04-06-12 BPU RPT 16 - Laserfiche WebLink

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W A 1 Eft C E R G Y L I F E OW& RIVERSIDE PUBLIC UTILITIES Boatd Memorandum PUBLIC UTILITIES BOARD OF PUBLIC UTILITIES DATE; April 6, 2012 ITEM NO: 16 SUBJECT= APPROVE THE REMARKETING OF 2011AWATER REFUNDING REVENUE BONDS WITH A NEW INDEX INTEREST RATE PERIOD ISSUE: That the Board of Public Utilities consider approval of remarketing the 2011A Water Refunding Revenue Bonds to reflect a new Index Interest Rate Period. RECOMMENDATIONS: That the Board of Public Utilities recommend that the City Council; 1. Approve the City's Financing Team; 2. Delegate to the City's Financing Team authority to make adjustments to the proposed structure of the Index Interest Rate Period ; 3. Approve and adopt the SIFMA Remarketing Management Policy; 4. Adopt the appropriate resolution to approve the preparation of future Reoffering Statements consistent with the initial authorization approving the 2011A Water Revenue Bond Index Interest Rate Pedod(s); and 5. Authorize the City Manager, or his designee, to execute all documents related to this transaction. BACKGROUND. On April 26, 2011, the City Council approved the issuance of approximately $59,000,000 of debt to refund debt that was held as Variable Rate Demand Obligations(VRDOs). The 2011 debt was issued as long-term SIFMA Index Bonds with an initial one-year Index Interest Rate Period (2011A issuance). In essence, the bonds represent a long term obligation, with a short term interest period. The initial Index Rate Scheduled Purchase Date for the 2011A issuance is June 1, 2012, although the bonds can be redeemed prior to that date. The proposed remarketing is expected to again place the debt into long-term SIFMA Index Bonds with a one-year Index Interest Rate Period. The term of the new Index Interest Rate Period is expected to commence on April 25,2012 through April 25, 2013. Alternatively, a longer(two year) interest rate period is being explored by the Financing Team to reduce ongoing costs of remarketing, . This transaction does not represent a new debt obligation. The 2011A issuance was sold with a variable interest rate equal to the weekly SIFMA Index plus 0.07% (SIFMA plus 7 basis points). Maintenance of the long-term SIFMA Index Bonds with annual refunding is expected to save $564,000 (present value) over alternative financing options such as the VRDOs that the SIFMA program replaced.