26 - Refunding and Restructuring of General Obligation Redunding Bonds Series 2023

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Item No. 26 Memorandum TO: Mayor, Mayor Pro Tem & City Council FROM: Grayson Path, City Manager Gene Anderson, Finance Director SUBJECT: Refunding and Restructuring of GO Bonds Series 2013 DATE: September 25, 2023 In July 2013, the City issued $33,925,000.00 in General Obligation (GO) Bonds to replace aging water and wastewater lines throughout the City. The term of the loan was 20 years with an option to call the loan on December 15, 2023. The term "call" means the City can pay off the bond anytime on or after the call date. The most common reason to call a bond issue is when interest rates have fallen since the original bonds were issued and the new Refunding Bonds, carrying lower interest rates, can replace the old Bonds. The lower interest rates reduce the annual debt service payments without changing the final maturity date. Another common reason that bonds are called is to restructure the original debt. In this scenario, the payoff period of the refunding bonds can be shortened or extended depending upon the situation. On June 12, 2023, the City Council heard a presentation from our financial advisor regarding several options to proceed. Those options are repeated here: 1. The City can issue Refunding Bonds while maintaining the original final maturity of December 15, 2032. This option will reduce debt service by approximately $105,000/year totaling $945,000 in total savings (present value savings of $804,000). 2. The City can issue Refunding Bonds to restructure the existing bonds by adding 10 years to the final maturity. This will reduce the annual debt service by approximately $1,000,000/year through fiscal year 2033, but will increase the total debt service by approximately $4,250,000 (present value loss of $125,000) over the life of the bonds.