues below the first scenario's path. Nevertheless, these two altematives provide important
perspective on the range of variation which could be experienced and, hence, should be
considered in contingency plans.
IV. Projected Future Use Tax Revenues
Use tax proceeds aze much more difficult to forecast than are sales ta�c revenues, in generai.
There are several reasons for this. First, the major payers of the state's use tax are corporations
who buy equipment from out-of-state vendors for delivery and use at locations inside of
Minnesota. Therefore, use tax receipts tend to vary with capital spending plans of companies,
especially larger companies, in Minnesota. The capital goods industry is one of the most volatile
sectors of the national and regional economies because, tygically, companies postpone non-
essential capital purchases in times of economic:weakness and then catch up with their postponed
purchases when economictimes (and cash flows) improve. This pattern stands in sharp contrast
to most retail sales (except for appliances and autos) whose flow is affected to a lesser extent by
the ebb and flow ofthe business cycle.
Second, much of the capital spending can be done by manufacturin� firms who often sell their
products directly to businesses and, therefore, may not collect sales tas. That is to say, the
industries who pay use tax to the state can be a very different mix of industries from those who
are filing sales tax returns. Therefore, the understanding of the dynamics of certain industries
which is helpful in projecting sales tax revenues may be of somewhat less help in forecasting use
tax revenues paid by a different set of industries.
Third, capital goods sales tend to be "lumpy," that is, the total of all sales may be dominated by
the effects of a few very large purchases. In doin� forecasts for locai area such as Saint Paul, this
creates an even greater problem because the actual revenues which the city can expect to collect
may go through wide swings as a large company or two builds and equips a new facility. In short,
it is harder to anticipate the sum of a few large purchases than the sum of a myriad of smaller
ones.
Finally, in projecting the proceeds to be realized by the city in future years, we face a data
problem analogous to the problem that was faced when makin� the first set of sales tax
projections in 1993, namely we do not have very timely data and the data we do have overstate
the city's actual tax base.
q�' ����
The Department of Revenue reports for state sales and use tax coilections are only available
throu�h 1995. This means that even if the state report represented the local ta7c base accurately, it
would still be necessary to estimate what had happened in 1996 and 1997 before we could project
for 1998 and beyond.
And, for reasons discussed earlier in this report, the fi?ures on use tax collections are hi�her than
Saint Paul should expect to collect because they inciude data from the returns of companies which
are located outside of the city limits and, hence, not liable for the local tax. In particular, the
states reports for Saint Paul, have in some years contained very large use tax collections from SIC
Code - Paper Products. There are only sixteen companies in this sector and the Department of
Revenue's policies prohibit disciosing whether any particular company has filed a return, let alone
how large a retum. Nevertheless, it is a very likely assumption that this category is dominated by
purchases made by 3M Corporation ofMaplewood. Purchases by 3M will not be subject to the
city's use tax unless it has a facility located inside the City of Saint Paul. If it has one, the site is
minor compared to the Maplewood complex. Similarly, it is very likely but not confirmable
through official sources, that the use tax numbers for Saint Paul may include purchases by
Northwest Airlines of Eagan in SIC Code 45 - Air Transportation.
Historical Data on Use Tax Purchases
The unadjusted data for purchases subject to use tax taken from the Department of Revenue
reports on Saint Paui aze included in Table 6.
T�►ble 6
Year
Purchases Subject to State Use Tnx
Reported in the City of Saint Paul
(Historical Dnta)
Total Purchases Subject to
Stnte Use T�x
Impiied City Revenues from
H�If-Cent Local Use Tax
1987
1988
1989
1990
1991
1992
1993
1994
1995
$157.0 million
$169.7 million
$113.0 million
$371.4 million
$491.4 million
$462.0 million
$489.0 million
$4962 million
$448.7 miilion
$267,8 million
Source: MinnesotaDepaRmentofRevenue
$ 785,000
$ 848,500
$ 565,000
$1,857,000
$2„457,000
$2,310,000
$2,444,960
$2,481,240
$2,243,450
$1,339,337
lo
q�-����
As the data in Table 6 apparently indicate purchases subject to state use tax inside the City of
Saint Paul appear to have gone through a wide ran�e of variation. However, the eactremely wide
range of variation in the unadjusted data strongly su��est that several lar�e payers, perhaps
including the ones discussed above, have drastically influenced the overall results. A detailed
study of the pattem of purchases by industry segment was undertaken to see if there were
discernible pattems which would su�gest appropriate adjustments which should be made to the
data. Three industries showed especially interestin� pattems which lead us to some educated
guesses and adjustments in the data flowing from those guesses. Table 7 shows the annual
purchases data for those three industries, paper products, air transportation and eatin� and
drinking establishments.
Table 7
Year
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
Purchases Subject to St1te Use Tax
Reported in the City of Saint Paul
(Historical D�tta for Three Selected Industries)
($millions)
SIC 26 SIC 45 SIC 58
Paper Products
Air Transportation
Enting and Drinking
$ 0.8
$ 0.4
$ 0.4
$123.6
$190.6
$188.8
$159.1
$182.4
$200.1
$ 4.9
Source; Minnesota Department of Revenue
$30.8
$51.2
$28.5
$35.5
$77.7
$65.7
$ 0.7
$1.4
$51.6
$60.6
$0.7
$0.8
$1.0
$0.8
$0.9
$17.0
$41.0
$46.9
$2.1
$$32
The first column shows annual use tax purchases for the paper products industry. We infer that
these purchases were likely to have been made by 3M and its divisions and hence should be
excluded from the Saint Paul tax base in formin� projections of expected use tax revenues. The
sharp increase in purchases in 1989 and the sharp drop in 1995 are likely to have resulted from
either organizational changes at the company or chan�es with regard to company purchasing
policies. In particular, the drop in 1995 may be the result of a chan�e in purchasing management
and policy such that either suppliers in Minnesota were being used or, probably more likely, out-
of-state suppiiers are remitting the ta�c directly to the state as sales taxes, thereby substituting for
the direct use tac payments which had been made by the customer, 3M, in 1994. Therefore, one
11
�8«y�
adjustment we chose to make to the taac base for Saint Paul is to exclude SIC Code 26 altogether,
i.e. assume use tax payments will be zero from ttus industry.
The second and third columns in Table 7, air transportation and eating and drinking
establishments seem to be related. We postulate, but cannot at this time confirm, that the pattern
of a precipitous drop in use tax payments form the airline industry and a sudden spike in payment
from the eating and drinking industry is related to a possible organizational change or supplier
relationship of Northwest Airlines and its food and/or catering suppliers. A logically consistent
story would be that use taac purchases were booked by an in-house food service arm of the
company through 1991, but that an outside contract for catering was awarded beginning probably
sometime after mid-year 1991. If the contract ended at the end of 1993 and the function was
brought back in house, the mirror image movements in the two industries' reported purchases
would have resuited. It may be possible to check on this through company sources. We wiil
endeavor to do so. However, we also choose to exclude airline use tax purchases from the
adjusted tax base for our calculations and will adjust the eating and drinking purchases by
reducing the historical data for the yeazs 1991 throu�h 1993 to be in line with the level of
purchases in the years before and after the period.
Use Tax Projections
To produce estimates of the revenues which would have been collected under a local use tax in
Saint Paui for the years 1992 throu�h 1995, we first made the adjustments discussed above,
namely excluding paper products purchases and airline purchases and adjusting eatin� and
drinking use tax payments: But the resultin� revenues would probably overstate use taxes
somewhat because they would still include data from firms outside the city boundaries.
Therefore, in addition, we further reduced those implied revenues by an additiona125 percent.
This further reduction was chosen after inspection of the relationship of actual city sales tax
revenues to the state's reported sales tax revenues for Saint Paul in the industries which are the
larger payers of use tax.
This process provided a base estimate of the tax base in 1992 through 1995. At this point, the
best approach we felt justified in taking was to grow those revenue figures at a constant and
conservative rate of 3 percent per year. The resultin� numbers are included in Table 8 below.
A coupie of points should be made about these estimates. First, they are much more speculative
than the sales tas estimates contained in the earlier sections of this study and subject to much
greater expected enor than the initiai projections of sales tax revenues made in 1993 before the
city had access to individual sales tax return data. Second, the actual collections in the years 2000
and beyond will be driven by the pace of economic development in the City of Saint Paul.
Significant projects, such as Lawson Software, are almost certain to have a sizable impact on the
actual revenues collected. The projections presented here have not been formed in a way which
would fold in the potential impact of such projects. As bud�ets and plans for new commercial,
office and manufacturing facilities are made, it may be possible to estimate a use tax impact for
each project separately. Such estimates should probably be added to the baseline revenue levels
being put forward here.
12
�8 ���
Table 8
Projected Revenues
City of Saint Pau1 Local Use Tas
Year
1994e
1995e
1996
1997
1998
1999
2000
2001
2002
Revenues
$738,551
$758,599
$781,000
$805,000
$829,000
$854,000
$879,000
$906,000
$933,000
Source: Anton & Associates estimates
The city is left with an almost irreducible level of uncertainty about the proceeds for the use tax.
With advances in the state's computer system, we have framed a strategy where some
supplemental data runs will be done to help sharpen our estimate of the 25 percent discount factor
used to further adjust the use t� revenues in this section. However, those runs were not ready at
this writing and, in fact, they hold out little hope of sharpening our overall estimates significantly
because of the other economic uncertainties about both the period since 1995 and the future
course of economic events in Saint Paul. Even after all of this analysis, it is very possible for the
revenues in the yeaz 2000 to differ from our figure of $879,000 by as much as $400,000. It is
somewhat more likely they would be higher than our projection rather than lower.
Nevertheless, it seems clear that the city should implement the use tax as soon as it is abie because
it would raise additional funds, however uncertain we may be of the exact amount. Once the city
has experience with actual collections of its use tax, it will also be possible to do a much better job
of understanding the pattem of use tax purchases and, ultimately, anticipating future years'
revenues.
V. Comptiance Issues and Strategies
The exact degree of compliance with Saint Paul's local option sales tax is not known. Almost
certainly, there are some businesses which should be collectin� and remitting the tax which aze not
doing so, but their number and the potential additional taxes that would be collected if compliance
were raised remain unknown. The city is considering whether it would be worthwhile to
undertake an initiative to raise compliance. In at least one instance, a city raised significant
additionai revenues throu�h undertaking such an effort.
13
���`�
In 1990 and 1991, after a study done by the principals of our firm who were workin� for Emst &
Youn� at the time, the City of Minneapolis chose to publicize its sales tax to businesses in the
city. In the yeaz followin� this initiative, revenues rose by I1 percent, a �rowth rate well above
the preceding year's growth and also well above the 5 percent rate bein� projected at that time.
If the City of Saint Paul were to undertake such an effort, it is unlikely that the financial retum
would be as hi�h as that experienced by 1vlinneapolis. Two factors argue for somewhat lower
expectations for the effects of such an initiative. First, the education effort undertaken by the
Mnnesota Department of Revenue at the beginnin� of Saint Paul's tax was significantly more
thorough, in our view, than what had been done earlier in Minneapolis. Therefore, Saint Paul
probably had significantly higher compliance on day one than did Minneapolis.
Second, changes in the Department of Revenue computer system and collection system now make
it harder for payers of the tax to avoid it or to "forget" to pay. Today, the state sends each
business taspayers a preprinted, customized form which includes line items for the state ta�c and
any local taxes for which the taxpayer is liable.
Despite these two factors, there remains a real possibility that the City of Saint Paul could coilect
enou�h additional tax to make.a collection initiative worthwhile. In the next section, we lay out
our recommendation for how such an initiative should be structured in order to be raise additional
revenue in a cost-effective manner.
There are two�separate groups of potential additional payers of the sales tax, namely businesses
located inside the Saint Paul city limits and those located outside the city limits who sell into Saint
Paul and, therefore, should pay the tax. As a practical matter, it makes sense to have separate
strategies for these two groups.
Businesses Inside Saint Paul
To assess the possible number of businesses inside Saint Paul who may be avoiding the local sales
tax, we were able to request a list of names and addresses of selected businesses located inside the
Saint Paul city limits. All of the businesses on the list had Saint Paul addresses and had not filed a
Saint Paul sales taac return but had paid the state sales tax in one or more of the years 1994
through 1496. (Similar data on 1997 has become available since our data request.) Table 9
below is based on data received under this request.
The data show that over this three year period over one thousand business entities with Saint Paul
addresses paid some state sales tax without filing a local sales tax return. Undoubtedly, some of
those businesses were not liable for Saint Paul's sales tax. For example, a building cleaning
business run out of an office in a person's home in Saint Paul but with no clients inside the city
limits would not be liable. Neither would a mail-order business which did not have any sales
inside the city limits.
I �1
�,�-�r�,�
Tabie 9
Number of Saint Paut Businesses
Filing State Sales Tax Returns
But Not Fi]ing City Sales Tax Returns
1994-1996
Number of Years Filed State
Return Without Filing City
Return
Number of Firms
Number of Possibly Missing
Locai Returns
One year
Two yeazs
Three years
Totals
683
253
160
1,036
Source: Minnesota Department of Revenue, Anton & Associates
683
506
480
1,669
The Department of Revenue cannot release information regarding the sizes of the businesses or
the amounts of their state sales tax liabilities. Judging from the names themselves many of the
businesses are probably very smail; many of them actually bear the names of individuals. We did
receive information about the industry desi;nations for the taYpayers in this data set. Table 10
includes information about the distribution of these firms across industries.
As the data in Table 10 indicate, the greatest number of potential taxpayers are in the
Miscellaneous Retail industry with Business Services being the second largest category. Beyond
the six industries singied out in the table, businesses were scattered through a variety of other
industries. Over all there were 643 businesses located in Saint Paul that filed state returns but did
not file local sales tax returns.
is
�� ����
Table 10
Industry Distribution of Saint Paul Businesses
Filing State Sales Tax Returns
Without Filing Locai Sales Tax Returns
SIC Code
59
73
58
72
57
50
Industry
1V1'iscellaneous Retail
Business Services
Eating and Drinking
Personal Services
Furniture
Wholesale Durable Goods
All Others
Total
Number of State
Returns FiSed in 1996
210
94
29
28
24
17
261
643
Total State Returns
Filed, 1994-46
Source: Minnesota Department of Revenue, Anton & Associates
593
258
73
80
67
53
545
1,669
It should be emphasized once again not only that many of these businesses are sma11 but also that
many of them may, in fact, not have Saint Paul sales tas ]iability. However, in dealing with this
group of businesses, the city has a distinct advantage as compared to dealing with potential
taxpayers located outside the city limits: namely, we know who the businesses are and where they
are located.
Therefore, an effective approach to raising compliance of (and revenues from) this group would
be the following set of steps:
• Obtain similar information for calendar year 1997 on Saint Paul companies paying
state sales taxes but not payin� the local tax
• Double check addresses to make sure they are inside the city limits
• Send each business that filed a state return in 1995, 1996, or 1997 a mailing which
requires a response re?arding whether or not they are liable
• Follow up on responses from firms and take additional actions with firms who choose
not to respond
Response to the mailings could, perhaps, be encoura�ed with some sort of offer of partial amnesty
for back ta�ces owed. The focus would be on raisin� revenues in the future and it very likely that
R�
! V �G ���
for some of these businesses who might be liable it mi?ht be very difficult if not impossible to
accurately reconstruct what their liability for a past year was because they have had no reason to
keep the detailed records from which such a calculation might be made.
In undertaking this effort, the Department of Revenue could help in a number of ways. If given a
list of names and addresses, the Revenue Accounting Unit could produce a report giving the
a�gregate state sales taxes paid by the group even thou�h no individual data could be released. In
additioq the newly-created liaison for local taxes, the Targeted Information Unit, couid help with
designing the letter to be sent and other elements of approaching the businesses.
In summary, approaching this population of possible local sales tax payers is relatively
straightforward, especially when compared to the hazder task of identifying potential payers
outside the city. It is also probably likely that this se;ment has less potential for si�nificant
revenue gains that does the outside segment.
Businesses Outside Saint Paul
Many firms who file Saint Paul sales tax returns are located outside the city limits. In fact, our
analysis of the individual records for the larger taxpayers indicates that almost half of the firms
that pay Saint Paul sales taac have addresses outside of the city limits. Some of these businesses
are disbursing funds from a headquarters and have business ]ocations inside the city limits. Many,
especially business service firms and personal service firms, are not located inside the city but sell
services or deliver goods to city businesses and residents and must, therefore, coilect the tas.
Data compiled from the returns of the larger tax payers is contained in Table 11 below.
Table 11
Location of Businesses Filing
S:tint Paui Sales Tax Returns in 1997
(firms paying over $500 per year)
Location from which tax is paid
Number of 1997 Revenues
firms
Percent of Total
Collections
Inside City limits
Inside Minnesota, but outside City
Outside Minnesota
1,113 $3,680,979
622 $3,916,313
305 $1396.399
Total 2,040 $8,993,691
Source: Minnesota Department of Reyenue, Anton & Associates
36.6%
38.9%
13.9%
893%
17
9� i��
There are 927 firms outside of Saint Paul which currently pay over 52 percent of the Saint Paul
local sales taz at this time. How many more firms should be paying? To answer this question and
to identify those additional fums, we recommend the following basic steps:
• E�ctract a complete list of all firms located outside Saint Paul that pay more than $500
per yeaz in local sales tax to the city
• Sort the list by industry and inspect the list of taxpaying firms in each industry
• For each industry, prepare a list of inetro, regionai, or national firms with location and
characteristics similar to taspaying firms as potentiai tax payers
• Contact each of these firms with information in a mailing and follow up on responses
and non-responses
The Department of Revenue will be able to advise on the design of some of the materials. It may
also be possible to design information requests to be made to DOR which would help to generate
gross estimates ofthe potential revenue from specific industry sectors.
In summary, we do not have enough information to make a reliable estimate of the additional
revenue to be raised from a compliance initiative. We believe that findin� additional businesses
with significant liability which are located outside of the City of Saint Paul is a more promising
avenue than finding large non-payers inside the city limits. However, the latter group may also be
worth pursuing because ttiey are relatively easier to identify.
Although we have not made estimates of the cost of a compliance initiative, we think it quite
likely that such a pro;ram would raise enou�h new revenue to pay for itself but we doubt that it
would generate a revenue increment proportional to that which Minneapolis experienced. When
the city enacts a use tax, as it must by the year 2000, there may be useful synergy between the
education effort undertaken at that time and the search for additional taxpayers inside the city
limits. Action to identify additional taxpayers outside of the city could be done at any time.
18
Arena Lease summary
Summary of the Provisions of the First Amendment
to Lease and State Loan Agreement
Ori�inaUAmended Lease Comparisons ����� Financine Plan
Page 1 of 8
( 0 d���
I. SUMMARY OF THE FIRST AMENDMENT TO ARENA LEASE
The following is a sununary of the First Amendment to the Arena Lease. The changes
over the Original Lease which was executed in January of this year, for the most part,
are to implement legislation passed during the 19981egislative session, to evidence the
State Loan, and to reduce the amount the City is required to contribute to the Arena
from $95,000,000 to $65,000,000.
Section 1. This section amends certain defmitions set forth in the Original Lease,
including "City Contribution" which has been increased from $30,000,000 to
$65,000,000. A definition of "Rent" is included, which includes "Base Rent" and a
definirion for the payments in lieu of taxes (i.e., "Pilot Payments"), which the Tenant
isrequired to make in lieu of the Tenant's $35,000,000 contribution in the Original
Lease. The definition of "Project Costs" has been amended to include the fees of the
respective Construcrion'Representatives.
Section 2. This secrion deletes various terms in the Original Lease and is necessary to
reflect that the State is making an interest free loan from money appropriated from the
State general fund, rather than a grant from the proceeds of State general obligation
bonds.
Section 3. This section adds defined terms to the Lease to reflect, among other things,
that the Tenant has agreed to provide a letter of credit to secure its obligation to pay
Rent, which letter of credit will be used by the City to fund a portion of the reserve
required for the City Bonds. The "City Bonds" are the Series 1999 Sales Tax Revenue
Bonds which are described in the Financing Plan which is set forth in a separate
attachment.
Section 4. This section amends the Lease to require the Tenant to pay $3,500,000 per
year as Base Rent, payable quarteriy in advance commencing on September 1, 2004,
through and including June l, 2025. The Base Rent due on September l, 2000, is
deferred until October 15, 2000. There is also a provision in the Lease to the effect that
Base Rent will decrease if the City does not approve a special sign district for
advertising on marquees for the RiverCentre.
This section also reflects the Pilot Payments to be paid by the Tenant. The Pilot
12/22/9g 5:3634 PM
1
�
4
5
6
7
8
9
10
11
12
13
14
15
16
27
18
19
20
21
22
23
24
25
26
� 9
30
31
32
33
34
35
36
37
38
i
RESOLVED:
����
� �� �
L°��"�j
q� -� i�t6
1. The City Council hereby approves First Amendment to
Arena Lease, First Amendment to Hockey Playing Agreement and the
State Loan Agreement (collectively, the "Documents") in
substantially the forms submitted and authorizes the Mayor,
Clerk, Director, Department of Planning and Economic Development
and Director, Office of Financial Services (the °Authorized
Officers") to execute the Documents. Any other documents and
certificates necessary to the transaction described above shall
be executed by the Authorized Officers. In the event of the
disability or the resignation or other absence of any of the
Authorized Officers, such other officers who may act in their
behalf shall without further act or authorization of the City be
deemed for purposes of this Resolution as such Authorized
Officers and shall do all things and execute all instruments and
documents required to be done or to be executed by such absent or
disabled officials. The approval hereby given to the Documents
includes appraval of such additional details therein as may be
necessary and appropriate and such modifications thereof,
deletions therefrom and additions thereto as may be necessary and
appropriate and approved by the Director, Department of Planning
and Economic Development and the City Attorney; and said
individuals are hereby authorized to approve said changes on
behalf of the City. The execution of any instrument by the
Authorized Officers of the City herein authorized shall be
conc2usive evidence of the approval of such document in
accordance with the terms hereof.
2. The City Council hereby approves the Financing Plan;
provided that the issuance of the City Bonds as described in the
Financing Plan is contingent upon the holding of a public hearing
on and approval of certain amendments to the Block 39/Arena Tax
Zncrement Financing Plan, the adoption by the City Council of a
final resolution authorizing the issuance of the City Bonds, and
the adoption of a resolution approving certain financing
documents by the RiverCentre Authority.
Lc,Gr+c
3 • �ikF�(�c � rs t�'ft�°�ftc����e�r�6�i,
ma� �c f���«�l a�"�� �6 �u � �� re,
/�C�� �i �•C��rN�O��cf� ��f. e��
�Ii�a �n
r� �L.
� "�G
1002941.3
�t���,�
��ic /�tit k���c
�t �G�i 124w eX/sf5
� _ �r���l Cea�c
� � �
C
�� ��
Y�/ �
�
a�-l�y�
2 �
3
4
S
Adopted by Council: Date
Adoption CeRified by Council Secretary
By:
Approved by Mayor: Date
By:
3002941.3
equ by Department of: �
u£h/)/� ��=�/� f�6
_., 7 _"' ,
By:
C\ ���� Y��
�
' - l'� � � Q C �Q —
� � ��a � 9q
RESOLUTION
CITY OF SAINT PAUL, MINNESOTA
Presented By
Referred To
Committee: Date
Council File # — tg "" ��_�
GreenSheet# lv//��
39
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
RESOLUTION APPROVING AND AUTHORIZING EXECUTION OF A FIRST
AMENDMENT TO ARENA LEASE, A FIRST AMENDMENT TO HOCKEY
PLAYING AGREEMENT AND A STATE LOAN AGREEMENT IN
CONNECTION WITH THE ARENA PROJECT
I:I;i�l a���
1. Pursuant to Laws of Minnesota, 1967, Chapter 459, as
amended, the Civic Center Authority (hereinafter referred to as
the "RiverCentre Authority") was created as an agency of the City
of Saint Paul (the "City"), and given the power to, among other
things, build, equip, maintain and operate a civic center
complex, now known as the RiverCentre Complex, which includes an
arena (the "Existing Arena").
2. The City, the RiverCer.tre Authority and Minnesota
Hockey Ventures Group, LP, a Minnesota limited partnership (the
"Tenant") have hereto entered into an Arena Lease dated as of
January 15, 1998 among the City, the RiverCentre Authority and
the Tenant (the "Arena Lease") which sets forth the rights and
obligations of the parties with respect to the demolition of the
Existing Arena, and the design, construction, financing and
operation of a new arena (the "Arena"), and (b) a Hockey Playing
Agreement by and between the City and the Tenant (the "Hockey
Playing Agreement") pursuant to which the Tenant agrees that the
Team will play all its NHL Home Games (as defined in the Hockey
Playing Agreement) at the Arena.
3. Pursuant to the Arena Lease, the Tenant agreed to
contribute at least $35,000,000 (the "Tenant Contribution") to
the costs of the demolishing the Existing Arena and constructing
and equipping the Arena (collectively, the "Project"), and the
City agreed to contribute $30,000,000 (the "City Contribution")
to the costs of the Project.
4. The City and the Tenant anticipated that the remaining
costs of the Project would be funded by a grant from the State of
Minnesota.
5. Pursuant to legislation
legislature, an appropriation was
interest free loan of $65,000,000
other legislation favorable to t
1998 legislature (collectively t
legislation required the Tenant t
City, which the Tenant agreed to
enacted by the 1998
made for the Project, for an
(the "State Loan"), and certain
he Project was enacted by the
he "1998 Legislation"), which
o make certain payments to the
make in lieu of the Tenant
1002941.3
Q�-���16��
1 Contribution, and the City agreed to increase the City
2 Contribution to $65,000,000.
3
4 6. The City and Tenant will submit an application to the
5 City at a future date with respect to the adoption of an
6 ordinance creating a special sign district covering the
7 RiverCentre Complex, and a public hearing will be held by the
8 Planning Commission and the City Council on the application.
10
li
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
7. Pursuant to legislation enacted by the 1998 legislature
Sections 30 through 32, and Sections 36 and 37 (the "Special
Law") which requires local approval in order to be effective,
which local approval will be given by the City Council in a
separate resolution, authorizes the City to issue its sales tax
revenue bonds (the "City Bonds") to finance the City Contribution
to the P_rena .
