City Council Meeting Date: July 22, 2025
To: Mayor and City Council
From: Ben Martig, City Administrator
Brenda Angelstad, Finance Director
Title
Consider Resolution Providing for the Issuance and Sale of $3,350,000 General Obligation Street Reconstruction Bonds, Series 2026B.
Body
Action Requested:
The Northfield City Council consider approving the attached Resolution providing for the Issuance and Sale of $3,350,000 General Obligation Street Reconstruction Bonds, Series 2026B.
Summary Report:
The proposed bond sale will provide financing for the City's 2026 Street Reconstruction Program, including the Mill & Overlay Project, Spring Street improvements, and the Fremouw Avenue Crossing project. Bond proceeds supplement other project funding sources, including franchise fee revenues, utility funds, and Mill Towns State Trail funding. These improvements are consistent with the City's adopted five-year Street Reconstruction Plan and were previously authorized following the public hearing held on January 6, 2026.
The action before the Council authorizes the competitive sale process for approximately $3.35 million in General Obligation Street Reconstruction Bonds. The Council authorized the bond sale at their meeting of June 19, 2026. The City's financial advisor, Ehlers, prepared the official offering documents (see attached Preliminary Official Statement), completed the credit rating process, and are currently marketing the bonds to qualified municipal investors through a competitive bidding process. Final bids will be received and presented to the City Council on Tuesday, July 21, 2026, at which time Council will consider awarding the bonds to the bidder offering the lowest true interest cost. The final interest rate, debt service schedule, and financing costs will not be known until competitive bids are received.
Independent Bond Rating - Why it is Important
Credit rating agencies provide one of the few truly independent external assessments of a local government's financial condition. Their evaluations consider financial management, reserves, debt, economic strength, governance, and long-term planning, making the City's bond rating an important benchmark of overall fiscal health in addition to influencing borrowing costs.
As part of this public bond issuance, the City obtained an independent credit rating from S&P Global Ratings to provide investors with an objective assessment of Northfield's financial condition and creditworthiness. This third party assessment provides credibility to the bond marketplace of a bond issuer’s ability and willingness to repay a debt.
Independent credit ratings are a standard practice for publicly offered municipal bonds because they expand the pool of potential investors and generally result in lower borrowing costs, reducing the long-term interest expense paid by taxpayers. A high credit rating indicates low risk, which translates to lower interest rates. S&P re-confirmed on July 11th Northfield’s assigned AA long-term bond rating with a Stable Outlook, placing the City among governments with a very strong capacity to meet their financial obligations. S&P evaluates local government credit on a scale with AAA as its highest rating, then AA+, AA, AA-, then A+, A, A-, BBB, BB, B , CCC and so forth. Northfield’s AA rating paces it as the third highest rating provided by S&P. This places the City among the top 28th to 50th percentile among all U.S. local government cities, townships, counties and villages that S&P evaluates.
The report (attached for reference) highlights Northfield's conservative financial management, healthy reserve levels, consistent operating surpluses, stable local economy, and long-range financial planning as key strengths. The primary area identified for continued monitoring is the City's increasing debt burden associated with its planned critical infrastructure and facility investment; however, S&P concluded that this is substantially offset by the City's growing tax base, strong reserves, and prudent financial management.
Credit ratings serve as one of the few independent external evaluations of a local government's financial health and are an important factor in determining the interest rates paid by taxpayers on long-term infrastructure financing
The bonds are scheduled to open for bids on the morning of the Council meeting on July 21, 2026. Ehlers will tabulate the bids and finalize the resolution for distribution at the Council meeting along with a summary presentation.
Alternative Options:
None recommended.
Financial Impacts:
The proposed bond issue is structured as a 15-year General Obligation bond and remains well within the City's statutory debt capacity. Minnesota law limits the City's net general obligation debt currently at approximately $72.3 million based on taxable market value. Following this issuance, the City will continue to maintain more than $21 million of remaining statutory debt capacity for future capital improvements. In addition, a significant portion of the City's overall debt is supported by utility revenues or other exempt obligations and therefore does not count against the statutory debt limit.
It is important to note that the statutory debt limit is a legal borrowing cap established by state law-not a measure of a city's financial health or debt affordability. Rather, it establishes the maximum amount of non-exempt general obligation debt a city may issue, while broader measures of financial condition are reflected through factors such as long-term financial planning, financial policies & related compliance, financial management and reporting, reserve levels, operating performance, debt management, and independent credit ratings.
The proposed financing is currently estimated to result in a True Interest Cost (TIC) of approximately 3.74%, based on recent municipal bond market conditions and the City's recently assigned AA credit rating. Current estimates project average annual debt service payments of approximately $297,206, with an estimated average annual levy requirement of approximately $312,066, recognizing that actual financing terms will be established through the competitive sale.
Tentative Timelines:
ü June 19th - Council Authorization of Bond Sale
ü July 14th - S&P reconfirmed AA bond rating
o July 21st - Council Award of Bond Sale
o August 13th, 2026 - Closing Date of Bond Sale -proceeds are received