EDA Meeting Date: June 23, 2025
To: Members of the Economic Development Authority
From: Ben Martig, City Administrator
Jake Reilly, Community Development Director
David Bennett, P.E., Public Works Director/City Engineer
Title
Consider Resolution Approving Ice Arena Lease Revenue Bonds Issuance Parameters with EDA.
Body
Action Requested:
Staff Recommends the Northfield EDA consider Resolution Approving Ice Arena Lease Revenue Bonds Issuance Parameters.
Summary Report:
The City of Northfield approved the partnership framework with the City of Dundas, Northfield School District and Northfield Hockey Association on June 18, 2024, along with the contract for the architect.
The City’s construction manager at risk, RJM Construction, received the bids for the new Ice Arena on Wednesday April 23, 2025 and the Council approved the bids and construction of the Ice Arena at the May 6, 2025 Council Meeting.
The City is proposing to establish Ice Arena Lease Revenue Bond Issuance Parameters that align with the partnership framework that has been established for the project. The Northfield Hockey Association has deposited the appropriate cash contribution at the City. The financing parameters align with the Ehlers Finance summary from the May 6, 2025, Council Meeting and is attached (Attachment 1).
Nick Anhut, Senior Municipal Advisor with Ehlers and Jenny Boulton, Transition Partner with Kutak Rock LLP - Minneapolis who is bond legal counsel will present the background information and be available for questions.
Ms. Boulton has provided a memo (Attachment 3) to provide the City and the EDA with a brief description of the legal authority for the issuance of EDA lease revenue bonds (the “Bonds”) and describe the various documents the City and/or EDA will execute in connection with the issuance of the Bonds. The legal authority described in Attachment 2 has been included in this staff memo. Staff recommends the members of the EDA Board read all of the attachments prior to the meeting and come prepared with questions, if any.
Background
The City of Northfield, Minnesota (the “City”) is authorized by Minnesota Statutes, Section 465.71, as amended, to acquire real and personal property under lease-purchase agreements and to enter into such an agreement with the EDA. The EDA is authorized by Minnesota Statutes, Sections 469.090 to 469.1082, as amended, (the “Act”), and specifically Section 469.103 thereof, to issue revenue bonds for any of its corporate purposes, and to pledge thereto income and revenues of the EDA, including without limitation revenues received under a lease with the City. Because the Bonds will be payable solely from lease revenues of the Ice Arena and other revenues pledged, the Bonds are exempt from any election requirements under Minnesota Statutes, Section 475.58.
Questions have been raised about whether Minnesota Statutes, Section 475.58, subd. 3a applies or limits the City’s financing options. That statute applies specifically to “refund existing debt of an indoor ice arena that is used predominantly for youth athletic activity”. The proposed financing in Northfield is new debt for a new facility rather than a refunding of existing debt and, therefore, this statute does not apply. Minnesota Statutes, Section 475.58, subd. 3a says that a municipality “may” utilize this bonding authority if certain conditions are satisfied. The word “may” means it is permissive, not required. There is nothing in this statute that says it is the only option for financing ice arenas or that an ice arena may be financed only if the facility revenues are sufficient to pay the debt. It is merely an option provided by the legislature in certain circumstances which do not apply here. Minnesota Statutes, Section 475.58, subd. 3a was enacted in 1999 and has not been revised since its enactment.
Following are questions that have been raised about the financial modeling for the arena:
1. Will the lease payments cover all or part of the ice operations?
a. The lease payments will pay down the debt incurred by selling lease revenue bonds. The existing ice arena operations are covered by a combination of earned revenue and the general fund.
2. Will the general fund have to subsidize the new ice arena operations?
a. The general fund has always supported parks and recreation operations, including the ice arena. The new ice arena will be more efficient to operate and will cost less to operate than the existing one. This is not an enterprise fund of the City which would indicate that it is a business enterprise with fees/revenue covering full costs (i.e. liquor store which fully funds itself and with excess property tax relief to the City via transfers to the general fund).
3. How is this effort appropriate for the Economic Development Authority to participate in? Is it Economic Development?
a. A vibrant and successful community relies on public infrastructure including parks and recreation facilities to ensure its economic success. The “multiplier” effect of a revenue generating parks and recreation facility on sales revenue for businesses, and sales and lodging taxes is a community and economic development effort.
4. Will this limit the ability of the EDA to issue other debt or generate revenue?
a. No.
b. Alternative Financing Option. Should the City have used tax abatement bonds (which would be an alternative) it would substantially utilize the statutory maximum allowed for use of this financing. Tax abatement also can be used for housing and economic development financing as well as other community projects. Therefore, that alternative option is not recommended as it could reduce future EDA initiatives.
Alternative Options:
Clarifications can be made by the EDA but no alternative options are recommended.
Note: Prior resolution committed the EDA’s support of the tool and directed all documents to be prepared to come back for consideration. This is completing the issuance phase of that requirement of the resolution from 2024. Additionally, tax abatement financing could negatively impact other housing and economic development goals and initiates should that be used.
Utilization of a General Obligation bond is not an option at this phase and determined in September of 2024 to use this financing tool instead. The sale of the arena had condition of sale that couldn’t be reasonably met with delay of an election, construction costs would have been substantially higher with delays (even when factoring in higher interest rates of lease revenue bonds), and support of partner entities and the City Council was strong and required certainty to move to action on all the agreements. Therefore, the G.O. bonds were chosen not to be utilized.
Financial Impacts:
See attached debt impacts with the financing.
Tentative Timelines:
A. Debt Issuance Schedule
• City Council authorization of Lease Agreements and approval of issuance of Lease Revenue Bonds Completed
• Pre-Sale Review by the Board of Commissioners June 23, 2025
• Due Diligence Call to Review Official Statement: Week of July 9, 2025
• Conference with Rating Agency: Week of July 9, 2025
• Distribute Official Statement: July 10, 2025
• Ehlers receives and evaluates proposals for purchase of the Bonds to provide a recommendation for award: July 22, 2025
• Designated Officials Award Sale of the Bonds: July 22, 2025
• Estimated Closing Date: August 7, 2025
B. Project Schedule (See Attached)