Memorandum

City of Lawrence

Finance Department

 

TO:

Thomas M. Markus, City Manager

FROM:

Bryan Kidney, Finance Director

DATE:

April 19, 2016

RE:

Resolution No. 7156 authorizing the sale of water and sewage system improvement and refunding revenue bonds, Series 2016-A.

 

2016 Project Funding

Staff proposed funding the 2016 water and sewage projects through a revenue bond. The projects identified for 2016 funding total $42,000,000. These projects have been authorized by the City Commission for tax-exempt debt financing.

 

The bonds will be 20 years with level annual debt service starting with the first payment in 2017. The total cost of the projects and debt service for the bonds are under the amounts that were used in the latest rate model update.

 

The bonds will be offered at a competitive sale at 11:00 a.m., June 7, 2016. Staff will bring a bond ordinance and resolution to accept the lowest net interest costs bid to the Commission at that evening’s Commission meeting.

 

Refunding

Refunding of 2007 Revenue Bonds

The City of Lawrence revenue bond series 2007 has outstanding balance of $18,820,000. The original bond was issued to finance a variety of water and wastewater projects in 2007 for a total issue size of $19,800,000 with a final maturity date of 11/01/2032.

 

The 2007 bonds included a provision to call outstanding maturities after 2016. The average interest rate the City is paying for the outstanding maturities for years 2016 through 2032 is 4.50%. The market rates for the same years of maturities are estimated to average 2.36%. If the City issues new revenue bonds and uses the proceeds from the new sale to pay-off the 2007 bonds, the latest estimated savings (net of issue costs) is a present value of $2,271,518.

 

Refunding of 2009 Revenue Bonds

The City of Lawrence revenue bond series 2009 has outstanding balance of $8,735,000. The original bond was issued to finance a variety of water and wastewater projects in 2009 for a total issue size of $10,385,000 with a final maturity date of 11/01/2031.

 

The 2009 bonds included a provision to call outstanding maturities after 2017. The average interest rate the City is paying for the outstanding maturities for years 2016 through 2031 is 5.56%. The market rates for the same years of maturities are estimated to average 2.38%. If the City issues new revenue bonds and uses the proceeds from the new sale to pay-off the 2009 bonds, the latest estimated savings (net of issue costs) is a present value of $847,903.

 

The total issue size for all three purposes is estimated to be:

 

Use of Funds

Amount

2016 projects

$42,000,000

2007 refunding

18,178,938

2009 refunding

8,272,849

Cost of Issuance

1,007,669

Less: Transfers from debt service fund

(446,825)

Less: Estimated Premium

$(832,631)

     Total Estimated Bond Size

$68,180,000

 

Staff would like to offer the bonds at a competitive sale at 11:00 a.m. on June 7, 2016.

 

Action 

The City Commission is requested to adopt Resolution No. 7156, authorizing the sale of water and sewage system improvement and refunding revenue bonds, series 2016-A.