8. A financing plan describing the interest free State
Loan and the issuance and security for the City Bonds has been
prepared and is attached hereto as Exhibit A(the "Financing
Plan");_ provided that the implementation of the Financing Plan
and issuance of the City Bonds will require the City Council to
(a) consider a resolution at a future date approving various
financing documents, and (b) hold a public hearing on and approve
certain amendments to the Block 39/Arena Tax Increment Financing
Plan and request the Housing and Redevelopment Authority of the
City of Saint Paul to approve the same.
9. In order to obtain the State Loan and to implement the
provisions of the 1998 Legislation, the following documents have
been prepared and submitted to the City Council:
(a) a First Amendment to Arena Lease by and among the
City, the RiverCentre Authority and Tenant (the "First
Amendment to Arena Lease") which amends the Arena Lease in
certain respects;
(b) a First Amendment to Hockey Playing Agreement by
and between the City and Tenant (the "First Amendment to
Hockey Playing Agreement") which amends the Hockey Playing
Agreement in certain respects; -
(c) a State Loan Agreement by and between the City,
the State and the Tenant (the "State Loan Agreement")
setting forth the terms and conditions under which the State
Loan will be made and disbursed to the City to pay a portion
of the costs of the Project; and
(d) the Financing Plan.
1002941.3
q�-�►�6
1
2
3
4
5
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
RESOLVED:
1. The City Council hereby approves First Amendment to
Arena Lease, First Amendment to Hockey Playing Agreement and the
State Loan Agreement (collectively, the "Documents") in
substantially the forms submitted and authorizes the Mayor,
Clerk, Director, Department of Planning and Economic Development
and Director, Office of Financial Services (the "Authorized
Officers") to execute the Documents. Any other documents and
certificates necessary to the transaction described above shall
be executed by the Authorized Officers. In the event of the
disability or the resignation or other absence of any of the
Authorized Officers, such other officers who may act in their
behalf shall without further act or authorization of the City be
deemed for purposes of this Resolution as such Authorized
Officers and shall do all things and execute all instruments and
documents required to be done or to be executed by such absent or
disabled officials. The approval hereby given to the Documents
includes approval of such additional details therein as may be
necessary and appropriate and such modifications thereof,
deletions therefrom and additions thereto as may be necessary and
appropriate and approved by the Director, Department of Planning
and Economic Development and the City Attorney; and said
individuals are hereby authorized to approve said changes on
behalf of the City. The execution of any instrument by the
Authorized Officers of the City herein authorized shall be
conclusive evidence of the approval of such document in
accordance with the terms hereof.
2. The City Council hereby approves the Financing Plan;
provided that the issuance of the City Bonds as described in the
Financing Plan is contingent upon the holding of a public hearing
on and approval of certain amendments to the Block 39/Arena Tax
Increment Financing Plan, the adoption by the City Council of a
final resolution authorizing the issuance of the City Bonds, and
the adoption of a resolution approving certain financing
documents by the RiverCentre Authority.
That the
to the MinnesoCa "Corporate Welfare" Statute which now exists in the Amended
Lease.
1002941.3
a�-��y�
3
4
5
Requested by Department of:
Yeas Nays Absent ���� �
Benanav `�
Bostrom
ey:
�✓ I I I �`��
v�--
� t � �
Adopted by Council: Date
Adoption ertified by Council Sec tary
a , a— _ �...,�.� ,.�—
h
Approved by Mayor: D ����
By:
3002941.3
Q�p_��.��
DEPARTMENT/OfFlCFICAUNCLL DA'C6IMIIATED � � � �
PlanningandEconomicDevelopment 12-16-98 GREEN SHEET NO. 61153
iaoal��re �nnaioaie
COMACIPERSONkPHONE a DEPAAiMENlD�tEClOR � Q'IYCOUNm.
PamWheelock266-6628 �� � rnvnrrow��r 0 an'u.EEwc
MUSlBEONNIINm,AGENDABY(DA'1£) � O FIIJANOALSERVICESOIIt O FAI.SERNCESOFF/ACCfG
December23, 1998 Q Mwrox<oxnss�sv,� O a�wccaies�wr
TOTAL # OF SIGNATURE PAGES (CLIP ALL LOCATIONS FOR SIGNATURE)
ACIfpNRFQUFSIID
Approval of the Firs[ Amendment to Arena Lease
�co��nnoNS: wy�o.«a�o�x�a(rt) PERSONAL SERVICE CON7RACfS MUST ANSWF.R 7'HE FOLLOR'ING QUESTIONS:
r�axtuctcCOe,muss�ox 1_ ETac tLic pe�son/Srm ever wodced �mder a conhact for tLis deparmient?
�co�mwneE YES NO
_avaseav�� Connmss�ow 2. Has tltis pecsoNSrm everbeen a city emp]oyee?
Srqt'F 1'ES NO
3. Dces this pawdSnn posuss a sldll notnormally possesud by avy c�ment city employee?
YES NO
4. is this perso¢ / 5m a Eargeted veadoY! '
YES NO
(Explain all yes answers oo separate sheet aud attach to greev sheey
WITIA'LMG P20HLEM, ISSIIE, OPPoRTUNIN (Wlw. What �w. Whcrt, WhY)
The 1998 Minnesota state legislature appropriated $65,000,000 to the City of Saint Paul for the demolidon of the old arena and construction of the
new RiverCentre Arena. The legislarive appropriation contained several condirions that had to be met by the team and city in order for the city
to receive the $65,000,000. This resolution sarifies the conditions set by the legislature.
ADVANTAGESIFAPPROVEP
The City will receive $65,000,000 from the state to complete the financing plan for the new RiverCentre Axena.
DISADVANTAGFS IF APPROVED
13one
DLSADVANfAGSSOFNOTAPPROVED
The City of Saint Paul would be responsible for $95,OOQ000 for the demolition of the old azena and construcrion of the new RiverCenh�e Arena
iOTALAMOUNTOFiRAN5ACC10H � COST/REVENUEeUDGEiE➢(CIXCLEONB) Y6S NO
FUNDINGSOURCE ACTIVI'IYNUAffiE2
FMANCIhL RJEORMATION� (Fa3LAIM
q�'-i►�&
.:,,:
FINANCING PLAN FOR RIVERCENTRE ARENA PROJECT
OVERVIEW
The following is the proposed Financing Plan for the RiverCentre Arena project. The bond resolution
authorizing the City bonds will be submitted to the City Council in January, 1999 for final approval.
The $130 million for the demolition of the existing Arena and construction of a new Arena relies on an
interest-free loan from the State of Minnesota in the amount of $65 million (with required repayment of $48
million), and on the issuance of Sales Tax Revenue Bonds su�cient to provide the remaining $65 million
for the project.
The $48 million repayment to the State of Minnesota is solely from rent payments from the operation of the
Arena by the NHL Team. The debt service for the $65 million in revenue bonds is predominantly fmanced
by NHL Team rent payments, PILOT (taY) payments made by the NI�, Team, and Half Cent Sales Tax
proceeds dedicated solely for use at the RiverCentre Arena.
The Team has agreed to go beyond the legal requirements of the state legislation and the previously enacted
Lease to help the City fmance the revenue bonds. The Team will post a I,etter of Credit ranging from $6 to
$8 million annually, which allows the City to fmance a bond reserve of $7.275 million which insure the debt
will be at investment grade. Without the Letter of Credit from the team the Ciry would be responsible for
funding the entire reserve.
The Financing Plan is consistent with respective obligations of the City and Team, as described in the
Amended Lease and State Loan Agreement. The Finance Plan reflects the reduced City Contribution from
$95 to $65 million and the Team paying Lease and Pilot payments totaling $1933 million dollazs through
2025 to the City.
Finally, this Financing Plan and Lease Revisions continues the obligation for the Team to: (1) fund all costs
in excess of $130 million necessary to complete the project, (2} to pay ongoing maintenance and capital
improvements to the Arena during the Lease term, and (3) to retire the outstanding City Bonds and State
Loan for early termination of the Lease.
FINANCING STRUCTURE
State Loan
The City will receive a$65 million interest free loan to be used for construction of the RiverCentre Arena.
The State Loan will not be a public debt of the City and will be repaid from a portion of Team payments.
The Loan payments (totaling $48 million due to foregiveness of $17 million) begin at $1,250,000 in the Yeaz
2003 and increase to a masimum of $4,750,000 in the Yeazs 2016 to 2020 (see Attachment III). The State
Loan will be secwed by a Letter of Credit provided by the Team in an amount equal to the following yeaz
payment due under the Agreement.
City Sales Tas Revenue Bonds
CiTy will issue approximately $72.75 million in Sales Tas Revenue Bonds in late January, which nets the
remaining $65 million necessary to fund construction of the Arena. This tasable debt will be investment
grade and insured by Financial Security Assurance ("Bond Insurer"). FSA is the current insurer of the
outstanding 1996 Sales Taac Refunding Bonds. The term will be for 27 years with the last payment in 2025.
a�
E%hibit A
Page Two
The annual debt service will range from approxirnately $5.1 to $93 million per yeaz (with average debt
service of $6.4 million per year.) The average tasable interest rate, if priced today, will be appro�mately
6.70 percent. The Series 1999 Bonds will be callable at paz in 2011.
SOIIRCES AND USES
See Attachment I, which provides a summary of the Sources and Uses for the RiverCentre Arena Project.
SERIES 1999 BOND SIZING
The Series 1999 Bonds will be sized to maYimize the use ofTeam Payments for debt service after repayment
of State Loan, minimize the use of the RiverCentre portion of the Sales Tax, and comply with a debt
coverage ratio of 1.20 required by the Bond Insurer.
On an average, 89% of the Series 1999 Bond's debt service is retired by Team Payments.
See Attachment IV, (Schedule of Available Revenue and Debt Service Coverage), which includes Team
Payments under the Lease, Sales Tvc from the RiverCentre's 40 Percent, and TaY Increments from Block
39/Arena DisVict.
SECURITY
The Series 1999 Bonds security will include the following:
Team Payments - Approximately $145 million of Team payments under the Amended Lease (see
Attachment II).
2. Sales Tax - The Series 1999 Bonds will have a first lien on the CiTy's Sales Tax and will be on
parity with 1996 Sales Tax Refunding Bonds. Beriveen 2003 and 2020, $15.6 million of Sales Taz
from the RiverCentre Account will be used to pay debt service on the new issue. This issue will be
structured so that the Neighborhood and Cultural Accounts of the Sales Tax is not expected to be
used for payment of debt on 1999 Series Bond. See Attachment V for Sales TaY Analysis of the
Neighborhood Cultural and RiverfrontAccounts. Bond Insurerwill underwrite a annua122 percent
inflation increase in sales tas which is half the annual historical growth rate.
3. Tas Increments - Taac increments between 2016 and 2025 from Block 39/Arena District will be
pledged on a first lien basis as an additional credit enhancement for the Bond Insurer. Tax
increments prior to this date are pledged on a subordinate basis to the Series 1999 Bonds.
4. Bond Reserve - A Reserve of approximately $7275 million (10 percent of the fmal bond size) will
be funded by:
a Letter of Credit ranging from $6 to $8 million per yeaz posted by the Team under the
Lease Amendment; and
a surety bond.
5. Euly,Termination of the Lease - The Team is obligated, under the Amended Lease and State Loan
Agreement, to pay offthe outstanding debt and any premium for eazly termination by the Team (See
Attachment VII).
°L�-i��6
Exhibit A
Page Three
FINANCING FZOW CHART
Attachment VI contains a detailed flow chart outlining the flow of funds of the Financing Plan
FINANCING TEAM
Attachment VII contains a list of the members of the City's Financing Team.
BENEFITS
Through the Amended lease, the City reduces the City Contribution from $95 million to $65 million.
2. City can take advantage of a$65 million interest-free loan from the State which is secured solely
by Team rent payments and only requires a repayment of $48 million.
3. The State Loan removes the concern raised by rating agency Standard and Poor when they changed
their outlook for the CiTy from stable to negative.
4. By issuing the Series 1999 Sales Tas Revenue Bonds, $33.5 million of General Obligation
Commercial Paper (which was used to fund most of the RiverCentre Arena Project construction
costs to date) will be retired. This reduction to the City's General Obligation Debt will be a positive
influence in the City's General Bond Rating deliberations in the year 1999.
5. City issues fixed rate debt neaz historic low interest rates.
6. Team provides $6 to $8 million in Letters of Credit for the Reserve Fund for the Series 1999 Bond
and for the State Loan.
SCHEDULE
December 16, 1998
December 23, 1998
December 26, 1998
January 13, 1999
Presentation to City Council
Consideration of changes to Amended Lease, State I,oan Agreement, Financing
Plan and Local Approval of Sales Tas changes by end of December
Request for commitment for Bond Insurance and Rating
Consideration of Series 1999 Bond Resolution
Public Heazing of modification of the Financing Plan for Block 39/Arena Tax
Increment District
January 29, 1999 Close on Series 1999 Bonds
��-f��s
ATTACHI��NTS
Attachment I
Attachment IB
Attaclunent II
Attachment III
Attachment IV
Attachment V
Attachment VI
Attachment VII
Attachment VIII
(Aevised 12/15/98 - I1:15)
Sources and Uses
Project Cost Summary
Team Lease and Pilot Payment
State I,oan Repayments
Schedule of All Available Revenues and Debt Service Coverage
Cash Flow of Sales Tax Trust Accounts
Financing Flow Chart
Early Terminarion Obligation
Financing Team
\�Ped�sys2\SHARED\GEURS�rivercentetplan.fin
Attachment I
Sources and Uses (RiverCentre Arena Project)
SOURCES OF FUNDS
Safes Tax Revenue Bond Proceeds, Series 1999
State Loan Proceeds
Credit Facility/Surety for Bond Reserve (from Team,FSA)
Interest Earning on Construction Fund
TOTALSOURCES
USE OF FUNDS
Project Construction Fund
Bond Reserve Fund (from Team,FSA)
Capitalized Interest Fund
Bond Insurance
Cost of Issuance
TOTALUSES
a�-i��
$72,725,000 (1),(2)
65,000,000
7,272,500 (3)
2,754,000
$147,751,500
$130,000,000
7,272,500
8,355,480
1,101,118
1,022,402
(4)
$147,751,500
Notes:
(1) Series 1999 Sales Tax Revenue Bond Proceeds will be used to retire $33.5 million dollars
of the City's General Obligation Commercial Paper issue, which along with the Team's
contribution, was used to fund construction costs to date of the RiverCentre Arena Project.
(2) Final Series 1999 bond sizing of $72.75 million dollars is dependent on interest rates
at pricing of the bonds which is estimated to in late January 1999.
(3) The Team will provide Letter(s) of Credit to secure the Series 1999 Bonds and the State
Loan, which is between $6 and $8 million during the term of the Lease. Since the amount
securing the State Loan is included in the total Team Letter of Credit requirements, the
difference needed for the Bond Reserve will be by a surety provided by FSA .
(4) The Team has obfigation to fund cost overuns above $130,000,000 to complete the Project.
See Attachment I-B for a Summary Cost breakdown of the Project.
12l15l98 File:arenafin.wk4
qY - ) i�ts
ATTAC��VIVIENT I -B
SAINT PAUL RIVERCENTRE ARENA
PROJECT COST SUMMARY
Foundation / Site Work
Structure
Enclosure I Roof
Interiors / Equipment
Conveying
Mechanical / Electrical
Existing Site Costs
Permits / Insurance
Furniture, Fi�tures & Equipment
Architect, Engineering and Construction Management
Other Costs
TOTAL PROJECT COSTS
$ 7,906,000
38,348,000
9,372,000
18,330,000
1,887,000
25,798,000
5,045,000
1,123,000
10,229,000
11,500,000
462,000
$ 130,000,000
NOTE: This cost breakdown summary is under revision. Individual line items are
subject to change until de[ivery of the Guaranteed Maximum Price. Team has
obligation to fund project cost overruns in excess of .SI30 million.
Attachment 11
The City of Saint Pauf, Minnesota
RiverCentre Arena Financing
Schedule of Team Payments
111 (2) (3)
�1�-11�6
Team Total
Year Lease PILOT Team
Ended Payment Payment Payments
9/1 /99 0 0 0
9/1 /00 0 0 0
9/1/01 3,500,000 2,500,000 6,000,000
9/1/02 3,500,000 2,504,250 6,004,250
9(1(03 3,500,000 2,524,462 6,024,462
9/1/04 3,500,000 2,545,686 6,045,686
9/1 /05 3,500,000 2,567,970 6,067,970
9/1/06 3,500,000 3,291,368 6,791,368
9/1(07 3,500,000 3,315,937 6,815,937
9/1/08 3,50Q,000 3,341,734 6,841,734
9/1 /09 3,500,000 3,368,820 6,868,820
9/1 /10 3,500,000 3,397,261 6,897,261
9/1/11 3,500,000 4,127,124 7,627,124
9!1/12 3,500,000 4,158,481 7,658,481
9/1/13 3,500,000 4,191,405 7,691,405
9/1/14 3,500,000 4,225,975 7,725,975
9/1/15 3,500,000 4,262,274 7,762,274
9/1/16 3,500,000 5,000,387 8,500,387
9/1/17 3,500,000 5,040,407 8,540,407
9i} i1 g 3,500,000 5,082,427 8,582,427
9/1/19 3,500,000 5,126,548 8,626,548
9/1l20 3,500,000 5,172,876 8,672,876
9/1/21 3,500,000 5,921,520 9,421,520
9/1 /22 3,500,000 5,972,596 9,472,596
9/1/23 3,500,000 6,026,225 9,526,225
9!1/24 3,500,000 6,082,537 9,582,537
9/1/25 3,500,000 6,141,663 9,641,663
Total: 87,500,000 105,889, 933 193,389,933
Attachment 111
The City of Saint Paul, Minnesota
RiverCentre Arena Financing
Schedule of State Loan Repayments
State
Loan
Date
8/15/99
8l15/00
8/15/01
8/15/02
8/15/03
8/15/04
8/15/05
8/15i06
8/15/07
8/15lO8
8/15/09
8/15/10
8/15/11
8/15/12
8/15/13
8/15/14
8/15/15
8/15/16
8/15/17
8/15/18
8(15/19
8/15(20
0
0
0
0
1,250,000
1,250,000
1,250,000
1,500,000
1, 500,000
1,500,000
1,500,000
1, 500,000
2,000,000
2,000,000
2,000,000
3,000,000
4,000,000
4,750,000
4,750,000
4,750,000
4,750,000
4,750,000
��'��`�
Total: 48,000,000
q�-i I�16
m
m ° p
u q
� o
N V
D �j
q O d
^ m d y
o a
> � ` ° o
>
G � K d m
d 3 % Q n
t a' F �
U C
�o .`_- = 3 ">
Q y w o ¢
p d � m
�,�ca
c A
v � � �
� O
a' S
u
a t
n y
f
x
O
F
�
d
>
0
�
>
¢
O
F
L
O
a y
C y
m '>
� N
> �
2 �
y mmie
U < V N
p j IA N t0
� � I� b K
u N mmof
- � a a a
w v v v v
0
d
o A
N
¢
e r m N M c- n u. n o o � n m c� h m o 0 0� o w r
�p rvwwnmw�ci e aa a a�o mwm �o��
N � � � � ��- �- � � � � � � � � r � � ��- �.^ � tV
O O f7 N[7 t'� N V t0 W � N f7 In � � ni N f0 f0 f0 N O h�
N W w m m Lo m m 0 0 O� G� m o� m O O^ � t'� n n
N � �-�- � � � � � � � � � � � N N N N N N N N N(7
D O O O O O O O O O O
0 0 0 0 0 0 0 0 0 0 0
O O O O O O O O O O O
`^ [�9 6�i O��� O� O m
m m <rw �or rv a�na
N N N m m �� � O O O
in�n o�n m mioninOin
�o�n o mn om moen
ma �o a � �<?N noo
iti [7 � t0 h n h�O t`i oi O
mm m inma w n wm
vamo�n�omv+�<e
e v aic oioiai doco
0 0� m o o m v�n o a
v
m O N t'� rD n C� tO
�- C t0 O� M N 1� (� �J
�� o � n m m m m
ui vi �i vi ui ui ui �i vi
O O O
° o ° o ° o
OO�n
< m v
N � �
N
m m m
m m o
(G I� P
ma in
O� in
m m �
m � m
O O O
m m o
C 0 �
o�no
< ? N
h N h
n a m
m�?�o
O O O
O O O
�o O �ti
inom
N l7 h
n ' H
tD N
o�nm
m � m
a�no
N tp 1�
n(o �
M N n
� O O
� o �
�O O f0
��o n
m � �
n b n
W O N
ui f? m
O O O
O O O
in O O
mmm
nn<o
� N �
moin
1� 1� N
o � m
ai ui m
�mm
m p) N
N N A
n m �n
� N N
m [o [y
N N CI
N OI Cl
t� [7 N
m m m
� O �[I O� i[1 ���� O O O b O
in e m n o ro a w n m m m N m m
a o �r.-.-�nin.-� m �m�oin
f7 N(O IA In O C IA (�f C N(O (O tO
m m m m m m m m m m m m m m m
e e v a a a v a e a v< a a a
<eee i.rea:vvvvee
m�c �nm m<v on nm �n� N
n� n�v o r o m c� v�� o� m
t7 @(7 �O m(� N In (� m � W � N O
oo�^'mmecnoeoinimm
v o n m o� r �� m o m
m c�a no an��oovn
� m N n n c0 W Oi m Oi O O � � O
� N N N N N
c m o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
E x
d o
E �
q O
r r
0 00 oN �o o mra o a.-�n�n
O�[f tD m �^ �D ['� c7 N tp ' 0 O n
e O N O fD � f7 m h 0 N V V�
� oa<inr-m mnnci�vi
0o nm e� m�om�+�n mN�
F� O O h h f0 N(7 t+i t7 N��D !�
m� e.raviinui ui�ri�ri 'in o
R
J
O
a
ci�z �.�
0000esgoaeaessss
00 oa0000000
O O O O O O O O O O O O
O O O O O O O O O O O O
in in o00 00 000 0
NN tv'��n� intnOOOO
`_ ___ � N N N t7
O O O O N� p O O n C O �« i n n
O tn (O 0 h tO l7 l�) N fp f OJ O h
O N< N W�� h 0 N V O N
o<a uir-^ oiri � co �ui
ooN a �om a�omrv inmr
In I[� In In N N(7 l7 (7 (7 �- � �
N N N N N(7 f7 (7 f7 [7 V Q Q V
�
J EI l 0 0 0 0 0°o�, o 0 0� o°I� ci ai ci
O O O O O O O O O
" n m � �
� G �- 1� b
h o 0 0] <
u�omn
o � � da�o+n
�- m oaioim
N O V U
2 d P
LL ~
. � m n
m m m
y m m m
In In N b In N IO
� T � Cl O N tO <
�N mtoo>O � m
1 V[O N Ot f� (� N
� m m m m m m m
a a a v a e v
;e v < v e < :
i� fnmmm��omammw
I OI N N O I� IP b N 1� In N
�t� 0O N�onn O 0to n
O m O � C) 1� l7 N a n �O in
' OJ O N r h t7 O� OI h O^�
iMmN�o �no�nm a �nc� w
' N N(7 M O1 O O O�- ��- ^ N
1 N N N N N t7 f7 M M N N N N
O O O O O O O O
0 0 0 0 0 o O o
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0�
� � � � � � �
a a a a e a a v
rrromo�inn
O N K h N T N fy
P O In Ol In In N In
O N(O N � N!O N
A C! 1� N N h N 0
nmmm e q�n �
mci�m ammoi
0 0 0 0
O O O O
0 0 0 0
Vl Ifl IA N
n n n n
: ? = p
Gm
0 o O
n n 0 tD O t� �n 1� c>
O N C' h N Ol N(7 (p
C< �q 0� 1[J N tn tO
O N tp N � N t0 N
e w N � N r N m a
O O m T o o �
In In 1� In In In t0 N tO
O O O O O O O O O O O O O
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 o c o
O O O O O O O O�
� � � b � � � �
C> t7 th M t7 [� nl M Cl
m�a vn.-wanmmnwr�o�o n wmm�mwmt+mm�a�em in
1� t0 m t0 N O�� O N h N N Q O n O m 0 1� IA m W N tp 1� IA N �
t7 Ot O � N V O f0 O O[O �D N Cl b n N h m N � t9 O IO N f7 � W tD h
O O h Gl 1� � 0 N N m N t7 � 1� O � O 1� C) h GI r � O Ol t� �O I[1
a o�oM.-oe�m mo <n in n a--om m ���cov o� �+
m � m�oma v n oa n om n oan�inmH �� �nmv mm nw
�riNNnirinmvvviciinin�o�6�nrnmcioimaioo_ _ r+
� � � � � � � � � � � � � � � � N[V tV N N
o�w� v in�nmmo-�+m<�n�o�mmo ��vma �m m� mm
O O O O O O O O O O �^ � �^^^ �^^ N N N N N N ry N N N
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N
�
O
N
N
9
C
0
0
N
0
c
�
c
m
�
� o
G
> E
Q O
V
d C
m C
C � �
E � t
c �
E o v
a, >
< < m
� 9
X y
a
� -
� o
3 �
N E
C y "
T
_ �
o ; v
�
� o o .�
c q
m � E �o
C Of � �"
d x N ° u E
� � c 2
� C y C V
L
v - 3 r �
r a o m o
w `� " H
o '
o � m . y H
� m �
� � d m d E
� o �_ �,�d
d V Z R C
m N E V y �:%
m � 0 6 v�
oj � m ° > 5
m� H W L N� I' �
� 9 �
=@ � O U N J O D 6
N O ¢ > •-
q O H O X> E L�
�a «�u�i d r¢ 3� �
7 C p O� W� N y X ry O C V
� o c v a - r r E
� N L (O 41 v� '^ � C
� O d Q�
7 U � O�� N� � N O C;
o m`m N« ' g m' o
�� C � O M � W m�� � y 3 m
n n C N O �>� m p'n
n m c.-w= 'o'n U [ y�
n�� a N v o
_' n@ � � � q `r' E G " i
w c U c m E E Q o o°� m
T O� m Q U C V S C` U` N.
