AgdaPkt 2003-09-08 - Laserfiche WebLink

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9-A -- 3 Utility Users' Tax Loan The City's utility users' tax revenues are, by policy of the City Council, used to finance capital expenditures anywhere in the City. These revenues currently pay debt service of $2.3 million annually on the City's 1991 Public Financing Authority ( "PFA ") bonds and 1998 (the 1998 bonds refinanced a portic.n of the 1991 bonds) PFA bonds. The 1991 bonds were issued to finance constructior. of the police station and to refinance the bonds issued in 1986, the proceeds of which were used to finance the construction of the library and the main fire station. Both bond issues will be retired in FY 2011/12, thus freeing up $2.3 million of annual payments for other capital expenditures. Loan -As part of the financing plan for the downtown improvements, staff is proposing that the 1991 PFA bonds that are presently paid with utility users' tax revenues be refinanced to realize interest cost savings (the 1998 PFA bonds cannot be refinanced), and that the amortization period on the 1991 PFA bonds be extended to allow for additional debt to be issued (and proceeds realized). Net proceeds of $4.4 million would be loaned to the Agency and applied to projects. Total annual payments on PFA bonds through FY 2011/12 would not exceed present PFA bond debt service payments of $2.3 million. Additional debt service of approximately $700,000 annually would be added subsequent to FY 2011/12 through approximately FY 2017/18 to repay the additional debt borrowed. The "new money" realized through the refinancing of the 1991 PFA bonds would be secured by a loan agreement between the Agency and the City, the payments on which would be subordinate to bonds and fiscal agreements with overlapping tax jurisdictions. This process is quite similar to refinancing one's home to obtain lower interest rate and to capture some equity to remodel the house. Here, we are refinancing to capture a lower interest rate and extending the payment to finance the remodel of the downtown. The Agency is expected to be able to repay this debt on a timely basis based on conservative assessed valuation growth projections of only 2 %. If necessary, the Agency will have the option of limiting its discretionary expenditures. Any un- reimbursed debt service payments would be financed by utility users' tax revenues. Next Steps While interest rates have been at historic lows recently, they have been rising for the past six weeks and are expected to continue their upward climb. Subsequent to the Agency's approval of tonight's resolutions, staff will apply for bond ratings and seek a bond insurance commitment, distribute the offering documents, and then price and close the bond issue. Ordinarily, bond documents are presented to the Agency as one of the very last steps in the bond issuance process in the event that rating agencies or bond insurers require substantive changes to the bond documents. Staff is asking the Agency to approve documents out of this normal sequence in order to accelerate the bond issuance calendar and thereby allow the Agency to lock in interest costs before they rise further. Although it is not anticipated, any substantive changes to the bond documents required by bond insurers or the rating agencies may require resubmission of documents to the Agency for its approval. Staff currently expects to obtain ratings and insurance commitments by September 22, price bonds on October 2, and close on October 22. 3