AgdaPkt 2003-09-08 - Laserfiche WebLink

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obligation of the Agency only, with no recourse by bondholders against the City's general fund in the event tax increment declines and is insufficient to pay debt service on the bonds. The Agency issued tax allocation bonds in 1991 to finance various capital projects. These bonds were refinanced in 1997 to save the Agency money as a resw' of declines in interest rates. In determining the size of the bond issue, the City's financial advisor has matched principal and interest payments of the new bonds to projected available tax increment revenue to allow the Agency to provide approximately $31 million for the Agency's projects. The bond issue will be structured to allow the release of the money held in a debt service reserve fund for the Agency's outstanding 1997 tax allocation bonds, which will add an additional $1.5 million to available net proceeds. The bond structure uses all available tax increment and anticipates very conservative, sustained growth of 2% in the Agency's assessed valuation base (in addition to projects now under way). In approximately 15 years the City Council and Agency Board will need to review the funds available for debt service and may need to make changes to the Agency's operating budgets to provide funds needed pay the principal and interest on these bonds or alternatively, identify a source of additional funds. The proposed loan of $4.460 million to the Agency via the refunding of the 1991 PFA bonds takes advantage of the current low interest rates available in the market. The City is currently paying approximately $1.2 million annually on its $6.725 million outstanding 1991 Public Financing Authority (PFA) Lease Revenue Bonds. The bonds bear interest at 6.5 %. The debt service on these bonds, which runs through FY 2011/12, is paid with utility users tax revenue. The City can reduce its interest cost to approximately 3.8% by refinancing the bonds and realize substantial debt service savings. This refinancing is very similar to that undertaken by a homeowner who desires to reduce his/her monthly mortgage payment and obtain funds to improve the home. By extending the debt maturity out to 2019 and adding a new money component to the refunding, the City can loan sufficient funds to the Agency to allow the Agency to complete its projects and nevertheless realize total annual debt service savings through 2012. The foregoing amounts may change as the financing plan is further refined and as interest rates change. The financing options will be brought back to the Agency for more in -depth review and analysis as part of the review and actions required for the issuance of the bonds. 1 -3