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File Number: 16-508 <br />1.B.Announcements <br />None. <br />2.DISCUSSION ITEMS <br />2.A.2016 Refunding lease Revenue Bonds <br />The City of San Leandro issued Certificates of Participation (COPs) in 2007 to refund prior <br />debt, the 1999 COPs. Currently there is $16.7 million outstanding on that issuance with <br />interest rates ranging from 4% 2016 to 4.375% in 2029. The proposed refinancing is <br />expected to bring the average interest rate down to approximately 2%, based on current <br />market conditions. <br />Holly Vocal of Stifel, Bond Underwriter, stated that the following financing strategy is now <br />contemplated: <br />·The 2007 COPs will be refunded as Lease Revenue Bonds. Lease Revenue Bonds in <br />the municipal market are perceived as a better credit than COPs. <br />·No Debt Service Reserve fund is necessary and that will increase cash flow savings for <br />the City. <br />·Standard and Poor’s will be the only rating the City will pursue and this will provide a <br />cost savings of $25,000 and there is no impact when bringing the bonds to market. <br />·Allowing for issuance of additional debt. In 2007 the Library had an asset value of $22 <br />million. Now the refinancing par value is $14 million and therefore there is at least $7 <br />million of value in the Library value that will provide the City with more flexibility for <br />future new money financing, which could be secured by the Library asset, if needed. <br />·Bonds are structured to create level annual savings to same final maturity in 2029 <br />·Current schedule contemplates a bond sale in November and closing in December <br />2016. <br />Based on current rates and proposed structure, total savings are about $2.5 million and <br />average annual savings of $195,000. Net present value savings is $2.2 million or 14.2% of <br />the refunded par amount. <br />Benefits of refunding are to achieve savings and modify legal structure to give the City <br />additional flexibility in the future. <br />Assistant Finance Director Fuentes indicated that staff is recommending locking in the savings <br />while interest rates are low and cautioned that a bond sale should occur before December. <br />City Manager Zapata advises to place the refunding on the City Council Agenda for October <br />17 approval. <br />Holly Vocal will provide additional information and analysis for the Council to consider in <br />October. <br />Committee Recommendation for City Council Consideration <br />Page 2 City of San Leandro Printed on 10/11/2016