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Minnetonka council approves $45 million conduit bonds for Breck School; legal protections and fees explained
Summary
The council authorized conduit revenue bonds of up to $45 million for Breck School’s refinancing and campus improvements, with bond counsel and staff stressing the bonds are special limited revenue obligations payable by the school and not general-obligation debt of the City of Minnetonka. The council also discussed the administrative fee and default protections.
The Minnetonka City Council on May 18 authorized issuance of conduit revenue bonds not to exceed $45,000,000 for Breck School to refinance prior debt and support campus improvements.
Gina Ferini, bond counsel with Kutak Rock, told the council the bonds would be issued as conduit revenue bonds and as qualified 501(c)(3) obligations. "The bonds are special limited revenue obligations of the city, payable solely from the revenues of BREC," Ferini said, adding that the city would not pledge its taxing power or general-obligation credit to the bonds. She explained that a bank letter of credit would be a security feature and that the bonds are structured so they should not affect the city's credit rating.
City staff said the school (Breck) would pay all issuance costs and an administrative fee to the city. In staff remarks the fee for administering the transaction was cited as approximately $95,000; during discussion Council member Calvert later referenced a different number from the packet when summarizing the city's receipt, which produced clarifying back-and-forth in the council chamber. Bond counsel described default protections, explaining the first recourse would be to draw on a letter of credit from US Bank and that Breck had the obligation to repay the debt if other credit supports were exhausted.
Council members asked how often Minnetonka has issued conduit bonds for entities outside the city and whether the arrangement produced local benefit. Staff and the city attorney said the city occasionally uses conduit financing for outside entities and that the immediate fiscal impact on city bonding capacity was limited because the bonds are not bank-qualified for the city's own bond limit. Council member Calvert said administration fees provide at least a small direct return to the city for staff time.
Council member Calvert moved the resolution authorizing issuance of the conduit revenue bonds for Breck School; the motion was seconded by Council member Foster Bolton and passed by roll call vote (7–0).
The resolution directs staff to finalize bond documents consistent with the presentation and with bond counsel advice; Breck School representatives were present in the chamber during the discussion and thanked the council for considering their request.
No members of the public spoke during the public hearing on this item.
