HomeMy WebLinkAboutCOW 2015-11-23 Item 4A - Powerpoint Presentation - Refund 2006 Water, Sewer, Surface Water BondsCity of Tukwila, Washington
Water and Sewer Revenue Refunding
Bond, 2015
November 23, 2015
Presented by:
Duncan Brown, Senior Managing Consultant
Public Financial Management, Inc.
(206) 858 -5367
brownd @pfm.com
Overview of Topics
1) Water and Sewer Revenue Bonds, 2006
2) Refunding Opportunity
3) Recommended Plan of Finance
4) Summary of Proposals and Refunding Results
5) Next Steps
1
Water and Sewer Revenue Bonds, 2006
• In November 2006, the City issued $3,180,000 of Water and Sewer Revenue
Bonds to fund Neighborhood Revitalization (Allentown) and the Foster Point
Sewer Systems Project
- Design and construction of the City's wastewater pumping facilities, force mains and
sewer mains, lift stations, and storm drain and water line improvements
• Following a payment on December 1, 2015, the 2006 Bonds will have $2,060,000
of principal outstanding
- Outstanding interest rate of 4.49%
• The 2006 Bonds may be redeemed prior to maturity beginning December 1, 2016
— Until this date, the City does not have the option to prepay the 2006 Bonds
N $300
3 $250
o $200
I— $150
$100
$50
$0
Water and Sewer Revenue Bonds, 2006
Annual Debt Service
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
• 2006 Principal 2006 Interest
2
Refunding Opportunity
• Since 2006, borrowing rates have fallen significantly, providing an opportunity
for the City to refund (refinance) its 2006 Bonds and realize savings in annual
debt service
• Similar to refinancing a mortgage, the City would benefit from refinancing the
2006 Bonds in the current market, lowering the interest rate from 4.49% to
approximately 2.39%
-o
5.00% .e
4.00%
3.00%
2.00%
1.00%
0.00%
Municipal Market Data (MMD) "AAA" GO Yield Curve
11/6/2006
Current (11/16/2015)
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
11/6/2006 —Current (11/16/2015)
�PFI
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Recommended Plan of Finance
• PFM recommends the City approve a "direct placement" refunding bond with a
commercial bank
— Relatively small size (less than $2 million) and short maturity (11 years) make the
proposed refunding bond attractive to prospective bank lenders
— Avoids lengthy disclosure and ratings process associated with publicly offered bonds
— Lower costs of issuance
A bank purchaser will not require a "debt service reserve account"
— The City can apply the reserve account for the 2006 Bonds — approximately
$430,000 — towards the refunding, thereby reducing the total size and annual debt
service of the refunding bond
• Proceeds of the 2015 Refunding Bond, along with the reserve account, would
be placed in a refunding escrow account
- Invested in U.S. Treasury securities
— Amount sufficient to pay interest on the 2006 Bonds through 12/1/16, and redeem all
outstanding 2006 Bonds on 12/1/16
- Once escrow is established, the 2006 Bonds will no longer be considered obligations
of the City (legal and economic "defeasance ")
• Refunding transaction will result in annual savings that can be passed on to
ratepayers
4
Estimated Refunding Results
• Average annual debt service on the new bonds is approximately $183,000,
approximately $56,000 less than 2006 Bonds
— Results from lower interest rate on the refunding bond and application of the 2006
debt service reserve account towards the refunding plan
• Net present value savings of over $130,000, or 6.3% of refunded par amount
Refunding Statistics
NPV Savings $130,087
NPV Savings % 6.31%
Avg. Annual Savings $58,216
Negative Arbitrage $37,524
New Call Date 12/1/2020
Refunding Par $1,760,322
Date Savings
12/1/2016 $56,151
12/1/2017 58,423
12/1/2018 58,423
12/1/2019 58,422
12/1/2020 58,423
12/1/2021 58,423
12/1/2022 58,422
12/1/2023 58,422
12/1/2024 58,423
12/1/2025 58,423
12/1/2026 58,423
Total $640,379
$300
o $250
s
$200
$150
$100
$50
$0
Water and Sewer Revenue Refunding Bond, 2015
Estimated Debt Service and Savings
• Savings • Refunding Debt Service
7 7 'I 1
LLLL 111_111_11_11_11_
1
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026
�PFM
5
Summary of Bank Proposals
• PFM distributed a brief request for bids to banks and lending institutions
• Five banks submitted proposals to purchase the refunding bond
• The most advantageous proposal was submitted by Columbia Bank
Purchaser
Summa of Pro • osals
Fixed Interest
Rate
Up -Front
Fees
True Interest
Cost(')
Debt Service Reserve
Account
Columbia Bank
2.34%
$5,100
2.39%
Not required
Washington Federal
2.37%
$3,500
2.41%
Required under certain
conditions
Zions Bank
2.50%
2.47%
Not required
Umpqua Bank
2.59%
$5,000
2.64%
Not required
Capital One Public Funding
2.77%
2.77%
Not required
(1) True Interest Cost accounts for both interest rate and up -front fees.
6
Next Steps
NOVEMBER
S M T W T F S
DECEMBER
S M T W T F S
1 2 3 4 5 6 7 1 2 3 4 5
8 9 10 11 12 13 14 6 7 8 9 10 11 12
15 16 17 18 19 20 21 13 14 15 16 17 18 19
22 23 24 25 26 27 28 20 21 22 23 24 25 26
29 30 27 28 29 30 31
• Committee of the Whole meeting November 23
• City Council meeting to pass Bond Ordinance December 7
■ Closing Date — escrow funding December 15
■ 2006 Bonds redeemed Dec. 1, 2016
Questions?
Public Financial Management, Inc.
Duncan Brown
Senior Managing Consultant
(206) 858 -5367
brownd @pfm.com
Susan Musselman
Director
(360) 445 -0238
musselmans @pfm.com
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