� � ° ` _ .> ° _ `
$ v� �`c o° o: N E a � m
� o��� y N y c ' =° v
O 9 '
m� � C_ y W N d O� N i u
y V J N C�� N> D � O O O
n �
- = - � Q
� � a a a� x� d y w� w w
¢¢a aaw _ -
_ _ O � N m
_ _ _ _ C N !O n OJ N _ _ _
� O G O O l'1 0 6 O� 17 1n 0 O � q 0 m f7 b N 0' N � ^ O 1n O tV N 6�
OI � N N d ry n O f7 � m f7 f0 011� O O� 1�' Iti m
C C� OI N p� IA T O 1'� 1� 0 m m O(D N 0 m n Q n m fO N
V U� N m�0 bNOt�i� OO�N� O�n0000 nNd �O �
N n fD b In V^ O fp � N fp N N � � N 0 O O m f0 N�- O
NI ('1 < b�O W 0 O � Cl c1 O m 0 0 0 0 0 O h O1 O N n OI
V a G �� � � �.. �uivi�0 oiN oimeDm
� n=m'ma000000000000000000000000000
N 0 V � 0 0 17 Q
b5 m Quf� Om
� j O N O N N�
U tV N N �
n O O O O O O O O O O O O O O O O O O O O O O O O O D O O O O
¢
� � O
my o
�O
U —
mm�mmwonmp�nm�in n mmminmm�wnnm�
m nmo�ti <(DmDO W mmmNmm� meV �mo�� ��-mmn
O O t� N n � � 0 N N iv [V t� � 1� O � O f� � h N^ O O+ h 0 N
O O O ID t7 ^ O N m W O � O 1� � 1f1 1� P� O A W^ C! 40 O Q O 1� b
O m N N N N 17 f7 l7 O O Q N�� m m m h 1� N 6J 0 N OI 01 O O � � N
. . . . . . . � . . . . . . � . . . . . . .
� ��. �� � ��- � � � �- � � � � � � � � � � ��. CI [V N N N
m m� Q 0' � m 0 N a ro v� n n m e a Cl O 1O O � 0 0 0 N� LLf
m �<NtntO�01n00<�tOO�in� Nm �mbn 0 � nm t�m
� OOt�O,tOON00� N� 9N [01� N0m�00f �bOO
N p O� 17 O m A m O N t7 10 0 0 O N l7 b 1� N � Ci N n Of N V Q f0 �
N N�p�Omrorotp0nn t�nhn tOmmO W mN NO� W O10000�
�
C
E
U
Q
e o
a �
.. m c
� u m
0
m � a` �
» a e m
i
L � m Q
� � E m
K o m
� F t m
q 9
6 d 6 `
F
`m H °� N
y m
� m O
O „ � �
« � �p p
�j ? m
. ui
W � n
U � tV
V w
O =
Y U
m �
x u
w N
N �
�°- O
A �
�a
mo
N
� Q OI l�l I(�] 0 N Ill O V O d th m�(O l�l f0 N fO N� N O� O Cl � O Ifl m
< V n n! N pi 1t� W tV � O t� N 0 � m m O 0 N(O tD 1� d h N tO �(O N
. . . _ . . . . . . . . . . . . .
A IA � N N W N Ip 1p N O C) � O OI � N O d< O N V C! O N
��pnnnau�imn
_ . . . . . . . . . . . . . . . . .
�� .�� ����.-ninmmmwmmm
<�mo--mmu+n wnvinar+mcimmoe�e � aammin
nmoNmu
Nri�e.�rvn mrioi�n ri uin m e�cui vi O o�m ^�=oiG' <ri`cui
em n u+' m�n om nmin.v �no ninm �o m m� v�
t� Q 1�1 O N N b m l�l (D W N IA S N � fl N h A MI I� N N I[I I� N
t0 n OCInm00)mOi0iT010000 �^ N�Nmn� �N �.-� N
� N N N N N N
pN�fON °omrvou"imoennmmnao°mm�mmn no�n�0000
rv.cu�ma�o<u�� naaoov+mmau�mma inonao.-nin
N V C N t'� �(p 1� h h tp N� O O+ O O � N 1'1 1� N �0 I� h t� N N t7 fp
m m m m m.-M�nmrv Nn rvmmm� a �mm � m��o �n m�n
e e v e e w O� m m n w a e�n n m m m o c�in m m � m m w w
�����mO?+?+�OOOOOOOOOOOOOOONNNmOi
_ "_--�-------"---"—
0 o m S o o m v n o a v� a m� m N�O O�O N IA � N N n O O O O
w�mo-r�nmc moo�no�<.� �onme m�e��n
oic cioi m �rimemv vai n<NOi�mnrci ri �o
e m w� a n n m a w n m r�m m � fo m m � N m n n
l7 I(1 O � f�i m(O OI N O N 17 Q 17 Ill (O f0 O N V{V M 17 N N
_____�___m0m1�I±���liN
m t'�t'��n O binO ✓�ONNNNin�OOONOY�ONb�n�nN�If�nOOOOOO
O< N N tO N P 0 N O 1O < f7 l7 {7 m iD N N l7 � V A� 1�J < N fO V
m V b N IA A O O 17 N N N � fp {p N A{p N 1� N N T 17 0 O 0
�� 1� 1f1 V d N f7 1V fO I[l IA d N V b Cl V[V fD lC 0 N 17 V N N 0 10 0� N
y Y � Of N Q� O� W Of Oi O� Ol O� Of A C� Ol O� Of T W O� q N A Cl O+ N A OI T W
O 0 N< d V O V< O Y< Q e a a v a a e a a a e e e v a e v a e
m h a_________g__ageee ___V_V_____
N
OI W iD Yf Cl OI N � O N 1� f� � M N 6l fC (O f'1 N 0 OI m � 0 Ol V D m N
b' OJ 1� 1H ' N O 0 N 0 f0 b O Cl � Q d fO 1� 1� N N O In N h N N �
W � mo�'+m mn v�nm�nm oN�mmo�+n o�<�nt� o�mmr
rir nmcoi.oai� cn�immecaivii:rvmmnc aviri ti n(6vi
�� N l7 Q1 0^ O � N O 1�l fO � m N O m b d M q N 0 0{! O Cl O] h O M b
0 W � f N 61 � 0 N N 0 N 1� � N m N 17 V m f7 M IO � 0 Ol Q b l9 1� N
Q G�OOJn'mOlOi'OiO
� � t V N N N t V N N N N N N N M 1'1 t � M N N N N
�
S m
�
m
O
° E
=m
¢ 'f
m c
� V 0
m ¢ `m
- a=
( ° n m
O
O O O O O O O O O O O O O O O O O� g� O g� Q� O O� O O O
s a°
ae00000sso�:
N 10 b b N N 4f N Yf b N
t� d V Y O Y C O O Q M1
OOOON00m�VO�V.�Ntn<hnnmO00Nhtn0000
N(D 0 1� m CI l7 N 0 N m O n n m O N O N lV W N Cl 0
wa mmmm�ma.-eam l'lCONmbbNlAO
Q O V 1[l h � N � OJ 1� N 0 � I[I N O O N(O N � N m N �
8 pt�0! A�<tppNNqNOlNAt7/�NNhNO V
o n n m�r m n n w� m�o m n n n �. m m m e o in vi 'p
o m< e e ui ai ui ui ui vi ui ui a vi ei ei vi ri ri ei oi oi ei oi
n000000000000000000000000000000000
N In N� If1 N N Y) I[I 1[1 In N In I[I N N N N N N N 1A In I[I N I[] iA Ill
nnnnnnnnnnnnnrrnnnnnnnnnnnnn
Nma
w
IOOA W 0�00t[I� t�1NC11'1C1NN1�MfONN OIT(OOSN O�N10C1(OC 6lOf Ifl
y m��p �{7n�n �p�pON OOlbON1�OJN OOhOmmhb 0mn� 01� NN �
q� � N N In0t700�NC 0(000(pMt00NNm1�0N�tpO�Nl'i� W(pN
V D tO0i00 �n001�0�1�� �ol NaV ONt�.�n0�0'nn0���.� Ome� •Cw
xtp p� I� O)NOOfOn�0010T0.-<n��n�h' O W pa.-t�b O V Ol��n
O� Q� (7 n p(� m �{7 0 A N O i� O d h O l7 1� O< N N A N fp � 1[f N V m Cl N ry
`p°�V[OO+OI N
q m �' ^ � � � � � �Y N N N N
Z O f
LL
In f0 n 0 Of O � N 17 V N(O n m W O^ N 17 O I[f 0 N 0 N O � tV �< N Ip h m N
CI m N A O1 O O O O O O O O O O N N N N ry N N N N N
N m m Of N o 0 0 o O O O O O O O A O O O O O O O O O O O O O O O O O N
� � N N N �V N N N�Y N N N N N N N N tV fV N N N N N N N ry M N N
a �-i,�s
T
Q
N
� � r' f �
a
a
a
�
R � h
b a d
C O� O
C '+ L
'� �, m 0.
v
> > uj � C
L �¢ 3
v � N Q �i
,� � o � O
m
. f/J � y p
Q O = C �'
�"' U
>
U a d
w >_
. F � ix
F `"
u
�
9
e
[z
e
e
V
L
O
U
a
a
u
L
a
�
O
n
H
a
C
o C
ti a
N �
H
�
�
i
G
4
O C
v e
m ^
N
H �
H
c
O V
J Q
9 C
9 N �
C � O
� D U
R� ¢
�
O P
V
= Q O
v
� u e
°' °' w
C � m
m p c
� � T
�
u
°= z
9
{y ` u
e U
V V
� '>
U
�
e
v
u
.�.
m
F
u y
O
`c
a` p
F "
a
�
m
u °-'
� A
u �
u �
a °
w
� c
C
n
�
{z
S
m
a
m
U
C
y
�
c
O
c
V O
Q y
� a
s �
o �
m '
U
d
c
V
�
F
u
F
�
a
U
a
�
�
d
:
�
c
S
w
o T F
^ n A
m � F
o A d
� E �
m
q y a�
? y �
�' � O
�' E y
m
c u n
_ � �
c
eo -
c
'$ q u
60 m
O � C
.�� �
2 � e
0
o m M
� F� U
��s
� A �
a
� € a
�+ 9 �
A
� � 9
c � y u v
L @ U
"' O
A p R
G N �
a .;: F
. N
E � =
v�F-m
� N �n
Attachment VII - Team Termination Obiigations a0 ����
Cky of Saint Paul, Minnesota
Taxabie Parity First Lien Saies Tax Revenue Bonds, Series '1999
(Minnesota Wild Arena Project)
Schedule of Outstanding Debt and Prepayment Premium
(tl 121 13) 14) 15) (61 f7)
Series 1999 Outstanding Series 1999 Prepayment Total City Outstanding Totai
November 1 Principal Series 1999 Prepayment Premium Prepayment State Loan Prepayment
Year Payment Principai Premium Amount Amount Balance Amount
2/1/99 72,725,000 N/A N/A N/A 48,000,000 N/A
1999 0 72,725,000 N/A N/A N/A 48,000,000 NtA
2000 0 72,725,000 N/A N/A N!A 48,000,000 N/A
2001 545,000 72,180,000 N/A N/A N/A 48,000,000 N/A
2002 795,000 71,385,000 N/A N/A N/A 48,000,000 N/A
2003 360,000 77,025,000 N/A N/A N/A 46,750,000 N/A
2004 510,000 70,515,000 N/A N/A N/A 45,500,000 N/A
2005 680,000 69,835,000 103% ' 2,095,D50 71,930,050 44,250,000 716,180,050
2006 1,215,000 68,620,000 103°k " 2,058.600 70,678,600 42,750,000 113,428,600
2007 1,335,000 67,285,000 103% • 2,018,550 69,303,550 41,250,000 110,553,550
2008 1,470,000 65,815,000 103% 1,974,450 67,789,450 39,750,000 107,539,450
2009 1,610,000 64,205,000 102% 7,284,100 65,489,100 38,250,000 103,739,100
2010 1,765,000 62,440,000 101°h 624,400 63,064,400 36,750,000 99,814,400
2011 2,115,000 60,325,000 100% 0 60,325,000 34,750,000 95,075,000
2012 2,330,000 57,995,000 100°� 0 57,995,000 32,750,000 90,745,000
2013 2,565,000 55,430,000 100% 0 55,430,000 30,750,000 86,180,000
2014 2,650,000 52,780,000 100°k 0 52,780,000 27,750,000 80,530,000
2015 2,005,000 50,775,000 100°/a 0 50,775,000 23,750,000 74,525,000
2016 2,275,000 48,500,000 100% 0 48,500,000 19,000,000 67,500,000
2077 2,670,000 45,890,000 100% 0 45,890,000 14,250,000 60,740,000
2078 2,975,000 42,915,000 100°� 0 42,915,000 9,500,000 52,475,000
2019 3,375,000 39,540,000 t00% 0 39,540,000 4,750,000 44,290,000
2020 3,800,000 35,740,000 100% 0 35,740,000 0 35,740,000
2021 5,845,000 29,895,000 100°h 0 29,895,000 29,895,000
2022 6,305,000 23,590,000 100% 0 23,590,000 23,590,000
2023 6,800,000 16,790,000 100°� 0 16,790,000 16,790,000
2024 8,100,000 8,690,000 100°h 0 8,690,000 8,690,000
2025 8,690,000 0 100% 0 0 0
Totai: 72,725,000
(1) Estimated annual principal payments based on the total par amount shown
at the bottom of the co�um�. This amount is preliminary and subject to change.
(2) Represents the total amount outstanding after giving effect to the payment
show� in column one on November 1 of each year.
(3) The Bonds are subject to Extraordinary Redemption in the event of an early
termination of the Team Lease, but in no event earlier than November 1, 2005
{indicated by the ` next to the premium). Tfie Bonds are atso subject to
Optiona� Redemption beginning on Novemberl, 2008 at 103%, deciining to
100% as shown in the column. These cali premiums are preliminary and
subject to a successful marketing of the Bonds.
(41 Equal to the premium over and above the par amount of Bonds outstanding
(51 Equal to the total of columns (21 and (41.
161 Represents the remaining unpaid balance of the State Loan as of August 15 of
the year shown.
(7) Equal to the total of Column (5) and column t6).
Note: Prior to 11lt/2005 the Bonds cou�d be defeased with an escrow of U.S.
Treasury securities in sufficient amounts to pay the de6t service to the 11/1 /2005
call date. The cost of such an escrow is dependant on interest rates at the time
the escrow is purchased.
q�-1
Bond Counsel
ATTACHl��NT VIII
FINANCING TEAM
Briggs and Morgan
a
Underwriter Counsel
City's Legal Counsel
City's Financial Adviser
Bond Insurer
Underwriters
Rating Agency
Trustee
Kennedy and Graven
City Attorney's Office
Springstead
Financial Security Assurance
Miller & Schroeder, U S Bancorp Piper
Jaffray, Dougherty Summit, Dain
Rauscher
Standard and Poor
Nonvest Corporate Trust
.
CITY OF SAINT PALTL
Norm Co[eman, Mayor
OFFICE OF THE MAYOR �� ����
FINANCIAL SERVICES OFFICE. Budge[ Sectian
Joseph Reid, Dtreaor of Financial Services
240 Ciry Ha[I Telephane: (612J 266-8.i43
IS West Kellogg Boulevard Facsimile: (612) 26G&547
Sainz Pau1, Minnesota 55102-763I
MEMORAI3DUM
To: Council President Dan Bostrom
Council Members
From: 7oe Reid, Financial Services Dire�
Pam Wheelock, Director, PED
f•7�
Date:
Additional Briefing Material for Resolution 98-1146 and tl�e financing plan for
the Arena Lease.
December 22, 1998
Four items aze attached for your information:
1. Present value of the teams's annual rent payment of $3,500,000 compared to the
present value of the team's original $35,000,000 construction payment.
2. A memo from Martha Larson, Chief Financial Officer for the Minnesota Wild, that
responds to several questions raised by Councilmember Benanav.
3. A memo from Springsted, Public Finance Advisors, the City's Financial Advisor,
regazding the financing plan.
4. A copy of Projections of Local Sales and Use Taz Revenues by Anton and Associates,
Inc. and the monthly collections of the half cent sales tax through October, 1998.
This attachment was printed off the City's web page. The financing plan, and the
comparison of the original to the amended lease are also available there as of Tuesday,
December 22.
If you have additional questions on these subjects, please contact Joe at 266-8553 or Pam
at 266-6628.
����
s„a o�� a�i��s
The City of Saint Paul, Minnesota
RiverCentre Arena Financing
Comparison of Team Payments Due Under the Amended vs. Original L.eases
8.00%
Team Present
P_ayments
Value
6.60%
City Present
Value
Payments
ginal Lease
8.00%
Team Present
Value
6.60°/a
City Present
Value
A) Under the Amended Lease the Team s payments will be 2.5 times [hose required under the Original Lease.
B) Since the timing of the payments varies between the rivo lease agreements, the time value of money (interest) must be
considered. The interes[ rate chosen will have significant unpact on [he results. This analysis uses two interest rate
scenarios. All present values are calculated as of 2/1/99.
C) The Team Present Values assume an 8% interest rate. This isthe same rate used in the Team's pro foanas and reflects
the risk associated with typical sports financing issues. Under this assumption the cost [o the Team is appro�mately
$600,000 greater under the Amended Lease.
D) The City Present Values assutne a 6.6% interest rate. This is an estimate of the taxable revenue borrowing rate. Under
this assumption the wst to the Team is approximately $5.5 million geater under the Amended Lease.
E) The payments under the Original Lease are assumed to follow the current construction schedule.
� This analysis assigns no value to the Team s Letters of Credit of $6 -$8 million under the Amended Lease.
G) This analysis assumes that the PILOT payments under the Amended Lease net against the revenues (ticket surcharge
and mazquee revenue) in the Original Lease.
12/2�/98 12:51 FA% 651 222 1055
To:
From:
Date:
Re:
MINNESOTA WILD
,
Joc Reid, Director ofFinancial Sec�ices,
Pam Wheelock, Directos of Pl n� and Ecoaomic Development
Maitha Larson, Chief Financial Officer��.�j�._,�,L
' LJ '
December 23, 1998
Responses to Council Inquiries.
Here is the information you tequested to assist in responding to a number of inqiriries
from the City Council, regazding their review of the lease amendment, State loan
ad eement and related documents. � '
Timin� of A�rorovals
The NHL is currently reviewi�g Yhe lease amendment and State loan agreement, aad I
anticipate rceeiving their coxnments next week. Our objective is to secure their appsoval
prior to the City Council meetinn on 7anuary 6, 1999. .
In their meetir�g fhis moming, our Boazd approyed execurion of the City lease
amendmenf and the State loan agre.ement.
Team Pavments for Acauisition of the NHI, Franchise
As you lmow, the team has already remitted its frrst eamest money paymene of $10
miliion to the IVfIG. The final payment of $70 million is due by Apri12000.
Team Ownershiu
There has been no change in the ownership of the team since ttie equity investrnent
transactions were closed in December 1997. ,� .
Cc: , Jac.Spezlin�, CEO
444 CedarSC,S�ite900oSYPaul,MN53i01aPhone657-222•WILD�Far651-122-1055aWebwww.wliG.com �'ic =�;' � "
f� 001/001
12/23/98 16:28 FAS 6 SPRINGS INC.
85 E. SfVENIH PIACE SUf1�E 100
$qIMT PAUL, MN 55101-2143
672.223->OW FA..Y:672-223.300
��
SPRINGSTED
Pu61it Finann Advisors
December 23, 1998
Mr. Joe Reid
Director of Financial Services
City of Saint Paul
�5 West Kellogg Blvd.
Saint Paul, MN 55102
s
1
s�
RE: Arena Project-Taxable Sales Tax Revenue Bonds (the "Bonds")
Response to City Questions on This Financing
Dear Mr. Reid:
� oo2iooa
��-l� ��
The City has asked Springsted, as its financial advisor, to respond to two questions relating to
this financing. The first question relates to the City's general obligation rating and the second
relates to the revenue sources available for debt service. Our intention here is to be summary
in nature, but we would be available to expand upon eitfier response upon request.
1. "Nas the City, with this issue, improved its reVative position witfi the credit rating agencies
from that of the original arena financing?"
Response: In January 1998, S&P, while not changing the City's `AA+ "rating, did change their
rating outiook to negative from stable. In targe part this outlook change was the result of the
numerous unknowns then existing relating to the project. In January the tWO othe� rating
agencies, Moody s and Fitch, noted the Arena project but me�tioned no major concerns at that
time. For S&P in particular given the absence of a definitive State commitment as to their $65.0
million participation and the City's conYracEual commitment to buiid the facility, their position was
that the City potentially would need to finance up to $95.0 million of project costs, with a
possible totai bond issue approaching $105.0 million with construction interest and issuance
costs. At that time the City's authority to issue debt may have piaced considerable reliance on
a"generai obtigation" borrowing. One additional facEor was fhe presence and form of the State
participation, then thought to be a grant or a loan for $65.0 million. The overa0 situation was in
part embodied by the $33.5 million Generai Obligation Commerciat Paper issue, which is a
short-term financing vehicle used here to permR time to pass to resoive outstanding items.
Today, the bond financing unknowns present in January have been defined. l"he City intends
to issue approximately $72.7 million in Sales Tax Revenue Bonds, yieiding $65.0 in project
financing, and the State will loan the City $65.0 million, of which $48•0 million is to be fepaid.
From January the dynamics and amounts of the debt structure have changed. The City's debt
profile has now changed to include; a) the team participation rether than the State's; (b) a
reduction in direct debt to the $72.7 miilion of sales tax bonds from the potential $95.0 million,
(c) a change in the character of the debt from a potentially predominate general obligation
backing to saies tax; and the State's participation now defined as a loan.
SAW7v,aUL.MN • MINNEnPOLS,MN • eRO0I�1D.W • O�EKUNDP.iRK,KS ' W'ASFiAIGTOrv,DC • iOWAUTI;iq
12/23/98 16:29 FAS 6122 2J3002 SPRINGSTED INC. f� 003/004
�� -� I ��
City of Saint Paul
December 23, 1998
Page 2
For those factors listed above which are positive and the comments below, from a credif rating
perspec6ve, this financing package is on balance favorabie as compared with the January
situation. The agencies view this as a sales tax transaction (see response to question two}.
Over time the team's historicat financial performance may play a limited role in the agencies'
determination of the impact on the sales tax revenue stream. A net positive credit rating factor
is that the financing pian is now defined, as compared to January. We expect the agencies will
have limited questions on the fundamental change in the dynamics of the fransaction from the
City potentially funding their own share and the State's share to the City funding their own share
and the team's share (a legislative requirement to secure the State loan).
It should be noted that although this transadion is a sales tax revenue bond, without a pVedge
of the City's general obligation property taxing powers, it will stiil be considered by the rating
agencies in their determination of the City's debt burden relative to the City's genesal obligation
rating. Historicalty, the City has considered the use of a general obligation sales tax revenue
bond for certain projeds, but has not used this option. Three crfteria have historicaliy been
discussed. One, the credit rating impact is presented above. Second, the policy position would
be to ultimately pledge the property taxing authority of the City to tfie given project. The third
factor is the cost differential in terms of interest rates between the City's general obligation "AA"
rating and an insured revenue bond and the impact on the given project's cashflow. In the
cuRent market a broad estimate is that there is no significant interesf rate differential between
the taxabie insured sales tax revenue bond versus the taxable "AA" general obligation issue.
On a tax-exempt basis in a future market the answer may be different.
2. "Would Springsted comment on the security and repayment of this financing?"
Response: This transaction should be viewed from fwo perspectives, a) the bond market and
bond investors, and b) the City. To the bond market this transaction is a sales tax revenue
financing, for which the City has pledged att annual sales tax revenues from the %s cent
dedicated sales tax. Other sources of revenues are also pledged such as team revenues a�d
certain TIF revenues from Biock 39. The bond market focuses on the total dedicated sales tax
collections as their primary source of repayment.
To the City the potential use of sales tax revenues is diminished because of the contractual
payments under the lease with the feam. The estimates of revenues and expenditures show
that over the short- and intermediate terms team lease payments and the 40% portion of the
dedicated sales tax for the Civic Center shoufd be adequate 4o meet debt service for this issue
and the outstanding 1996 sales tax revenue bond issue. The sales tax estimates include a
2.2°/a compounded inflator over the term of the issue, with such inflator being approximately
5�% of recent City experience. Shouid the team not make their contractual paymenis on a
timely basis, the City will have in place a reserve to fund debt service for one year. tf the
difficulty with the contractuai payments is not resolved in this one-year time period, then the City
has pledged total dedicated sales tax collections for debt service. TF�e estimates o4 total sales
tax collections show the abiiity to make timely payment of debt service on both this issue and
the 1996 transaction. In the later years of the issue, 2016 and beyond, T1F revenues from the
Block 39 p�oject are estimated to be availabie to fund in paR debt service if required.
, 12/zJ/98 16:29 FA% 6122233002 SPRINGSTED INC.
City of Saint Paul
December 23, 1998
Page 3
C� 004/004
ag-���
As previously noted these are summary comments, which may require additional discussion at
the City's direction. We trust these responses address fhe questions posed to us. Piease feel
free to contract us 'rf we can be of any further assistance.
Respectfuliy,
��J �_
David N. MacGillivray, Principai
Client Representative
dmf
a �-i ���
SALES TAX STATUS
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Total - City Actual Estimates
Percent change from previous year
Actuaf
1995
841,230
684,422
668,953
758,190
688,302
764,829
487,350
1,043,013
722,945
867,643
743,344
697 944
Actual
1996
874,113
650,602
728,683
781,596
716,765
843,786
370,242
1,240,117
796,101
901,303
708,498
787 9 5
. •.: .. _ �
Actuai
1997
958,205
726,710
675,962
848,254
583,751
749,932
544,843
1,268,343
865,185
874,367
765,154
913 S34
�
4.0%
Actua! ( (Est. *)
1998
1,004,620
751,022
1,090,879
860,059
815,397
844,314
441,365
1,348,896
832,750
921,438
765,154 '
913 834 '
� :•
8.3%
Office of Financial Services - Budget Section H:\USERS\SUDGEll123\STAXFMSM.WK 12/23l98
q g -ll ��
City of Saint Paul
Projections af
Local Sales and Use Tax Revenues
June, 1998
Anton & Associates, Inc.
