City Council Minutes 1993 10 06 - Laserfiche WebLink

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levels. He introduced three items, 1. Proposed schedule for conducting the refunding transaction, 2 and 3. graphs that explain the results they will try to achieve. Proposed Schedule: ind. icates the refunding bond transaction close by the end of this calendar year. Beneficial because, in November many other Colorado cities will be having elections and there will likely be more supply and will effect the demand and interest yields will not be as good; and by the end of the calendar year there are a category of investors, who are bank qualified, who would be interested in th~.s type of bond issue and will have a beneficial effect on the interest cost to the City of Louisville. What they are trying to ackieve with the transaction is shown on the graphs. The graph (yellow cross hatching) green line indicates shows what the interest rate is on your outstanding 1989 sales tax bonds, the fuchsia shows what they think the interest rate would be, if the sales tax bonds were to be refunded in the non-rated refunding and the blue line is the interest rate we think you will be able to ackieve, if they are able to get the sales tax bonds insured. They want to have these refunding bonds insured; and therefore, the estimate of the current value of the savings would be approximately $670,000. The graph (blue cross-hatching) illustrates the same concept, but the distance that represents the potential savings is the distance between the green line and the fuchsia line, non-rated transaction. Non-rated transaction your interest rate would be hi?her than in an insured transaction. Even in a non-rated transaction the savings estimated would be approximately $400,000 at present value. Net present value is net of the cost of issuance and. underwriter's discount, so your expenses for conducting the transaction are netted out before we calculate that present value savings. Recommending that the City capture the benefit of lower interest rates and sell refunding bonds that would have a lower interest rate over their life than your current 1989 outstanding bo~Lds. Mayer asked what the cost of bond insurance was and Cason replied that it was calculated as a percentage of total principal and interest and they estimate that cost would be about $50,000, but the present value savings differential ($670,000 vs $400,000) is again net of that cost of bond insurance as well. Mayer then asked, if the 1989 bonds would be called or talking about buying treasuries and refunding. Cason replied that it was the latter situation, an advanced refunding, a Treasury escrow wo~.ld be purchased to pay the 1989 bonds until the call date and at the call date those bonds would be called and no longer outstanding. Mayer then asked that in today's financial pages of the New York Times, they discussed credit markets and the great supply of municipals and forcing yields higher, are these curves still accurate or have things deteriorated slightly since these estimates?