AgdaPkt 2007-04-23 - Laserfiche WebLink

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8C Page 3 allow up to 3,238 acre-feet of recycled water to be produced and delivered should demand so warrant. The costs of the various components of the project are shown in Attachment 1. The Financing Structure The City will use its non-profit financing authority, the PFA, to implement the financing. The PFA will sell the water system improvements to the City pursuant to installment purchase contracts. The PFA will sell water revenue bonds to raise the funds to advance the City the purchase price for each portion of the project so financed. Repayment of the various purchase prices will be in installments over time, together with interest thereon, as documented by installment purchase contracts, and will be equal in amount to debt service on the water revenue bonds sold to fund each installment purchase price. The City's obligation to make these installment payments will be a special fund obligation of the water fund, with no recourse to the general fund. The PFA will pledge the installment payments it receives from the City as security to repay the water revenue bonds. While the City could use its charter powers to sell revenue bonds secured by the water fund, the charter requires voter approval for charter authorized revenue bonds. The charter authorizes the City to enter into installment purchase arrangements without voter approval. No voter approval is required for the sale of bonds by the PFA. The 2005 and 2006 bonds received ratings of AA- by Standard and Poor's Corporation, A+ by Fitch Ratings, and A 1 by Moody's Investors Service. The proposed 2007 bonds are expected to receive the same ratings. Additionally, the 2005 and 2006 bonds were insured by a municipal bond insurance policy purchased by the underwriters of those bond issues. Issuance of an insurance policy increases the rating on the bonds to Aaa/AAA and thereby lowers the interest rates on the bonds. The City will submit the 2007 bonds for bond insurance review. The 2007 bonds will be offered to underwriters in an auction format, with the purchase of bond insurance at the option of the bidding underwriters. The underwriter that submits a bid with the lowest true interest cost ("TIC") will be awarded the bonds. The TIC is the discount rate which, when applied to all future payments by the City of principal and interest on the bonds, is equal to the purchase price paid by the underwriter for the bonds. The resolution approving the sale of the bonds authorizes the City Manager or the City Finance Director to award the bonds to the low bidder provided that the TIC does not exceed five percent (5.0%), the par amount of bonds does not exceed $15.5 million, and the final maturity of the bonds does not exceed 30 years. A sources and uses of funds table showing the application of bond proceeds for the two completed bond sales and the projected application of bond proceeds for the proposed bond sale is included in this package as Attachment 2 for your review. The actual bond issue size for the 2007 bonds will depend on interest rates, incidental financing expenses, and may vary from the estimate shown in Attachment 2. 3