[0:06] Turn your mic on.

[0:10] » All right. Like to call to order the agenda. City council special session

[0:15] July 16th. It is 5:06 p.m. And

[0:22] that mean roll call. >> Yes. Yes.

[0:25] Um, council member Runer

[0:29] » present. >> Council member Helguson

[0:31] » here. >> Council member Bailey

[0:32] » here. >> Mayor Kirchman

[0:34] » here. >> Also, uh, Council Member Scholander is

[0:38] excused. He did notify me what, uh, that he had something pop up at the last

[0:42] second here, but we do still do have a forum. Um, we have George from Northland

[0:47] Security's here. And we have Derek from Bolton Mink. Holl's in the back taking

[0:53] notes. and your city administrator is present. Roll call is taken, sir.

[0:57] » All right. Thank you. >> All right.

[1:01] Um, we get a motion to adopt the agenda for the July the July 16th, 2025 special

[1:07] meeting. >> I will make a motion to adopt the agenda

[1:12] for our meeting July 16th, 2025. >> I'll second.

[1:16] » All in favor? >> Motion passes.

[1:19] All right. This is to be discussed in possible action.

[1:24] Doris, can you speak on Northland Securities Review Bond sales results?

[1:29] » Yes. Thank you, mayor. Um, good evening and thank you for meeting a special

[1:34] meeting like you're doing tonight. Um, and so the bond, as you know, is for the

[1:42] 2025 street utility improvement project. And we've been kind of working towards

[1:48] this date. I know you've you got your construction bids in hand. The project's

[1:53] probably slated to start very soon. So, it's time to get the financing in place.

[1:59] And so, I'll walk you through this bond sale summary. In particular, the the

[2:06] first page we come to um where it's more of a summary of of the financing itself.

[2:13] So um again uh the purpose is that street

[2:19] utility project finance plan. We we worked with with your staff. Um you also

[2:26] reviewed at a previous meeting different lengths of financing 15 years 20 years

[2:32] to see what was the best fit for this project. with it being a larger project

[2:37] um from from Kenyan's standpoint the 20

[2:42] years was was I think the better fit for the city in terms of you know a little

[2:46] bit lower debt service payment as well as uh you know assessments impact uh

[2:52] when you spread it out a little bit longer. So um so the bonds are

[2:56] structured with an overall financing term of 20 years. As part of the rating

[3:01] or I'm sorry, as part of the bond issue process, we worked with with your

[3:07] administrator on the assignment of the bond rating. The city has an existing

[3:13] bond rating with standard and pores of A+.

[3:18] And so worked through that process. Um I don't know if Scott's hair got a little

[3:24] grayer or or or there's less of it now, but uh um they affirmed the city's bond

[3:32] rating, which was a very good result. And and I'll just note a couple of

[3:37] things. Uh there's two highlights that I put under that. Um they noted steady tax

[3:43] revenue growth and sound financial management framework. I'll go into a

[3:48] little more detail on that. the they in the in the rating report talk about um

[3:55] Kenyan's small but growing local economy um which is driving steady tax revenue

[4:02] growth. Its operating budget is small and exhibited mixed financial

[4:07] performance but general fund reserves remain healthy. So that's one of the

[4:11] keys is maintaining reserves and maybe even build up a a little bit on the

[4:17] reserves. Um, and then it it does state this. Although

[4:22] the city's debt and liabilities burden is higher and long-term and a long-term

[4:29] credit consideration, we believe it remains manageable. So, um, so that

[4:35] that's, you know, kind of a negative and positive at the same time where they

[4:39] recognize that for a city your size and you're not alone in this comment that,

[4:44] uh, you know, the debt burden is a little bit higher because you're a

[4:48] little lower population, but it's manageable. They did like a lot of your

[4:54] administrators answers about kind of like the buck stops here uh, in terms of

[5:00] expenses going forward. Is that okay that I say that?

