HomeMy WebLinkAbout12 WTR REV REFUND BDS 6-16-03AGENDA REPORT
12
Agenda Item
Reviewed: ~
City Manager
Finance Director
MEETING DATE:
JUNE 16, 2003
TO:
FROM:
SUBJECT:
WILLIAM A. HUSTON, CITY MANAGER
RONALD A. NAULT, FINANCE DIRECTOR
AUTHORIZATION TO PROCEED WITH WATER REVENUE REFUNDING BONDS
SUMMARY:
Staff has been monitoring the municipal bond market interest rates, looking for opportunities to
refund existing debt. The recent drop in rates has provided an opportunity to refund the $7.2
million balance of the 1993 Water Revenue Bonds. At current rates we can realize a five
percent present value savings on the remaining ten years to the final maturity. The average
annual debt service saving should be about $50,000 for a total savings of $500,000. We will
also be looking at two short term loans we have with Orange County Water District that were
issued at seven percent and should have a significantly larger present value savings if we can
roll them into our refunding.
RECOMMENDATION:
.
Authorize staff to proceed with a current refunding of the 1993 Water System Revenue
Certificates of Participation with a minimum present value savings of three percent, and
include the Orange County Water District notes if analysis proves it to be beneficial to
the system.
.
Approve the selection of Gardner, Underwood & Bacon LLC as the City's Financial
Advisor; Quint & Thimmig LLC as Bond Counsel; U. S. Bank National Association as
the Trustee/Escrow Agent; Grant Thornton LLP as Verification Agent; and Bond Logistix
as Reserve Funds Investment Consultant.
FISCAL IMPACT:
If we can complete the refunding process in time for a late July early August closing we should
be able to capture an annual savings of $50,000 with current rates.
DISCUSSION:
We monitor the interest rate environment for all outstanding debt quarterly, looking for
refinancing opportunities. We have set a minimum present value savings target of three
percent, which is a common benchmark. The 1993 Water Bonds are the only outstanding issue
that can take advantage of the current Iow rates. We are proposing to refund the balance of
$7.2 million due over the next ten years with the final maturity on April 1, 2013. We are not
extending the term of the outstanding bonds. We are also reviewing the option, to include two
outstanding notes we currently have with the Orange County Water District. One is for the
construction of a new well at the Seventeenth Street Desalter, for $1 million at seven percent for
ten years; the other is the balance of the Desalter construction, with a balance of approximately
$4 million at seven percent for the remaining five years. If the notes allow us to prepay we will
realize a significant interest savings on these short term notes.
Due to expected volatility in the market we are moving quickly to finalize the sale of the
refunding bonds prior to the next available bond call date on August 1st. We will continue to
monitor rates as we proceed and if we find that they are rising, we will not finalize the refunding.
The firms we are suggesting under Recommendation No. 2 have intimate knowledge of the City
which will be an advantage in completing the issue in such a short time period.
Finance Director
RAN/ts
RAN:AuthorizationToProceedWithWaterRevenueRefundingBondsStaffReport.doc