256 First Avenue North, Suite 250
M'inneapolis, Minnesota 55401
�g-����
I. Issues and Objectives
This study is a follow-up to and extension of an earlier study prepared in April, 1993 before the
local option sales taac for the City of Saint Paul was implemented. That earlier study, entitled
"City of Saint Paul: Sales Taac Estimates and Projections," included projections of the amount of
revenue the city could expect to raise with the haif-cent locat option sales t� which became
effective in October, 1993.
Though they were done in 1993, those projections were based on final data on Minnesota sales
taY collections for the year 1990 and preliminary data for the year 1991 because those were the
most recent data available at the time. In addition, as explained in that report, state information
about sales ta3c collections in individual cities overstates the amount of actual sales within the
cities' boundaries. Therefore, substantial adjustments had to be made to the 1990 and 1991 state
data to estimate the actuai taac base for the City of Saint Paul.
Since the city has been collecting the tax, its information about both its sales tax base and about
individual sales tax payers is vastly improved over what was available in 1993. Therefore, it is
appropriate to develop a new set of projections at this time. However, there are several additional
and more compelling reasons for doing a detailed analysis of the sales tax and other possible local
excise taxes at this time.
First, the city has committed to buiiding a new azena wkuch will house the National Hockey
r.League franchise which will begin to play in Saint Paul in the year 2000. As the city frames the
financial strategies necessary to carry out this plan, it is more impoRant than ever that the most
accurate possible projections be used to ensure not only the success of this plan but also the
continued fiscal heaith of the city. In addition, the success o£the hockey team and other
economic development initiatives may be transformative for the downtown business district,
thereby impacting future tax coliections.
Second, the city will have to modify its local option tax to include a use tax. This tax, chazged on
any equipment or goods which individuals or businesses purchase outside of Minnesota and brin�
across the state border for use in Minnesota, is currently part of the statewide sales tax. Saint
Paul officials chose not to include a local use tax in the tax proposal implemented in 1993.
However, recent legisiation in the State of Minnesota now requires cities to bring their local
option sales taxes into close conformity with state's sales and use tax. Therefore, the city of Saint
Paul must be�in to collect a half-cent local use tax within its boundaries by the year 2000. So it
makes sense to develop estimates of the additional revenue which will be raised as result of this
change mandated by the state.
Finally, the city also is now in a position to evaluate whether or not there would be a substantial
financial retum to undertaking an initiative to increase compliance with its local option sales taY.
Although there was an outreach and education pro�ram conducted by the Minnesota Department
of Revenue at the time the tax was implemented, the exact de�ree of compliance with the tax is
not known. Almost certainly there are some businesses who should be collecting and paying the
Saint Paul tax who are not doing so, but whether the number of such businesses and the lost
�g-�i��
revenues are substantial is unknown at this time. Given the information to which the city now has
access and recent improvements in the computer system at the Department of Revenue, it may
now be possible to frame an effective strategy for raisin� compliance and to make at least some
estimates of the likely financial return from such action.
The succeeding sections of this report will include
• a brief examination of city sales taa� receipts throu�h calendar 1997 in comparison to both
the initia11993 projections and to the growth in statewide sales tax revenues;
• projections of overall sales tas revenues for the years 1998 through 2002, together with a
breakdown of expected receipts by major industries;
• estimates of the amount of use tax collections for the years 2000 throu�h 2002; and
• a discussion of a collection strategy designed to raise additional sales tax revenues through
greater compliance.
II. Past Sales Tax Receipts
Actual sales tas receipts for the Saint Paul local option tax have grown each year. As Table 1
shows, receipts were slightly below ei�ht and one-half million dollars in 1994 and grew to over
nine and three-quarter million in 1997.
Table 1
Actual Sales Tax Revenues
Receipts Net of State Administrative Charges
Year
1994
1995
1996
1997
Receipts
$8,417,037.72
$8,968,16634
$9,399,710.47
$9,774,539.91
Annual
Growth Rate
6.5%
4.8%
4.0%
The growth rate of tax receipts has declined over the last three years. It may be true that the
growth of 6.5 percent in 1995 was artificially high if some companies only found out about the tax
with a time lag and, therefore, only be�an to collect it during that year. However, it is impossible
to estimate the precise impact of this possible effect.
�g �r��
Of greater potential concem for future revenue growth is the fact that receipts slowed to a 4.0
percent growth rate in 1997, a year of stron� national and regional economic growth. City budget
officials were especially concemed in mid- to late-1997 when year-to-date growth was runnin� at
the rate of azound 2.5%. However, detailed analysis of individual tax retums indicates that the
growth in revenues for 1997 was unduly impacted by the retums of one large corporation.
In particular, a large utility company filed amended sales tax returns in May, 1997 to correct for
its overpayment of the Saint Paul tas from October, 1993 through that date. This filin' resulted
in a refund to the utility of approximately $149,000 paid in May of last year. Since the state acts
merely as conduit for the cash receipts due the city, the effect of these amended returns was to
reduce the cash received by the city in May, 1997 by the fuil amount of the refund.
The quantitative effect of this refund on the growth of overall city sales tax receipts for the year
was substantial. If this refund had not been claimed by the utility company, revenues would have
risen by 5.5% in 1997, an amount more in line with the vibrancy of the local and national
economies.
When compared to overail state sales tax revenues, Saint Paul's sales tax receipts have grown
somewhat more slowly as the data in Table 2 indicate. Even in 1995 when city revenue growth
might have been overstated because of some startup effects, state revenue growth has been
greater than Saint Paul's rate of increase.
Table 2
Actual Sales Tax Revenues
City Growth Complred to Stnte
City St�te
Year Growth Rate Growth Rate
1995 6.5%
1996 4.8%
1997 4.0%
7.3 %
6.5%
6.0%
1997 5.5% 6.0%
(adjusted)
On the other hand, when the 1997 growth rate is adjusted for the effect of the refund discussed
above, a somewhat different comparison emer�es. Based on the adjusted tax data, it appears as
though city collections accelerated their growth in 1997 at the same time that state collections
slowed their rate of increase. Furthermore, the city's growth rate in 1997 came into much closer
�8 ����
conformity with the state's rate of increase. Criven the increasin�ly constructive posture of the
city with regard to economic development, it is likely that this trend will continue in future years.
Finally, it is also useful to compaze the ciry's actual revenues with the projections made in April,
1993. This is a fair comparison because economic conditions during the years in which the tas
has been in place have, by and lar�e, been in line with the economic assumptions which underlay
the baseline estimates in the earlier study. The foilowin� tabie shows revenue fiwres before
deduction of the state's administrative chazges since that was the quantiry bein� forecast in the
1943 report.
Table 3
Year
1994
1995
1996
1997
Sales Tax Revenues
Versus April, 1993 Projections
(Gross Revenues 6efore Administrative Charges)
($000)
Gross
Revenues
$8,597
$9,074
$9,506
$10,066
Projected
Revenues
$8,995
$9,248
$9,510
not projected
Dollar
Difference
$398
$174
$4
na
Percentage
Difference
4.63%
1.92%
0.04%
na
As the data in Table 3 indicate, the initial base line projections overestimated the tax base for the
year 1994 causing an overestimate of 4.6%. The projected rate of increase in the projections was
somewhat conservative by desi�n and the actual growth rate of revenues has been somewhat
higher than the projected rate. Therefore, revenues grew closer to the projected figures each year
until in 1996, the last year of the 1993 projections, actual revenues were virtually the same as the
revenues projected three years earlier. In 1993 no projections were made for calendar year 1997,
but, given the conservative growth assumptions used at that time, any such projections would
almost certainly have underestimated 1997 revenues.
Still the projections made in the earlier report should be considered successful from at least two
perspectives. First, they were made without the benefit of very timely data. Only final data were
available for 1990 and preliminary data were available for 1991. No state sales tax data were
available for calendar years 1992 or 1993 at the time the projections were made.
Second, and quantitatively more importantly, the adjustments made to reduce the tax base from
the overstated numbers in state reports were quite ciose to the mark. In particular, because of
R�-�r��
limitations in the data the state receives from tas filers, the Department of Revenue's report of
sales taxes collected in a particular city necessarily includes the data from the retums of some
businesses who list the city as their mailing address even thou�h they are technically located
outside of the city limits, sometimes in a Zipcode area which is totally outside of the city. At the
time the earlier projections were made, a literal reading ofthe state report for Saint Paul would
have implied that initial year sales taac receipts would have been approximately $13 million, over
40 percent higher than they turned out to be. Therefore, the 1993 adjustments were successful in
bringing expected revenues into a realistic ran�e for the city's financial planning and the issuance
of debt securities backed by sales ta;c receipts.
What can the City of Saint Paul expect for future salas tax revenues? That is the topic of the ne�ct
section.
III. Projected Future Snles Tax Revenues
The baseline projections of future sales tax revenue growth for the City of Saint Paul are based on
assumed continued economic expansion both nationally and regionally as weli as continued-
economic momentum in the city itself. The actual method for projecting city tax revenues
involves making projections for the growth of 21 different industries sectors which are important
collectors of the local sales tax and then adding those different industry forecasts together to
provide an overall estimate. In addition, adjustments are made for any special events occurring or
expected to occur in specific industry sectors.
Table 4
Baseline Projections of
Sates Tax Revenues
(Receipts Net of Stnte Administrative Charges)
Year
Receipts
($000)
Annual
Growth Rate
1994a
1995a
1996a
1997a
1998f
1999f
2000f
2001f
2002f
Source: Anton & Associates
$8,417
$8,968
$9,399
$9,774
$10,258
$10,653
$11,135
$11,698
$12,237
6.5%
4.8%
4.0%
4.9%
3.9%
4.5%
5.1%
4.6%
9� j���
As the data in Table 4 make clear, sales tax revenues are expected to grow at annual rates of
between 3.9% and 5.1% over the upcoming five yeazs. Again, it should be emphasized, that this
path is predicated on the absence of either a national economic recession or an economic calamity
with severe regional consequences. (A subsequent portion of this section of the report deals with
alternative economic scenarios.)
Revenue growth is projected to be 4.9% in 1998, an actual acceleration of growth over 1997's
pace. However, it should be noted that the 4.0% growth in revenues in 1997 was depressed by
1.5% due to the effect of the one-time refund discussed above, an event not likely to be repeated
with another entity of similar size. In fact, the 4.9% growth for 1998 represents a slowing from
the growth which would have otherwise been realized last year. In the detailed industry
projections contained in the appendix, growth in the affected industry sector (SIC Code 49) is
approacimately $154,000 in 1998 based on a normal year of industry receipts without any amended
returns.
In 1999, gowth is expected to slow to a 3.9% annual rate before startin� to accelerate in the
years 2000 and 2001. This latter acceleration is based on two factors, the expiicit stimulus
provided by the hockey team and the new arena and the general building of additional momentum
in the central business district based on redevelopment plans now underway or contemplated.
The hockeyfarena impact is concentrated in stadium concessions, bars and restaurants, sports
ticket sales, parking and lodging. The more general momentum produced by such events as the
relocation of Lawson Software has an impact on restaurants, parking, general merchandise
shopping; and business services among others.
The growth rate is highest in calendar year 2001, projected as the first fuli year of hockey piay
and arena operations. Crrowth is projected at 5.1% for that year before slowing to 4.6% in the
following year.
Of course, these multi-year projections do not factor in the effects of a national or regional
economic slowdown. Such events, especially if they were to occur in the early years of the
projection period could seriousiy derail financial plans grounded on this baseline forecast.
Therefore, additional perspective can be gained, and perhaps caution acquired, by examining what
the likely effects of such events would be on the stream of revenues to be expected from the city's
sales tax.
Conversely, it is possible, and indeed hoped, that the city will make even greater economic
progress than assumed in the construction of this baseline forecast. It would be useful to attempt
to quantify the effects of a more optimistic scenario on the city's expected sales tax collections.
Therefore, the next table includes projected revenue streams for two alternative economic
scenarios. The column labeled "Economic Slowdown" includes the projected revenue stream for
a scenario in which a"garden variety" recession hits the nation and Midwest proportionately
beginning eady in calendar year 1999. The recession includes two quarters of deciining real
Gross Domestic Product and another quarter of essentially no growth. The net effect of this
scenario is to depress the growth of local sales tax revenues to rates of growth of 1.5% and 3.5%
��-�� ��
in 1999 and 2000 respectively_ However, revenue growth rates are somewhat hi�her in the two
yeazs following the recession than they are in the baseline projections. The net impact of this
scenario is to produce a revenue shortfall (relative to baseline) which grows to $360,000 in the
yeaz 2000 and then declines modestly from there on.
This scenario is not meant as a prediction that there will be recession in 1999. The start date was
chosen to maximize the impact on prospective revenues. Obviously, a recession occurrin� in one
of the more outlying years would have a smaller impact on the expected revenue stream for the
city.
Table 5
Atternative Projections of
Sales Tax Revenues
Year
1998f
1999f
2000f
2001f
2002f
Economic Slowdown
$10,412
(1.5%)
$10,776
(3.5%)
$1•1,368
(5.5%)
$11,937
(5.0%)
Baseline Projection
$10,258
(4.9%)
$10,653
(3.9%)
$11,135
(4.5%)
$11,698
(5.1%)
$12,237
(4.6%)
Stronger NIomentum
Source: Anton & Associates
$11,238
(5.5%)
$11,969
(6.5%)
$12,746
(6.5%)
The column in Table 5 labeled "Stronger Momentum" is desi�ned to show the possible impact of
a more optimistic outlook for Saint Paul's local economic growth. The growth rate of sales t�
revenues in this scenario is distinctly higher than in the baseline case. Implicit in this scenario is
the assumption that national economic conditions are similar to those assumed in the baseline
projections.
While the increment in projected growth rates beginnin� in the year Z000 may stili seem
conservative relative to some people's visions of how dramatically economic momentum may
change if all of the possible economic initiatives undertaken or contemplated succeed, it should he
pointed out that this is a citywide growth rate. Higher growth rates for specific areas, especially
the central business district or targeted redevelopment areas, are certainly possible, but their force
would be somewhat diluted when considering citywide numbers.
Therefore, it is felt that this scenario gives a realistic scaling of the upside from succeeding in line
with the city's wildest dreams, if not necessarily beyond. The cumulative effect of the stronjer
q81t ��
growth which is assumed to begin in 2000 culminates in an additional $510,000 in sales ta�c
revenues for calendar year 2002.
It should be pointed out that these two scenarios are not intended to bracket the range of all
possible outcomes. In particulaz, the first scenario assumes national weakness combined with
local conditions otherwise similar to the baseline case. The second scenario assumes the same
national conditions as the baseline scenario with stronger local economic momentum
superimposed. Obviously, if the national economy were to exceed baseline assumptions while
local initiatives were as successful as assumed in this second case, revenues could be even higher.
Likewise, less happy local outcomes combined with a weaker national economy could push
revenues below the first scenario's path. Nevertheless, these two altematives provide important
perspective on the range of variation which could be experienced and, hence, should be
considered in contingency plans.
IV. Projected Future Use Tax Revenues
Use tax proceeds aze much more difficult to forecast than are sales ta�c revenues, in generai.
There are several reasons for this. First, the major payers of the state's use tax are corporations
who buy equipment from out-of-state vendors for delivery and use at locations inside of
Minnesota. Therefore, use tax receipts tend to vary with capital spending plans of companies,
especially larger companies, in Minnesota. The capital goods industry is one of the most volatile
sectors of the national and regional economies because, tygically, companies postpone non-
essential capital purchases in times of economic:weakness and then catch up with their postponed
purchases when economictimes (and cash flows) improve. This pattern stands in sharp contrast
to most retail sales (except for appliances and autos) whose flow is affected to a lesser extent by
the ebb and flow ofthe business cycle.
Second, much of the capital spending can be done by manufacturin� firms who often sell their
products directly to businesses and, therefore, may not collect sales tas. That is to say, the
industries who pay use tax to the state can be a very different mix of industries from those who
are filing sales tax returns. Therefore, the understanding of the dynamics of certain industries
which is helpful in projecting sales tax revenues may be of somewhat less help in forecasting use
tax revenues paid by a different set of industries.
Third, capital goods sales tend to be "lumpy," that is, the total of all sales may be dominated by
the effects of a few very large purchases. In doin� forecasts for locai area such as Saint Paul, this
creates an even greater problem because the actual revenues which the city can expect to collect
may go through wide swings as a large company or two builds and equips a new facility. In short,
it is harder to anticipate the sum of a few large purchases than the sum of a myriad of smaller
ones.
Finally, in projecting the proceeds to be realized by the city in future years, we face a data
problem analogous to the problem that was faced when makin� the first set of sales tax
projections in 1993, namely we do not have very timely data and the data we do have overstate
the city's actual tax base.
q�' ����
The Department of Revenue reports for state sales and use tax coilections are only available
throu�h 1995. This means that even if the state report represented the local ta7c base accurately, it
would still be necessary to estimate what had happened in 1996 and 1997 before we could project
for 1998 and beyond.
And, for reasons discussed earlier in this report, the fi?ures on use tax collections are hi�her than
Saint Paul should expect to collect because they inciude data from the returns of companies which
are located outside of the city limits and, hence, not liable for the local tax. In particular, the
states reports for Saint Paul, have in some years contained very large use tax collections from SIC
Code - Paper Products. There are only sixteen companies in this sector and the Department of
Revenue's policies prohibit disciosing whether any particular company has filed a return, let alone
how large a retum. Nevertheless, it is a very likely assumption that this category is dominated by
purchases made by 3M Corporation ofMaplewood. Purchases by 3M will not be subject to the
city's use tax unless it has a facility located inside the City of Saint Paul. If it has one, the site is
minor compared to the Maplewood complex. Similarly, it is very likely but not confirmable
through official sources, that the use tax numbers for Saint Paul may include purchases by
Northwest Airlines of Eagan in SIC Code 45 - Air Transportation.
Historical Data on Use Tax Purchases
The unadjusted data for purchases subject to use tax taken from the Department of Revenue
reports on Saint Paui aze included in Table 6.
T�►ble 6
Year
Purchases Subject to State Use Tnx
Reported in the City of Saint Paul
(Historical Dnta)
Total Purchases Subject to
Stnte Use T�x
Impiied City Revenues from
H�If-Cent Local Use Tax
1987
1988
1989
1990
1991
1992
1993
1994
1995
$157.0 million
$169.7 million
$113.0 million
$371.4 million
$491.4 million
$462.0 million
$489.0 million
$4962 million
$448.7 miilion
$267,8 million
Source: MinnesotaDepaRmentofRevenue
$ 785,000
$ 848,500
$ 565,000
$1,857,000
$2„457,000
$2,310,000
$2,444,960
$2,481,240
$2,243,450
$1,339,337
lo
q�-����
As the data in Table 6 apparently indicate purchases subject to state use tax inside the City of
Saint Paul appear to have gone through a wide ran�e of variation. However, the eactremely wide
range of variation in the unadjusted data strongly su��est that several lar�e payers, perhaps
including the ones discussed above, have drastically influenced the overall results. A detailed
study of the pattem of purchases by industry segment was undertaken to see if there were
discernible pattems which would su�gest appropriate adjustments which should be made to the
data. Three industries showed especially interestin� pattems which lead us to some educated
guesses and adjustments in the data flowing from those guesses. Table 7 shows the annual
purchases data for those three industries, paper products, air transportation and eatin� and
drinking establishments.
Table 7
Year
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
Purchases Subject to St1te Use Tax
Reported in the City of Saint Paul
(Historical D�tta for Three Selected Industries)
($millions)
SIC 26 SIC 45 SIC 58
Paper Products
Air Transportation
Enting and Drinking
$ 0.8
$ 0.4
$ 0.4
$123.6
$190.6
$188.8
$159.1
$182.4
$200.1
$ 4.9
Source; Minnesota Department of Revenue
$30.8
$51.2
$28.5
$35.5
$77.7
$65.7
$ 0.7
$1.4
$51.6
$60.6
$0.7
$0.8
$1.0
$0.8
$0.9
$17.0
$41.0
$46.9
$2.1
$$32
The first column shows annual use tax purchases for the paper products industry. We infer that
these purchases were likely to have been made by 3M and its divisions and hence should be
excluded from the Saint Paul tax base in formin� projections of expected use tax revenues. The
sharp increase in purchases in 1989 and the sharp drop in 1995 are likely to have resulted from
either organizational changes at the company or chan�es with regard to company purchasing
policies. In particular, the drop in 1995 may be the result of a chan�e in purchasing management
and policy such that either suppliers in Minnesota were being used or, probably more likely, out-
of-state suppiiers are remitting the ta�c directly to the state as sales taxes, thereby substituting for
the direct use tac payments which had been made by the customer, 3M, in 1994. Therefore, one
11
�8«y�
adjustment we chose to make to the taac base for Saint Paul is to exclude SIC Code 26 altogether,
i.e. assume use tax payments will be zero from ttus industry.
The second and third columns in Table 7, air transportation and eating and drinking
establishments seem to be related. We postulate, but cannot at this time confirm, that the pattern
of a precipitous drop in use tax payments form the airline industry and a sudden spike in payment
from the eating and drinking industry is related to a possible organizational change or supplier
relationship of Northwest Airlines and its food and/or catering suppliers. A logically consistent
story would be that use taac purchases were booked by an in-house food service arm of the
company through 1991, but that an outside contract for catering was awarded beginning probably
sometime after mid-year 1991. If the contract ended at the end of 1993 and the function was
brought back in house, the mirror image movements in the two industries' reported purchases
would have resuited. It may be possible to check on this through company sources. We wiil
endeavor to do so. However, we also choose to exclude airline use tax purchases from the
adjusted tax base for our calculations and will adjust the eating and drinking purchases by
reducing the historical data for the yeazs 1991 throu�h 1993 to be in line with the level of
purchases in the years before and after the period.
Use Tax Projections
To produce estimates of the revenues which would have been collected under a local use tax in
Saint Paui for the years 1992 throu�h 1995, we first made the adjustments discussed above,
namely excluding paper products purchases and airline purchases and adjusting eatin� and
drinking use tax payments: But the resultin� revenues would probably overstate use taxes
somewhat because they would still include data from firms outside the city boundaries.
Therefore, in addition, we further reduced those implied revenues by an additiona125 percent.
This further reduction was chosen after inspection of the relationship of actual city sales tax
revenues to the state's reported sales tax revenues for Saint Paul in the industries which are the
larger payers of use tax.
This process provided a base estimate of the tax base in 1992 through 1995. At this point, the
best approach we felt justified in taking was to grow those revenue figures at a constant and
conservative rate of 3 percent per year. The resultin� numbers are included in Table 8 below.
A coupie of points should be made about these estimates. First, they are much more speculative
than the sales tas estimates contained in the earlier sections of this study and subject to much
greater expected enor than the initiai projections of sales tax revenues made in 1993 before the
city had access to individual sales tax return data. Second, the actual collections in the years 2000
and beyond will be driven by the pace of economic development in the City of Saint Paul.
Significant projects, such as Lawson Software, are almost certain to have a sizable impact on the
actual revenues collected. The projections presented here have not been formed in a way which
would fold in the potential impact of such projects. As bud�ets and plans for new commercial,
office and manufacturing facilities are made, it may be possible to estimate a use tax impact for
each project separately. Such estimates should probably be added to the baseline revenue levels
being put forward here.
12
�8 ���
Table 8
Projected Revenues
City of Saint Pau1 Local Use Tas
Year
1994e
1995e
1996
1997
1998
1999
2000
2001
2002
Revenues
$738,551
$758,599
$781,000
$805,000
$829,000
$854,000
$879,000
$906,000
$933,000
Source: Anton & Associates estimates
The city is left with an almost irreducible level of uncertainty about the proceeds for the use tax.
With advances in the state's computer system, we have framed a strategy where some
supplemental data runs will be done to help sharpen our estimate of the 25 percent discount factor
used to further adjust the use t� revenues in this section. However, those runs were not ready at
this writing and, in fact, they hold out little hope of sharpening our overall estimates significantly
because of the other economic uncertainties about both the period since 1995 and the future
course of economic events in Saint Paul. Even after all of this analysis, it is very possible for the
revenues in the yeaz 2000 to differ from our figure of $879,000 by as much as $400,000. It is
somewhat more likely they would be higher than our projection rather than lower.
Nevertheless, it seems clear that the city should implement the use tax as soon as it is abie because
it would raise additional funds, however uncertain we may be of the exact amount. Once the city
has experience with actual collections of its use tax, it will also be possible to do a much better job
of understanding the pattem of use tax purchases and, ultimately, anticipating future years'
revenues.
V. Comptiance Issues and Strategies
The exact degree of compliance with Saint Paul's local option sales tax is not known. Almost
certainly, there are some businesses which should be collectin� and remitting the tax which aze not
doing so, but their number and the potential additional taxes that would be collected if compliance
were raised remain unknown. The city is considering whether it would be worthwhile to
undertake an initiative to raise compliance. In at least one instance, a city raised significant
additionai revenues throu�h undertaking such an effort.
13
���`�
In 1990 and 1991, after a study done by the principals of our firm who were workin� for Emst &
Youn� at the time, the City of Minneapolis chose to publicize its sales tax to businesses in the
city. In the yeaz followin� this initiative, revenues rose by I1 percent, a �rowth rate well above
the preceding year's growth and also well above the 5 percent rate bein� projected at that time.
If the City of Saint Paul were to undertake such an effort, it is unlikely that the financial retum
would be as hi�h as that experienced by 1vlinneapolis. Two factors argue for somewhat lower
expectations for the effects of such an initiative. First, the education effort undertaken by the
Mnnesota Department of Revenue at the beginnin� of Saint Paul's tax was significantly more
thorough, in our view, than what had been done earlier in Minneapolis. Therefore, Saint Paul
probably had significantly higher compliance on day one than did Minneapolis.
Second, changes in the Department of Revenue computer system and collection system now make
it harder for payers of the tax to avoid it or to "forget" to pay. Today, the state sends each
business taspayers a preprinted, customized form which includes line items for the state ta�c and
any local taxes for which the taxpayer is liable.
Despite these two factors, there remains a real possibility that the City of Saint Paul could coilect
enou�h additional tax to make.a collection initiative worthwhile. In the next section, we lay out
our recommendation for how such an initiative should be structured in order to be raise additional
revenue in a cost-effective manner.
There are two�separate groups of potential additional payers of the sales tax, namely businesses
located inside the Saint Paul city limits and those located outside the city limits who sell into Saint
Paul and, therefore, should pay the tax. As a practical matter, it makes sense to have separate
strategies for these two groups.
