Adopt Resolution #21-244 Providing for the Sale of $10,700,000 General Obligation Capital Improvement Plan Refunding Bonds, Series 2021A

Purpose:  To refinance the debt issue related to the Municipal Center that was issued in 2012 to take advantage of reduced interest rates.

Background:  In 2005, the City issued $19.2M of Public Project Lease Revenue Bonds to construct the new Municipal Center building.

To take advantage of lower interest rates and to place the debt issuance under a General Obligation (GO) Capital Improvement Plan (CIP) bond, the city refunded the 2005 issue and sold $16.875M of GO CIP bonds in 2012.  The 2012 bonds have an annual debt service of approximately $1.242M and a net interest cost of 3.07%.  The first available call date (date on which the issuer has the right to redeem a bond at par prior to the stated maturity date) for the 2012 debt issue is December 15, 2021.      

Given current market conditions, if the city were to call the 2012 bonds and sell approximately $10.7M of GO CIP bonds, the annual debt service would be approximately $1.137M or a savings of $105,000 per year, with a net interest cost of 1.26%.  The stated maturity date of December 31, 2031 remains consistent with the 2012 issue. 

The numbers presented for 2021 are strictly estimates based on current market conditions plus 15 basis points.  The numbers, as currently presented, have been used in the 2022 preliminary debt levy calculation related to the municipal center debt.  The actual bond pricing is proposed to be held on September 28, 2021 and brought back to City Council for awarding the sale of the bonds September 28, 2021.  The city is allowed to sell the bonds up to three months prior to the call date of Dec 15, 2021.  

A copy of the proposed finance plan for the bond sale is attached.  

 

The refinancing of debt to capitalize on lower interest rates was included in the city's strategic plan under Strategy:  Identify and implement operational efficiencies, cost savings, and additional funding sources while maintaining and increasing transparency and accountability (strategic plan item attached).  

1.  Motion to Adopt Resolution #21-244 Providing for the sale of $10.7M GO Capital Improvement Plan Refunding Bonds.

2.  Motion to not Adopt Resolution #21-244.

Staff recommends option #1 as this meets the Strategic Plan action of refinaning debt to capitalize on low interest rates and produce a cost savings.

Motion to adopt Resolution #21-244 Providing for the Sale of $10,700,000 General Obligation Capital Improvement Plan Refunding Bonds, Series 2021A.