8.1 Issue WS Bonds
City Of Salina
Request for Commission Action Date
8/12/02
Time
4:00 PM
AGENDA SECTION:
ORIGINATING DEPARTMENT:
APPROVED
FOR AGENDA
8
FINANCE
ITEM NO,:
1 & 1a
BY: Rodney Franz
Item:
A. Receive report on Refunding Revenue Bond offering.
B. Second Reading Ordinance No. 02-10091, authorizing the issuance and delivery of
$6,790,000 principal amount in Water and Sewage System Revenue Refunding Bonds.
C. Resolution Number 02-5864 prescribing the form and details of and authorizing and
directing the issuance, sale, and delivery of $6,790,000 principal amount of Water and
sewage System Revenue Refunding Bonds.
Backqround:
A. Report: We have discussed this proposed transaction several times before. As you
may recall, the City of Salina has one remaining Revenue Bond outstanding in the
principal amount of $10,890,000, originally issued in 1994 and used to finance
improvements to the Wastewater Plant and system. These bonds become callable on
September 1, 2002. Because of the current interest rate environment, it is
advantageous to refinance those bonds with new bonds at lower rates. In addition, we
have some additional resources available as a result of earlier refundings, and a
residual balance in the Sewer Construction Fund that has now been released. The net
result is that we can realize significant savings be reducing the balance of the bonds
outstanding to $6,790,000, as well as by taking advantage of the current interest rate
environment. The final analysis shows net cash flow savings on our debt service
payments of about $4.8 million through 2012, with net present value savings
attributable to the refunding alone of $800,922 or about 8% of refunded par. The
industry rule of thumb is that if savings exceed 3%, the refunding is justifiable. The
average coupon on the new bonds will be 3.582% compared to the average rate on the
refunded bonds of 5.161 %.
B. Ordinance Number 02-10091 authorizes the sale of the bonds, provides that they are
special obligations of the City of Salina payable from the net revenues of the Water and
Sewer Utility, establishes certain rate and tax covenants, and provides that the bonds
shall be issued pursuant to the bond resolution.
C. Resolution Number 02-5864 actually implements the bond sale, providing for the form
and details of the bonds, addressing such issues as arbitrage restrictions, designation
of the Paying Agent and Registrar, providing for the maturity schedule, definition of
ownership, book entry, tax matters, registration, etc.
Recommendation:
Item A: Receive Report. No Specific Action Required.
Item B. Adopt Ordinance No. 02-10091 on second reading.
Item C: Adopt Resolution No. 02-5864.