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•'MBYP411K
<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 />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
<br />20 -Year Structure 30 -Year Structure
<br />Public Sale Pvt. Placement Public Sale Public Sale Public Sale
<br />Amount
<br />$8,000,000
<br />$8,000,000
<br />$8,000,000 $8,000,000
<br />$8,000,000
<br />Rating
<br />AA
<br />BBB
<br />BBB AA
<br />BBB
<br />Term, years
<br />20
<br />20
<br />20 30
<br />30
<br />All -in TIC
<br />4.57%
<br />4.98%
<br />5.54% 5.01%
<br />6.06%
<br />Annual Debt Service
<br />$604,000
<br />$629,459
<br />$670,000 $506,400
<br />$571,000
<br />Total Debt Service
<br />$12,080,000
<br />$12,589,180
<br />$13,400,000 $15,192,000
<br />$17,130,000
<br />Increase in Annual Cost
<br />+$25,000
<br />+$40,000
<br />+$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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