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12 - Refunding and Restucturing of GO Bond Series 2013
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12 - Refunding and Restucturing of GO Bond Series 2013
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Item No. 12 <br />Memorandum <br />TO: Mayor, Mayor Pro Tem & City Council <br />FROM: Grayson Path, City Manager <br />Gene Anderson, Finance Director <br />SUBJECT: Refunding and Restructuring of GO Bonds Series 2013 <br />DATE: June 12, 2023 <br />BACKGROUND: <br />In July 2013, the City issued $33,925,000.00 in General Obligation (GO) Bonds to replace aging <br />water and wastewater lines throughout the City. The term of the loan was 20 years with an option <br />to call the loan on December 15, 2023. The term "call" means the City can pay off the bond anytime <br />on or after the call date. The most common reason to call a bond issue is when interest rates have <br />fallen since the original bonds were issued and the new Refunding Bonds, carrying lower interest <br />rates, can replace the old Bonds. The lower interest rates reduce the annual debt service payments <br />without changing the final maturity date. <br />Another common reason that bonds are called is to restructure the original debt. In this scenario, <br />the payoff period of the refunding bonds can be shortened or extended depending upon the <br />situation. <br />STATUS OF ISSUE: <br />The City's financial advisor, Mark McLiney from SAMCO Capital Markets, has a presentation on <br />some opportunities available on the GO Bonds, Series 2013. <br />In summary, the City will have two options to consider. <br />1. The City can issue Refunding Bonds while maintaining the original final maturity of <br />December 15, 2032. This option will reduce debt service by approximately $105,000/year <br />totaling $945,000 in total savings (present value savings of $804,000). <br />2. The City can issue Refunding Bonds to restructure the existing bonds by adding 10 years <br />to the final maturity. This will reduce the annual debt service by approximately <br />
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