[5:02] » Yes, that's just fine because that's pretty much what I said. But

[5:06] » and uh well, okay, here's how they they say it

[5:10] in a different way, kind of a better way. They say um staff will be exerting

[5:17] stronger controls on spending including capital to reverse the trend

[5:22] of recent operating deficits. So, so that was duly noted on the call that uh

[5:28] because they do factor in not only economy

[5:33] uh finances but also management and so they they have left the rating process

[5:40] with a positive view of management. So um along with that so an A+ bond rating

[5:48] we were we went out and solicited quotes from bond insurance providers

[5:54] uh nationwide there's two companies that provide bond insurance and bond

[5:59] insurance is for the investor's benefit but it also is benefit for the city. The

[6:05] investor's benefit is if they buy a city of canyon bond issue, the bond insurance

[6:12] guarantees the payment of principal and interest or the return of their

[6:16] investment. And so they are rated double A, the bond insurance providers. And so

[6:22] that opens the door to a broader investment market. Um and and so Scott

[6:30] was able to sit in on a couple of pricing calls pre-sale when we talk

[6:35] about what the market's doing and you know what are comparable municipalities

[6:41] to Kenyon when we uh when when these interest rates were were developed when

[6:47] we brought the bonds to market and then post sale as well. And so I don't know

[6:51] if you want to add any comments to that Scott. No, other than, you know, I I

[6:56] thought it was a really good move when we took a look at the insurance because

[6:59] I think it as as George was saying, it opened us up to a whole different group

[7:03] of investors that according to the call I was on today, these investors only are

[7:08] looking at bonds that are insured. So, we actually got a really favorable

[7:13] outcome because of that because we we and it also helps our rating by going

[7:18] to, you know, an A uh plus+ is what I call it or double A

[7:25] rating, right? Or AAA rating. Um, it really helps us because what a part of

[7:29] that what it does, the higher your rating is just like your credit score

[7:33] personally, better interest rate you get when you take a look at that kind of

[7:36] stuff. So, um, I appreciate George inviting me into these calls cuz I

[7:40] learned a lot sitting down and talking to these folks. Uh, I also verified that

[7:44] I could never be one of them because the numbers and all the stuff that they go

[7:47] through, but it was very eye opening to me and it was a very smooth process and

[7:52] and they answered every single question I had and then some. So, it was a it

[7:57] went very well. So, >> and having the insurance gives us lower

[8:01] interest rate as well. >> Yeah, good question, Mayor. The U. So

[8:05] yes, the the benefit of the bond insurance is is um one you it lifts your

[8:11] rating. So we we bring your bonds to market with your underlying A+ rating.

[8:16] » Mhm. >> And then an enhanced double A rating,

[8:20] right? >> So the benefit of that is at the regular

[8:24] A+ rating, there's a certain level of buyers. you're you may get the community

[8:30] banks, you may get some um individual investors as well. The benefit of that

[8:37] insurance is that a lot of say pension funds or mutual funds, it opens the door

[8:43] to them coming in as an investor as well. And so that that's a positive

[8:49] because it will drive down the interest rates a little bit.

[8:52] » We had more investors to look at and pick and choose from.

[8:55] » That's right. So, we um it it it definitely benefited because on a longer

[9:01] 20-year bond, um you know, there there's a number of bonds to move, if you will,

[9:06] or place into the market. So, based upon the cost of the insurance, it cost

[9:12] $6,300 to get the insurance. You pay a premium

[9:17] just like you would for your homeowner's insurance premium. You pay a bond

[9:20] premium to get bond insurance. But the benefit of it, it our bond trader

[9:26] Dustin, who was the one that talked the most on these calls, talked about it

[9:31] benefiting you at least a tenth of a percent, probably closer to 210 of a

[9:36] percent >> by bringing in that extra level of

[9:39] buyers. So that interest cost savings of just the insurance is probably 60 to

[9:45] $80,000. So So definitely worth having it. And then I mean I mean I know this

[9:51] is a 20-year bond but then will this help us like for future like that we

[9:55] kind of have like this good ratings or we have a good past like say 20 years

[9:59] from now if you need to do something like this again does this benefit us in