Businesses Inside Saint Paul
To assess the possible number of businesses inside Saint Paul who may be avoiding the local sales
tax, we were able to request a list of names and addresses of selected businesses located inside the
Saint Paul city limits. All of the businesses on the list had Saint Paul addresses and had not filed a
Saint Paul sales taac return but had paid the state sales tax in one or more of the years 1994
through 1496. (Similar data on 1997 has become available since our data request.) Table 9
below is based on data received under this request.
The data show that over this three year period over one thousand business entities with Saint Paul
addresses paid some state sales tax without filing a local sales tax return. Undoubtedly, some of
those businesses were not liable for Saint Paul's sales tax. For example, a building cleaning
business run out of an office in a person's home in Saint Paul but with no clients inside the city
limits would not be liable. Neither would a mail-order business which did not have any sales
inside the city limits.
I �1
�,�-�r�,�
Tabie 9
Number of Saint Paut Businesses
Filing State Sales Tax Returns
But Not Fi]ing City Sales Tax Returns
1994-1996
Number of Years Filed State
Return Without Filing City
Return
Number of Firms
Number of Possibly Missing
Locai Returns
One year
Two yeazs
Three years
Totals
683
253
160
1,036
Source: Minnesota Department of Revenue, Anton & Associates
683
506
480
1,669
The Department of Revenue cannot release information regarding the sizes of the businesses or
the amounts of their state sales tax liabilities. Judging from the names themselves many of the
businesses are probably very smail; many of them actually bear the names of individuals. We did
receive information about the industry desi;nations for the taYpayers in this data set. Table 10
includes information about the distribution of these firms across industries.
As the data in Table 10 indicate, the greatest number of potential taxpayers are in the
Miscellaneous Retail industry with Business Services being the second largest category. Beyond
the six industries singied out in the table, businesses were scattered through a variety of other
industries. Over all there were 643 businesses located in Saint Paul that filed state returns but did
not file local sales tax returns.
is
�� ����
Table 10
Industry Distribution of Saint Paul Businesses
Filing State Sales Tax Returns
Without Filing Locai Sales Tax Returns
SIC Code
59
73
58
72
57
50
Industry
1V1'iscellaneous Retail
Business Services
Eating and Drinking
Personal Services
Furniture
Wholesale Durable Goods
All Others
Total
Number of State
Returns FiSed in 1996
210
94
29
28
24
17
261
643
Total State Returns
Filed, 1994-46
Source: Minnesota Department of Revenue, Anton & Associates
593
258
73
80
67
53
545
1,669
It should be emphasized once again not only that many of these businesses are sma11 but also that
many of them may, in fact, not have Saint Paul sales tas ]iability. However, in dealing with this
group of businesses, the city has a distinct advantage as compared to dealing with potential
taxpayers located outside the city limits: namely, we know who the businesses are and where they
are located.
Therefore, an effective approach to raising compliance of (and revenues from) this group would
be the following set of steps:
• Obtain similar information for calendar year 1997 on Saint Paul companies paying
state sales taxes but not payin� the local tax
• Double check addresses to make sure they are inside the city limits
• Send each business that filed a state return in 1995, 1996, or 1997 a mailing which
requires a response re?arding whether or not they are liable
• Follow up on responses from firms and take additional actions with firms who choose
not to respond
Response to the mailings could, perhaps, be encoura�ed with some sort of offer of partial amnesty
for back ta�ces owed. The focus would be on raisin� revenues in the future and it very likely that
R�
! V �G ���
for some of these businesses who might be liable it mi?ht be very difficult if not impossible to
accurately reconstruct what their liability for a past year was because they have had no reason to
keep the detailed records from which such a calculation might be made.
In undertaking this effort, the Department of Revenue could help in a number of ways. If given a
list of names and addresses, the Revenue Accounting Unit could produce a report giving the
a�gregate state sales taxes paid by the group even thou�h no individual data could be released. In
additioq the newly-created liaison for local taxes, the Targeted Information Unit, couid help with
designing the letter to be sent and other elements of approaching the businesses.
In summary, approaching this population of possible local sales tax payers is relatively
straightforward, especially when compared to the hazder task of identifying potential payers
outside the city. It is also probably likely that this se;ment has less potential for si�nificant
revenue gains that does the outside segment.
Businesses Outside Saint Paul
Many firms who file Saint Paul sales tax returns are located outside the city limits. In fact, our
analysis of the individual records for the larger taxpayers indicates that almost half of the firms
that pay Saint Paul sales taac have addresses outside of the city limits. Some of these businesses
are disbursing funds from a headquarters and have business ]ocations inside the city limits. Many,
especially business service firms and personal service firms, are not located inside the city but sell
services or deliver goods to city businesses and residents and must, therefore, coilect the tas.
Data compiled from the returns of the larger tax payers is contained in Table 11 below.
Table 11
Location of Businesses Filing
S:tint Paui Sales Tax Returns in 1997
(firms paying over $500 per year)
Location from which tax is paid
Number of 1997 Revenues
firms
Percent of Total
Collections
Inside City limits
Inside Minnesota, but outside City
Outside Minnesota
1,113 $3,680,979
622 $3,916,313
305 $1396.399
Total 2,040 $8,993,691
Source: Minnesota Department of Reyenue, Anton & Associates
36.6%
38.9%
13.9%
893%
17
9� i��
There are 927 firms outside of Saint Paul which currently pay over 52 percent of the Saint Paul
local sales taz at this time. How many more firms should be paying? To answer this question and
to identify those additional fums, we recommend the following basic steps:
• E�ctract a complete list of all firms located outside Saint Paul that pay more than $500
per yeaz in local sales tax to the city
• Sort the list by industry and inspect the list of taxpaying firms in each industry
• For each industry, prepare a list of inetro, regionai, or national firms with location and
characteristics similar to taspaying firms as potentiai tax payers
• Contact each of these firms with information in a mailing and follow up on responses
and non-responses
The Department of Revenue will be able to advise on the design of some of the materials. It may
also be possible to design information requests to be made to DOR which would help to generate
gross estimates ofthe potential revenue from specific industry sectors.
In summary, we do not have enough information to make a reliable estimate of the additional
revenue to be raised from a compliance initiative. We believe that findin� additional businesses
with significant liability which are located outside of the City of Saint Paul is a more promising
avenue than finding large non-payers inside the city limits. However, the latter group may also be
worth pursuing because ttiey are relatively easier to identify.
Although we have not made estimates of the cost of a compliance initiative, we think it quite
likely that such a pro;ram would raise enou�h new revenue to pay for itself but we doubt that it
would generate a revenue increment proportional to that which Minneapolis experienced. When
the city enacts a use tax, as it must by the year 2000, there may be useful synergy between the
education effort undertaken at that time and the search for additional taxpayers inside the city
limits. Action to identify additional taxpayers outside of the city could be done at any time.
18
Arena Lease summary
Summary of the Provisions of the First Amendment
to Lease and State Loan Agreement
Ori�inaUAmended Lease Comparisons ����� Financine Plan
Page 1 of 8
( 0 d���
I. SUMMARY OF THE FIRST AMENDMENT TO ARENA LEASE
The following is a sununary of the First Amendment to the Arena Lease. The changes
over the Original Lease which was executed in January of this year, for the most part,
are to implement legislation passed during the 19981egislative session, to evidence the
State Loan, and to reduce the amount the City is required to contribute to the Arena
from $95,000,000 to $65,000,000.
Section 1. This section amends certain defmitions set forth in the Original Lease,
including "City Contribution" which has been increased from $30,000,000 to
$65,000,000. A definition of "Rent" is included, which includes "Base Rent" and a
definirion for the payments in lieu of taxes (i.e., "Pilot Payments"), which the Tenant
isrequired to make in lieu of the Tenant's $35,000,000 contribution in the Original
Lease. The definition of "Project Costs" has been amended to include the fees of the
respective Construcrion'Representatives.
Section 2. This secrion deletes various terms in the Original Lease and is necessary to
reflect that the State is making an interest free loan from money appropriated from the
State general fund, rather than a grant from the proceeds of State general obligation
bonds.
Section 3. This section adds defined terms to the Lease to reflect, among other things,
that the Tenant has agreed to provide a letter of credit to secure its obligation to pay
Rent, which letter of credit will be used by the City to fund a portion of the reserve
required for the City Bonds. The "City Bonds" are the Series 1999 Sales Tax Revenue
Bonds which are described in the Financing Plan which is set forth in a separate
attachment.
Section 4. This section amends the Lease to require the Tenant to pay $3,500,000 per
year as Base Rent, payable quarteriy in advance commencing on September 1, 2004,
through and including June l, 2025. The Base Rent due on September l, 2000, is
deferred until October 15, 2000. There is also a provision in the Lease to the effect that
Base Rent will decrease if the City does not approve a special sign district for
advertising on marquees for the RiverCentre.
This section also reflects the Pilot Payments to be paid by the Tenant. The Pilot
12/22/9g 5:3634 PM
1
�
4
5
6
7
8
9
10
11
12
13
14
15
16
27
18
19
20
21
22
23
24
25
26
� 9
30
31
32
33
34
35
36
37
38
i
RESOLVED:
����
� �� �
L°��"�j
q� -� i�t6
1. The City Council hereby approves First Amendment to
Arena Lease, First Amendment to Hockey Playing Agreement and the
State Loan Agreement (collectively, the "Documents") in
substantially the forms submitted and authorizes the Mayor,
Clerk, Director, Department of Planning and Economic Development
and Director, Office of Financial Services (the °Authorized
Officers") to execute the Documents. Any other documents and
certificates necessary to the transaction described above shall
be executed by the Authorized Officers. In the event of the
disability or the resignation or other absence of any of the
Authorized Officers, such other officers who may act in their
behalf shall without further act or authorization of the City be
deemed for purposes of this Resolution as such Authorized
Officers and shall do all things and execute all instruments and
documents required to be done or to be executed by such absent or
disabled officials. The approval hereby given to the Documents
includes appraval of such additional details therein as may be
necessary and appropriate and such modifications thereof,
deletions therefrom and additions thereto as may be necessary and
appropriate and approved by the Director, Department of Planning
and Economic Development and the City Attorney; and said
individuals are hereby authorized to approve said changes on
behalf of the City. The execution of any instrument by the
Authorized Officers of the City herein authorized shall be
conc2usive evidence of the approval of such document in
accordance with the terms hereof.
2. The City Council hereby approves the Financing Plan;
provided that the issuance of the City Bonds as described in the
Financing Plan is contingent upon the holding of a public hearing
on and approval of certain amendments to the Block 39/Arena Tax
Zncrement Financing Plan, the adoption by the City Council of a
final resolution authorizing the issuance of the City Bonds, and
the adoption of a resolution approving certain financing
documents by the RiverCentre Authority.
Lc,Gr+c
3 • �ikF�(�c � rs t�'ft�°�ftc����e�r�6�i,
ma� �c f���«�l a�"�� �6 �u � �� re,
/�C�� �i �•C��rN�O��cf� ��f. e��
�Ii�a �n
r� �L.
� "�G
1002941.3
�t���,�
��ic /�tit k���c
�t �G�i 124w eX/sf5
� _ �r���l Cea�c
� � �
C
�� ��
Y�/ �
�
a�-l�y�
2 �
3
4
S
Adopted by Council: Date
Adoption CeRified by Council Secretary
By:
Approved by Mayor: Date
By:
3002941.3
equ by Department of: �
u£h/)/� ��=�/� f�6
_., 7 _"' ,
By:
C\ ���� Y��
�
' - l'� � � Q C �Q —
� � ��a � 9q
RESOLUTION
CITY OF SAINT PAUL, MINNESOTA
Presented By
Referred To
Committee: Date
Council File # — tg "" ��_�
GreenSheet# lv//��
39
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
RESOLUTION APPROVING AND AUTHORIZING EXECUTION OF A FIRST
AMENDMENT TO ARENA LEASE, A FIRST AMENDMENT TO HOCKEY
PLAYING AGREEMENT AND A STATE LOAN AGREEMENT IN
CONNECTION WITH THE ARENA PROJECT
I:I;i�l a���
1. Pursuant to Laws of Minnesota, 1967, Chapter 459, as
amended, the Civic Center Authority (hereinafter referred to as
the "RiverCentre Authority") was created as an agency of the City
of Saint Paul (the "City"), and given the power to, among other
things, build, equip, maintain and operate a civic center
complex, now known as the RiverCentre Complex, which includes an
arena (the "Existing Arena").
2. The City, the RiverCer.tre Authority and Minnesota
Hockey Ventures Group, LP, a Minnesota limited partnership (the
"Tenant") have hereto entered into an Arena Lease dated as of
January 15, 1998 among the City, the RiverCentre Authority and
the Tenant (the "Arena Lease") which sets forth the rights and
obligations of the parties with respect to the demolition of the
Existing Arena, and the design, construction, financing and
operation of a new arena (the "Arena"), and (b) a Hockey Playing
Agreement by and between the City and the Tenant (the "Hockey
Playing Agreement") pursuant to which the Tenant agrees that the
Team will play all its NHL Home Games (as defined in the Hockey
Playing Agreement) at the Arena.
3. Pursuant to the Arena Lease, the Tenant agreed to
contribute at least $35,000,000 (the "Tenant Contribution") to
the costs of the demolishing the Existing Arena and constructing
and equipping the Arena (collectively, the "Project"), and the
City agreed to contribute $30,000,000 (the "City Contribution")
to the costs of the Project.
4. The City and the Tenant anticipated that the remaining
costs of the Project would be funded by a grant from the State of
Minnesota.
5. Pursuant to legislation
legislature, an appropriation was
interest free loan of $65,000,000
other legislation favorable to t
1998 legislature (collectively t
legislation required the Tenant t
City, which the Tenant agreed to
enacted by the 1998
made for the Project, for an
(the "State Loan"), and certain
he Project was enacted by the
he "1998 Legislation"), which
o make certain payments to the
make in lieu of the Tenant
1002941.3
Q�-���16��
1 Contribution, and the City agreed to increase the City
2 Contribution to $65,000,000.
3
4 6. The City and Tenant will submit an application to the
5 City at a future date with respect to the adoption of an
6 ordinance creating a special sign district covering the
7 RiverCentre Complex, and a public hearing will be held by the
8 Planning Commission and the City Council on the application.
10
li
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
7. Pursuant to legislation enacted by the 1998 legislature
Sections 30 through 32, and Sections 36 and 37 (the "Special
Law") which requires local approval in order to be effective,
which local approval will be given by the City Council in a
separate resolution, authorizes the City to issue its sales tax
revenue bonds (the "City Bonds") to finance the City Contribution
to the P_rena .
8. A financing plan describing the interest free State
Loan and the issuance and security for the City Bonds has been
prepared and is attached hereto as Exhibit A(the "Financing
Plan");_ provided that the implementation of the Financing Plan
and issuance of the City Bonds will require the City Council to
(a) consider a resolution at a future date approving various
financing documents, and (b) hold a public hearing on and approve
certain amendments to the Block 39/Arena Tax Increment Financing
Plan and request the Housing and Redevelopment Authority of the
City of Saint Paul to approve the same.
9. In order to obtain the State Loan and to implement the
provisions of the 1998 Legislation, the following documents have
been prepared and submitted to the City Council:
(a) a First Amendment to Arena Lease by and among the
City, the RiverCentre Authority and Tenant (the "First
Amendment to Arena Lease") which amends the Arena Lease in
certain respects;
(b) a First Amendment to Hockey Playing Agreement by
and between the City and Tenant (the "First Amendment to
Hockey Playing Agreement") which amends the Hockey Playing
Agreement in certain respects; -
(c) a State Loan Agreement by and between the City,
the State and the Tenant (the "State Loan Agreement")
setting forth the terms and conditions under which the State
Loan will be made and disbursed to the City to pay a portion
of the costs of the Project; and
(d) the Financing Plan.
1002941.3
q�-�►�6
1
2
3
4
5
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
RESOLVED:
1. The City Council hereby approves First Amendment to
Arena Lease, First Amendment to Hockey Playing Agreement and the
State Loan Agreement (collectively, the "Documents") in
substantially the forms submitted and authorizes the Mayor,
Clerk, Director, Department of Planning and Economic Development
and Director, Office of Financial Services (the "Authorized
Officers") to execute the Documents. Any other documents and
certificates necessary to the transaction described above shall
be executed by the Authorized Officers. In the event of the
disability or the resignation or other absence of any of the
Authorized Officers, such other officers who may act in their
behalf shall without further act or authorization of the City be
deemed for purposes of this Resolution as such Authorized
Officers and shall do all things and execute all instruments and
documents required to be done or to be executed by such absent or
disabled officials. The approval hereby given to the Documents
includes approval of such additional details therein as may be
necessary and appropriate and such modifications thereof,
deletions therefrom and additions thereto as may be necessary and
appropriate and approved by the Director, Department of Planning
and Economic Development and the City Attorney; and said
individuals are hereby authorized to approve said changes on
behalf of the City. The execution of any instrument by the
Authorized Officers of the City herein authorized shall be
conclusive evidence of the approval of such document in
accordance with the terms hereof.
2. The City Council hereby approves the Financing Plan;
provided that the issuance of the City Bonds as described in the
Financing Plan is contingent upon the holding of a public hearing
on and approval of certain amendments to the Block 39/Arena Tax
Increment Financing Plan, the adoption by the City Council of a
final resolution authorizing the issuance of the City Bonds, and
the adoption of a resolution approving certain financing
documents by the RiverCentre Authority.
That the
to the MinnesoCa "Corporate Welfare" Statute which now exists in the Amended
Lease.
1002941.3
a�-��y�
3
4
5
Requested by Department of:
Yeas Nays Absent ���� �
Benanav `�
Bostrom
ey:
�✓ I I I �`��
v�--
� t � �
Adopted by Council: Date
Adoption ertified by Council Sec tary
a , a— _ �...,�.� ,.�—
h
Approved by Mayor: D ����
By:
3002941.3
Q�p_��.��
DEPARTMENT/OfFlCFICAUNCLL DA'C6IMIIATED � � � �
PlanningandEconomicDevelopment 12-16-98 GREEN SHEET NO. 61153
iaoal��re �nnaioaie
COMACIPERSONkPHONE a DEPAAiMENlD�tEClOR � Q'IYCOUNm.
PamWheelock266-6628 �� � rnvnrrow��r 0 an'u.EEwc
MUSlBEONNIINm,AGENDABY(DA'1£) � O FIIJANOALSERVICESOIIt O FAI.SERNCESOFF/ACCfG
December23, 1998 Q Mwrox<oxnss�sv,� O a�wccaies�wr
TOTAL # OF SIGNATURE PAGES (CLIP ALL LOCATIONS FOR SIGNATURE)
ACIfpNRFQUFSIID
Approval of the Firs[ Amendment to Arena Lease
�co��nnoNS: wy�o.«a�o�x�a(rt) PERSONAL SERVICE CON7RACfS MUST ANSWF.R 7'HE FOLLOR'ING QUESTIONS:
r�axtuctcCOe,muss�ox 1_ ETac tLic pe�son/Srm ever wodced �mder a conhact for tLis deparmient?
�co�mwneE YES NO
_avaseav�� Connmss�ow 2. Has tltis pecsoNSrm everbeen a city emp]oyee?
Srqt'F 1'ES NO
3. Dces this pawdSnn posuss a sldll notnormally possesud by avy c�ment city employee?
YES NO
4. is this perso¢ / 5m a Eargeted veadoY! '
YES NO
(Explain all yes answers oo separate sheet aud attach to greev sheey
WITIA'LMG P20HLEM, ISSIIE, OPPoRTUNIN (Wlw. What �w. Whcrt, WhY)
The 1998 Minnesota state legislature appropriated $65,000,000 to the City of Saint Paul for the demolidon of the old arena and construction of the
new RiverCentre Arena. The legislarive appropriation contained several condirions that had to be met by the team and city in order for the city
to receive the $65,000,000. This resolution sarifies the conditions set by the legislature.
ADVANTAGESIFAPPROVEP
The City will receive $65,000,000 from the state to complete the financing plan for the new RiverCentre Axena.
DISADVANTAGFS IF APPROVED
13one
DLSADVANfAGSSOFNOTAPPROVED
The City of Saint Paul would be responsible for $95,OOQ000 for the demolition of the old azena and construcrion of the new RiverCenh�e Arena
iOTALAMOUNTOFiRAN5ACC10H � COST/REVENUEeUDGEiE➢(CIXCLEONB) Y6S NO
FUNDINGSOURCE ACTIVI'IYNUAffiE2
FMANCIhL RJEORMATION� (Fa3LAIM
q�'-i►�&
.:,,:
FINANCING PLAN FOR RIVERCENTRE ARENA PROJECT
OVERVIEW
The following is the proposed Financing Plan for the RiverCentre Arena project. The bond resolution
authorizing the City bonds will be submitted to the City Council in January, 1999 for final approval.
The $130 million for the demolition of the existing Arena and construction of a new Arena relies on an
interest-free loan from the State of Minnesota in the amount of $65 million (with required repayment of $48
million), and on the issuance of Sales Tax Revenue Bonds su�cient to provide the remaining $65 million
for the project.
The $48 million repayment to the State of Minnesota is solely from rent payments from the operation of the
Arena by the NHL Team. The debt service for the $65 million in revenue bonds is predominantly fmanced
by NHL Team rent payments, PILOT (taY) payments made by the NI�, Team, and Half Cent Sales Tax
proceeds dedicated solely for use at the RiverCentre Arena.
The Team has agreed to go beyond the legal requirements of the state legislation and the previously enacted
Lease to help the City fmance the revenue bonds. The Team will post a I,etter of Credit ranging from $6 to
$8 million annually, which allows the City to fmance a bond reserve of $7.275 million which insure the debt
will be at investment grade. Without the Letter of Credit from the team the Ciry would be responsible for
funding the entire reserve.
The Financing Plan is consistent with respective obligations of the City and Team, as described in the
Amended Lease and State Loan Agreement. The Finance Plan reflects the reduced City Contribution from
$95 to $65 million and the Team paying Lease and Pilot payments totaling $1933 million dollazs through
2025 to the City.
Finally, this Financing Plan and Lease Revisions continues the obligation for the Team to: (1) fund all costs
in excess of $130 million necessary to complete the project, (2} to pay ongoing maintenance and capital
improvements to the Arena during the Lease term, and (3) to retire the outstanding City Bonds and State
Loan for early termination of the Lease.
FINANCING STRUCTURE
State Loan
The City will receive a$65 million interest free loan to be used for construction of the RiverCentre Arena.
The State Loan will not be a public debt of the City and will be repaid from a portion of Team payments.
The Loan payments (totaling $48 million due to foregiveness of $17 million) begin at $1,250,000 in the Yeaz
2003 and increase to a masimum of $4,750,000 in the Yeazs 2016 to 2020 (see Attachment III). The State
Loan will be secwed by a Letter of Credit provided by the Team in an amount equal to the following yeaz
payment due under the Agreement.
City Sales Tas Revenue Bonds
CiTy will issue approximately $72.75 million in Sales Tas Revenue Bonds in late January, which nets the
remaining $65 million necessary to fund construction of the Arena. This tasable debt will be investment
grade and insured by Financial Security Assurance ("Bond Insurer"). FSA is the current insurer of the
outstanding 1996 Sales Taac Refunding Bonds. The term will be for 27 years with the last payment in 2025.
a�
E%hibit A
Page Two
The annual debt service will range from approxirnately $5.1 to $93 million per yeaz (with average debt
service of $6.4 million per year.) The average tasable interest rate, if priced today, will be appro�mately
6.70 percent. The Series 1999 Bonds will be callable at paz in 2011.
SOIIRCES AND USES
See Attachment I, which provides a summary of the Sources and Uses for the RiverCentre Arena Project.
SERIES 1999 BOND SIZING
The Series 1999 Bonds will be sized to maYimize the use ofTeam Payments for debt service after repayment
of State Loan, minimize the use of the RiverCentre portion of the Sales Tax, and comply with a debt
coverage ratio of 1.20 required by the Bond Insurer.
On an average, 89% of the Series 1999 Bond's debt service is retired by Team Payments.
See Attachment IV, (Schedule of Available Revenue and Debt Service Coverage), which includes Team
Payments under the Lease, Sales Tvc from the RiverCentre's 40 Percent, and TaY Increments from Block
39/Arena DisVict.
SECURITY
The Series 1999 Bonds security will include the following:
Team Payments - Approximately $145 million of Team payments under the Amended Lease (see
Attachment II).
2. Sales Tax - The Series 1999 Bonds will have a first lien on the CiTy's Sales Tax and will be on
parity with 1996 Sales Tax Refunding Bonds. Beriveen 2003 and 2020, $15.6 million of Sales Taz
from the RiverCentre Account will be used to pay debt service on the new issue. This issue will be
structured so that the Neighborhood and Cultural Accounts of the Sales Tax is not expected to be
used for payment of debt on 1999 Series Bond. See Attachment V for Sales TaY Analysis of the
Neighborhood Cultural and RiverfrontAccounts. Bond Insurerwill underwrite a annua122 percent
inflation increase in sales tas which is half the annual historical growth rate.
3. Tas Increments - Taac increments between 2016 and 2025 from Block 39/Arena District will be
pledged on a first lien basis as an additional credit enhancement for the Bond Insurer. Tax
increments prior to this date are pledged on a subordinate basis to the Series 1999 Bonds.
4. Bond Reserve - A Reserve of approximately $7275 million (10 percent of the fmal bond size) will
be funded by:
a Letter of Credit ranging from $6 to $8 million per yeaz posted by the Team under the
Lease Amendment; and
a surety bond.
5. Euly,Termination of the Lease - The Team is obligated, under the Amended Lease and State Loan
Agreement, to pay offthe outstanding debt and any premium for eazly termination by the Team (See
Attachment VII).
°L�-i��6
Exhibit A
Page Three
FINANCING FZOW CHART
Attachment VI contains a detailed flow chart outlining the flow of funds of the Financing Plan
FINANCING TEAM
Attachment VII contains a list of the members of the City's Financing Team.
BENEFITS
Through the Amended lease, the City reduces the City Contribution from $95 million to $65 million.
2. City can take advantage of a$65 million interest-free loan from the State which is secured solely
by Team rent payments and only requires a repayment of $48 million.
