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

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INFORMATIONAL MEMO Page 2 December 2020. Given the current interest rate environment and the uncertainty of future interest rates, it is the City's best interest to pursue a refunding of these bonds. Per the City's current debt policy, adopted by Resolution No. 1840, the City will refinance debt to achieve debt service savings as market opportunities arise. DISCUSSION As of May 2021, the outstanding balance of the 2011 LTGO bonds is $1,545,000 plus total interest of $98,700. The 2014 refunding LTGO bonds have an outstanding principal amount of $3,101,000 and total interest is estimated to be $748,907. Total interest is subject to change depending on the interest rate in effect from 2025 through 2034. An RFP will be circulated to banks at the end of April 2021 to determine what banks are interested in submitting a proposal. Review of the proposals is tentatively scheduled for May 20, 2021, with an expected closing date of June 8, 2021, for the component related to the PW Shops Phase I project and a closing date of September 2, 2021, for refunding the 2011 and/or 2014 outstanding bond issues. The draft ordinance delegates authority to the Finance Director to select the proposal that is in the best interest of the City (if any) and to approve the interest rate and terms of the bond within the parameters set forth in the ordinance. If a proposal is accepted, the Finance Director will report back to the full Council on the details of the agreement. Updated Information on Issuing Debt for PW Shops Phase I and Refunding Two Issues The City successfully issued debt to fund the PW Shops Phase I project. The City was also successful in refunding both the 2011 and 2014 LTGO bonds and the deal closed on June 8, 2021. The City received bids from 4 banks and the lowest bid for the combined three issues was from Capital One. Debt issued for the PW Shops Phase I project came in very close to budget. Total debt service payments over the life of the 10 -year bonds will average just over $314 thousand each year with an interest rate of 1.70%. Total savings, after taking into consideration the debt refinancing costs, is approximately $97 thousand total for refunding both the 2011 and 2014 LTGO bonds. Interest rates for the refunded bonds range from 1.15% to 2.70%, which a reduction from 3.0% to 4.86%. RECOMMENDATION The Council is being asked to approve the ordinance and consider this item at the May 10, 2021, Committee of the Whole meeting and subsequent May 17, 2021, Regular Meeting. ATTACHMENTS Draft Ordinance 28