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6.2.C. - Page 1 RE PO RT To the Honorable Mayor and City Council From the Cit Mana er November 5, 2012 SUBJECT Selection of Financing Team to Refund the Outstanding Redwood Shores Community Facilities District No. 99-1, Series 2001A and 2003B Bonds (Bonds) RECOMMENDATION Approve, by Resolution, appointment of the consultants in connection with the refunding of the Bonds and Authorize City Manager to execute agreements with appointed consultants. BACKGROUND In 2001 and 2003 the City issued the Redwood Shores Community Facilities District bonds ($12.5 million) to finance transportation improvements in the Redwood Shores area. The bonds were issued under the authority of the Mello-Roos Community Facilities Act of 1982 with the property owners in the district being solely responsible for the payment of principal and interest. A special tax (currently $ 0.209 /square foot of building space) is levied on property owners in the district to make principal and interest payments on these bonds. There are no residential properties in the district; only commercial properties. Currently about $10 million of these bonds remain outstanding. A recent analysis by Bill Euphrat, the City's Financial Advisor, estimates that refunding these bonds could produce net present value savings of $1.5 million or 14.7% of the refunding bonds that would need to be sold. The Government Finance Officers Association recommended threshold for conducting a refunding is net present value savings of at least 3% of the refunding bonds. Clearly, refunding these bonds makes financial sense. However, there can be no assurance that current rates will hold until the refunding bonds are sold and that savings of this magnitude will be achieved. Issuing refunding bonds is analogous to refinancing a mortgage with a high interest rate and replacing it with a mortgage with a lower interest rate in order to reduce monthly mortgage payments. Inasmuch as the Bonds were issued in 2001 and 2003, when interest rates were higher than they currently are, it is now possible to reduce the property owner's special taxes through a refunding. At current interest rates a refunding will reduce the property owners special taxes by 12.5% or $.025 per square foot annually. Although the City will not receive any financial benefits associated with a refunding (other than a fee to reimburse ourselves for the staff time involved in managing the