AgdaPkt 2016-10-24 Closed and Joint SA PFA HHCC

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8.3.C. - Page 3 Bond Buyer 25-Bond Revenue Index 4.50% 1 - 4.00% - 3.50% 3.Otlx 2.50% 2.00% L50% - - 1.00 0-50% O.011% • • • 10-Mar 10-Apr 10,-Ha) 10-Jun 10-Jul 10-Aug 1C- up -2S-Band Index Future Capital Needs The water utility's capital spending needs are sufficiently modest at present and Public Works staff believes that no additional debt is necessary to fund these expenditures. Consequently, there is no new-money component to the refunding plan. Should longer term capital requirements exceed the enterprise's ability to fund capital improvements on a pay-as-you-go basis, projected debt service coverage is sufficiently high that the enterprise should be strong enough to sell additional debt at that time. Depending on interest rates at the time bonds are sold, every $1.0 million of required project funding will add approximately $75,000 of annual debt service expense. Release of Debt Service Reserve Funds Each of the outstanding bond issues has a restricted debt service reserve fund equal to their maximum annual debt service. The total on deposit is approximately $4.4 million. The 2013 and 2015 refunding bonds were structured to allow elimination of the debt service reserve requirement when all of the 2005, 2006, and 2007 bonds are no longer outstanding. When the 2007 bonds are refunded, the amount on deposit in the 2013, 2015, and 2007 bond issue reserve funds can be either released to the enterprise for expenditure on capital projects, or used to pay down the amount of bonds sold to refund the 2007 bonds. Council Finance/Audit Committee The potential refunding was discussed with the Council Finance/Audit Committee (Vice Mayor Bain and Councilmember Aguirre) at the October 10, 2016 meeting. The committee approved staff's recommendation to explore the Water Revenue Bonds refunding and to engage the public finance professionals recommended to assist with the requisite analysis. Future Steps Approval of bond documents and bond issuance by the Council, including the Preliminary Official Statement, would be scheduled for January 9, 2017, followed by a bond sale on January 25, 2017, and a bond closing on February 15, 2017. The City's recently adopted debt disclosure policy requires periodic bond disclosure training for staff and Council. Bond counsel has extensive experience providing training for cities and counties and has agreed to provide this specialized training to Redwood City at a nominal cost.