AgdaPkt 2013-05-20 Closed Cancelled and Special

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7.B. - Page 2 associated with a public offering, and the small size of the transaction make the refunding a good candidate for a negotiated private placement with a bank. Private placements typically have much lower issuance costs, which can, in a circumstance such as this, give them an edge over a public sale. Further, they do not require the City to maintain a debt service reserve fund (DSRF), which will eliminate the investment costs the City currently experiences on the 2003 Lease Revenue Bonds DSRF. The investment costs are the difference between the cost of borrowing the DSRF and the rate at which it is invested, multiplied by the amount in the DSRF. This is a variable cost that has not been factored into the above savings figures. Based on current investment rates, it is currently approximately $36,000 annually. The City sent requests for private placement proposals to eight banks and received three expressions of interest. BBVA Compass Bank (Bank) submitted the most attractive proposal, which the City's financial advisor evaluated against the likely savings that would accrue (if bonds were sold at the time of the analysis) with a public sale of refunding bonds. Due to the lower issuance costs associated with a private placement, the NPV savings associated with the BBVA Compass Bank proposal exceed the likely savings the City might realize with a public sale. Based on current rates, the private placement with BBVA Compass Bank continues to have better economics than those projected with a public sale of refunding bonds. The resolutions before the Council tonight will approve, in substantially final form, the following documents: 1. Site Lease & Facility Lease (City and PFA); 2. Lease Agreement (City and PFA); 3. Assignment Agreement (PFA); 4. Termination Agreement (City and PFA); 5. Letter Agreement for Purchase (City and PFA); 6. Memorandum of Lease Agreement (City and PFA); 7. Escrow Instructions (PFA); and will authorize such other actions by City and PFA officials that are necessary to the refunding of the PFA's 2003 Lease Revenue Bonds (2003 Bonds). ANALYSIS Financing Structure The refunding will be accomplished pursuant to a refunding lease of the City's fire station located at 755 Marshall Street, which presently serves as one of the leased assets for the 2003 Bonds. The PFA will serve as the lessor and the City will be the lessee. The other 2003 Bonds leased assets (the Red Morton Community Center and adjacent park facilities and the City's Main Library and adjacent parking lot) will be released from the lien of the 2003 Bonds estate. The Bank will buy a 100% leasehold interest in the refunding lease in amount sufficient to pay off all of the outstanding 2003 Lease Revenue Bonds, and the new lease will be substituted for the prior lease. The City will use the amount in the 2003 Bonds debt service reserve fund, the amount