Item No: 5M
Meeting Date: November
26, 2012
From: William
Spinelli, CPA
Subject: Memorandum
for 2004 Bond Refunding Options
Staff Recommendation:
Option 1: Do nothing- Effect: Lose savings from
SunTrust refunding of approximately $3.1 million as approved by the City
Commission
Option 2: Proceed with SunTrust refunding; use
City cash for termination cost of approximately $1.3 million.
Option 3: Proceed with SunTrust refunding,
finance $1.3 million termination cost with the SunTrust bank note.
Option 4: Do not go forward with the SunTrust
Bank Note, and move forward with three separate bond refinancing in the spring
of 2013. As per Wells Fargo, the bank
will amend the DSDA agreement, so the City will not have to pay the$1.3 million
termination fees. The City will incur
higher bond issuance costs for these transactions.
Analysis:
Following
City Commission approval on October 22nd to proceed with the SunTrust RFP
response and 20 Year Tax Exempt Fixed Rate of 3.18% for the partial refundings
on the City’s respective 2004 Utility and Electric Utility Revenue bonds, the
City proceeded to work with Bond Counsel and Larson Consulting Services (LCS) towards
a closing set for November 7th.
As
in 2009 when the City refunded its 1999 Capital Improvement Bonds with a 2009
Fixed Rate Bank Placement refunding, the two refundings for this year also
required an amendment to an existing July 2005 Debt Service Deposit Agreement
(“DSDA”) with Wachovia Bank/Wells Fargo. This DSDA , or investment agreement,
thru a City approved Bid Process in 2005, provided the City with approximately
$925,000 in July 2005. LCS worked in
2009 to obtain Wachovia bank approval for the DSDA amendment, and expected the
same result in 2012.
The
DSDA is an arrangement whereby the City sends its monthly 1/6th and 1/12th
sinking fund deposits to a Custodian Bank, US Bank, that releases these funds
to Wachovia/WellsFargo upon receipt of US Treasury securities held in the
City’s name that mature into Cash prior to each semi- annual interest payment
and annual principal payment for the 1999/2009 Bonds/Note, the 2004 Electric
Bonds, the 2004 Utility Bonds, and the 2004 Capital Improvement bonds. The
Agreement goes out to 2034 and the present value of these funds is what
generated the 2005 cash receipt to the City of $925,000.
LCS
approached Wells Fargo (they acquired Wachovia Bank) with the same request that
they had approved in 2009, with the same documents and objectives. Wells Fargo told us that they were not
allowing any amendments to these DSDA agreements. Per Jeff Larson, this
response did not make sense, as there was no additional risk or exposure to the
Bank, and in fact the City’s Electric Utility and Utility have better ratings
today than in 2009.
Options:
1. See above options 1-4.
2. Such alternative action as the Commission may
deem appropriate
Fiscal Impact:
Option
1- loss to the City of approximately $3.1 million (PV savings)
Option
2-Gross savings of $4,178,750 less $1,300,000 termination fees (annual savings
of approximately $155,000).
Option
3- Annual savings from option #2 goes from $155,000 to $65,000
Option
4- There should be no termination requirements, which saves the City $1.3
million. Bond issuance costs will be
higher.
Submission Date and Time: 11/21/2012 7:11 PM____
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Department: ______________________ Prepared
by: ______________________ Attachments: Yes____ No ______ Advertised: ____Not Required ______ Dates: __________________________ Attorney
Review : Yes___ No ____ _________________________________ Revised 6/10/04 |
Reviewed by: Dept. Head ________ Finance Dept. __________________ Deputy
C.M. ___________________ Submitted
by: City Manager ___________________
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Account
No. _________________ Project
No. ___________________ WF No.
______________________ Budget ______________________ Available
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