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<br />million. Phase 2 of the project, totaling an estimated $12.8 million, will extend the <br />distribution system west of US 101 if demand warrants. The project is flexibly designed <br />to deliver up to 3,238 acre-feet of recycled water within the Redwood City water service <br />area should demand so warrant. Additional capacity in the pumping and distribution <br />system provides for export of recycled water to adjacent communities if regional supply <br />and local demand create interest. The costs of the various components of the project <br />and the sequencing of the bond sales are shown in Attachment I. <br /> <br />The Financing Structure <br />The City will use its non-profit financing authority, the Redwood City Public Financir1g <br />Authority (the UPFA") to implement the financing. The PFA will sell the water system <br />improvements to the City pursuant to an installment purchase contract. The PF A will sell <br />water revenue bonds to raise the funds to advance the City the purchase price. <br />Repayment of the purchase price will be in installments over time and will be equal in <br />amount to debt service on the water revenue bonds. The City's obligation to make <br />these installment payments will be a special fund obligation of the water fund, with no <br />recourse to the general fund. The PF A will pledge the installment payments it receives <br />from the City as security to repay the water revenue bonds. No voter approval is <br />required for the sale of bonds by the PFA. <br /> <br />Credit ratings have been applied for from Standard and Poor's Corporation, Moody's <br />Investors Service, and Fitch Ratings. As of the date that this report was prepared, we <br />have not received the credit ratings from these firms. Once the ratings are received, <br />staff will apply for municipal bond insurance which will increase the ratings on the bonds <br />and lower our annual interest costs. The bonds will be offered to underwriters in an <br />auction format, with the purchase of bond insurance at the option of the bidding <br />underwriters. The underwriter that submits a bid with the lowest true interest cost <br />("TIC") will be awarded the bonds.1 The resolution approving the sale of the bonds <br />authorizes the City Manager or the City Finance Director to award the bonds to the low <br />bidder provided that the TIC does not exceed six percent (60/0), the par amount of bonds <br />does not exceed $36 million, and the final maturity of the bonds does not exceed 30 <br />years. <br /> <br />A sources and uses of funds table showing the projected application of bond proceeds <br />for each of the five bond sales that are planned for this project is included in this <br />package as Attachment II for your review. Actual bond issue sizes will depend on future <br />interest rates, future project funding requirements, future revenues generated by new <br />connections, and future incidental financing expenses and will vary from the estimates <br />shown in Attachment II. <br /> <br />Competitive Sale , <br />Unlike prior bond issues sold by the City, these bonds will be offered for sale in an <br />auction format, referred to as a competitive sale. Competitive sales are generally <br />thought to result in the lower interest costs for high credit quality bond issues with <br /> <br />1 The TIC is the discount rate which, when applied to all future payments by the City of principal and interest on the <br />bonds, is equal to the purchase price paid by the underwriter for the bonds. <br /> <br />3 <br /> <br />._. , <br />