FIN 2021-07-26 Item 1B - Public Safety Plan - Update on Debt Issuance for Public Works Shops

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City of Tukwila Allan Ekberg, Mayor INFORMATIONAL MEMORANDUM TO: Finance Committee FROM: Vicky Carlsen, Finance Director CC: Mayor Ekberg DATE: April 20, 2021 SUBJECT: Approve Ordinance to Issue Debt to Fund General Fund Portion of PW Shops Phase I Project, Refund Outstanding 2011 Limited Tax Obligation Bonds, Refund Outstanding 2014 Limited Tax Obligation Bonds Updated for July 26, 2021 ISSUE Delegate authority to the Finance Director, through the end of September, to issue limited tax obligation bonds (LTGO) to issue debt to fund the general fund portion of the PW Shops Phase I project, refund the City's outstanding 2011 LTGO bonds, and refund the City's outstanding 2014 LTGO bonds via a direct placement process. Refunding the 2011 and 2014 bonds would only occur if total debt service would be lower than currently structured. BACKGROUND During the 2021-2022 budget process it was determined that, due to the current interest rate environment, the general fund portion ($2,850,000) of funding the PW Shops Phase I project would be financed. The City also has an opportunity to refund two outstanding LTGO issues, if debt service savings can be achieved, net of issuance costs. 1). The City issued $4,620,000 LTGO bonds on December 28, 2011, to refund 2003 Series A bonds that were issued to fund street improvements. Bonds were issued with an interest rate ranging from 2.00% to 4.00%; interest rates are higher during the last few years of the repayment schedule. Interest rates for the remaining life of the bonds range from 3.00% to 4.00%. Final payment for these bonds is December 2023. These bonds have a call provision that allows the bonds to be called on December 1, 2021. Given that current interest rates are lower than the rate the City is paying on these bonds, it is the City's best interest to pursue a refunding of these bonds. 2). The City issued $3,850,000 LTGO bonds in December 2014 to fund land acquisition and capital costs of redevelopment activities withing the City's Urban Renewal area. Bonds were issued with an interest rate ranging from 0.85% to 4.86% through 2024. After 2024, the interest rate is adjusted to the 5 -year Advance Fixed Bullet Rate, as quoted by the Seattle Federal Loan Bank, divided by 0.65. Interest rates for the remaining life of the bonds range from 4.32% to 4.86% through 2024. Final payment for these bonds is December 2034. These bonds were a private placement with Zions Bank and there is no prepayment penalty for refunding them after 27