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understated that the City's ultimate scoring on the TWDB list is a reflection of our need and ability <br />to pay for a project vs. our competition in the State. <br />Certificates <br />wor . onOr�C <br />lonOs : First, given the TWDB Loan is no longer an option at this time, <br />we <br />alternative long term financing, that being Certificates of Obligation (Cps) (i.e. <br />bonding). The market has remained favorable in recent months. We learned that IRS regulations <br />for tax-exempt debt limit the amount of COs we can issue to a certain amount that can reasonably <br />be spent within three years. In short, the City must have 5% spent within the first six months and <br />85% spent within the first three years, otherwise IRS penalties could be incurred. Our project is <br />expected to last 5-7 years. Working with Garver, we have estimated an ability to issue $46 million <br />as part of a Phase I in bonding, followed by approximately $18 million as part of a Phase II in <br />bonding. Please remember that these are all still engineering estimates. But in order to take <br />advantage of good rates now and to insure that this project can move from design to construction <br />fluidly, issuing COs for Phase I of construction is recommended. When bids are received, there <br />may be a need to "true up" the bond via a much smaller bond, but that will be addressed at that <br />time. Other options were considered that included only bonding out for the engineering portion at <br />this time, but we run the risk of seeing interest rates go up by the time our significant share of <br />bonding is issued. Likewise, there may still yet be future hope for a TWDB low interest loan in a <br />couple of years when we are ready to pursue the $18 million share, but that option does not appear <br />likely by the time we are ready for Phase I of construction. By splitting the CO up in to two issues <br />as required by IRS regulations, it has the natural impact of helping to soften the needed rate <br />adjustments over time. <br />Garver�Amendment: Second, proceeding from the same regulations that impacts our <br />bondingability, the Cit y p <br />only bid out a portion of the project equivalent to the CO notes we <br />can issue. In other words, Garver cannot bid out the entire project when we only have financing <br />secured for $46 million of it. Therefore, Garver has developed a strategy that led to the $46 million <br />/ $18 million divide that will allow us a reasonable transition to proceed through the project, <br />continue to operate, and get us ready for a second phase in bidding. More information will be <br />provided by Garver tonight on how this preliminarily will look. This will though require an <br />amendment to the Professional Engineering Services Agreement that the City Council tentatively <br />authorized on July 27th (which has not been signed pursuant to the Council's instructions to secure <br />long term financing first). We intend to bring that to the City Council on February 8th. The <br />amendment will be to split the project in two in order to effectively bid out a Phase I and then later <br />a Phase II. It is critical to know though that we will need both Phase I and Phase II to have a <br />completed project. <br />Debt Pa ents: Third, with any CO, there are options for easing in to debt payments to help soften <br />the increase in cost — i.e. rate adjustments. Working with SAMCO Capital, they have developed <br />a strategy to shift the highest proportion of principal payments to later in the bond amortization <br />