3. The State Loan removes the concern raised by rating agency Standard and Poor when they changed
their outlook for the CiTy from stable to negative.
4. By issuing the Series 1999 Sales Tas Revenue Bonds, $33.5 million of General Obligation
Commercial Paper (which was used to fund most of the RiverCentre Arena Project construction
costs to date) will be retired. This reduction to the City's General Obligation Debt will be a positive
influence in the City's General Bond Rating deliberations in the year 1999.
5. City issues fixed rate debt neaz historic low interest rates.
6. Team provides $6 to $8 million in Letters of Credit for the Reserve Fund for the Series 1999 Bond
and for the State Loan.
SCHEDULE
December 16, 1998
December 23, 1998
December 26, 1998
January 13, 1999
Presentation to City Council
Consideration of changes to Amended Lease, State I,oan Agreement, Financing
Plan and Local Approval of Sales Tas changes by end of December
Request for commitment for Bond Insurance and Rating
Consideration of Series 1999 Bond Resolution
Public Heazing of modification of the Financing Plan for Block 39/Arena Tax
Increment District
January 29, 1999 Close on Series 1999 Bonds
��-f��s
ATTACHI��NTS
Attachment I
Attachment IB
Attaclunent II
Attachment III
Attachment IV
Attachment V
Attachment VI
Attachment VII
Attachment VIII
(Aevised 12/15/98 - I1:15)
Sources and Uses
Project Cost Summary
Team Lease and Pilot Payment
State I,oan Repayments
Schedule of All Available Revenues and Debt Service Coverage
Cash Flow of Sales Tax Trust Accounts
Financing Flow Chart
Early Terminarion Obligation
Financing Team
\�Ped�sys2\SHARED\GEURS�rivercentetplan.fin
Attachment I
Sources and Uses (RiverCentre Arena Project)
SOURCES OF FUNDS
Safes Tax Revenue Bond Proceeds, Series 1999
State Loan Proceeds
Credit Facility/Surety for Bond Reserve (from Team,FSA)
Interest Earning on Construction Fund
TOTALSOURCES
USE OF FUNDS
Project Construction Fund
Bond Reserve Fund (from Team,FSA)
Capitalized Interest Fund
Bond Insurance
Cost of Issuance
TOTALUSES
a�-i��
$72,725,000 (1),(2)
65,000,000
7,272,500 (3)
2,754,000
$147,751,500
$130,000,000
7,272,500
8,355,480
1,101,118
1,022,402
(4)
$147,751,500
Notes:
(1) Series 1999 Sales Tax Revenue Bond Proceeds will be used to retire $33.5 million dollars
of the City's General Obligation Commercial Paper issue, which along with the Team's
contribution, was used to fund construction costs to date of the RiverCentre Arena Project.
(2) Final Series 1999 bond sizing of $72.75 million dollars is dependent on interest rates
at pricing of the bonds which is estimated to in late January 1999.
(3) The Team will provide Letter(s) of Credit to secure the Series 1999 Bonds and the State
Loan, which is between $6 and $8 million during the term of the Lease. Since the amount
securing the State Loan is included in the total Team Letter of Credit requirements, the
difference needed for the Bond Reserve will be by a surety provided by FSA .
(4) The Team has obfigation to fund cost overuns above $130,000,000 to complete the Project.
See Attachment I-B for a Summary Cost breakdown of the Project.
12l15l98 File:arenafin.wk4
qY - ) i�ts
ATTAC��VIVIENT I -B
SAINT PAUL RIVERCENTRE ARENA
PROJECT COST SUMMARY
Foundation / Site Work
Structure
Enclosure I Roof
Interiors / Equipment
Conveying
Mechanical / Electrical
Existing Site Costs
Permits / Insurance
Furniture, Fi�tures & Equipment
Architect, Engineering and Construction Management
Other Costs
TOTAL PROJECT COSTS
$ 7,906,000
38,348,000
9,372,000
18,330,000
1,887,000
25,798,000
5,045,000
1,123,000
10,229,000
11,500,000
462,000
$ 130,000,000
NOTE: This cost breakdown summary is under revision. Individual line items are
subject to change until de[ivery of the Guaranteed Maximum Price. Team has
obligation to fund project cost overruns in excess of .SI30 million.
Attachment 11
The City of Saint Pauf, Minnesota
RiverCentre Arena Financing
Schedule of Team Payments
111 (2) (3)
�1�-11�6
Team Total
Year Lease PILOT Team
Ended Payment Payment Payments
9/1 /99 0 0 0
9/1 /00 0 0 0
9/1/01 3,500,000 2,500,000 6,000,000
9/1/02 3,500,000 2,504,250 6,004,250
9(1(03 3,500,000 2,524,462 6,024,462
9/1/04 3,500,000 2,545,686 6,045,686
9/1 /05 3,500,000 2,567,970 6,067,970
9/1/06 3,500,000 3,291,368 6,791,368
9/1(07 3,500,000 3,315,937 6,815,937
9/1/08 3,50Q,000 3,341,734 6,841,734
9/1 /09 3,500,000 3,368,820 6,868,820
9/1 /10 3,500,000 3,397,261 6,897,261
9/1/11 3,500,000 4,127,124 7,627,124
9!1/12 3,500,000 4,158,481 7,658,481
9/1/13 3,500,000 4,191,405 7,691,405
9/1/14 3,500,000 4,225,975 7,725,975
9/1/15 3,500,000 4,262,274 7,762,274
9/1/16 3,500,000 5,000,387 8,500,387
9/1/17 3,500,000 5,040,407 8,540,407
9i} i1 g 3,500,000 5,082,427 8,582,427
9/1/19 3,500,000 5,126,548 8,626,548
9/1l20 3,500,000 5,172,876 8,672,876
9/1/21 3,500,000 5,921,520 9,421,520
9/1 /22 3,500,000 5,972,596 9,472,596
9/1/23 3,500,000 6,026,225 9,526,225
9!1/24 3,500,000 6,082,537 9,582,537
9/1/25 3,500,000 6,141,663 9,641,663
Total: 87,500,000 105,889, 933 193,389,933
Attachment 111
The City of Saint Paul, Minnesota
RiverCentre Arena Financing
Schedule of State Loan Repayments
State
Loan
Date
8/15/99
8l15/00
8/15/01
8/15/02
8/15/03
8/15/04
8/15/05
8/15i06
8/15/07
8/15lO8
8/15/09
8/15/10
8/15/11
8/15/12
8/15/13
8/15/14
8/15/15
8/15/16
8/15/17
8/15/18
8(15/19
8/15(20
0
0
0
0
1,250,000
1,250,000
1,250,000
1,500,000
1, 500,000
1,500,000
1,500,000
1, 500,000
2,000,000
2,000,000
2,000,000
3,000,000
4,000,000
4,750,000
4,750,000
4,750,000
4,750,000
4,750,000
��'��`�
Total: 48,000,000
q�-i I�16
m
m ° p
u q
� o
N V
D �j
q O d
^ m d y
o a
> � ` ° o
>
G � K d m
d 3 % Q n
t a' F �
U C
�o .`_- = 3 ">
Q y w o ¢
p d � m
�,�ca
c A
v � � �
� O
a' S
u
a t
n y
f
x
O
F
�
d
>
0
�
>
¢
O
F
L
O
a y
C y
m '>
� N
> �
2 �
y mmie
U < V N
p j IA N t0
� � I� b K
u N mmof
- � a a a
w v v v v
0
d
o A
N
¢
e r m N M c- n u. n o o � n m c� h m o 0 0� o w r
�p rvwwnmw�ci e aa a a�o mwm �o��
N � � � � ��- �- � � � � � � � � r � � ��- �.^ � tV
O O f7 N[7 t'� N V t0 W � N f7 In � � ni N f0 f0 f0 N O h�
N W w m m Lo m m 0 0 O� G� m o� m O O^ � t'� n n
N � �-�- � � � � � � � � � � � N N N N N N N N N(7
D O O O O O O O O O O
0 0 0 0 0 0 0 0 0 0 0
O O O O O O O O O O O
`^ [�9 6�i O��� O� O m
m m <rw �or rv a�na
N N N m m �� � O O O
in�n o�n m mioninOin
�o�n o mn om moen
ma �o a � �<?N noo
iti [7 � t0 h n h�O t`i oi O
mm m inma w n wm
vamo�n�omv+�<e
e v aic oioiai doco
0 0� m o o m v�n o a
v
m O N t'� rD n C� tO
�- C t0 O� M N 1� (� �J
�� o � n m m m m
ui vi �i vi ui ui ui �i vi
O O O
° o ° o ° o
OO�n
< m v
N � �
N
m m m
m m o
(G I� P
ma in
O� in
m m �
m � m
O O O
m m o
C 0 �
o�no
< ? N
h N h
n a m
m�?�o
O O O
O O O
�o O �ti
inom
N l7 h
n ' H
tD N
o�nm
m � m
a�no
N tp 1�
n(o �
M N n
� O O
� o �
�O O f0
��o n
m � �
n b n
W O N
ui f? m
O O O
O O O
in O O
mmm
nn<o
� N �
moin
1� 1� N
o � m
ai ui m
�mm
m p) N
N N A
n m �n
� N N
m [o [y
N N CI
N OI Cl
t� [7 N
m m m
� O �[I O� i[1 ���� O O O b O
in e m n o ro a w n m m m N m m
a o �r.-.-�nin.-� m �m�oin
f7 N(O IA In O C IA (�f C N(O (O tO
m m m m m m m m m m m m m m m
e e v a a a v a e a v< a a a
<eee i.rea:vvvvee
m�c �nm m<v on nm �n� N
n� n�v o r o m c� v�� o� m
t7 @(7 �O m(� N In (� m � W � N O
oo�^'mmecnoeoinimm
v o n m o� r �� m o m
m c�a no an��oovn
� m N n n c0 W Oi m Oi O O � � O
� N N N N N
c m o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
E x
d o
E �
q O
r r
0 00 oN �o o mra o a.-�n�n
O�[f tD m �^ �D ['� c7 N tp ' 0 O n
e O N O fD � f7 m h 0 N V V�
� oa<inr-m mnnci�vi
0o nm e� m�om�+�n mN�
F� O O h h f0 N(7 t+i t7 N��D !�
m� e.raviinui ui�ri�ri 'in o
R
J
O
a
ci�z �.�
0000esgoaeaessss
00 oa0000000
O O O O O O O O O O O O
O O O O O O O O O O O O
in in o00 00 000 0
NN tv'��n� intnOOOO
`_ ___ � N N N t7
O O O O N� p O O n C O �« i n n
O tn (O 0 h tO l7 l�) N fp f OJ O h
O N< N W�� h 0 N V O N
o<a uir-^ oiri � co �ui
ooN a �om a�omrv inmr
In I[� In In N N(7 l7 (7 (7 �- � �
N N N N N(7 f7 (7 f7 [7 V Q Q V
�
J EI l 0 0 0 0 0°o�, o 0 0� o°I� ci ai ci
O O O O O O O O O
" n m � �
� G �- 1� b
h o 0 0] <
u�omn
o � � da�o+n
�- m oaioim
N O V U
2 d P
LL ~
. � m n
m m m
y m m m
In In N b In N IO
� T � Cl O N tO <
�N mtoo>O � m
1 V[O N Ot f� (� N
� m m m m m m m
a a a v a e v
;e v < v e < :
i� fnmmm��omammw
I OI N N O I� IP b N 1� In N
�t� 0O N�onn O 0to n
O m O � C) 1� l7 N a n �O in
' OJ O N r h t7 O� OI h O^�
iMmN�o �no�nm a �nc� w
' N N(7 M O1 O O O�- ��- ^ N
1 N N N N N t7 f7 M M N N N N
O O O O O O O O
0 0 0 0 0 o O o
0 0 0 0 0 0 0 0
0 0 0 0 0 0 0�
� � � � � � �
a a a a e a a v
rrromo�inn
O N K h N T N fy
P O In Ol In In N In
O N(O N � N!O N
A C! 1� N N h N 0
nmmm e q�n �
mci�m ammoi
0 0 0 0
O O O O
0 0 0 0
Vl Ifl IA N
n n n n
: ? = p
Gm
0 o O
n n 0 tD O t� �n 1� c>
O N C' h N Ol N(7 (p
C< �q 0� 1[J N tn tO
O N tp N � N t0 N
e w N � N r N m a
O O m T o o �
In In 1� In In In t0 N tO
O O O O O O O O O O O O O
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 0 0 0
0 0 0 0 0 0 o c o
O O O O O O O O�
� � � b � � � �
C> t7 th M t7 [� nl M Cl
m�a vn.-wanmmnwr�o�o n wmm�mwmt+mm�a�em in
1� t0 m t0 N O�� O N h N N Q O n O m 0 1� IA m W N tp 1� IA N �
t7 Ot O � N V O f0 O O[O �D N Cl b n N h m N � t9 O IO N f7 � W tD h
O O h Gl 1� � 0 N N m N t7 � 1� O � O 1� C) h GI r � O Ol t� �O I[1
a o�oM.-oe�m mo <n in n a--om m ���cov o� �+
m � m�oma v n oa n om n oan�inmH �� �nmv mm nw
�riNNnirinmvvviciinin�o�6�nrnmcioimaioo_ _ r+
� � � � � � � � � � � � � � � � N[V tV N N
o�w� v in�nmmo-�+m<�n�o�mmo ��vma �m m� mm
O O O O O O O O O O �^ � �^^^ �^^ N N N N N N ry N N N
0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0
N N N N N N N N N N N N N N N N N N N N N N N N N N N N N N
�
O
N
N
9
C
0
0
N
0
c
�
c
m
�
� o
G
> E
Q O
V
d C
m C
C � �
E � t
c �
E o v
a, >
< < m
� 9
X y
a
� -
� o
3 �
N E
C y "
T
_ �
o ; v
�
� o o .�
c q
m � E �o
C Of � �"
d x N ° u E
� � c 2
� C y C V
L
v - 3 r �
r a o m o
w `� " H
o '
o � m . y H
� m �
� � d m d E
� o �_ �,�d
d V Z R C
m N E V y �:%
m � 0 6 v�
oj � m ° > 5
m� H W L N� I' �
� 9 �
=@ � O U N J O D 6
N O ¢ > •-
q O H O X> E L�
�a «�u�i d r¢ 3� �
7 C p O� W� N y X ry O C V
� o c v a - r r E
� N L (O 41 v� '^ � C
� O d Q�
7 U � O�� N� � N O C;
o m`m N« ' g m' o
�� C � O M � W m�� � y 3 m
n n C N O �>� m p'n
n m c.-w= 'o'n U [ y�
n�� a N v o
_' n@ � � � q `r' E G " i
w c U c m E E Q o o°� m
T O� m Q U C V S C` U` N.
� � ° ` _ .> ° _ `
$ v� �`c o° o: N E a � m
� o��� y N y c ' =° v
O 9 '
m� � C_ y W N d O� N i u
y V J N C�� N> D � O O O
n �
- = - � Q
� � a a a� x� d y w� w w
¢¢a aaw _ -
_ _ O � N m
_ _ _ _ C N !O n OJ N _ _ _
� O G O O l'1 0 6 O� 17 1n 0 O � q 0 m f7 b N 0' N � ^ O 1n O tV N 6�
OI � N N d ry n O f7 � m f7 f0 011� O O� 1�' Iti m
C C� OI N p� IA T O 1'� 1� 0 m m O(D N 0 m n Q n m fO N
V U� N m�0 bNOt�i� OO�N� O�n0000 nNd �O �
N n fD b In V^ O fp � N fp N N � � N 0 O O m f0 N�- O
NI ('1 < b�O W 0 O � Cl c1 O m 0 0 0 0 0 O h O1 O N n OI
V a G �� � � �.. �uivi�0 oiN oimeDm
� n=m'ma000000000000000000000000000
N 0 V � 0 0 17 Q
b5 m Quf� Om
� j O N O N N�
U tV N N �
n O O O O O O O O O O O O O O O O O O O O O O O O O D O O O O
¢
� � O
my o
�O
U —
mm�mmwonmp�nm�in n mmminmm�wnnm�
m nmo�ti <(DmDO W mmmNmm� meV �mo�� ��-mmn
O O t� N n � � 0 N N iv [V t� � 1� O � O f� � h N^ O O+ h 0 N
O O O ID t7 ^ O N m W O � O 1� � 1f1 1� P� O A W^ C! 40 O Q O 1� b
O m N N N N 17 f7 l7 O O Q N�� m m m h 1� N 6J 0 N OI 01 O O � � N
. . . . . . . � . . . . . . � . . . . . . .
� ��. �� � ��- � � � �- � � � � � � � � � � ��. CI [V N N N
m m� Q 0' � m 0 N a ro v� n n m e a Cl O 1O O � 0 0 0 N� LLf
m �<NtntO�01n00<�tOO�in� Nm �mbn 0 � nm t�m
� OOt�O,tOON00� N� 9N [01� N0m�00f �bOO
N p O� 17 O m A m O N t7 10 0 0 O N l7 b 1� N � Ci N n Of N V Q f0 �
N N�p�Omrorotp0nn t�nhn tOmmO W mN NO� W O10000�
�
C
E
U
Q
e o
a �
.. m c
� u m
0
m � a` �
» a e m
i
L � m Q
� � E m
K o m
� F t m
q 9
6 d 6 `
F
`m H °� N
y m
� m O
O „ � �
« � �p p
�j ? m
. ui
W � n
U � tV
V w
O =
Y U
m �
x u
w N
N �
�°- O
A �
�a
mo
N
� Q OI l�l I(�] 0 N Ill O V O d th m�(O l�l f0 N fO N� N O� O Cl � O Ifl m
< V n n! N pi 1t� W tV � O t� N 0 � m m O 0 N(O tD 1� d h N tO �(O N
. . . _ . . . . . . . . . . . . .
A IA � N N W N Ip 1p N O C) � O OI � N O d< O N V C! O N
��pnnnau�imn
_ . . . . . . . . . . . . . . . . .
�� .�� ����.-ninmmmwmmm
<�mo--mmu+n wnvinar+mcimmoe�e � aammin
nmoNmu
Nri�e.�rvn mrioi�n ri uin m e�cui vi O o�m ^�=oiG' <ri`cui
em n u+' m�n om nmin.v �no ninm �o m m� v�
t� Q 1�1 O N N b m l�l (D W N IA S N � fl N h A MI I� N N I[I I� N
t0 n OCInm00)mOi0iT010000 �^ N�Nmn� �N �.-� N
� N N N N N N
pN�fON °omrvou"imoennmmnao°mm�mmn no�n�0000
rv.cu�ma�o<u�� naaoov+mmau�mma inonao.-nin
N V C N t'� �(p 1� h h tp N� O O+ O O � N 1'1 1� N �0 I� h t� N N t7 fp
m m m m m.-M�nmrv Nn rvmmm� a �mm � m��o �n m�n
e e v e e w O� m m n w a e�n n m m m o c�in m m � m m w w
�����mO?+?+�OOOOOOOOOOOOOOONNNmOi
_ "_--�-------"---"—
0 o m S o o m v n o a v� a m� m N�O O�O N IA � N N n O O O O
w�mo-r�nmc moo�no�<.� �onme m�e��n
oic cioi m �rimemv vai n<NOi�mnrci ri �o
e m w� a n n m a w n m r�m m � fo m m � N m n n
l7 I(1 O � f�i m(O OI N O N 17 Q 17 Ill (O f0 O N V{V M 17 N N
_____�___m0m1�I±���liN
m t'�t'��n O binO ✓�ONNNNin�OOONOY�ONb�n�nN�If�nOOOOOO
O< N N tO N P 0 N O 1O < f7 l7 {7 m iD N N l7 � V A� 1�J < N fO V
m V b N IA A O O 17 N N N � fp {p N A{p N 1� N N T 17 0 O 0
�� 1� 1f1 V d N f7 1V fO I[l IA d N V b Cl V[V fD lC 0 N 17 V N N 0 10 0� N
y Y � Of N Q� O� W Of Oi O� Ol O� Of A C� Ol O� Of T W O� q N A Cl O+ N A OI T W
O 0 N< d V O V< O Y< Q e a a v a a e a a a e e e v a e v a e
m h a_________g__ageee ___V_V_____
N
OI W iD Yf Cl OI N � O N 1� f� � M N 6l fC (O f'1 N 0 OI m � 0 Ol V D m N
b' OJ 1� 1H ' N O 0 N 0 f0 b O Cl � Q d fO 1� 1� N N O In N h N N �
W � mo�'+m mn v�nm�nm oN�mmo�+n o�<�nt� o�mmr
rir nmcoi.oai� cn�immecaivii:rvmmnc aviri ti n(6vi
�� N l7 Q1 0^ O � N O 1�l fO � m N O m b d M q N 0 0{! O Cl O] h O M b
0 W � f N 61 � 0 N N 0 N 1� � N m N 17 V m f7 M IO � 0 Ol Q b l9 1� N
Q G�OOJn'mOlOi'OiO
� � t V N N N t V N N N N N N N M 1'1 t � M N N N N
�
S m
�
m
O
° E
=m
¢ 'f
m c
� V 0
m ¢ `m
- a=
( ° n m
O
O O O O O O O O O O O O O O O O O� g� O g� Q� O O� O O O
s a°
ae00000sso�:
N 10 b b N N 4f N Yf b N
t� d V Y O Y C O O Q M1
OOOON00m�VO�V.�Ntn<hnnmO00Nhtn0000
N(D 0 1� m CI l7 N 0 N m O n n m O N O N lV W N Cl 0
wa mmmm�ma.-eam l'lCONmbbNlAO
Q O V 1[l h � N � OJ 1� N 0 � I[I N O O N(O N � N m N �
8 pt�0! A�<tppNNqNOlNAt7/�NNhNO V
o n n m�r m n n w� m�o m n n n �. m m m e o in vi 'p
o m< e e ui ai ui ui ui vi ui ui a vi ei ei vi ri ri ei oi oi ei oi
n000000000000000000000000000000000
N In N� If1 N N Y) I[I 1[1 In N In I[I N N N N N N N 1A In I[I N I[] iA Ill
nnnnnnnnnnnnnrrnnnnnnnnnnnnn
Nma
w
IOOA W 0�00t[I� t�1NC11'1C1NN1�MfONN OIT(OOSN O�N10C1(OC 6lOf Ifl
y m��p �{7n�n �p�pON OOlbON1�OJN OOhOmmhb 0mn� 01� NN �
q� � N N In0t700�NC 0(000(pMt00NNm1�0N�tpO�Nl'i� W(pN
V D tO0i00 �n001�0�1�� �ol NaV ONt�.�n0�0'nn0���.� Ome� •Cw
xtp p� I� O)NOOfOn�0010T0.-<n��n�h' O W pa.-t�b O V Ol��n
O� Q� (7 n p(� m �{7 0 A N O i� O d h O l7 1� O< N N A N fp � 1[f N V m Cl N ry
`p°�V[OO+OI N
q m �' ^ � � � � � �Y N N N N
Z O f
LL
In f0 n 0 Of O � N 17 V N(O n m W O^ N 17 O I[f 0 N 0 N O � tV �< N Ip h m N
CI m N A O1 O O O O O O O O O O N N N N ry N N N N N
N m m Of N o 0 0 o O O O O O O O A O O O O O O O O O O O O O O O O O N
� � N N N �V N N N�Y N N N N N N N N tV fV N N N N N N N ry M N N
a �-i,�s
T
Q
N
� � r' f �
a
a
a
�
R � h
b a d
C O� O
C '+ L
'� �, m 0.
v
> > uj � C
L �¢ 3
v � N Q �i
,� � o � O
m
. f/J � y p
Q O = C �'
�"' U
>
U a d
w >_
. F � ix
F `"
u
�
9
e
[z
e
e
V
L
O
U
a
a
u
L
a
�
O
n
H
a
C
o C
ti a
N �
H
�
�
i
G
4
O C
v e
m ^
N
H �
H
c
O V
J Q
9 C
9 N �
C � O
� D U
R� ¢
�
O P
V
= Q O
v
� u e
°' °' w
C � m
m p c
� � T
�
u
°= z
9
{y ` u
e U
V V
� '>
U
�
e
v
u
.�.
m
F
u y
O
`c
a` p
F "
a
�
m
u °-'
� A
u �
u �
a °
w
� c
C
n
�
{z
S
m
a
m
U
C
y
�
c
O
c
V O
Q y
� a
s �
o �
m '
U
d
c
V
�
F
u
F
�
a
U
a
�
�
d
:
�
c
S
w
o T F
^ n A
m � F
o A d
� E �
m
q y a�
? y �
�' � O
�' E y
m
c u n
_ � �
c
eo -
c
'$ q u
60 m
O � C
.�� �
2 � e
0
o m M
� F� U
��s
� A �
a
� € a
�+ 9 �
A
� � 9
c � y u v
L @ U
"' O
A p R
G N �
a .;: F
. N
E � =
v�F-m
� N �n
Attachment VII - Team Termination Obiigations a0 ����
Cky of Saint Paul, Minnesota
Taxabie Parity First Lien Saies Tax Revenue Bonds, Series '1999
(Minnesota Wild Arena Project)
Schedule of Outstanding Debt and Prepayment Premium
(tl 121 13) 14) 15) (61 f7)
Series 1999 Outstanding Series 1999 Prepayment Total City Outstanding Totai
November 1 Principal Series 1999 Prepayment Premium Prepayment State Loan Prepayment
Year Payment Principai Premium Amount Amount Balance Amount
2/1/99 72,725,000 N/A N/A N/A 48,000,000 N/A
1999 0 72,725,000 N/A N/A N/A 48,000,000 NtA
2000 0 72,725,000 N/A N/A N!A 48,000,000 N/A
2001 545,000 72,180,000 N/A N/A N/A 48,000,000 N/A
2002 795,000 71,385,000 N/A N/A N/A 48,000,000 N/A
2003 360,000 77,025,000 N/A N/A N/A 46,750,000 N/A
2004 510,000 70,515,000 N/A N/A N/A 45,500,000 N/A
2005 680,000 69,835,000 103% ' 2,095,D50 71,930,050 44,250,000 716,180,050
2006 1,215,000 68,620,000 103°k " 2,058.600 70,678,600 42,750,000 113,428,600
2007 1,335,000 67,285,000 103% • 2,018,550 69,303,550 41,250,000 110,553,550
2008 1,470,000 65,815,000 103% 1,974,450 67,789,450 39,750,000 107,539,450
2009 1,610,000 64,205,000 102% 7,284,100 65,489,100 38,250,000 103,739,100
2010 1,765,000 62,440,000 101°h 624,400 63,064,400 36,750,000 99,814,400
2011 2,115,000 60,325,000 100% 0 60,325,000 34,750,000 95,075,000
2012 2,330,000 57,995,000 100°� 0 57,995,000 32,750,000 90,745,000
2013 2,565,000 55,430,000 100% 0 55,430,000 30,750,000 86,180,000
2014 2,650,000 52,780,000 100°k 0 52,780,000 27,750,000 80,530,000
2015 2,005,000 50,775,000 100°/a 0 50,775,000 23,750,000 74,525,000
2016 2,275,000 48,500,000 100% 0 48,500,000 19,000,000 67,500,000
2077 2,670,000 45,890,000 100% 0 45,890,000 14,250,000 60,740,000
2078 2,975,000 42,915,000 100°� 0 42,915,000 9,500,000 52,475,000
2019 3,375,000 39,540,000 t00% 0 39,540,000 4,750,000 44,290,000
2020 3,800,000 35,740,000 100% 0 35,740,000 0 35,740,000
2021 5,845,000 29,895,000 100°h 0 29,895,000 29,895,000
2022 6,305,000 23,590,000 100% 0 23,590,000 23,590,000
2023 6,800,000 16,790,000 100°� 0 16,790,000 16,790,000
2024 8,100,000 8,690,000 100°h 0 8,690,000 8,690,000
2025 8,690,000 0 100% 0 0 0
Totai: 72,725,000
(1) Estimated annual principal payments based on the total par amount shown
at the bottom of the co�um�. This amount is preliminary and subject to change.
