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06/18/2012
<br /> Attachment 2
<br /> finance future projects looking over the 10-year capital improvement program horizon.
<br /> WEMF used estimated interest rates as of the week of March 19-23. Interest rates have
<br /> declined overall since that time, and the spread between high grade and low grade
<br /> credits remains wide.
<br /> A 20-year City-guaranteed bond is about $25,000/year less expensive than the GE loan,
<br /> which is in turn about $40,0001 less than a 20-year BBB publicly offered Port revenue
<br /> bond. The all-in TICs are as follows:
<br /> • 20 year City guaranteed financing$604,000/4.57%,
<br /> • 20 year GE private placement $629,500/4.98%, and
<br /> • 20 year Port revenue bond $670,000/5.54%.
<br /> Thirty year bonds were evaluated to determine both the savings that might accrue with
<br /> a longer maturity and whether the lower payments associated with a slower
<br /> amortization schedule would materially improve future market access. Examining a 30-
<br /> year bond structure also allowed the Port to evaluate how a traditional, 30-year
<br /> municipal bond would compare to the more rapidly amortized GE loan. A 30-year BBB
<br /> Port revenue bond has the highest interest cost ($571,000 /6.06%), over 100 basis
<br /> points and $70,000 higher than a 30-year City guaranteed bond ($506,400/5.01%). The
<br /> following table compares key aspects of the alternatives.
<br /> 20-Year Structure 30-Year Structure
<br /> Public Sale Pvt. Placement Public Sale Public Sale Public Sale
<br /> Amount $8,000,000 $8,000,000 $8,000,000 $8,000,000 $8,000,000
<br /> Rating AA BBB BBB AA BBB
<br /> Term,years 20 20 20 30 30
<br /> All-in TIC 4.57% 4.98% 5.54% 5.01% 6.06%
<br /> Annual Debt Service $604,000 $629,459 $670,000 $506,400 $571,000
<br /> Total Debt Service $12,080,000 $12,589,180 $13,400,000 $15,192,000 $17,130,000
<br /> Increase in Annual Cost +$25,000 +$40,000 +$70,000
<br /> Conclusions & Recommendations
<br /> The Port pays less interest with a 20-year loan than it does with a 30 year loan. This is to
<br /> be recommended as long as higher debt service payments allow the Port access to the
<br /> bond market for future financing requirements. The Port will be able to sell bonds as
<br /> long as it can show debt service coverage in excess of 1.50 times. All of the scenarios
<br /> have coverage in excess of 1.50 times.
<br /> Twenty-year bonds with a City guarantee are approximately $25,000/year less
<br /> expensive than the next best alternative, the GE loan. The difference between a 30-year
<br /> City guarantee and a 30-year Port bond increases to $70,000/year. And finally, while a
<br /> 30-year City- guaranteed bond is $125,000/year less than a 20-year GE loan, the GE loan
<br /> 2 RESO. # 15199
<br /> MUFF # 505
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