Electric Bond Options ERMUSR 11-09-2005 lip
Elk River
1 Municipal Utilities
13069 Orono Parkway phone: 763.441.2020
I
Elk River,MN 55330 Fax.763.441 8099
I
October 5, 2005
I To: Elk River Municipal Utilities Commission
Jerry Takle
John Dietz
IJim Tralle
From: Bryan Adams
ISubject: Electric Bond Options
I
At the September 13`11, 2005 Elk River Municipal Utilities Commission meeting, we
discussed options for our upcoming electric bond issue. Anthony Hedlof of MMUA
made a presentation using MCMU bond pool. Anthony Hedlof and Kathleen Aho of
NO Springsted will be at our meeting with more information. Srpingsted is MCMU financial
advisors and the former City of Elk River financial advisor.
I Enclosed is an Email and graph reflecting the history of tax-exempt variable rates which
is a good indicator of MCMU program rates.
I The commission asks what would be the impact on communities with outstanding loans
if the $50 million draw down bond was not completely spent before the required time.
The initial response is no effect. This issue will be addressed further at our meeting.
I
Page 1 of 1
110 Bryan Adams
From: "Leo Lawrenson" <Leo@Lawrenson corn>
I
To: <bryada@nsatel.net>
Cc: "'Jack Kegel"' <jkegel@mmua.org>; "'Anthony Hedlof" <ahedlof@mmua.org>
Sent: Thursday, September 22, 2005 7:34 AM
I Attach: BMA History 9-7-05.pdf
Subject: MMUA Variable Rate
As Jack Kegel has requested, I have attached a graph depicting the history of tax-exempt variable rates, the Bond
I Market Association (BMA) Municipal Swap Index, a very good indicator of where MCMU Program rates would
have been, even before the MCMU Program came into existence. As you can see on the graph, last week's BMA
was 2.43%, while the historical average (over 20 years) is 3.473%. The average over the last year is 2.094%,
I
and the last 5 years is 1.823%. There has never been a period in the last 25 years where variable rate hasn't
averaged lower than fixed rate for any term over 10 years.
By way of comparison, our current fixed rate for a 30-yr Loan term (18-yr Weighted Average Maturity) is 4.04%,
' for a 20-yr term (12-yr WAM) is 3.82%, and for a 10-yr term (6-yr WAM) is 3.47%.
To all the above mentioned rates (variable or fixed), we add approximately 0.80-0.90% for ongoing fees and costs
Iof issuance, so the all-in yield on a MCMU Loan would be approximately that much higher.
If you have any questions, please don't hesitate to call me direct. Thanks!
I -Leo
apLeo J. Lawrenson, President
Lawrenson Services Inc.
1393 Riverview Run Lane
Suwanee, Georgia 30024
I
Leo@Lawrenson.com
Phone 678-714-4933 Fax 678-714-4678
I
I
I
I
la
I10/6/2005
8% - - BMA Muni Swap Index History
Average of Muni Variable Rates
7% -
6% - '
, Sti IlL
8%
J' �\
j
k I il4% a
1IiiiIWI' 911111Trillik
. :1,ii p 1 SII ±,I711)11:
3% IVIP
s
--Weekly • '1117:111
-�-1-Yr Avg I I
2% 1
-•-5-Yr Avg 1
Hist Avg
1% - ,
0%
'sAi Aim �i moi. 'i i� i� moi• �i �i� �i ?. z �i >0,, 4'411, Nto \\NI,
Lawrenson Services Inc. 9/22/2005 BMA H,story.xls
IIII NIP IMO - 111 NM 111111 IN - a - l... — MIN — 1111111.11111111