AgdaPkt 2015-02-09 Closed and Joint SA

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7.1.B. - Page 2 Both of these firms have provided bond - related legal services to the City in the past and both are highly qualified to serve in these capacities. The municipal advisor was selected based on prior experience and performance with the City. WEMF has completed 17 bond issues for the City since 1998. The proposed refunding bonds would use the same legal structure used to sell the original bond issues and the 2013 refunding bonds, and like all of these bond issues, would be offered for sale to underwriters pursuant to a sealed bid electronic auction. The City would sell the bonds to the underwriter that submits the bid with the lowest true interest cost, a measure of interest cost that takes into account the time value of money. Anticipated Savings from Refunding Savings are driven by interest rate levels and the demand for the City's bonds on the day they are sold. The City's water enterprise bonds are rated A+ by Moody's Investors Service and AA- by Standard and Poor's Corporation, which are considered moderately strong credit ratings. Because good credit quality utility revenue bonds are in high demand at present, bidding demand can be expected to be robust for the bonds (the City received eight bids for its 2013 water refunding bonds), although market conditions and competing bond sales on the day of the sale will influence the results of the sale. The GFOA best practices recommendation for refunding savings, which the City adheres to, suggests an NPV savings floor equal to three percent of the amount of refunding bonds sold. NPV savings are total future savings that have been discounted into present (2015) dollars. Based on current interest rates, the 2006 bonds are expected to have NPV savings of approximately 6.53 %. If, after bonds are priced, the best bid for the 2006 bonds does not produce NPV savings of at least 3 %, all bids will be rejected and the 2006 bonds will not be refunded. The following table shows current estimates of NPV savings and average annual savings over the 20 -year life of the proposed bonds, which is equal to the remaining life of the 2006A bonds. The NPV savings calculation has taken into account the costs of issuance and underwriter's discount, which together total approximately $372,000, and which would be paid at the closing from the bond proceeds. A preliminary refunding analysis is attached to this report. NPV Savings NPV % Average Annual Savings 2006 Bonds $1,165,759 6.53% $143,679 The following chart, which tracks interest rates since July through the beginning of January, shows that rates have trended downward during the latter half of 2014. Page 2 of 4