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City of San Leandro <br />Meeting Date: October 17, 2016 <br />Staff Report <br />Agenda Section:File Number:16-511 ACTION ITEMS <br />Agenda Number:10.A. <br />TO:City Council <br />FROM:Chris Zapata <br />City Manager <br />BY:David Baum <br />Finance Director <br />FINANCE REVIEW:David Baum <br />Finance Director <br />TITLE:Staff Report for Resolutions Approving San Leandro Public Financing <br />Authority 2016 Refunding Lease Revenue Bonds <br />SUMMARY AND RECOMMENDATION <br />Staff recommends that the City Council and the San Leandro Public Financing Authority <br />approve the referenced resolutions and documents required to issue the San Leandro Public <br />Financing Authority 2016 Refunding Lease Revenue Bonds (Refunding Bonds). The proposed <br />Refunding Bonds will be issued to refund $15,825,000 of currently outstanding City of San <br />Leandro 2007 Certificates of Participation (2007 COPs). The par, or face value, of the <br />Refunding Bonds will not exceed $15.8 million and they will mature in 2029, which is the <br />existing final maturity of the 2007 COPs. Annual debt service on the Refunding Bonds will not <br />exceed the annual debt service currently payable on the outstanding 2007 COPs. <br />DISCUSSION <br />In May 2007 the City issued $23,425,000 of the 2007 COPs to refund 1999 COPs (Library <br />and Fire Stations Financing). After the scheduled principal payment on 11/1/16, there will be <br />$15,825,000 of the 2007 COPs outstanding. The City has an opportunity to refinance the <br />2007 COPs and realize substantial savings in annual debt service payments. Staff <br />recommends that the City Council use the savings from the 2007 COPs to augment the City’s <br />General Fund reserve. The savings can also be leveraged in the future to issue bonds for <br />new-money projects. Please refer to the table on Attachment 1 that shows how the current <br />municipal bond market allows for projected savings. <br />Based on municipal bond market rates effective 9/13/16, staff estimates that the City will <br />realize almost $2.5 million in total nominal savings over the life of the 2007 COPs. The <br />present value (PV) of these future savings, discounting the nominal savings by the estimated <br />arbitrage yield of 1.8%, is just over $2.2 million. This results in net present value (NPV) <br />savings of about 14% when taken as a percentage of the par value of the 2007 COPs to be <br />refunded. The general rule of thumb is that the minimum NPV savings should be at least 3% <br />Page 1 City of San Leandro Printed on 10/11/2016