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HomeMy WebLinkAboutCOW 2011-09-26 Item 4F - Discussion - Early Redemption of 1995 Water Revenue BondsCOUNCIL AGENDA SYNOPSIS Initials ITEM NO. Meeting Date I Prepared by I Mayor's tleview I Colrndll review 09/26/11 PM F 10/03/11 PM `t ITEM INFORMATION CAS NUMBER: 11-097 I STAFF SPONSOR: PEGGY MCCARTHY I ORIGINAL AGENDA DATE: 09/26/11 AGENDA ITEM TITLE Water Revenue Bonds 1995 Early Redemption CATEGORY Discussion Motion Resolution Ordinance Bid Award Public Hearing Other Mtg Date 09126111 Mtg Date 10103111 Mtg Date Mtg Date Mtg Date Mtg Date Mtg Date SPONSOR Council Mayor HR DCD Finance Fire IT P&R Police PW SPONSOR'S The City issued $4,500,000.00 of revenue bonds in 1995 to finance capital improvements SUMMARY for the Water Enterprise Fund (401) with the final payment due in 2015. The current outstanding balance of these bonds is $1,370,000.00 plus interest. The City has the option to pay off or redeem these bonds for a savings of over $150,000.00. The Water Fund has $4 million in cash and investments as of 7/31/11 to support this early pay -off. Council is being asked to approve the early redemption of Water Revenue Bonds 1995. REVIEWED BY COW Mtg. CA &P Cmte F &S Cmte Transportation Cmte Utilities Cmte Arts Comm. Parks Comm. Planning Comm. DATE: 09/13/11 COMMITTEE CHAIR: DE'SEAN QUINN RECOMMENDATIONS: SPONSOR /ADMIN. Public Works COMMITTEE Unanimous Approval; Forward to Committee of the Whole COST IMPACT FUND SOURCE EXPENDITURE REQUIRED AMOUNT BUDGETED APPROPRIATION REQUIRED $1,392,690.00 $0.00 $1,392,690.00 Fund Source: WATER FUND 401 Comments: Water Fund has over $4 Million in cash and investments as of 7131111. MTG. DATE 09/26/11 10/03/11 MTG. DATE 09/26/11 10/03/11 RECORD OF COUNCIL ACTION ATTACHMENTS Informational Memorandum dated 09/09/11 Revenue Bond 1995 Amortization Schedule Excerpts from the Revenue Bond 1995 Official Statement Minutes from the Utilities Committee meeting of 09/13/11 I I Ej L.*r.j City of Tukwila Jim Haggerton, Mayor INFORMATIONAL MEMORANDUM TO: Mayor Haggerton Utilities Committee FROM: Peggy McCarthy, Acting Finance Director DATE: September 9, 2011 SUBJECT: 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 \OTHER \Gail Labanara\InfoMemo 1995 Water Fund RevBndRedemption.docx M9 0 1995 Revenue Bonds Date Principal D Interest i Total Principal 0/S 211/1996 163,627 163,627 4,500,000 8/1/1996 122.770 1 22 770 s 267,720 i 4,355,000_ 2/1/1997 145,000r _122,720 8/1/1997 211 /1998 119,711 119,71 19 711 4,200,000_. 811/19 2/99 9 155,000 116 418 160,000 116, 418 _274,711 116 418 276,418 4,040,000 8/1 /1999 1 112,938 112 2/1/2000 170,000 1.._...... 112,938 282,938 3,870,000 8/1/2000 109,155 109,166" 109,155 3,695,000 2/1/2001 8/1 !2001 175 000 1 105, i _284_,,155 1 105,174 -j/ 1 /2002 10 185,000 5 174 1 290,174 3 51 Q 000 811 /2002 l 10 ©8 3 100,873 1 2/1/2003 195 00 0..1....._ 100,873 T.._.. 3,315,000 811 /2003 96,241 96241 2/1/2004 200,000 7 9;, 1 296,241 l 3,115,000 8/1/2004 i 1 91,3911 2/1/2 005 21o,o 00 91, 391 _91 301,391 2,905,000_ 01, Y� 8!112005 1 86,141 86 I 2/1/2006 6 0 64--- --Y 225,000 1 86,141 31 8,141 2,680,000 2 /9%2007 235,000 1 80,51G sQ- S- 315 ,516 8/1 /2007 1 _2,445,000_ 74_406 74,406 FO 74,406 324,406 2,195,000 2/11 ?008 8/1/2008 250,0 3 67,656 2/1/2Q09 _67 67,656rt 1,935,0 260 327,65_.. 1... $11/2009 2/1/2014 60 ,6 3 6 _1 60,6361 00 1,660,000 275,0 60636 335,636 1 8/1 /2010 1 53,211 2/1/2019 _53_211 290,000 53 211 3 343 211_ 1,370,000 8/1!2011 2/1/2012 1 45 45,381 310,000 1 45,381 355,381 1 1,060,000 35_113 2!1/2013 330,000 i 365,113 3 730,000 8/1 12013 _35,11 24,181 1 24,18f] 2/1/2014 355,000 24,181 3 1 375,000 8/ 1 1 2,422 1 _'12,422 1 Y 2 /1 /2015 375,000 12,422 367,422 4,500,000 3,192;245 .7.,692 1 0 DESCRIPTION OF THE BONDS 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 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 $1,00000 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 anv 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. 4 91 Redemption Dates 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 Mandatory Sinking Fund Ptedemntion Amounts February 1, 2008 February 1; 2009 February 1, 2010 February 1, 2011 February 1, 2012 February 1, 2013 February 1, 2014 February 1, 2015 (Maturity) .$255,000 270,000 285,000 305,000 320,000 340,000 365,000 385,000 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 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 tOwner, 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 anv 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 5 92 City of Tukwila Utilities Committee UTILITIES COMMITTEE Meeting Minutes September 13, 2011 5: 00 p. m. Conference Room #1 PRESENT De'Sean Quinn, Chair; Dennis Robertson and Kathy Hougardy Staff. Bob Giberson, Peggy McCarthy, Gail Labanara and Kimberly Matej CALL TO ORDER: Committee Chair Quinn called the meeting to order at 5:00 p.m. I. PRESENTATIONS No Presentations II. BUSINESS AGENDA A. Pavoff: Earlv Redemntion of 1995 Revenue Bonds Staff is seeking Council approval for an early redemption of Revenue Bonds originally issued for $4,500,000 from 1995. If approved, this early redemption will result in the payoff of the revenue bonds three years earlier than scheduled. The payoff face value is currently $1,370,000 and the early payoff will save the City approximately $150,000. Payoff monies will come from the Fund 401 Water, which was the same fund financed by the original bonds for capital improvements. Staff will also present this item as information only to the Finance Safety Committee. UNANIMOUS APPROVAL. FORWARD TO SEPTEMBER 26 COW FOR DISCUSSION. III. MISCELLANEOUS Meeting adjourned at 5:16 p.m. Next meeting: Tuesday, September 27, 2011 5:00 p.m. Con£ Room No. 1. Committee Chair Approval Minutes by KAM. Reviewed by GL. 93 M