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1 <br />9-a-15 <br />revenue to allow the Agency to provide approximately $31 million for the Agency's <br />projects. The bond issue will be structured to allow the release of the money held in a <br />debt service reserve fund for the Agency's outstanding 1997 tax allocation bonds, which <br />will add an additional $1.5 million to available net proceeds. The bond structure uses all <br />available tax increment and anticipates very conservative, sustained growth of 2% in the <br />Agency's assessed valuation base (in addition to projects now under way). In <br />approximately 15 years the City Couticil and Agency Board will need to review the funds <br />available for debt service and may need to make changes to the Agency's operating <br />budgets to provide funds needed pay the principal and interest on these bonds or <br />alternatively, identify a source of additional funds. <br />The proposed loan of $4.460 million to the Agency via the refunding of the 1991 PFA <br />bonds takes advantage of the current low interest rates available in the market. The City <br />is currently paying approximately $1.2 million annually on its $6.725 million outstanding <br />1991 Public Financing Authority (PFA) Lease Revenue Bonds. The bonds bear interest <br />at 6.5 %. The debt service on these bonds, which runs through FY 2011/12, is paid with <br />utility users tax revenue. The City can reduce its interest cost to approximately 3.8% by <br />refinancing the bonds and realize substantial debt service savings. This refinancing is <br />very similar to that undertaken by a homeowner who desires to reduce his/her monthly <br />mortgage payment and obtain funds to improve the home. By extending the debt <br />maturity out to 2019 and adding a new money component to the refunding, the City can <br />loan sufficient funds to the Agency to allow the Agency to complete its projects and <br />nevertheless realize total annual debt service savings through 2012. <br />The foregoing amounts may change as the financing plan is further refined and as <br />interest rates change. The financing options will be brought back to the Agency for <br />more in -depth review and analysis as part of the review and actions required for the <br />issuance of the bonds. <br />1 -3 <br />