8D Consent 2007 0416 - Laserfiche WebLink

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Refunding of the 1999 Certificates Page 2 of5 In November 1999, the City issued $26,000,000 of 1999 Certificates of Participation (Library and Fire Stations Financing) (the "1999 Certificates"). The 1999 Certificates were sold to finance the Library Community Center Improvements for approximately $13.5 Million and the acquisition and construction of Fire Stations 10 and 11 for approximately $6 Million. The 1999 Certificates were sold at a net interest cost of approximately 5.70% and in today's market can be refinanced at approximately 4.15%. The savings to the City as a result of the refinancing would be as follows: Par Amount NPV of COPs Annual Estimated Total Savings as Final Original Currently Debt Annual Nominal NPV %O/S Issue Date Maturity Issued Outstandin2 Service Savin2s Savin2s Savin2s COPS 1999 Certificates 11/1/99 711/2029 $26,000,000 $23,600,000 $1,863,000 Refunding COPs 5/15/07 7/112029 $25,345,000 $1,716,000 $150,000 $3,442,074 $2,105,108 8.92% Therefore, the total nominal dollars saved from the refunding of the 1999 Certificates would be approximately $3,442,074. The present value of these future savings is estimated to be $2,105,108 for a net present value savings as a percentage of the outstanding 1999 Certificates of 8.92%. The industry rule of thumb is that anytime the net present value exceeds 3% the City should undertake the refunding. The refunding would be an advance refunding because the first call date for the 1999 Certificates is November 1,2009. A tax exempt obligation is only allowed one advance refunding. Therefore, after this advance refunding, under current law, the City must wait until the refunding certificates (the ''Refunding Certificates") qualify for current refunding before the City can undertake a another refunding of the Certificates. This would be approximately ten years before the Refunding Certificates could be refinanced assuming future interest rates warranted it. The refunding is a current refunding if it is issued no more than 90 days prior to the call date of the refunded obligations. Financine Structure In 1999, the City pledged the Library Community Center and Fire Stations 9, 12 and 13 as collateral for the 1999 Certificates. At that time all four projects were required as collateral for the fmancing because the transaction required additional collateral. Today, the plan is to remove the three fire stations from the collateral for the Refunding Certificates and to only pledge the Library Community Center as collateral for the Refunding Certificates. Staff and the consultants think this will be possible as a result of the Library Community Center having a current appraised value of approximately $26 Million and the amount of the Refunding Certificates should be approximately $25.345 Million. The transaction is being structured as a 21- year tax -exempt fixed interest rate certificate issue. The Refunding Certificates will be sold through a competitive bid process with the Refunding Certificates being awarded to the underwriter with the lowest total interest cost. Finally, the City is also requesting that the bond insurance company provide a surety bond to replace the cash reserve fund. If the City is able to secure a surety bond for the cash reserve