At the quarterly meeting on April 14, 2021, the Board of Directors of the Canadian River Municipal Water Authority (the "Authority"), considered the refunding of the Series 2012 Bonds (as defined below) previously issued for the Conjunctive Use Groundwater Supply Project, in order to provide debt service savings for the Authority and its Member Cities. To prepare for that refunding, the Board of the Authority requested that the staff of the Authority, the financial advisor, and bond counsel continue to monitor market conditions, prepare an update, obtain the required Member City consent to the transaction and place an action item on the agenda for the Authority's regular quarterly meeting scheduled for July 14, 2021, to authorize the refunding. As a part of those preparations I am contacting the City of Lubbock ("City") on behalf of the Authority to request your consideration and consent to the Authority's proposed refunding. The Conjunctive Use Groundwater Supply Project Contract between the Authority and the Member Cities, requires that prior to refunding any outstanding bonds, the Authority must obtain each Member City’s consent and waiver, as to certain notice requirements in the contract. Attached is a proposed draft resolution that sets out the City's consent and waiver, with regard to the bond refunding, for consideration by the City Council. As further background for the requested action, the following information is included. The revenues paid by the City under the Conjunctive Use Groundwater Supply Project Contract between the City and the Authority secure the debt service on certain obligations of the Authority, including the outstanding Canadian River Municipal Water Authority Subordinate Lien Contract Revenue Refunding Bonds, Series 2012 (Conjunctive Use Groundwater Supply Project) (the "Series 2012 Bonds"). At the Authority's regular meeting on April 14, 2021, George Williford with Hilltop Securities Inc., the Authority's financial advisor, identified potentially significant savings if some or all of these outstanding bonds are refunded, as a tax-exempt refunding issue in accordance with the February 15, 2022 optional call date on the Series 2012 Bonds. Based on that presentation, the Board of Directors of the Authority authorized the staff, the financial advisor, and our firm to reach out to each of the Member Cities to obtain the requisite consents, monitor market conditions and, if favorable market conditions persist, to present the item on the July 14, 2021 regular quarterly meeting agenda for Board action. The contract with the Member Cities contains notice requirements that affect the Authority's ability to timely refund the Series 2012 Bonds in question, unless each of the Member Cities waives the notice requirements and consents to the issuance of the refunding bonds. The contract makes the notice requirements apply to all bonds, not just new money bonds. As it has in prior refunding transactions, as a prerequisite to refunding the bonds, the Authority is requesting that the Member Cities waive the notice requirements and express their consent to the refunding through the adoption of the enclosed resolution. To appropriately time the refunding of the outstanding Series 2012 Bonds, the Authority will delegate the ability to trigger the refunding of the obligations to the General Manager, if he is able to achieve a certain level of savings through the refunding of the Series 2012 Bonds, depending on market conditions. The resolution which is presented for the City's consideration tracks those conditions. Accordingly, the City's resolution is effective only if the Authority can achieve, at a minimum, the present value savings of at least 5.00% of the refunded principal amount. It is anticipated that the Board of the Authority may authorize proceeding with the transaction at the July meeting, either for sale in late 2021, or for an earlier sale, in the event that market conditions warrant. The Authority is soliciting executed consent resolutions from all of the Member Cities and requesting that the Member Cities take action on the resolutions prior to July 9, 2021. Having all of these City consent forms in hand at the July quarterly meeting, will enable the Board of the Authority to consider action proceeding with authorizing the refunding. If, as anticipated, the Board delegates the sale of the bonds to the General Manager, then the General Manager will have up to 6 months to trigger the actual sale. Upon consultation with the financial advisor as to market conditions and timing, the General Manager will meet with the Finance Committee of the Authority and determine whether and when to exercise the delegated authority to refund some, all or none of the Series 2012 Bonds. It is contemplated that the sale of the refunding bonds would be effected in calendar year 2021, and the consent resolution limits the City's waiver to that year. As we have done in prior refunding transactions of Authority bonds, the City will be provided with the results of the sale and how it reduces your payments. |