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7.A. - Page 3 <br /> that while rates have evidenced movement, they have not been particularly volatile in <br /> 2013. The 2005 bonds are expected to retain savings through the sale date. <br /> ��nd �u��r ��-��r�� R���nu� �an� �r���� <br /> .,.:�� <br /> �.�o�s <br /> �.��� <br /> �.�o�s <br /> a.��� <br /> �.�o�s <br /> �.i�� <br /> d.144� <br /> ,T T rri m rw rt, m r�Y rh ,r r+� rA T � m �i rri <br /> ,.y �--i ,--i ,--i � ,.y ,--i � ,--� ,.y � ,--� �--� 'y ,--i � � <br /> � � � � � � � � � � � � � � � <br /> � � ,--� � ,--i �i <br /> � .--i ,--i r�v r+� � ,-�-i rv rv � � rv r,� � ,--i � rv <br /> '� .-�-i � � N � r-�,� r�i� r�w m r�+i r�i'y i i � � � � <br /> L <br /> 6�nd 3uy����-3o�7d Rewer�ue e�nd I�yd ex <br /> The 2013 Bonds have a new provision that allows the City to terminate the requirement <br /> that it maintain a debt service reserve fund in the amount of maximum annual debt <br /> service in the event that the City refunds the 2006 Bonds and the 2007 Bonds with <br /> bonds that do not require a debt service reserve fund. Water and sewer utility <br /> enterprises with strong cash reserves and high debt service coverage ratios are <br /> transitioning, without rating reductions or investor interest rate penalties, away from fully <br /> funded debt service reserve funds that are borrowed as part of the bond financing. <br /> When investment rates were much higher, the requirement imposed by rating agencies <br /> and lenders that an issuer borrow one year of debt service and maintain it in a special <br /> reserve for the duration of the bond issue had only a small cost associated with it. Now <br /> that investment rates are so low, the cost is quite significant, on the order of 3% <br /> annually of the amount deposited to the reserve fund. The City's water enterprise has <br /> $4.5 million presently invested in debt service reserve funds. The actual annual cost to <br /> maintain these reserves depends on the interest cost associated with each bond issue <br /> and the rate at which these amounts can be invested, and will vary over time as <br /> investment rate change and investments mature and funds are reinvested. At present, <br /> the cost is approximately $180,000 annually. <br /> The water enterprise's current bond ratings are AA2 (Moody's) and AA- (Standard and <br /> Poor's), ratings that are considered quite high. However, the water enterprise's cash <br /> balances are not as robust as those of other AA credits, and the potential future <br /> termination of the debt service reserve fund on the 2013 Bonds could result in a rating <br /> downgrade due to this credit feature. In such case, the resolution approving the bonds <br /> allows staff, with the advice of the City's financial advisor, to delete provisions in the <br />