AgdaPkt 2016-05-23 Closed, Joint SA and PFA

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7.B. - Page 2 to collect development fees from Benefitted Properties to reimburse the One Marina CFD for Bair Island Road Excess Costs that it financed on their behalf. While the refunding documentation was underway, the City issued building permits and collected Excess Cost development fees in the amount of $1,437,468 for 412 new units attributable to a Benefitted Property, now named the Blu Harbor Development. These funds may be used to reduce the size of the refunding debt issuance, in which case the City would not need to issue the full amount authorized by the attached Resolution. The savings described in this report as attributable to the refunding exclude savings to property owners that will result from bonds called with the Benefitted Properties development fee. If bonds are not called in connection with the Benefitted Properties fee, the savings for property owners could vary. Interest rates on the One Marina bonds range from a low of 5.25% for bonds maturing in 2016 to a high of 7.75% for bonds maturing in 2041 . Interest rates have declined substantially since the One Marina bonds were sold and the bonds can now be refunded with substantial annual savings to property owners. ANALYSIS Expected Savings: Refunding a bond issue is like refinancing a home mortgage. When interest rates decline new (refunding) bonds are sold to replace the current (outstanding) bonds. The outstanding bonds are paid off prior to their stated maturity dates at the outstanding bonds' first optional redemption date (September 1 , 2016 for the One Marina bonds) and the borrower pays a new, lower annual debt service payment on the refunding bonds. Debt service savings on the One Marina bonds, and subsequent property tax savings to the property owners, will be realized annually through 2041 . To evaluate the cost- effectiveness of a refunding, these future annual savings have been compressed into a single, present value number called net present value (NPV) savings, which reflects the sum of each future year's savings value, discounted into present dollars. Best practices, as endorsed by the Government Finance Officers Association, suggests that NPV savings should equal or exceed 3% of the par amount of refunding bonds sold. Using current market rates (as of mid-April 2016), NPV savings for the One Marina bonds are expected to be $2.217 million, which is nearly 39% of the par amount of refunding bonds to be sold. Annual (future value) debt service attributable to the refunding will decline by approximately $116,000, which will translate into annual special tax reductions of approximately 30% for One Marina residents.