Utility Committee Agenda and Packet 2021 02 09

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other part of that is the Pool Program is the component that comes from the CWCB loan which actually amortizes out 35 years. To do an interest rate comparison we'd have to come up with some way to blend the rate on the Pool Program because there's no principle retirements in the first 5 years so we are doing more standard level payment assumptions on City Financing. There would be some yield effect in that comparison. We'd want to capture the CWCB component which keeps repayment longer but the rate is locked at 2.08% for the term. There are other advantages to that, e.g. those funds would be drawn down; we don't pay interest immediately. A lot of dynamics going on in the Pool Program but we can come up with some blended interest rate measurement that will help you see how the two comparable City alternatives look interest wise. The 5 year interest only would not be his preference as the economics of the programs are very similar and feels they are reasonable comparisons. Councilmember Lipton asked why he prefers to borrow for 20 years instead of 30 years given how low rates are and then why is the Pool Program interest only for 5 years? Mr. Manire replied no one has presented the rational for that but did say we have clarity that there is no capitalized interest and we have structural options that we didn't have before. His preference for the 20 year is that he encourages it if you can afford the payment then amortize a little faster but if the City prefers 30 year term that's justifiable too. Mr. Kowar added that with 4-5M dollars of principle and interest they felt that it's a lot to pay for 30 years where the numbers didn't work out and it wasn't worth it. Councilmember Lipton asked why there is the interest only payments for the first 5 years. Mr. Manire said that's how it was presented. Mr. Dragger from the Northern District joined in and said they've spent a lot of time over the last year looking at these financing issues. Northern has looked at a lot of different scenarios and was surprised that so many of the 12 participants were interested in a 20 year repayment period. So we came up with this scenario where they can offer a 20 year payment plan and with that is the 90M loan that we get from the State CWCB. The fixed bond payment is a straight payment with 5 year interest only. Mr. Dragger continued saying that our scenario was that the project wasn't built yet as it takes 4+ years to build and we assume the participants would prefer to pay interest for the first 5 years. Then once the project was in place and you start getting a return on your investment you might want to pay off the rest of the principle. So that's a scenario we could offer the participants if they agree and we could start the interest for the first 5 years in the beginning of the project. We use PFM which is our Municipal Advisors and that's the way they set it up for this scenario. We would like to keep it that way but if all the participants want to move a different way then they will be willing to do that. Mr. Zilles with Vranesh & Raisch stated everything mirrors what they talked about at the participant's meeting and they agreed not to pay principle until the project is built and filling with water. Mr. Dragger agreed and said that is common with projects like this where if they can minimize payment until year project is in operation then that's preferred. Councilmember Lipton said he understand this and asked the committee 5