Finance Committee Agenda and Packet 2013 07 15

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CITY COUNCIL COMMUNICATION CITY COUNCIL COMMUNICATION AGENDA ITEM ___ SUBJECT: ORDINANCE NO. __, SERIES 2013 – AN ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF THE CITY OF LOUISVILLE, COLORADO, WATER AND WASTEWATER ENTERPRISE REVENUE REFUNDING BONDS, SERIES 2013, PAYABLE SOLELY OUT OF THE NET REVENUES TO BE DERIVED FROM THE OPERATION OF THE CITY’S WATER AND WASTEWATER ENTERPRISE; AND PROVIDING OTHER DETAILS CONCERNING THE BONDS, INCLUDING, WITHOUT LIMITATION, COVENANTS AND AGREEMENTS IN CONNECTION THEREWITH. 1ST READING – SET PUBLIC HEARING. DATE: JULY 16, 2013 PRESENTED BY: KEVIN WATSON, FINANCE SUMMARY: In 2003, the City of Louisville issued a revenue bond to fund a loan from the Colorado Water Resources and Power Development Authority in the amount of $13.8 million at an interest rate of 2% to 4 1/8%. There is currently $8.905 million in principal left on the bond. The net effective interest rate on the existing bond is approximately 3.75%. Favorable interest rates make it appropriate to refinance the bond by issuing refunding bonds and prepay the existing debt. The City’s Financial Advisor, BLX Group, Sherman & Howard, Bond Counsel, and City staff have developed and issued on June 17, 2013 a Request for Proposals to purchase the refunding bonds. The proposals are due July 10, 2013 and the City anticipates selecting a preferred purchaser by July 15, 2013. FISCAL IMPACT: The proposed Ordinance allows the transaction to be completed so long as present value savings are at least $250,000 and the net effective interest rate on the new debt does not exceed 3.25%. While the interest rate markets are going through some volatility at the moment, the projected interest rate for the refunding is currently estimated at 2.50%, which would produce present value savings of approximately $500,000. The refunding will also allow the City to change the bond covenants. For example, the additional bonds test is less restrictive under the new covenants than the old, the gross revenue definition used in the revenue coverage test is more refined under the new covenants than the old, and the required operations and maintenance reserve under the old covenants will not be required in connection with the new bond issue. This Council Communication and supporting documentation are preliminary drafts of the documentation that will be presented at the July 16, 2013 regular Council Meeting. 5