AgdaPkt 2013-05-20 Closed Cancelled and Special

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7.B. - Page 1 RE PO RT To the Honorable Mayor and City Council/Public Financing Authority From the Cit Mana er May 20, 2013 SUBJECT Approval of financing documents in connection with the execution of a City of Redwood City Refunding Lease (2013 Lease) RECOMMENDATION Approve, by resolution, authorization for the execution of a refunding lease in an amount up to $3.36 million between the City of Redwood City Public Financing Authority (PFA) as lessor and the City of Redwood City as lessee, and approve other related actions necessary to consummate the refunding of the PFA's 2003 Lease Revenue Bonds (2003 Bonds). BACKGROUND In 2003 the PFA sold $11,475,000 lease revenue bonds, of which $5,130,000 remains outstanding. The 2003 Bonds were sold to refinance bonds previously sold in 1998 to finance the acquisition and construction of certain general city infrastructure improvements. The 2003 Bonds mature on July 15, 2018 and may be redeemed with no penalty on or after July 15, 2013. Staff has determined that these bonds may be refinanced (refunded) at a lower interest rate which could produce a net present value (NPV) debt service savings of approximately $257,000, or 7.66% of the par amount of refunding obligations issued. Net present value is a measure of savings that takes into consideration the time value of money and allows one to evaluate different debt service cash flows over time, keeping the time value of money constant between the two cash flows, and condensing money paid out over time into a single "present" dollar value. The NPV savings of 7.66% are well above the Government Finance Officers Association's "best practices" recommendation of minimum NPV savings of 3%. The following table summarizes savings: Total NPV Average Savin s Savinqs� Annual Savinqs Debt Service Savings $2,288,000 $257,000 $282,000 A schedule comparing the existing debt service payments for the proposed bond issue can be found in Attachment Five. The City typically sells refunding bonds at public sale to refund its bonds. However, the short period of time to maturity on these bonds (5 years), the high issuance costs 1 NPV savings are net of cash contributions by the City that reduce gross savings. See Attachment Five for detail.