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8D Consent 2007 0416
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8D Consent 2007 0416
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Last modified
5/4/2007 12:38:04 PM
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4/12/2007 12:16:32 PM
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CM City Clerk-City Council
CM City Clerk-City Council - Document Type
Staff Report
Document Date (6)
4/16/2007
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_CC Agenda 2007 0416
(Reference)
Path:
\City Clerk\City Council\Agenda Packets\2007\Packet 2007 0416
PFA Reso 2007-002
(Reference)
Path:
\City Clerk\City Council\Resolutions\2007
Reso 2007-053
(Reference)
Path:
\City Clerk\City Council\Resolutions\2007
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<br />Refunding of the 1999 Certificates <br /> <br />Page 2 of5 <br /> <br />In November 1999, the City issued $26,000,000 of 1999 Certificates of Participation (Library <br />and Fire Stations Financing) (the "1999 Certificates"). The 1999 Certificates were sold to <br />finance the Library Community Center Improvements for approximately $13.5 Million and the <br />acquisition and construction of Fire Stations 10 and 11 for approximately $6 Million. The 1999 <br />Certificates were sold at a net interest cost of approximately 5.70% and in today's market can be <br />refinanced at approximately 4.15%. <br /> <br />The savings to the City as a result of the refinancing would be as follows: <br /> <br /> Par Amount NPV <br /> of COPs Annual Estimated Total Savings as <br /> Final Original Currently Debt Annual Nominal NPV %O/S <br />Issue Date Maturity Issued Outstandin2 Service Savin2s Savin2s Savin2s COPS <br />1999 Certificates 11/1/99 711/2029 $26,000,000 $23,600,000 $1,863,000 <br />Refunding COPs 5/15/07 7/112029 $25,345,000 $1,716,000 $150,000 $3,442,074 $2,105,108 8.92% <br /> <br />Therefore, the total nominal dollars saved from the refunding of the 1999 Certificates would be <br />approximately $3,442,074. The present value of these future savings is estimated to be <br />$2,105,108 for a net present value savings as a percentage of the outstanding 1999 Certificates of <br />8.92%. The industry rule of thumb is that anytime the net present value exceeds 3% the City <br />should undertake the refunding. The refunding would be an advance refunding because the first <br />call date for the 1999 Certificates is November 1,2009. A tax exempt obligation is only allowed <br />one advance refunding. Therefore, after this advance refunding, under current law, the City must <br />wait until the refunding certificates (the ''Refunding Certificates") qualify for current refunding <br />before the City can undertake a another refunding of the Certificates. This would be <br />approximately ten years before the Refunding Certificates could be refinanced assuming future <br />interest rates warranted it. The refunding is a current refunding if it is issued no more than 90 <br />days prior to the call date of the refunded obligations. <br /> <br />Financine Structure <br />In 1999, the City pledged the Library Community Center and Fire Stations 9, 12 and 13 as <br />collateral for the 1999 Certificates. At that time all four projects were required as collateral for <br />the fmancing because the transaction required additional collateral. Today, the plan is to remove <br />the three fire stations from the collateral for the Refunding Certificates and to only pledge the <br />Library Community Center as collateral for the Refunding Certificates. Staff and the consultants <br />think this will be possible as a result of the Library Community Center having a current <br />appraised value of approximately $26 Million and the amount of the Refunding Certificates <br />should be approximately $25.345 Million. <br /> <br />The transaction is being structured as a 21- year tax -exempt fixed interest rate certificate issue. <br />The Refunding Certificates will be sold through a competitive bid process with the Refunding <br />Certificates being awarded to the underwriter with the lowest total interest cost. <br /> <br />Finally, the City is also requesting that the bond insurance company provide a surety bond to <br />replace the cash reserve fund. If the City is able to secure a surety bond for the cash reserve <br />
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