HomeMy WebLinkAboutUtilities 2011-09-13 Item 2A - Discussion - Early Redemption of Revenue Bonds 1995r
Jim Haggerton, Mayor
i
TO:
FROM:
DATE:
SUBJECT:
Mayor Haggerton
Utilities Committee
Peggy McCarthy, Acting Finance Director
September 9, 2011
Early Redemption of Revenue Bonds 1995
ISSUE
Approve the early redemption of Revenue Bonds 1995.
BACKGROUND
The City issued $4,500,000 of revenue bonds in 1995 to finance Water Fund -401 capital
improvements. The outstanding balance of these bonds is $1,370,000 (face value) with the
next mandatory bond redemption occurring February 1, 2012 and the last mandatory bond
redemption occurring February 1, 2015. An optional redemption clause allows the City to
redeem, or pay -off, these bonds at 100% of face value on February 1, 2007 and thereafter.
Interest payments that would be made over this three year period (February 1, 2012 to
February 1, 2015) should the bonds not be redeemed before the next interest payment date
total $188,813 and represent a 4.6% per annum interest rate ($188,813 interest
$1,370,000 balance 3 year period).
If the bonds were redeemed on November 1, 2011, the total pay -off would approximate
$1,392,690 comprised of the bond principal of $1,370,000 and the estimated accrued
interest of $22,690. Under this scenario, the interest cost savings to the City would be
$166,123 (total interest payments of $188,813 due February 1, 2012 to February 1, 2015
less accrued interest from August 1, 2011 through November 1, 2011 of $22,690). The
Water Fund -401 had $4 million in cash and investments as of July 31, 2011.
DISCUSSION
The City will benefit financially by early redemption of these bonds. If the $1,370,000 were
invested in a 3 -year Treasury note at today's interest rate of .35 $4,795 would be
generated in annual investment earnings or $14,385 for the 3 -year period. The net benefit
to the City of using these funds to pay -off the bonds would be over $150,000 represented
by the bond interest cost savings of $166,123 less the investment earnings opportunity cost
of $14,385.
RECOMMENDATION
The Council is being asked to approve the Early Redemption of Revenue Bonds -1995 and
consider this item at the September 26, 2011 Committee of the Whole meeting and the
subsequent October 3, 2011 Regular Meeting. The issue will also be presented as an
information only item at the September 20, 2011 Finance and Safety Committee meeting.
Attachments: Revenue Bond 1995 amortization schedule.
Excerpts from the Revenue Bond 1995 Official Statement
WAPW Eng\OTHER1Gail LabanaraUnfoMemo 1995 Water Fund RevBndRedemption.docx
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1896Rmv�nueBonds
Date"
Principal
Princ ipal 015
�1��6
163,627
163,627 1 4,600,000
8
119,711
119,7 1 1
M��q
811 /2000
109,165
109,155
284 3,695,000
'--------'18 600 0
100
100,873-
96,241
96,241
�1�Q�
1,391 2,005,000
---���.�C3 31 2,680,000
-'��-�r�
8/1/2DO7
74 40 6 2,195,000
21112008
/1/2008
67,656
---------'��i� 006
-'--------�75`D0O
60,636
60 636 1
O/1-010
�11
2/1/2D11
29DU0 0
343 1 Q7OUU0
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6 yc� 8 1060
ll
35,113
__8/1/2O12
2/1/201�
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161
8/112014
/�01�
i 12 ,422 1 12 12
3?5.O0D 38�/|22| J
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4,500,000 3192,245 i
7,G92'240!-
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General
The Bonds will be issued as fully registered bonds in denominations of $5,000, or integral multiples
thereof within a single maturity, will be in the aggregate principal amount of $4,500,000% will be
dated June 1, 1995, and will mature on February 1 in the years and in the amounts set forth on the
cover page of this Official Statement.
The Bonds shall bear interest from their date at the respective rates set forth on the cover of this
Official Statement. Interest shall be calculated on the basis of a 360 -day year consisting of twelve
30 -day months, and shall be payable commencing February 1, 1996, and semiannually thereafter on
each August 1 and February 1 to the respective dates of maturity of the Bonds.
Method of Payment
The principal of and interest on the Bonds shall be payable in lawful money of the United States of
America to the Registered Owners thereof whose names and addresses appear on the Bond Register.