(2) Represents the total amount outstanding after giving effect to the payment
show� in column one on November 1 of each year.
(3) The Bonds are subject to Extraordinary Redemption in the event of an early
termination of the Team Lease, but in no event earlier than November 1, 2005
{indicated by the ` next to the premium). Tfie Bonds are atso subject to
Optiona� Redemption beginning on Novemberl, 2008 at 103%, deciining to
100% as shown in the column. These cali premiums are preliminary and
subject to a successful marketing of the Bonds.
(41 Equal to the premium over and above the par amount of Bonds outstanding
(51 Equal to the total of columns (21 and (41.
161 Represents the remaining unpaid balance of the State Loan as of August 15 of
the year shown.
(7) Equal to the total of Column (5) and column t6).
Note: Prior to 11lt/2005 the Bonds cou�d be defeased with an escrow of U.S.
Treasury securities in sufficient amounts to pay the de6t service to the 11/1 /2005
call date. The cost of such an escrow is dependant on interest rates at the time
the escrow is purchased.
q�-1
Bond Counsel
ATTACHl��NT VIII
FINANCING TEAM
Briggs and Morgan
a
Underwriter Counsel
City's Legal Counsel
City's Financial Adviser
Bond Insurer
Underwriters
Rating Agency
Trustee
Kennedy and Graven
City Attorney's Office
Springstead
Financial Security Assurance
Miller & Schroeder, U S Bancorp Piper
Jaffray, Dougherty Summit, Dain
Rauscher
Standard and Poor
Nonvest Corporate Trust
.
CITY OF SAINT PALTL
Norm Co[eman, Mayor
OFFICE OF THE MAYOR �� ����
FINANCIAL SERVICES OFFICE. Budge[ Sectian
Joseph Reid, Dtreaor of Financial Services
240 Ciry Ha[I Telephane: (612J 266-8.i43
IS West Kellogg Boulevard Facsimile: (612) 26G&547
Sainz Pau1, Minnesota 55102-763I
MEMORAI3DUM
To: Council President Dan Bostrom
Council Members
From: 7oe Reid, Financial Services Dire�
Pam Wheelock, Director, PED
f•7�
Date:
Additional Briefing Material for Resolution 98-1146 and tl�e financing plan for
the Arena Lease.
December 22, 1998
Four items aze attached for your information:
1. Present value of the teams's annual rent payment of $3,500,000 compared to the
present value of the team's original $35,000,000 construction payment.
2. A memo from Martha Larson, Chief Financial Officer for the Minnesota Wild, that
responds to several questions raised by Councilmember Benanav.
3. A memo from Springsted, Public Finance Advisors, the City's Financial Advisor,
regazding the financing plan.
4. A copy of Projections of Local Sales and Use Taz Revenues by Anton and Associates,
Inc. and the monthly collections of the half cent sales tax through October, 1998.
This attachment was printed off the City's web page. The financing plan, and the
comparison of the original to the amended lease are also available there as of Tuesday,
December 22.
If you have additional questions on these subjects, please contact Joe at 266-8553 or Pam
at 266-6628.
����
s„a o�� a�i��s
The City of Saint Paul, Minnesota
RiverCentre Arena Financing
Comparison of Team Payments Due Under the Amended vs. Original L.eases
8.00%
Team Present
P_ayments
Value
6.60%
City Present
Value
Payments
ginal Lease
8.00%
Team Present
Value
6.60°/a
City Present
Value
A) Under the Amended Lease the Team s payments will be 2.5 times [hose required under the Original Lease.
B) Since the timing of the payments varies between the rivo lease agreements, the time value of money (interest) must be
considered. The interes[ rate chosen will have significant unpact on [he results. This analysis uses two interest rate
scenarios. All present values are calculated as of 2/1/99.
C) The Team Present Values assume an 8% interest rate. This isthe same rate used in the Team's pro foanas and reflects
the risk associated with typical sports financing issues. Under this assumption the cost [o the Team is appro�mately
$600,000 greater under the Amended Lease.
D) The City Present Values assutne a 6.6% interest rate. This is an estimate of the taxable revenue borrowing rate. Under
this assumption the wst to the Team is approximately $5.5 million geater under the Amended Lease.
E) The payments under the Original Lease are assumed to follow the current construction schedule.
� This analysis assigns no value to the Team s Letters of Credit of $6 -$8 million under the Amended Lease.
G) This analysis assumes that the PILOT payments under the Amended Lease net against the revenues (ticket surcharge
and mazquee revenue) in the Original Lease.
12/2�/98 12:51 FA% 651 222 1055
To:
From:
Date:
Re:
MINNESOTA WILD
,
Joc Reid, Director ofFinancial Sec�ices,
Pam Wheelock, Directos of Pl n� and Ecoaomic Development
Maitha Larson, Chief Financial Officer��.�j�._,�,L
' LJ '
December 23, 1998
Responses to Council Inquiries.
Here is the information you tequested to assist in responding to a number of inqiriries
from the City Council, regazding their review of the lease amendment, State loan
ad eement and related documents. � '
Timin� of A�rorovals
The NHL is currently reviewi�g Yhe lease amendment and State loan agreement, aad I
anticipate rceeiving their coxnments next week. Our objective is to secure their appsoval
prior to the City Council meetinn on 7anuary 6, 1999. .
In their meetir�g fhis moming, our Boazd approyed execurion of the City lease
amendmenf and the State loan agre.ement.
Team Pavments for Acauisition of the NHI, Franchise
As you lmow, the team has already remitted its frrst eamest money paymene of $10
miliion to the IVfIG. The final payment of $70 million is due by Apri12000.
Team Ownershiu
There has been no change in the ownership of the team since ttie equity investrnent
transactions were closed in December 1997. ,� .
Cc: , Jac.Spezlin�, CEO
444 CedarSC,S�ite900oSYPaul,MN53i01aPhone657-222•WILD�Far651-122-1055aWebwww.wliG.com �'ic =�;' � "
f� 001/001
12/23/98 16:28 FAS 6 SPRINGS INC.
85 E. SfVENIH PIACE SUf1�E 100
$qIMT PAUL, MN 55101-2143
672.223->OW FA..Y:672-223.300
��
SPRINGSTED
Pu61it Finann Advisors
December 23, 1998
Mr. Joe Reid
Director of Financial Services
City of Saint Paul
�5 West Kellogg Blvd.
Saint Paul, MN 55102
s
1
s�
RE: Arena Project-Taxable Sales Tax Revenue Bonds (the "Bonds")
Response to City Questions on This Financing
Dear Mr. Reid:
� oo2iooa
��-l� ��
The City has asked Springsted, as its financial advisor, to respond to two questions relating to
this financing. The first question relates to the City's general obligation rating and the second
relates to the revenue sources available for debt service. Our intention here is to be summary
in nature, but we would be available to expand upon eitfier response upon request.
1. "Nas the City, with this issue, improved its reVative position witfi the credit rating agencies
from that of the original arena financing?"
Response: In January 1998, S&P, while not changing the City's `AA+ "rating, did change their
rating outiook to negative from stable. In targe part this outlook change was the result of the
numerous unknowns then existing relating to the project. In January the tWO othe� rating
agencies, Moody s and Fitch, noted the Arena project but me�tioned no major concerns at that
time. For S&P in particular given the absence of a definitive State commitment as to their $65.0
million participation and the City's conYracEual commitment to buiid the facility, their position was
that the City potentially would need to finance up to $95.0 million of project costs, with a
possible totai bond issue approaching $105.0 million with construction interest and issuance
costs. At that time the City's authority to issue debt may have piaced considerable reliance on
a"generai obtigation" borrowing. One additional facEor was fhe presence and form of the State
participation, then thought to be a grant or a loan for $65.0 million. The overa0 situation was in
part embodied by the $33.5 million Generai Obligation Commerciat Paper issue, which is a
short-term financing vehicle used here to permR time to pass to resoive outstanding items.
Today, the bond financing unknowns present in January have been defined. l"he City intends
to issue approximately $72.7 million in Sales Tax Revenue Bonds, yieiding $65.0 in project
financing, and the State will loan the City $65.0 million, of which $48•0 million is to be fepaid.
From January the dynamics and amounts of the debt structure have changed. The City's debt
profile has now changed to include; a) the team participation rether than the State's; (b) a
reduction in direct debt to the $72.7 miilion of sales tax bonds from the potential $95.0 million,
(c) a change in the character of the debt from a potentially predominate general obligation
backing to saies tax; and the State's participation now defined as a loan.
SAW7v,aUL.MN • MINNEnPOLS,MN • eRO0I�1D.W • O�EKUNDP.iRK,KS ' W'ASFiAIGTOrv,DC • iOWAUTI;iq
12/23/98 16:29 FAS 6122 2J3002 SPRINGSTED INC. f� 003/004
�� -� I ��
City of Saint Paul
December 23, 1998
Page 2
For those factors listed above which are positive and the comments below, from a credif rating
perspec6ve, this financing package is on balance favorabie as compared with the January
situation. The agencies view this as a sales tax transaction (see response to question two}.
Over time the team's historicat financial performance may play a limited role in the agencies'
determination of the impact on the sales tax revenue stream. A net positive credit rating factor
is that the financing pian is now defined, as compared to January. We expect the agencies will
have limited questions on the fundamental change in the dynamics of the fransaction from the
City potentially funding their own share and the State's share to the City funding their own share
and the team's share (a legislative requirement to secure the State loan).
It should be noted that although this transadion is a sales tax revenue bond, without a pVedge
of the City's general obligation property taxing powers, it will stiil be considered by the rating
agencies in their determination of the City's debt burden relative to the City's genesal obligation
rating. Historicalty, the City has considered the use of a general obligation sales tax revenue
bond for certain projeds, but has not used this option. Three crfteria have historicaliy been
discussed. One, the credit rating impact is presented above. Second, the policy position would
be to ultimately pledge the property taxing authority of the City to tfie given project. The third
factor is the cost differential in terms of interest rates between the City's general obligation "AA"
rating and an insured revenue bond and the impact on the given project's cashflow. In the
cuRent market a broad estimate is that there is no significant interesf rate differential between
the taxabie insured sales tax revenue bond versus the taxable "AA" general obligation issue.
On a tax-exempt basis in a future market the answer may be different.
2. "Would Springsted comment on the security and repayment of this financing?"
Response: This transaction should be viewed from fwo perspectives, a) the bond market and
bond investors, and b) the City. To the bond market this transaction is a sales tax revenue
financing, for which the City has pledged att annual sales tax revenues from the %s cent
dedicated sales tax. Other sources of revenues are also pledged such as team revenues a�d
certain TIF revenues from Biock 39. The bond market focuses on the total dedicated sales tax
collections as their primary source of repayment.
To the City the potential use of sales tax revenues is diminished because of the contractual
payments under the lease with the feam. The estimates of revenues and expenditures show
that over the short- and intermediate terms team lease payments and the 40% portion of the
dedicated sales tax for the Civic Center shoufd be adequate 4o meet debt service for this issue
and the outstanding 1996 sales tax revenue bond issue. The sales tax estimates include a
2.2°/a compounded inflator over the term of the issue, with such inflator being approximately
5�% of recent City experience. Shouid the team not make their contractual paymenis on a
timely basis, the City will have in place a reserve to fund debt service for one year. tf the
difficulty with the contractuai payments is not resolved in this one-year time period, then the City
has pledged total dedicated sales tax collections for debt service. TF�e estimates o4 total sales
tax collections show the abiiity to make timely payment of debt service on both this issue and
the 1996 transaction. In the later years of the issue, 2016 and beyond, T1F revenues from the
Block 39 p�oject are estimated to be availabie to fund in paR debt service if required.
, 12/zJ/98 16:29 FA% 6122233002 SPRINGSTED INC.
City of Saint Paul
December 23, 1998
Page 3
C� 004/004
ag-���
As previously noted these are summary comments, which may require additional discussion at
the City's direction. We trust these responses address fhe questions posed to us. Piease feel
free to contract us 'rf we can be of any further assistance.
Respectfuliy,
��J �_
David N. MacGillivray, Principai
Client Representative
dmf
a �-i ���
SALES TAX STATUS
Jan
Feb
Mar
Apr
May
June
July
Aug
Sept
Oct
Nov
Dec
Total - City Actual Estimates
Percent change from previous year
Actuaf
1995
841,230
684,422
668,953
758,190
688,302
764,829
487,350
1,043,013
722,945
867,643
743,344
697 944
Actual
1996
874,113
650,602
728,683
781,596
716,765
843,786
370,242
1,240,117
796,101
901,303
708,498
787 9 5
. •.: .. _ �
Actuai
1997
958,205
726,710
675,962
848,254
583,751
749,932
544,843
1,268,343
865,185
874,367
765,154
913 S34
�
4.0%
Actua! ( (Est. *)
1998
1,004,620
751,022
1,090,879
860,059
815,397
844,314
441,365
1,348,896
832,750
921,438
765,154 '
913 834 '
� :•
8.3%
Office of Financial Services - Budget Section H:\USERS\SUDGEll123\STAXFMSM.WK 12/23l98
q g -ll ��
City of Saint Paul
Projections af
Local Sales and Use Tax Revenues
June, 1998
Anton & Associates, Inc.
256 First Avenue North, Suite 250
M'inneapolis, Minnesota 55401
�g-����
I. Issues and Objectives
This study is a follow-up to and extension of an earlier study prepared in April, 1993 before the
local option sales taac for the City of Saint Paul was implemented. That earlier study, entitled
"City of Saint Paul: Sales Taac Estimates and Projections," included projections of the amount of
revenue the city could expect to raise with the haif-cent locat option sales t� which became
effective in October, 1993.
Though they were done in 1993, those projections were based on final data on Minnesota sales
taY collections for the year 1990 and preliminary data for the year 1991 because those were the
most recent data available at the time. In addition, as explained in that report, state information
about sales ta3c collections in individual cities overstates the amount of actual sales within the
cities' boundaries. Therefore, substantial adjustments had to be made to the 1990 and 1991 state
data to estimate the actuai taac base for the City of Saint Paul.
Since the city has been collecting the tax, its information about both its sales tax base and about
individual sales tax payers is vastly improved over what was available in 1993. Therefore, it is
appropriate to develop a new set of projections at this time. However, there are several additional
and more compelling reasons for doing a detailed analysis of the sales tax and other possible local
excise taxes at this time.
First, the city has committed to buiiding a new azena wkuch will house the National Hockey
r.League franchise which will begin to play in Saint Paul in the year 2000. As the city frames the
financial strategies necessary to carry out this plan, it is more impoRant than ever that the most
accurate possible projections be used to ensure not only the success of this plan but also the
continued fiscal heaith of the city. In addition, the success o£the hockey team and other
economic development initiatives may be transformative for the downtown business district,
thereby impacting future tax coliections.
Second, the city will have to modify its local option tax to include a use tax. This tax, chazged on
any equipment or goods which individuals or businesses purchase outside of Minnesota and brin�
across the state border for use in Minnesota, is currently part of the statewide sales tax. Saint
Paul officials chose not to include a local use tax in the tax proposal implemented in 1993.
However, recent legisiation in the State of Minnesota now requires cities to bring their local
option sales taxes into close conformity with state's sales and use tax. Therefore, the city of Saint
Paul must be�in to collect a half-cent local use tax within its boundaries by the year 2000. So it
makes sense to develop estimates of the additional revenue which will be raised as result of this
change mandated by the state.
Finally, the city also is now in a position to evaluate whether or not there would be a substantial
financial retum to undertaking an initiative to increase compliance with its local option sales taY.
Although there was an outreach and education pro�ram conducted by the Minnesota Department
of Revenue at the time the tax was implemented, the exact de�ree of compliance with the tax is
not known. Almost certainly there are some businesses who should be collecting and paying the
Saint Paul tax who are not doing so, but whether the number of such businesses and the lost
�g-�i��
revenues are substantial is unknown at this time. Given the information to which the city now has
access and recent improvements in the computer system at the Department of Revenue, it may
now be possible to frame an effective strategy for raisin� compliance and to make at least some
estimates of the likely financial return from such action.
The succeeding sections of this report will include
• a brief examination of city sales taa� receipts throu�h calendar 1997 in comparison to both
the initia11993 projections and to the growth in statewide sales tax revenues;
• projections of overall sales tas revenues for the years 1998 through 2002, together with a
breakdown of expected receipts by major industries;
• estimates of the amount of use tax collections for the years 2000 throu�h 2002; and
• a discussion of a collection strategy designed to raise additional sales tax revenues through
greater compliance.
II. Past Sales Tax Receipts
Actual sales tas receipts for the Saint Paul local option tax have grown each year. As Table 1
shows, receipts were slightly below ei�ht and one-half million dollars in 1994 and grew to over
nine and three-quarter million in 1997.
Table 1
Actual Sales Tax Revenues
Receipts Net of State Administrative Charges
Year
1994
1995
1996
1997
Receipts
$8,417,037.72
$8,968,16634
$9,399,710.47
$9,774,539.91
Annual
Growth Rate
6.5%
4.8%
4.0%
The growth rate of tax receipts has declined over the last three years. It may be true that the
growth of 6.5 percent in 1995 was artificially high if some companies only found out about the tax
with a time lag and, therefore, only be�an to collect it during that year. However, it is impossible
to estimate the precise impact of this possible effect.
�g �r��
Of greater potential concem for future revenue growth is the fact that receipts slowed to a 4.0
percent growth rate in 1997, a year of stron� national and regional economic growth. City budget
officials were especially concemed in mid- to late-1997 when year-to-date growth was runnin� at
the rate of azound 2.5%. However, detailed analysis of individual tax retums indicates that the
growth in revenues for 1997 was unduly impacted by the retums of one large corporation.
In particular, a large utility company filed amended sales tax returns in May, 1997 to correct for
its overpayment of the Saint Paul tas from October, 1993 through that date. This filin' resulted
in a refund to the utility of approximately $149,000 paid in May of last year. Since the state acts
merely as conduit for the cash receipts due the city, the effect of these amended returns was to
reduce the cash received by the city in May, 1997 by the fuil amount of the refund.
The quantitative effect of this refund on the growth of overall city sales tax receipts for the year
was substantial. If this refund had not been claimed by the utility company, revenues would have
risen by 5.5% in 1997, an amount more in line with the vibrancy of the local and national
economies.
When compared to overail state sales tax revenues, Saint Paul's sales tax receipts have grown
somewhat more slowly as the data in Table 2 indicate. Even in 1995 when city revenue growth
might have been overstated because of some startup effects, state revenue growth has been
greater than Saint Paul's rate of increase.
Table 2
Actual Sales Tax Revenues
City Growth Complred to Stnte
City St�te
Year Growth Rate Growth Rate
1995 6.5%
1996 4.8%
1997 4.0%
7.3 %
6.5%
6.0%
1997 5.5% 6.0%
(adjusted)
On the other hand, when the 1997 growth rate is adjusted for the effect of the refund discussed
above, a somewhat different comparison emer�es. Based on the adjusted tax data, it appears as
though city collections accelerated their growth in 1997 at the same time that state collections
slowed their rate of increase. Furthermore, the city's growth rate in 1997 came into much closer
�8 ����
conformity with the state's rate of increase. Criven the increasin�ly constructive posture of the
city with regard to economic development, it is likely that this trend will continue in future years.
Finally, it is also useful to compaze the ciry's actual revenues with the projections made in April,
1993. This is a fair comparison because economic conditions during the years in which the tas
has been in place have, by and lar�e, been in line with the economic assumptions which underlay
the baseline estimates in the earlier study. The foilowin� tabie shows revenue fiwres before
deduction of the state's administrative chazges since that was the quantiry bein� forecast in the
1943 report.
Table 3
Year
1994
1995
1996
1997
Sales Tax Revenues
Versus April, 1993 Projections
(Gross Revenues 6efore Administrative Charges)
($000)
Gross
Revenues
$8,597
$9,074
$9,506
$10,066
Projected
Revenues
$8,995
$9,248
$9,510
not projected
Dollar
Difference
$398
$174
$4
na
Percentage
Difference
4.63%
1.92%
0.04%
na
As the data in Table 3 indicate, the initial base line projections overestimated the tax base for the
year 1994 causing an overestimate of 4.6%. The projected rate of increase in the projections was
somewhat conservative by desi�n and the actual growth rate of revenues has been somewhat
higher than the projected rate. Therefore, revenues grew closer to the projected figures each year
until in 1996, the last year of the 1993 projections, actual revenues were virtually the same as the
revenues projected three years earlier. In 1993 no projections were made for calendar year 1997,
but, given the conservative growth assumptions used at that time, any such projections would
almost certainly have underestimated 1997 revenues.
Still the projections made in the earlier report should be considered successful from at least two
perspectives. First, they were made without the benefit of very timely data. Only final data were
available for 1990 and preliminary data were available for 1991. No state sales tax data were
available for calendar years 1992 or 1993 at the time the projections were made.
Second, and quantitatively more importantly, the adjustments made to reduce the tax base from
the overstated numbers in state reports were quite ciose to the mark. In particular, because of
R�-�r��
limitations in the data the state receives from tas filers, the Department of Revenue's report of
sales taxes collected in a particular city necessarily includes the data from the retums of some
businesses who list the city as their mailing address even thou�h they are technically located
outside of the city limits, sometimes in a Zipcode area which is totally outside of the city. At the
time the earlier projections were made, a literal reading ofthe state report for Saint Paul would
have implied that initial year sales taac receipts would have been approximately $13 million, over
40 percent higher than they turned out to be. Therefore, the 1993 adjustments were successful in
bringing expected revenues into a realistic ran�e for the city's financial planning and the issuance
of debt securities backed by sales ta;c receipts.
What can the City of Saint Paul expect for future salas tax revenues? That is the topic of the ne�ct
section.
III. Projected Future Snles Tax Revenues
The baseline projections of future sales tax revenue growth for the City of Saint Paul are based on
assumed continued economic expansion both nationally and regionally as weli as continued-
economic momentum in the city itself. The actual method for projecting city tax revenues
involves making projections for the growth of 21 different industries sectors which are important
collectors of the local sales tax and then adding those different industry forecasts together to
provide an overall estimate. In addition, adjustments are made for any special events occurring or
expected to occur in specific industry sectors.
Table 4
Baseline Projections of
Sates Tax Revenues
(Receipts Net of Stnte Administrative Charges)
Year
Receipts
($000)
Annual
Growth Rate
1994a
1995a
1996a
1997a
1998f
1999f
2000f
2001f
2002f
Source: Anton & Associates
$8,417
$8,968
$9,399
$9,774
$10,258
$10,653
$11,135
$11,698
$12,237
6.5%
4.8%
4.0%
4.9%
3.9%
4.5%
5.1%
4.6%
9� j���
As the data in Table 4 make clear, sales tax revenues are expected to grow at annual rates of
between 3.9% and 5.1% over the upcoming five yeazs. Again, it should be emphasized, that this
path is predicated on the absence of either a national economic recession or an economic calamity
with severe regional consequences. (A subsequent portion of this section of the report deals with
alternative economic scenarios.)
Revenue growth is projected to be 4.9% in 1998, an actual acceleration of growth over 1997's
pace. However, it should be noted that the 4.0% growth in revenues in 1997 was depressed by
1.5% due to the effect of the one-time refund discussed above, an event not likely to be repeated
with another entity of similar size. In fact, the 4.9% growth for 1998 represents a slowing from
the growth which would have otherwise been realized last year. In the detailed industry
projections contained in the appendix, growth in the affected industry sector (SIC Code 49) is
approacimately $154,000 in 1998 based on a normal year of industry receipts without any amended
returns.
In 1999, gowth is expected to slow to a 3.9% annual rate before startin� to accelerate in the
years 2000 and 2001. This latter acceleration is based on two factors, the expiicit stimulus
provided by the hockey team and the new arena and the general building of additional momentum
in the central business district based on redevelopment plans now underway or contemplated.
The hockeyfarena impact is concentrated in stadium concessions, bars and restaurants, sports
ticket sales, parking and lodging. The more general momentum produced by such events as the
relocation of Lawson Software has an impact on restaurants, parking, general merchandise
shopping; and business services among others.
The growth rate is highest in calendar year 2001, projected as the first fuli year of hockey piay
and arena operations. Crrowth is projected at 5.1% for that year before slowing to 4.6% in the
following year.
Of course, these multi-year projections do not factor in the effects of a national or regional
economic slowdown. Such events, especially if they were to occur in the early years of the
projection period could seriousiy derail financial plans grounded on this baseline forecast.
Therefore, additional perspective can be gained, and perhaps caution acquired, by examining what
the likely effects of such events would be on the stream of revenues to be expected from the city's
sales tax.