[10:02] the future as well. >> Yeah good good question again. So the

[10:07] maintaining the A+ is a a positive in itself. You're you're one step away from

[10:14] doubling. So meaning it goes in the A category it's A minus A then A+ and then

[10:21] the next step above A+ is is double A minus and to get into that next even

[10:28] though that's only one step it's a big step to get into the double A category

[10:33] because that's where the bigger like a farable you know being a broader and

[10:37] diverse economy more diverse economy a larger tax base that's where those

[10:43] issuers are Northfield. Um on the high end, of course, the AAA's that's where

[10:48] you're going to get your Minneapolis, Homemstead County. Yeah, th those uh

[10:53] types of issuers. Um but it does say in here um

[11:00] upside and downside scenario. So the upside scenario,

[11:05] we could raise the rating if Kenyon's economic metrics were to improve. Now,

[11:11] that's hard to control because what they mean by that is your median household

[11:15] incomes, >> population, some of those types of

[11:19] things. Um, and if it's reserve levels, meaning your

[11:25] fund balances, uh, sustainably increase to higher levels. So, so what's what

[11:31] that's saying is you're probably A+ um, because some of those demographics are

[11:37] hard to uh to change. Um downside, we could lower the rating if the city's

[11:43] budget were to continue producing deficits or future capital expenses lead

[11:48] to diminished general fund reserves. So if you drew down your reserves below

[11:54] um existing levels, there's more of a downside risk than an

[12:00] upside uh potential, I would I would say. So,

[12:03] » it's very important to us at the city that we start to increase that fund

[12:07] balance that we talked about a couple meetings ago.

[12:10] » Yeah. >> For a lot of different reasons. This is

[12:12] one of them. Yeah. Yeah. >> Yeah. All All very good questions,

[12:16] council. The the um so that's that's a little bit behind the credit behind the

[12:22] bonds. Again, 20-year bonds, the average what's called the true interest cost

[12:26] over that 20-year term is a 4.44%. Um

[12:32] » is that a going rate or is that in what rank of rate is that

[12:37] » for >> for these loans?

[12:39] » Yeah, that that is um essentially what the market is bearing in the current

[12:44] market for this credit if you will. So for example, if you were um a stronger

[12:53] credit coming to market today, your interest rate might be 4.25%.

[12:59] And if you are likewise issuing without a rating, um, you know, let's just if

[13:06] there's a city smaller than Kenyon selling bonds today, they might be

[13:10] closer to 5% or 4 and 3/4%. So, so yes, it's it's the rate that we're seeing.

[13:16] So, we're kind of penalized for basically the size of our town

[13:20] » because >> we don't it's harder for us to get to

[13:23] that higher rating because we're a smaller town and income area is not as

[13:29] easy easily changed as like far. >> Well, I think there's there's part of it

[13:35] is that uh there's a couple things that they look at. Population certainly is

[13:39] one of them. If you're less than 5,000, they give you a little bit of a a

[13:45] negative connotation on that. Now, we know that that shouldn't that's not fair

[13:51] necessarily, but it's a smaller tax base, so there's more risk involved. Um,

[13:57] as well, if you have a fund balance that's less than $2 million, then they

[14:03] consider that nominally low. And so even if it might be in your um your range,

[14:10] say you have 35 to 50% uh maintain that percentage, but if it's

[14:16] if that percentage equals $1 million, um they consider that kind of low. So,

[14:22] so there's a couple things that cities, >> you know, if you if you are a smaller

[14:27] community, less than 5,000, and if you have a decent percentage, but a a

[14:33] smaller or less than $2 million fund balance, it's it's just kind of tougher

[14:38] to get a stronger credit rating. >> Yeah. And we looked at comparables as we

[14:43] were going through this, and as much as I don't like paying 4% interest, it they

[14:48] were be it was fair. I mean, when you really took a look at others that were

[14:53] it it was fair. >> They're not taxed either, right? Certain

[15:00] federal taxes. >> Ah,

[15:02] » right. >> Right. So, on the investment side,

[15:07] municipal debt in Minnesota anyway is double tax exempt. So um if you were to