Payment of each installment of interest shall be made to the Registered Owner whose name appears
on the Bond Register at the close of business on the fifteenth day of the calendar month preceding
each semiannual interest payment date, and shall be paid by check or draft of the Bond Registrar
mailed to such Registered Owner on the due date, at the address appearing on the Bond Register, or
at such other .address as may be furnished in writing by .such Registered Owner .to the Bond
Registrar. Interest, installments may be paid by wire transfer to a Registered Owner of $1,000
or more aggregate principal amount. of Bonds if a written request of such Registered Owner is
submitted to the Bond Registrar at least 10 days prior to the interest payment date.
The principal of each Bond shall be paid to the Registered Owner thereof, upon presentation and
surrender of each Bond on or.after the stated date of maturity, at either of the principal corporate
trust offices of the Bond Registrar.
The City and the Bond Registrar may deem and treat the Registered Owner of each. Bond as the
absolute owner of such Bond for the purpose of receiving payments of principal and interest due on
such. Bond and for all other purposes,, and neither the City nor the Bond Registrar shall be affected
by any notice to the contrary.
Redemption Provisions
Optional Redemption. The Bonds maturing in the years 1997 through 2005, inclusive, are not
subject. to redemption prior to their stated dates of maturity. The City has reserved the right to
redeem and call the Bonds maturing on or after February 1, 2006, prior to their stated maturity, on
or after February 1, 2005, in whole or in part (maturities to be selected by the City and by lot
within a maturity in such manner as the Bond Registrar shall determine) at any time, at the
following prices (expressed as a percentage of the principal amount of the Bonds to be redeemed),
plus accrued interest, if any, to the date of redemption:
Preliminary, subject to change.
rd
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Redemption. bates Redemption Prices
February 1, 2005, through January 31, 2006 102%
February 1, 2006, through January 31, 2007 101
February 1, 2007 and thereafter 100
Mandatory Sinking Fund Redemption. The Bonds maturing on February 1, 2015, are Term Bonds
and are subject to mandatory sinking fund redemption prior to :maturity, in part, by lot in such
manner as the Bond Registrar shall determine, at 100 percent of the principal amount thereof plus
accrued interest to the date of redemption, from mandatory sinking fund deposits into the Principal
and Interest Account in the years and principal amounts set forth below:
Mandatory Sinking Fund
Redemption Dates
February 1, 2008
February L. 2009
February 1, 2010
February 1, 2011
February 1, 2012
February 1, 2013
February 1, 2014
February 1, 2015 (Maturity)
Mandatory Sinking Fund
Redernntion Amounts
.$255,000
270,000
285,000
305,000
320,000
340,000
365
385,000
Partial Redemptions. In accordance with the preceding two paragraphs, portions of the principal
amount of any Bond, in installments of $5,000 or any integral multiple of $5,000,. may be
redeemed. If less than all of the principal amount of any Bond is redeemed, upon surrender of such
Bond at either of the principal corporate trust offices of the Bond Registrar there shall be issued to
the Registered Owner, without charge therefor, for the then unredeemed balance of the .principal
amount thereof, a new Bond or Bonds, at the option of the Registered Owner, with like maturity
and interest rate; .in. any authorized denomination.
Notice of Redemption. Unless waived by the Registered. Owner of any Bond to be redeemed, notice
of any such redemption shall be sent by the Bond Registrar by first -class mail postage prepaid, not
less than 30 or more than 60 days prior to the date fixed for redemption to the Registered Owner of
each Bond to be redeemed at the address shown on the Bond Register, or at such other address as
may be furnished in writing by such Registered Owner to the Bond Registrar.. Such notice
requirement shall be deemed to be complied with when notice is mailed as herein provided,
regardless of whether or not it is actually received by the Registered Owner of any Bond.
Effect of Redemption. When so called for redemption, the Bonds will cease to accrue interest on the
specified redemption date, provided funds for redemption are on deposit_ at the place of payment at
that time, and shall not be deemed to be. Outstanding as of such redemption date.
Open Market Purchase and Cancellation. The City has .reserved the right to purchase the Bonds on
the open market at any time and at any price. The Bonds so purchased or redeemed shall be
canceled. To the extent the City purchases Term Bonds or redeemed under the optional redemption
provisions described above, the City, at its. discretion, may reduce the amount of any mandatory
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