Ordinance Single Reading - Lubbock Power & Light: Consider an ordinance providing for the issuance of City of Lubbock, Texas, Electric Light & Power System Revenue Bonds, Series 2021; providing for the award of the sale thereof in accordance with specified parameters; approving the official statement; approving execution of a purchase contract; and enacting other provisions relating thereto.
Item Summary
The Electric Light and Power System Revenue Bonds, Series 2021 ("Bonds"), are being issued for the following purposes: (i) to fund acquisition, purchasing, construction, improvement, renovation, enlarging and/or equipping of property, buildings, structures, facilities, and/or related infrastructure for Lubbock Power & Light (LP&L), and (ii) to refund interim obligations issued for such purposes.
On April 23, 2019, the City Council approved an ordinance authorizing the issuance of short-term (interim) obligations to fund LP&L's capital program. On that date, the City Council established an Electric Light and Power System Revenue Revolving Note Program ("Note Program") and authorized the issuance of program obligations, from time to time, in an aggregate principal amount not to exceed $300,000,000.
LP&L has utilized the Note Program to finance the significant investment in new power lines and substation construction related to a 69kV inner transmission loop, a 115kV outer transmission loop, and a 345kV interconnection, to the Electric Reliability Council of Texas (ERCOT), along with other ongoing System improvements.
Now that construction is complete for the majority of these projects, LP&L wishes to refinance the interim obligations with long-term, fixed rate bonds. The majority of the anticipated issuance is related to transmissions costs that will be repaid from a new revenue stream, which is the recovery of LP&L transmission expenses through a transmission cost of service (TCOS) rate. Additionally, non-transmission related LP&L improvements will also be financed, and will be repaid using existing base rates.
On June 22, 2021, the City Council approved the first step in the issuance process, by authorizing publication of a Notice of Intent to Issue the Bonds.
The ordinance authorizing the issuance of the Bonds is a "parameters ordinance" delegating authority to the Mayor, City Manager, or Chief Financial Officer (each an "Authorized Officer"), to determine the timing, terms, and interest rates of the issuance. The ordinance expires on the first anniversary of its adoption, and designates parameters to which the Authorized Officers must conform while executing the sale of the Bonds. The designated authority allows the City to attain the most attractive rates and terms by offering the Bonds when market conditions are favorable.
The following conditions must be satisfied in order for the Authorized Officers to act on behalf of the City in selling and delivering the Bonds to the Underwriters:
The price to be paid for the Bonds shall not be less than 90% of the aggregate principal amount of the Bonds.
The Bonds shall not bear interest at a rate greater than the maximum rate allowed by Chapter 1204, Texas Government Code, as amended.
The aggregate principal amount of the Bonds shall produce proceeds in an amount sufficient, as determined by the Authorized Officer, to fund the purpose described in Section 3.01., and such aggregate principal amount shall not exceed $320,000,000.
The maximum maturity for the Bonds shall not exceed 31 years.
The Bonds to be issued, prior to delivery, must have been rated by a nationally recognized agency for municipal securities in one of the 4 highest rating categories for long term obligations.
The City will sell the Bonds on a negotiated basis. The City and RBC Capital Markets, the City's financial advisor, will negotiate a purchase price for the Bonds with the City's underwriters, BofA Securities, CitiGroup, Goldman Sachs, and Jefferies.
Pursuant to Section 1201.028(3), Texas Government Code, the authorization of a public security is effective immediately, with only one reading of the ordinance. The ordinance excludes certain information that is unknown as of the printing of the backup material. Examples include annual principal and interest amounts and maturity dates. Once negotiations have concluded, the final results will be provided to the City Council. The projects that will be funded with the Bonds have been approved by the City Council. The listing of those projects is attached as backup to this agenda item. Additionally, a draft preliminary official statement is available in the Office of the City Secretary.
Fiscal Impact
Annual payments will be made from the revenues of LP&L. The bond proceeds will be used to fund the capital projects, fund a debt service reserve, and pay cost of issuance related to the financing.