[15:13] buy some of these bonds personally, the interest that you that you earn is not

[15:19] subject to taxation. So that's that's why um from individual standpoint, it

[15:25] it's a it's a positive or attractive investment

[15:31] and um and sometimes community banks also get credits

[15:37] uh for buying municipal debt as well. So,

[15:40] so um yeah, certainly a goal would be to maintain our credit rating at this level

[15:46] and then you know if if if there's opportunities to um review the next time

[15:53] there's a consideration of a project that you need financing for, you know,

[15:58] we'd probably be in a slightly better spot if you add to your reserves. So,

[16:05] » great. Thank you for the questions. the um a couple important things.

[16:10] Closing date, August 13th, that's when you get the money. So, tonight there's

[16:16] that resolution. Locking in the resolution locks in the rates and terms.

[16:21] Um closing is August 13th. Um final maturity, again, 20 years out, February

[16:29] 1 of 20 46. And then call date, that's the date that um you can either prepay

[16:37] on principal or refinance once you hit that date. So that's an important date

[16:43] and and uh from the perspective of probably more so refinancing than

[16:49] prepaying because once you reach that call date, you're you really only have

[16:55] about a third of your principal that's paid at that point.

[17:00] And so part of what Scott heard on the call was

[17:06] a lot of uh um bond pricing lingo, but one of them was what's called

[17:12] optionality. And that is that call date because the way the bonds are priced

[17:18] it um it lends itself a little bit to be more callable meaning more likely to get

[17:26] refinanced by the city provided interest rates we're not going to get back to

[17:31] COVID level interest rates I don't believe where we were in the ones but uh

[17:35] if we see kind of historical swings in the market you know we're right now at

[17:41] maybe a little bit higher interest rates because of volatility in 2025,

[17:46] but over the c over a 20-year term, it's certainly realistic to think that you

[17:51] would refinance this one time.

[17:56] » Um, so again, we size the bonds based upon information from Derek on low bid,

[18:04] you know, the other project related costs and then um, you know, factored in

[18:09] the cost of issuance. So, there's no out of pocket for the city. And uh I can

[18:16] address any other questions you might have, mayor or councel.

[18:21] I think I'm good.

[18:28] » All right. There's no questions. Then we're looking for a motion for

[18:31] resolution 202522 awarding the sale of general obligation

[18:35] bond series 2025A. We have a motion.

[18:44] » I will make a motion to accept resolution 202522.

[18:49] » I'll second it. >> All in favor?

[18:52] » I >> I motion passes for resolution 2025-22

[18:57] awarding sale of general oblation bond series 2025A.

[19:02] » So, Mr. Mayor, you and I all just have to sign that resolution then after the

[19:06] meeting here. Okay. >> All right.

[19:08] That's all for me, mayor. Thank you. All right. Thank you.

[19:11] » Thank you. >> All right.

[19:14] » Thanks, George. Nice job. >> Yeah.

[19:17] » Moving on to Adro proposal for accounting services.

[19:23] » Can you speak on that, Scott? >> I can. or if anybody wants to open it up

[19:26] to questions to start with and then I can

[19:31] Did everybody have an opportunity to take a look at and understand what uh I

[19:36] was proposing there? Um yeah I I didn't get to read it as but

[19:42] so is this going to be um in place of our finance director or

[19:50] » so this would be in so in interim this would be actually bridging the gap. Yes.

[19:56] This isn't forever going on forever and ever.

[19:59] » Sure. >> So when

[20:02] uh sorry I'm just trying to get >> we got a fire instructor in here.

