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8.A. - Page 2 <br /> 1. An Installment Purchase Contract (City and PFA) <br /> 2. An Indenture of Trust (PFA) <br /> 3. A Continuing Disclosure Agreement with the trustee for the 2015 Bonds (City) <br /> 4. A Preliminary Official Statement and its distribution (City and PFA) <br /> 5. An Official Notice of Sale (City and PFA) <br /> ANALYSIS <br /> The Plan of Finance <br /> The proposed refunding bonds will use the same legal structure used to sell the original <br /> bond issues and the 2013 refunding bonds, and like these prior bond sales, will be <br /> offered for sale to underwriters pursuant to a sealed bid electronic auction. The City will <br /> sell the bonds to the underwriter that submits the bid with the lowest true interest cost, a <br /> measure of interest cost that takes into account the time value of money. <br /> Anticipated Savings <br /> Savings are driven by interest rate levels and the demand for the City's bonds on the <br /> day they are sold. The City's water enterprise bonds are rated A+ by Moody's Investors <br /> Service and AA- by Standard and Poor's Corporation, which are considered moderately <br /> strong credit ratings. Bidding demand is expected to be strong for the bonds, although <br /> market conditions and competing bond sales on the day of the sale will influence the <br /> results of the sale. The Government Finance Officers Association best practices <br /> recommendation for refunding savings, which the City adheres to, suggests a net <br /> present value (NPV) savings floor equal to 3% of the amount of refunding bond sold. <br /> Net present value savings are total future savings that have been discounted into <br /> present (2015) dollars. <br /> Based on current interest rates, refunding of the 2006 bonds is expected to generate <br /> NPV savings of approximately 7.53%. The following table shows present estimates of <br /> NPV savings and average annual (future value) savings. These amounts are rounded <br /> estimates and will depend primarily on interest rates at the time the bonds are sold. The <br /> NPV savings calculation has taken into account the costs of issuance and underwriter's <br /> discount, which together total approximately $374,000, and which would be paid from <br /> bond proceeds. <br /> Average <br /> NPV Savings NPV % Annual Savings <br /> $1,390,000 7.53 $102,000 <br /> Future Capital Needs <br /> The water utility's capital spending needs are sufficiently modest at present that Public <br /> Works believes that no additional debt is necessary to fund these expenditures. <br /> Consequently, there is no new-money component to the refunding plan. Refunding of <br /> the 2007 bonds will be evaluated periodically, and if economical, could be combined <br /> with a future new-money funding component to address future capital needs. <br /> 2 <br />