Title
Resolution Making Certain Findings With Respect to, and Ratifying the Filing by the Finance Director of an Application With The North Carolina Local Government Commission for Approval of, the Issuance and Private Sale of City of Greensboro, North Carolina Combined Enterprise System Revenue Refunding Bonds, Series 2014A, and Requesting the Local Government Commission to Approve the Financing Team in Connection Therewith
Body
Department: Financial & Administrative Services
Council District: n/a
Public Hearing:
Advertising Date/By:
Contact 1 and Phone: Richard Lusk, Finance Director, ext. 2077
Contact 2 and Phone: Marlene Druga, Deputy Finance Director, ext. 2077
PURPOSE:
The City proposes to issue up to $71.5 million in Water & Sewer Revenue Refunding Bonds on July 31, 2014 to refinance variable rate bonds issued from 1998 through 2009, with a projected debt service savings of $800,000 or more. The first step in the process to issue these bonds requires City Council approval of the attached resolution making certain findings with respect to, and ratifying the filing of an application with the N.C. Local Government Commission (LGC) for approval of, the issuance of the bonds.
BACKGROUND:
The City Council is requested to authorize the refinancing of all of the $70.29 million outstanding maturities of the Series 1998B, 2001B, 2003B, 2005B, 2007B and 2009B Combined Enterprise System (Water & Sewer) Variable Rate Revenue Bonds on June 3, 2014, from proceeds of the proposed Series 2014A Revenue Refunding Bonds. The City has determined that it is advantageous to issue a new series of variable rate revenue bonds for the purpose of refinancing all of the $70.29 million outstanding variable rate bonds (approx. 25% of outstanding Water and Sewer Revenue Bonds). The City proposes to begin procedures for the issuance of revenue refunding bonds at this time. Subsequently, on June 17, 2014, the City Council will consider authorization of a bond order for the issuance and sale of the Series 2014A Revenue Refunding Bonds.
Refinancing the above six bond series into one series is being undertaken to significantly lower annual bank and rating agency fees, which have nearly tripled over the last five years, in conjunction with the required update of variable rate bank documents and to meet new bond rating agency standards for variable rate debt. Having one series of bonds will also result in lower interest rate costs over the remaining 20-year term of the bonds. The reduction in annual fees and interest rates is projected to result in a debt service savings of $800,000 or more. Based on current market rates we expect the variable rate refunding bonds to average an interest rate of 0.25% or less in 2014. (Interest rates averaged 0.107% in 2013 and have averaged 0.064% to date in 2014. The LGC has reviewed the proposed refinancing and is expected to approve sale of the refunding bonds on July 1, 2014.
BUDGET IMPACT:
The reduction in annual fees and interest rates, net of bond issuance costs, is projected to result in a debt service savings in the Water Resources Operating Fund of $800,000 or more over the next 20 years.
RECOMMENDATION / ACTION REQUESTED:
The Finance and Legal Departments recommend City Council approval of the attached resolution making certain findings with respect to, and ratifying the filing of an application with the N.C. Local Government Commission for approval of, the issuance and sale of the proposed Series 2014A Combined Enterprise System Revenue Refunding Bonds.