Consent 1.M.
Regular City Council Meeting
- Meeting Date:
- 07/13/2020
- TITLE
- Bond Resolution for Airport Revenue Bonds
- PRESENTED BY:
- Andy Zoeller
- Department:
- Finance
RECOMMENDATION
Staff recommends the City Council approve the bond resolution for Airport revenue bonds to finance the terminal expansion and refund Series 2010B bonds.
BACKGROUND (Consistency with Adopted Plans and Policies, if applicable)
The Council approved a parameters resolution authorizing the issuance of revenue bonds for the terminal construction and the refunding of the 2010B bonds on May 11, 2020. First Interstate Bank has signed a commitment agreement with a closing to take place on July 20,2020. The Airport will draw funds as needed for the construction project over 3.5 years at an interest rate of 2.65%. At the end of that time, the loan becomes a 20 year fixed loan with a reset period after the 10th year. The first 10 year fixed rate will be 4.17% for a combined true interest rate of 3.28%. The second 10 year period would have a rate based on the 10 year Federal Home Loan Bank tax exempt rate plus 250 basis points. The City may refinance with another institution or reset the interest rate with First Interstate Bank for the remainder of the loan ending in the year 2044.
The Series 2010B bonds were used to finance the rental car wash and maintenance facility. The proceeds will be use to refinance the bonds at a lower interest of 3.60%. The true interest cost on the construction portion (2020A) is 3.28%, which is below the Council authorized parameter of 5.0%. The true interest cost for the refinancing portion (2020B) is 3.60%, which is above the authorized parameter of 3.25% set by City Council. With an interest rate of 3.6% on the refinancing portion, the Airport will realize an interest savings of approximately $190K. Because of the favorable interest rates, staff is recommending approval of both bond sales, Series 2020A and Series 2020B.
Once Council approves this resolution, the closing can take place and the Airport can draw funds as construction payments are submitted.
The Series 2010B bonds were used to finance the rental car wash and maintenance facility. The proceeds will be use to refinance the bonds at a lower interest of 3.60%. The true interest cost on the construction portion (2020A) is 3.28%, which is below the Council authorized parameter of 5.0%. The true interest cost for the refinancing portion (2020B) is 3.60%, which is above the authorized parameter of 3.25% set by City Council. With an interest rate of 3.6% on the refinancing portion, the Airport will realize an interest savings of approximately $190K. Because of the favorable interest rates, staff is recommending approval of both bond sales, Series 2020A and Series 2020B.
Once Council approves this resolution, the closing can take place and the Airport can draw funds as construction payments are submitted.
ALTERNATIVES
The City Council may:
Approve the bond resolution consistent with staff recommendation, or
Disapprove the Series 2020B refinancing bonds, as the interest rate is greater than the authorized parameters resolution. Disapproval will mean the Airport will continue to pay the higher interest rate.
Approve the bond resolution consistent with staff recommendation, or
Disapprove the Series 2020B refinancing bonds, as the interest rate is greater than the authorized parameters resolution. Disapproval will mean the Airport will continue to pay the higher interest rate.
FISCAL EFFECTS
The bonds will be paid from Airport revenues and Passenger Facility Charges (PFC). The Airport has the option to pay down the loan, after the construction period, with cash on hand without incurring a penalty for pre-payment.