[20:05] » That's really it. And then these folks would actually work with the finance

[20:08] director uh and help train on what they've already been worked on. So this

[20:13] I just wanted to be clear this is different than uh what we already

[20:17] approved at the council at a previous council meeting where we uh are using

[20:22] ABDO to do payroll. Okay. So this is outside of that. So if you look at the

[20:27] sheets on there, there were four different topics that needed to be

[20:29] addressed. Those topics actually uh came from myself. And I'm sorry I'm still

[20:34] scrolling here. Here we go. um those um topics were the topics that were of

[20:40] concern of mine um where I felt that there were some deficiencies. So when I

[20:45] re reached out to Jean, I've known Jean, I've worked with Jean before. Um when I

[20:50] reached out to her, we kind of did put our heads together a little bit and came

[20:53] up with what we're looking at. So if you're looking at the ABDO document,

[20:56] Derek, you got it. Um, what we're looking at is is the accounts payable

[21:01] review, but really just to make sure uh I think staff does a pretty good job

[21:06] with that, but there were some questions. It seems like staff is talked

[21:09] are talking to me uh on a daily basis on certain things that they're finding or

[21:13] certain things that don't quite make sense or or certain things that we just

[21:17] can't connect, you know, the dots on how did we get to this point, right? So, I

[21:21] think taking a review of of uh of the accounts payable there. Um, cash flow.

[21:27] That's just kind of figuring out how bills are coming in, cash flows coming

[21:30] in. And if and if you want to look further down, it gives you definitions

[21:34] of what I'm talking about there. I'm just using my own terms, but it does

[21:37] have the the official scope of services down on the next page. Um, these are

[21:42] estimated fees. Some of them may be coming down depending upon what they

[21:46] see. Also remember we were right in the middle of bringing KMU over into the the

[21:51] financials coming over into the city uh and kind of putting that all together.

[21:56] Uh we were about break even right at about the 50% mark right there. So

[22:00] they're going to take that across the finish line for us and be able to put

[22:03] that in place and then just make sure that uh everything is working properly.

[22:07] The biggest ticket item you see there is the budget. And that's what I started

[22:10] talking about the other night when we were talking to have them come in to

[22:14] help us put together our budget to get the uh few meetings put together talking

[22:18] about um what it's going to take. All this has to be done. We should been

[22:22] starting it already. Um we just don't have a mechanism right now to have them

[22:27] come in. This is one of the things they specialize in. have them come in and

[22:30] work with us to get our budget put together and have it done by September

[22:34] 30th so we can get it into the county is is a top priority. Um and then the cash

[22:39] » right around the corner. >> It is. I know it's coming quick. I mean

[22:42] I've already started uh with a couple employees. I department heads this

[22:46] morning. I was talking to them a little bit about budgets already and that we're

[22:50] going to need to print those off and they're going to go through and then

[22:52] I'll sit down with them and and then bring them in. And then the cash

[22:55] investments. um couple of you, we had a meeting before the personnel committee

[23:00] got together right before this and I just was um just talking a little bit

[23:05] about cash investments and how I've been on the phone with our with Laura from 3M

[23:10] and how we invest and and how we move money and how we get the best interest

[23:14] rate and how if we need to pay for something we can slide things over. I'm

[23:19] I'm learning a lot about the finance on side of things here. Um, and I think to

[23:23] look at that and make sure we're doing it properly and to make sure we have the

[23:26] proper paper trail when we move money from one to another. What I've been

[23:31] finding is that there's no paper trail there. There's nothing that's telling me

[23:34] why didn't we move X over to this and and for what reason. So I think all four

[23:39] of these are very very important that we take a look at because I want to set the

[23:44] table for the next finance direct or finance officer that comes in here and

[23:48] make sure that for lack of better term it's not a mess

[23:52] for somebody to walk into because I can tell you right now seriously

[23:57] um it's a mess and my head wants to explode sometimes when I'm looking at

[24:00] some of this kind of stuff. So, I've been working really hard to try to to to

[24:05] dive into this as deep as I can and understand it and try to get the the

[24:09] answers to what we're looking for here. So,

[24:13] I may be a little biased cuz I'm into this up to my eyeballs on the finance

[24:16] piece, but I really don't see how we

[24:25] can move forward without having this. As much as I hate to spend the money

[24:30] because I'm frugal when it comes to that and I was looking at all different

[24:34] avenues. How can I get around that? I'm not sure we can afford not to do this

[24:40] right now with what I'm seeing. >> Straighten out like we need people to

[24:44] straighten out this mess, get the next person in so that you know set values