Conversely, it is possible, and indeed hoped, that the city will make even greater economic
progress than assumed in the construction of this baseline forecast. It would be useful to attempt
to quantify the effects of a more optimistic scenario on the city's expected sales tax collections.
Therefore, the next table includes projected revenue streams for two alternative economic
scenarios. The column labeled "Economic Slowdown" includes the projected revenue stream for
a scenario in which a"garden variety" recession hits the nation and Midwest proportionately
beginning eady in calendar year 1999. The recession includes two quarters of deciining real
Gross Domestic Product and another quarter of essentially no growth. The net effect of this
scenario is to depress the growth of local sales tax revenues to rates of growth of 1.5% and 3.5%
��-�� ��
in 1999 and 2000 respectively_ However, revenue growth rates are somewhat hi�her in the two
yeazs following the recession than they are in the baseline projections. The net impact of this
scenario is to produce a revenue shortfall (relative to baseline) which grows to $360,000 in the
yeaz 2000 and then declines modestly from there on.
This scenario is not meant as a prediction that there will be recession in 1999. The start date was
chosen to maximize the impact on prospective revenues. Obviously, a recession occurrin� in one
of the more outlying years would have a smaller impact on the expected revenue stream for the
city.
Table 5
Atternative Projections of
Sales Tax Revenues
Year
1998f
1999f
2000f
2001f
2002f
Economic Slowdown
$10,412
(1.5%)
$10,776
(3.5%)
$1•1,368
(5.5%)
$11,937
(5.0%)
Baseline Projection
$10,258
(4.9%)
$10,653
(3.9%)
$11,135
(4.5%)
$11,698
(5.1%)
$12,237
(4.6%)
Stronger NIomentum
Source: Anton & Associates
$11,238
(5.5%)
$11,969
(6.5%)
$12,746
(6.5%)
The column in Table 5 labeled "Stronger Momentum" is desi�ned to show the possible impact of
a more optimistic outlook for Saint Paul's local economic growth. The growth rate of sales t�
revenues in this scenario is distinctly higher than in the baseline case. Implicit in this scenario is
the assumption that national economic conditions are similar to those assumed in the baseline
projections.
While the increment in projected growth rates beginnin� in the year Z000 may stili seem
conservative relative to some people's visions of how dramatically economic momentum may
change if all of the possible economic initiatives undertaken or contemplated succeed, it should he
pointed out that this is a citywide growth rate. Higher growth rates for specific areas, especially
the central business district or targeted redevelopment areas, are certainly possible, but their force
would be somewhat diluted when considering citywide numbers.
Therefore, it is felt that this scenario gives a realistic scaling of the upside from succeeding in line
with the city's wildest dreams, if not necessarily beyond. The cumulative effect of the stronjer
q81t ��
growth which is assumed to begin in 2000 culminates in an additional $510,000 in sales ta�c
revenues for calendar year 2002.
It should be pointed out that these two scenarios are not intended to bracket the range of all
possible outcomes. In particulaz, the first scenario assumes national weakness combined with
local conditions otherwise similar to the baseline case. The second scenario assumes the same
national conditions as the baseline scenario with stronger local economic momentum
superimposed. Obviously, if the national economy were to exceed baseline assumptions while
local initiatives were as successful as assumed in this second case, revenues could be even higher.
Likewise, less happy local outcomes combined with a weaker national economy could push
revenues below the first scenario's path. Nevertheless, these two altematives provide important
perspective on the range of variation which could be experienced and, hence, should be
considered in contingency plans.
IV. Projected Future Use Tax Revenues
Use tax proceeds aze much more difficult to forecast than are sales ta�c revenues, in generai.
There are several reasons for this. First, the major payers of the state's use tax are corporations
who buy equipment from out-of-state vendors for delivery and use at locations inside of
Minnesota. Therefore, use tax receipts tend to vary with capital spending plans of companies,
especially larger companies, in Minnesota. The capital goods industry is one of the most volatile
sectors of the national and regional economies because, tygically, companies postpone non-
essential capital purchases in times of economic:weakness and then catch up with their postponed
purchases when economictimes (and cash flows) improve. This pattern stands in sharp contrast
to most retail sales (except for appliances and autos) whose flow is affected to a lesser extent by
the ebb and flow ofthe business cycle.
Second, much of the capital spending can be done by manufacturin� firms who often sell their
products directly to businesses and, therefore, may not collect sales tas. That is to say, the
industries who pay use tax to the state can be a very different mix of industries from those who
are filing sales tax returns. Therefore, the understanding of the dynamics of certain industries
which is helpful in projecting sales tax revenues may be of somewhat less help in forecasting use
tax revenues paid by a different set of industries.
Third, capital goods sales tend to be "lumpy," that is, the total of all sales may be dominated by
the effects of a few very large purchases. In doin� forecasts for locai area such as Saint Paul, this
creates an even greater problem because the actual revenues which the city can expect to collect
may go through wide swings as a large company or two builds and equips a new facility. In short,
it is harder to anticipate the sum of a few large purchases than the sum of a myriad of smaller
ones.
Finally, in projecting the proceeds to be realized by the city in future years, we face a data
problem analogous to the problem that was faced when makin� the first set of sales tax
projections in 1993, namely we do not have very timely data and the data we do have overstate
the city's actual tax base.
q�' ����
The Department of Revenue reports for state sales and use tax coilections are only available
throu�h 1995. This means that even if the state report represented the local ta7c base accurately, it
would still be necessary to estimate what had happened in 1996 and 1997 before we could project
for 1998 and beyond.
And, for reasons discussed earlier in this report, the fi?ures on use tax collections are hi�her than
Saint Paul should expect to collect because they inciude data from the returns of companies which
are located outside of the city limits and, hence, not liable for the local tax. In particular, the
states reports for Saint Paul, have in some years contained very large use tax collections from SIC
Code - Paper Products. There are only sixteen companies in this sector and the Department of
Revenue's policies prohibit disciosing whether any particular company has filed a return, let alone
how large a retum. Nevertheless, it is a very likely assumption that this category is dominated by
purchases made by 3M Corporation ofMaplewood. Purchases by 3M will not be subject to the
city's use tax unless it has a facility located inside the City of Saint Paul. If it has one, the site is
minor compared to the Maplewood complex. Similarly, it is very likely but not confirmable
through official sources, that the use tax numbers for Saint Paul may include purchases by
Northwest Airlines of Eagan in SIC Code 45 - Air Transportation.
Historical Data on Use Tax Purchases
The unadjusted data for purchases subject to use tax taken from the Department of Revenue
reports on Saint Paui aze included in Table 6.
T�►ble 6
Year
Purchases Subject to State Use Tnx
Reported in the City of Saint Paul
(Historical Dnta)
Total Purchases Subject to
Stnte Use T�x
Impiied City Revenues from
H�If-Cent Local Use Tax
1987
1988
1989
1990
1991
1992
1993
1994
1995
$157.0 million
$169.7 million
$113.0 million
$371.4 million
$491.4 million
$462.0 million
$489.0 million
$4962 million
$448.7 miilion
$267,8 million
Source: MinnesotaDepaRmentofRevenue
$ 785,000
$ 848,500
$ 565,000
$1,857,000
$2„457,000
$2,310,000
$2,444,960
$2,481,240
$2,243,450
$1,339,337
lo
q�-����
As the data in Table 6 apparently indicate purchases subject to state use tax inside the City of
Saint Paul appear to have gone through a wide ran�e of variation. However, the eactremely wide
range of variation in the unadjusted data strongly su��est that several lar�e payers, perhaps
including the ones discussed above, have drastically influenced the overall results. A detailed
study of the pattem of purchases by industry segment was undertaken to see if there were
discernible pattems which would su�gest appropriate adjustments which should be made to the
data. Three industries showed especially interestin� pattems which lead us to some educated
guesses and adjustments in the data flowing from those guesses. Table 7 shows the annual
purchases data for those three industries, paper products, air transportation and eatin� and
drinking establishments.
Table 7
Year
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
Purchases Subject to St1te Use Tax
Reported in the City of Saint Paul
(Historical D�tta for Three Selected Industries)
($millions)
SIC 26 SIC 45 SIC 58
Paper Products
Air Transportation
Enting and Drinking
$ 0.8
$ 0.4
$ 0.4
$123.6
$190.6
$188.8
$159.1
$182.4
$200.1
$ 4.9
Source; Minnesota Department of Revenue
$30.8
$51.2
$28.5
$35.5
$77.7
$65.7
$ 0.7
$1.4
$51.6
$60.6
$0.7
$0.8
$1.0
$0.8
$0.9
$17.0
$41.0
$46.9
$2.1
$$32
The first column shows annual use tax purchases for the paper products industry. We infer that
these purchases were likely to have been made by 3M and its divisions and hence should be
excluded from the Saint Paul tax base in formin� projections of expected use tax revenues. The
sharp increase in purchases in 1989 and the sharp drop in 1995 are likely to have resulted from
either organizational changes at the company or chan�es with regard to company purchasing
policies. In particular, the drop in 1995 may be the result of a chan�e in purchasing management
and policy such that either suppliers in Minnesota were being used or, probably more likely, out-
of-state suppiiers are remitting the ta�c directly to the state as sales taxes, thereby substituting for
the direct use tac payments which had been made by the customer, 3M, in 1994. Therefore, one
11
�8«y�
adjustment we chose to make to the taac base for Saint Paul is to exclude SIC Code 26 altogether,
i.e. assume use tax payments will be zero from ttus industry.
The second and third columns in Table 7, air transportation and eating and drinking
establishments seem to be related. We postulate, but cannot at this time confirm, that the pattern
of a precipitous drop in use tax payments form the airline industry and a sudden spike in payment
from the eating and drinking industry is related to a possible organizational change or supplier
relationship of Northwest Airlines and its food and/or catering suppliers. A logically consistent
story would be that use taac purchases were booked by an in-house food service arm of the
company through 1991, but that an outside contract for catering was awarded beginning probably
sometime after mid-year 1991. If the contract ended at the end of 1993 and the function was
brought back in house, the mirror image movements in the two industries' reported purchases
would have resuited. It may be possible to check on this through company sources. We wiil
endeavor to do so. However, we also choose to exclude airline use tax purchases from the
adjusted tax base for our calculations and will adjust the eating and drinking purchases by
reducing the historical data for the yeazs 1991 throu�h 1993 to be in line with the level of
purchases in the years before and after the period.
Use Tax Projections
To produce estimates of the revenues which would have been collected under a local use tax in
Saint Paui for the years 1992 throu�h 1995, we first made the adjustments discussed above,
namely excluding paper products purchases and airline purchases and adjusting eatin� and
drinking use tax payments: But the resultin� revenues would probably overstate use taxes
somewhat because they would still include data from firms outside the city boundaries.
Therefore, in addition, we further reduced those implied revenues by an additiona125 percent.
This further reduction was chosen after inspection of the relationship of actual city sales tax
revenues to the state's reported sales tax revenues for Saint Paul in the industries which are the
larger payers of use tax.
This process provided a base estimate of the tax base in 1992 through 1995. At this point, the
best approach we felt justified in taking was to grow those revenue figures at a constant and
conservative rate of 3 percent per year. The resultin� numbers are included in Table 8 below.
A coupie of points should be made about these estimates. First, they are much more speculative
than the sales tas estimates contained in the earlier sections of this study and subject to much
greater expected enor than the initiai projections of sales tax revenues made in 1993 before the
city had access to individual sales tax return data. Second, the actual collections in the years 2000
and beyond will be driven by the pace of economic development in the City of Saint Paul.
Significant projects, such as Lawson Software, are almost certain to have a sizable impact on the
actual revenues collected. The projections presented here have not been formed in a way which
would fold in the potential impact of such projects. As bud�ets and plans for new commercial,
office and manufacturing facilities are made, it may be possible to estimate a use tax impact for
each project separately. Such estimates should probably be added to the baseline revenue levels
being put forward here.
12
�8 ���
Table 8
Projected Revenues
City of Saint Pau1 Local Use Tas
Year
1994e
1995e
1996
1997
1998
1999
2000
2001
2002
Revenues
$738,551
$758,599
$781,000
$805,000
$829,000
$854,000
$879,000
$906,000
$933,000
Source: Anton & Associates estimates
The city is left with an almost irreducible level of uncertainty about the proceeds for the use tax.
With advances in the state's computer system, we have framed a strategy where some
supplemental data runs will be done to help sharpen our estimate of the 25 percent discount factor
used to further adjust the use t� revenues in this section. However, those runs were not ready at
this writing and, in fact, they hold out little hope of sharpening our overall estimates significantly
because of the other economic uncertainties about both the period since 1995 and the future
course of economic events in Saint Paul. Even after all of this analysis, it is very possible for the
revenues in the yeaz 2000 to differ from our figure of $879,000 by as much as $400,000. It is
somewhat more likely they would be higher than our projection rather than lower.
Nevertheless, it seems clear that the city should implement the use tax as soon as it is abie because
it would raise additional funds, however uncertain we may be of the exact amount. Once the city
has experience with actual collections of its use tax, it will also be possible to do a much better job
of understanding the pattem of use tax purchases and, ultimately, anticipating future years'
revenues.
V. Comptiance Issues and Strategies
The exact degree of compliance with Saint Paul's local option sales tax is not known. Almost
certainly, there are some businesses which should be collectin� and remitting the tax which aze not
doing so, but their number and the potential additional taxes that would be collected if compliance
were raised remain unknown. The city is considering whether it would be worthwhile to
undertake an initiative to raise compliance. In at least one instance, a city raised significant
additionai revenues throu�h undertaking such an effort.
13
���`�
In 1990 and 1991, after a study done by the principals of our firm who were workin� for Emst &
Youn� at the time, the City of Minneapolis chose to publicize its sales tax to businesses in the
city. In the yeaz followin� this initiative, revenues rose by I1 percent, a �rowth rate well above
the preceding year's growth and also well above the 5 percent rate bein� projected at that time.
If the City of Saint Paul were to undertake such an effort, it is unlikely that the financial retum
would be as hi�h as that experienced by 1vlinneapolis. Two factors argue for somewhat lower
expectations for the effects of such an initiative. First, the education effort undertaken by the
Mnnesota Department of Revenue at the beginnin� of Saint Paul's tax was significantly more
thorough, in our view, than what had been done earlier in Minneapolis. Therefore, Saint Paul
probably had significantly higher compliance on day one than did Minneapolis.
Second, changes in the Department of Revenue computer system and collection system now make
it harder for payers of the tax to avoid it or to "forget" to pay. Today, the state sends each
business taspayers a preprinted, customized form which includes line items for the state ta�c and
any local taxes for which the taxpayer is liable.
Despite these two factors, there remains a real possibility that the City of Saint Paul could coilect
enou�h additional tax to make.a collection initiative worthwhile. In the next section, we lay out
our recommendation for how such an initiative should be structured in order to be raise additional
revenue in a cost-effective manner.
There are two�separate groups of potential additional payers of the sales tax, namely businesses
located inside the Saint Paul city limits and those located outside the city limits who sell into Saint
Paul and, therefore, should pay the tax. As a practical matter, it makes sense to have separate
strategies for these two groups.
Businesses Inside Saint Paul
To assess the possible number of businesses inside Saint Paul who may be avoiding the local sales
tax, we were able to request a list of names and addresses of selected businesses located inside the
Saint Paul city limits. All of the businesses on the list had Saint Paul addresses and had not filed a
Saint Paul sales taac return but had paid the state sales tax in one or more of the years 1994
through 1496. (Similar data on 1997 has become available since our data request.) Table 9
below is based on data received under this request.
The data show that over this three year period over one thousand business entities with Saint Paul
addresses paid some state sales tax without filing a local sales tax return. Undoubtedly, some of
those businesses were not liable for Saint Paul's sales tax. For example, a building cleaning
business run out of an office in a person's home in Saint Paul but with no clients inside the city
limits would not be liable. Neither would a mail-order business which did not have any sales
inside the city limits.
I �1
�,�-�r�,�
Tabie 9
Number of Saint Paut Businesses
Filing State Sales Tax Returns
But Not Fi]ing City Sales Tax Returns
1994-1996
Number of Years Filed State
Return Without Filing City
Return
Number of Firms
Number of Possibly Missing
Locai Returns
One year
Two yeazs
Three years
Totals
683
253
160
1,036
Source: Minnesota Department of Revenue, Anton & Associates
683
506
480
1,669
The Department of Revenue cannot release information regarding the sizes of the businesses or
the amounts of their state sales tax liabilities. Judging from the names themselves many of the
businesses are probably very smail; many of them actually bear the names of individuals. We did
receive information about the industry desi;nations for the taYpayers in this data set. Table 10
includes information about the distribution of these firms across industries.
As the data in Table 10 indicate, the greatest number of potential taxpayers are in the
Miscellaneous Retail industry with Business Services being the second largest category. Beyond
the six industries singied out in the table, businesses were scattered through a variety of other
industries. Over all there were 643 businesses located in Saint Paul that filed state returns but did
not file local sales tax returns.
is
�� ����
Table 10
Industry Distribution of Saint Paul Businesses
Filing State Sales Tax Returns
Without Filing Locai Sales Tax Returns
SIC Code
59
73
58
72
57
50
Industry
1V1'iscellaneous Retail
Business Services
Eating and Drinking
Personal Services
Furniture
Wholesale Durable Goods
All Others
Total
Number of State
Returns FiSed in 1996
210
94
29
28
24
17
261
643
Total State Returns
Filed, 1994-46
Source: Minnesota Department of Revenue, Anton & Associates
593
258
73
80
67
53
545
1,669
It should be emphasized once again not only that many of these businesses are sma11 but also that
many of them may, in fact, not have Saint Paul sales tas ]iability. However, in dealing with this
group of businesses, the city has a distinct advantage as compared to dealing with potential
taxpayers located outside the city limits: namely, we know who the businesses are and where they
are located.
Therefore, an effective approach to raising compliance of (and revenues from) this group would
be the following set of steps:
• Obtain similar information for calendar year 1997 on Saint Paul companies paying
state sales taxes but not payin� the local tax
• Double check addresses to make sure they are inside the city limits
• Send each business that filed a state return in 1995, 1996, or 1997 a mailing which
requires a response re?arding whether or not they are liable
• Follow up on responses from firms and take additional actions with firms who choose
not to respond
Response to the mailings could, perhaps, be encoura�ed with some sort of offer of partial amnesty
for back ta�ces owed. The focus would be on raisin� revenues in the future and it very likely that
R�
! V �G ���
for some of these businesses who might be liable it mi?ht be very difficult if not impossible to
accurately reconstruct what their liability for a past year was because they have had no reason to
keep the detailed records from which such a calculation might be made.
In undertaking this effort, the Department of Revenue could help in a number of ways. If given a
list of names and addresses, the Revenue Accounting Unit could produce a report giving the
a�gregate state sales taxes paid by the group even thou�h no individual data could be released. In
additioq the newly-created liaison for local taxes, the Targeted Information Unit, couid help with
designing the letter to be sent and other elements of approaching the businesses.
In summary, approaching this population of possible local sales tax payers is relatively
straightforward, especially when compared to the hazder task of identifying potential payers
outside the city. It is also probably likely that this se;ment has less potential for si�nificant
revenue gains that does the outside segment.
Businesses Outside Saint Paul
Many firms who file Saint Paul sales tax returns are located outside the city limits. In fact, our
analysis of the individual records for the larger taxpayers indicates that almost half of the firms
that pay Saint Paul sales taac have addresses outside of the city limits. Some of these businesses
are disbursing funds from a headquarters and have business ]ocations inside the city limits. Many,
especially business service firms and personal service firms, are not located inside the city but sell
services or deliver goods to city businesses and residents and must, therefore, coilect the tas.
Data compiled from the returns of the larger tax payers is contained in Table 11 below.
Table 11
Location of Businesses Filing
S:tint Paui Sales Tax Returns in 1997
(firms paying over $500 per year)
Location from which tax is paid
Number of 1997 Revenues
firms
Percent of Total
Collections
Inside City limits
Inside Minnesota, but outside City
Outside Minnesota
1,113 $3,680,979
622 $3,916,313
305 $1396.399
Total 2,040 $8,993,691
Source: Minnesota Department of Reyenue, Anton & Associates
36.6%
38.9%
13.9%
893%
17
9� i��
There are 927 firms outside of Saint Paul which currently pay over 52 percent of the Saint Paul
local sales taz at this time. How many more firms should be paying? To answer this question and
to identify those additional fums, we recommend the following basic steps:
• E�ctract a complete list of all firms located outside Saint Paul that pay more than $500
per yeaz in local sales tax to the city
• Sort the list by industry and inspect the list of taxpaying firms in each industry
• For each industry, prepare a list of inetro, regionai, or national firms with location and
characteristics similar to taspaying firms as potentiai tax payers
• Contact each of these firms with information in a mailing and follow up on responses
and non-responses
The Department of Revenue will be able to advise on the design of some of the materials. It may
also be possible to design information requests to be made to DOR which would help to generate
gross estimates ofthe potential revenue from specific industry sectors.
In summary, we do not have enough information to make a reliable estimate of the additional
revenue to be raised from a compliance initiative. We believe that findin� additional businesses
with significant liability which are located outside of the City of Saint Paul is a more promising
avenue than finding large non-payers inside the city limits. However, the latter group may also be
worth pursuing because ttiey are relatively easier to identify.
Although we have not made estimates of the cost of a compliance initiative, we think it quite
likely that such a pro;ram would raise enou�h new revenue to pay for itself but we doubt that it
would generate a revenue increment proportional to that which Minneapolis experienced. When
the city enacts a use tax, as it must by the year 2000, there may be useful synergy between the
education effort undertaken at that time and the search for additional taxpayers inside the city
limits. Action to identify additional taxpayers outside of the city could be done at any time.
18
Arena Lease summary
Summary of the Provisions of the First Amendment
to Lease and State Loan Agreement
Ori�inaUAmended Lease Comparisons ����� Financine Plan
Page 1 of 8
( 0 d���
I. SUMMARY OF THE FIRST AMENDMENT TO ARENA LEASE
The following is a sununary of the First Amendment to the Arena Lease. The changes
over the Original Lease which was executed in January of this year, for the most part,
are to implement legislation passed during the 19981egislative session, to evidence the
State Loan, and to reduce the amount the City is required to contribute to the Arena
from $95,000,000 to $65,000,000.
Section 1. This section amends certain defmitions set forth in the Original Lease,
including "City Contribution" which has been increased from $30,000,000 to
$65,000,000. A definition of "Rent" is included, which includes "Base Rent" and a
definirion for the payments in lieu of taxes (i.e., "Pilot Payments"), which the Tenant
isrequired to make in lieu of the Tenant's $35,000,000 contribution in the Original
Lease. The definition of "Project Costs" has been amended to include the fees of the
respective Construcrion'Representatives.
Section 2. This secrion deletes various terms in the Original Lease and is necessary to
reflect that the State is making an interest free loan from money appropriated from the
State general fund, rather than a grant from the proceeds of State general obligation
bonds.
Section 3. This section adds defined terms to the Lease to reflect, among other things,
that the Tenant has agreed to provide a letter of credit to secure its obligation to pay
Rent, which letter of credit will be used by the City to fund a portion of the reserve
required for the City Bonds. The "City Bonds" are the Series 1999 Sales Tax Revenue
Bonds which are described in the Financing Plan which is set forth in a separate
attachment.
Section 4. This section amends the Lease to require the Tenant to pay $3,500,000 per
year as Base Rent, payable quarteriy in advance commencing on September 1, 2004,
through and including June l, 2025. The Base Rent due on September l, 2000, is
deferred until October 15, 2000. There is also a provision in the Lease to the effect that
Base Rent will decrease if the City does not approve a special sign district for
advertising on marquees for the RiverCentre.
This section also reflects the Pilot Payments to be paid by the Tenant. The Pilot
12/22/9g 5:3634 PM
1
�
4
5
6
7
8
9
10
11
12
13
14
15
16
27
18
19
20
21
22
23
24
25
26
� 9
30
31
32
33
34
35
36
37
38
i
RESOLVED:
����
� �� �
L°��"�j
q� -� i�t6
1. The City Council hereby approves First Amendment to
Arena Lease, First Amendment to Hockey Playing Agreement and the
State Loan Agreement (collectively, the "Documents") in
substantially the forms submitted and authorizes the Mayor,
Clerk, Director, Department of Planning and Economic Development
and Director, Office of Financial Services (the °Authorized
Officers") to execute the Documents. Any other documents and
certificates necessary to the transaction described above shall
be executed by the Authorized Officers. In the event of the
disability or the resignation or other absence of any of the
Authorized Officers, such other officers who may act in their
behalf shall without further act or authorization of the City be
deemed for purposes of this Resolution as such Authorized
Officers and shall do all things and execute all instruments and
documents required to be done or to be executed by such absent or
disabled officials. The approval hereby given to the Documents
includes appraval of such additional details therein as may be
necessary and appropriate and such modifications thereof,
deletions therefrom and additions thereto as may be necessary and
appropriate and approved by the Director, Department of Planning
and Economic Development and the City Attorney; and said
individuals are hereby authorized to approve said changes on
behalf of the City. The execution of any instrument by the
Authorized Officers of the City herein authorized shall be
conc2usive evidence of the approval of such document in
accordance with the terms hereof.
2. The City Council hereby approves the Financing Plan;
provided that the issuance of the City Bonds as described in the
Financing Plan is contingent upon the holding of a public hearing
on and approval of certain amendments to the Block 39/Arena Tax
Zncrement Financing Plan, the adoption by the City Council of a
final resolution authorizing the issuance of the City Bonds, and
the adoption of a resolution approving certain financing
documents by the RiverCentre Authority.
Lc,Gr+c
3 • �ikF�(�c � rs t�'ft�°�ftc����e�r�6�i,
ma� �c f���«�l a�"�� �6 �u � �� re,
/�C�� �i �•C��rN�O��cf� ��f. e��
�Ii�a �n
r� �L.
� "�G
1002941.3
�t���,�
��ic /�tit k���c
�t �G�i 124w eX/sf5
� _ �r���l Cea�c
� � �
C
�� ��
Y�/ �
�
a�-l�y�
2 �
3
4
S
Adopted by Council: Date
Adoption CeRified by Council Secretary
By:
Approved by Mayor: Date
By:
3002941.3
equ by Department of: �
u£h/)/� ��=�/� f�6
_., 7 _"' ,
By:
C\ ���� Y��
