Laserfiche WebLink
Investors Service and AA- by Standard and Poor’s Corporation, which are considered <br />strong credit ratings. Because good credit quality utility revenue bonds are in high <br />demand at present, if sold competitively bidding demand can be expected to be robust <br />for the bonds (the City received eight bids for its 2013 water refunding bonds and four <br />bids for its 2015 water refunding bonds), although market conditions and competing <br />bond sales on the day of the sale will influence the results of the sale. Net present value <br />savings are total future savings that have been discounted into present (2017) dollars. <br />NPV savings will depend on interest rates at the time refunding bonds are sold, but are <br />presently estimated at approximately $916,550, or 7.63% of the amount of refunding <br />bonds sold, more than two times the GFOA recommended minimum NPV savings of <br />3%. If, after bonds are priced, the refunding does not produce NPV savings of at least <br />3%, the 2007 bonds will not be refunded; the City will still have the opportunity to <br />conduct the sale at a later date. <br /> <br />The 2005 and 2006 Bonds were refunded competitively with savings of 4.57% and <br />10.57%, respectively. The average annual debt service savings on the 2007 bonds are <br />estimated to be approximately $66,673 per year for the 18-year life of the proposed <br />bonds, which is equal to the remaining life of the 2007 Bonds. <br /> <br />The following table shows present estimates of NPV savings and average annual <br />savings. The NPV savings calculation has taken into account the costs of issuance and <br />underwriter’s discount, together totaling approximately $316,500, and which would be <br />paid at the closing from the bond proceeds. <br /> <br /> <br />NPV Savings <br /> <br />NPV % <br />Average <br />Annual Savings <br />2017 Bonds $916,550 7.63% $66,673 <br /> <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. Should longer <br />term capital requirements exceed the enterprise’s ability to fund capital improvements <br />on a pay-go basis, projected debt service coverage is sufficiently high that the <br />enterprise should be strong enough to sell additional debt at that time. Depending on <br />interest rates at the time bonds are sold, every $1 million of required project funding will <br />add approximately $75,000 of annual debt service expense. <br /> <br />Release of Debt Service Reserve Funds <br />Each of the outstanding bond issues has a restricted debt service reserve fund equal to <br />maximum annual debt service. The total on deposit is approximately $4.4 million. The <br />2013 and 2015 refunding bonds were structured to allow elimination of the debt service <br />reserve requirement when all of the 2005, 2006, and 2007 bonds are no longer <br />outstanding. When the 2007 bonds are refunded the amount on deposit in the 2013, <br />2015, and 2007 bond issue reserve funds can be either released to the enterprise for <br />8.C. - Page 3