AgdaPkt 2012-12-03 - Laserfiche WebLink

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8.B. - Page 2 service reserve fund and, if necessary, to initiate foreclosure proceedings. No City funds are pledged to repay the debt service on these bonds. The annual debt service and administrative expenses currently average about $900,000 and are allocated to property owners based on their amount of improved property within the CFD. Since the inception of the CFD, there have been no delinquencies in the payment of special taxes. On September 25, 2012 this refunding was discussed with the Council Finance Committee (Council members Ira, Seybert, and Bain) who authorized staff to move forward with the refunding. On November 5, 2012 the Council approved its selection of the financing team. ANALYSIS Refunding bonds are typically sold to take advantage of lower interest rates and reduce debt service payments. The Government Finance Officers Association's "Best Practice" recommendation is that a refunding generate cash flow savings with a net present value (NPV) (i.e., have value in current dollars) equal to at least 3% of the amount of refunding bonds issued in order to justify the expenditure of resources necessary to implement the refunding. NPV savings estimates based on current interest rates are approximately $1.5 million, or 14% of the proposed par amount of refunding bonds. While it is more likely than not that interest rates will not rise dramatically before the proposed refunding bonds can be sold in January, there can be no assurance that rates will remain low until the refunding bonds are sold and that savings of this magnitude will be achieved. TONIGHT'S ACTIONS Principal documents relating to the proposed refunding bonds are substantially complete. The Council is being asked to approve those documents in substantially final form in order to allow staff to implement the sale of refunding bonds. With the exception of the preliminary official statement (Attachment 3), and the special tax formula, which is an appendix to the preliminary official statement, all other documents are on file with the City Clerk. Summary descriptions of all documents are included as an attachment to this staff report (Attachment 4). The resolution staff recommends that the Council approve will authorize the underwriter to distribute the preliminary official statement. The resolution also provides that the refunding bonds may be sold if the following conditions are met: the principal amount of the total bonds issued in connection with the refunding does not exceed $11,550,000, the underwriter's discount does not exceed 1.0 % of the par amount of refunding bonds sold, and the NPV savings are equal to or greater than 4% of the amount of refunding bonds issued. The requested bond authorization is larger than the estimated preliminary bond size to allow for sale of bonds at an original issue discount (OID), which marketing structure requires the issuance of more debt to make up for the lower proceeds received from OID bonds. An OID marketing structure would only be used if it