[24:47] like hey this is what we need to do and your job. It's like it helps with their

[24:51] job description and everything in the future. Correct. agree 100%. It's a

[24:55] grown running into a wall to get higher. >> Yeah. And we all know it's been a mess

[24:59] and probably has been for a long time. So yeah, I'm on board and and it's like

[25:03] temporary. It's not like we're paying this bill the rest of our lives. We're

[25:06] going to pay in this. It's kind of sucks, but we got

[25:08] » So if we get to the point, >> if the if the council gets to the point

[25:12] or I get to the point where I'm recommending the council, um you know, I

[25:17] think we're at a good place, we can move on or this isn't giving us exactly what

[25:21] we were looking for. We give them a 60-day notice.

[25:24] » If for any reason we didn't pay them, they have to give us a 30-day notice.

[25:28] Okay. But we at any time can give a 60-day notice and get out of this thing

[25:32] at any point. Yep. But right now, if you add this all

[25:36] up, um we're on the high end. We're looking about a $22,000 investment to

[25:42] try to get the ship writed a little bit here. And

[25:45] » are they kind of aware too that we this is temporary for us?

[25:49] » 100%. They they completely know. Okay. >> Yep. That way I wanted them to come in

[25:53] and help interum and then get ready for the next

[25:57] finance officer to be able to be hired and be able to brought to be brought in.

[26:01] Yeah. Yeah. Yeah. >> And in the long run, it's going to cost

[26:03] us more if we don't do it. Probably. >> I think so.

[26:05] » I think so. >> Setting up the next person for failure

[26:08] to try to come in and try to figure it out. Why not

[26:11] » hire them? They know what they're doing. >> Yeah.

[26:15] » The turnover. >> That's funny. That's reliable. And

[26:19] » it makes the job look a little more appeal. Yeah, instead of like coming in

[26:22] here and it seems investing. >> And I just want to be the payroll piece

[26:26] of it may stay on just a little bit longer because if a new person's coming

[26:30] in and trying to learn all this other stuff, it might be at least easier

[26:33] learning curve not to have to worry about the payroll piece for a little

[26:37] while and then we can slowly move the payroll piece in. I can tell you I am

[26:40] thoroughly impressed with what Val's doing from Abdo on our payroll and

[26:44] payroll is really starting to hum along. So, we should see a reduction in the

[26:48] cost that it does because she should be spending less hours on doing that. But,

[26:51] she's receptive. She's emails me every day. We're talking every day if she's

[26:55] got a question. Um, things are are going well there.

[27:01] So, that I just want you want to make sure everybody's This is one piece,

[27:04] these four items, and then the payroll piece is a standalone that we're talking

[27:07] about. Yep. But I guess my

[27:12] my recommendation would be that the council approve

[27:16] moving forward with this. And then I can Oh, the other thing I didn't is I I did

[27:20] have Rigs go through this just to make sure from verbiage wise everything was

[27:24] on the up and up and and making sure that everything was consistent with what

[27:27] we want to see here at the city. He's already gone through it. He's already

[27:30] approved it. He said everything looks fine on this one. And um all we would

[27:35] have to do if you guys approve this is for the mayor and I to sign the contract

[27:38] and then they will start working with us immediately.

[27:42] [Music] >> Oh, I think I think we have to do this

[27:46] to >> clean things up. Yeah.

[27:48] » Okay. Well, I'll make a motion to to accept the ADO proposal for accounting

[27:54] services. Have a second. >> I second it.

[27:57] » All in favor? >> I. The motion passes for the ado for

[28:02] common services. >> Thank you. I think that's going to go a

[28:06] long way and and we'll be able to get after things

[28:10] quicker. So, appreciate that. Thank you very much for making

[28:13] » All right, that brings us down to adjourn.

[28:17] » I will make a motion to adjurnn. I will second.

[28:20] » All in favor? I >> motion passes to adjourn the meeting at

[28:24] 5:34 p.m. >> Excellent.

2025 07 16 Special Council Meeting

Transcript