7.3. SR 12-17-2007REQUEST ~ORACTION
To Item Number
City Council 7.3•
Agenda Section Meeting Date Prepared by
Administration December 17, 2007 Tim Simon, Finance Director
Item Description Reviewed by
Pre-Sale report for $3,045,000 G.O. Water Revenue Refunding Lori ohnson, Ci Administrator
Bonds, Series 2008A Reviewed by
Action Requested
The City Council is asked to review and approve the Pre-Sale report for $3,045,000 G.O. Water Revenue
Refunding Bonds, Series 2008A.
Background/Discussion
Due to changes in the bond interest rate environment and the City's upgrade in bond rating, it provides
an opportunity for the Water Utility to refund Water Revenue Bonds, Series 1998B & 2001A. The
average interest rate on Series 1998B & 2001A is 4.75 percent. It is expected that these bonds could be
refunded at or below 4 percent. This would provide a future value savings of approximately $120,000
after issuance costs. If interest rates increase prior to the sale and no longer represent a savings of at least
3 percent of the refunded principal, the sale may be delayed or cancelled.
The utility commission on December 11, 2007, approved a resolution authorizing the City Council to
proceed with the current proposed refunding.
Next Steas
January 22, 2008 -the City Council will issue and award sale of the Bonds.
Financial Impact
The bonds will be repaid with revenues from the water utility.
Attachments
• Pre-sale report
ActlOn Motion by Second by Vote
Follow Up
S: \Council\Tim\2008Axefunding. doc
ia` ~ ~~~
~~
Cit~j of
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Liver
Pre-Sale Report
G.O. Water Revenue Refunding Bonds, Series 2008A
December, 2007
Proposed Issue: $3,045,000 G.O. Water Revenue Refunding Bonds, Series 2008A
Purpose: Provide for a current refunding of the $395,000 of remaining principal of the
$820,000 G.O. Water Revenue Bonds, Series 1998B and a crossover refunding
for the $3,590,000 G.O. Water Revenue Bonds, Series 2001A. The 2001A
Bonds are not callable until February 1, 2010, but proceeds of the Bonds are to
be escrowed until the call date. Savings on the 2001A Bonds would begin in
2010 while the 1998B Bonds would be called in early 2008 and savings would
commence later that year.
Term/Call Feature: We do not anticipate changing the original term of the 2001A or the 1998B
Bonds. The first interest payment on the new Bonds will be August 1, 2008.
The principal payments will be February 1, 2009, and the final payment is
February 1, 2022. We propose a call (pre-payment) date of February 1, 2017,
which is in nine years.
Proposed Savings: The interest rates on the prior bonds average over 4.75%. We expect interest
rates today to be at or below 4%. The savings of the two issues combined is
expected to be over $120,000 in future value savings and over $90,000 in present
value savings after any fees are paid. State law requires the savings to be at least
3% of refunded principal. If interest rates increase prior to the sale, we will
recommend in delay in the sale at no cost to the City.
Funding Sources: The funding source will be revenues from the City's water utility system
operated by the Elk River Municipal Utilities. State law under Chapter 444
allows the City to pledge its general obligation to water revenue bonds (unlike
electric revenue bonds). This means no debt service reserve or other rate
covenants are necessary. Because the taxpayers are pledging to pay debt service
if revenues are inadequate, G.O. bonds carry the lowest possible interest rates.
Other Issues: The Bonds are expected to be rated by Moody's at an "Aa3" level utilizing the
City's debt rating rather than the Utilities revenue bond rating. They may be
considered for bond insurance up to a "Aaa" level if qualified by private
insurance companies and if the winning bidder chooses to purchase bond
insurance.
Because the City expects to issue more than $5,000,000 in tax-exempt
obligations in 2008, the Bonds will be subject to arbitrage rebate. The escrow on
the crossover refunding bonds will be yield restricted and should not be a
concern for the City.
Because the City expects to issue less than $10,000,000 in tax-exempt
obligations in 2008, the Bonds will be bank qualified. This means the Bonds will
achieve a slightly lower interest rate.
Schedule:
Pre-Sale Report and Approval of
Bonds by Utility Commission:
December 11, 2007
Pre-Sale Report Review by City
Council:
Distribute Official Statement:
Conference call with Moody's
Bond Sale and City Council
Resolution approving Bonds
December 17, 2007
January 11, 2008
Week of January 14, 2008
January 22, 2008
Estimated Closing Date: Week of February 11, 2008
Attachment: ____
Preliminary debt service schedules and sources and uses
Ehlers Contacts:
Financial Advisors: Mark Ruff (651) 697-8505
Sid Inman (651) 697-8507
Bond Analysts: Diana Lockard (651) 697-8534
Debbie Holmes (651) 697-8536
Bond Sale Coordinator: Connie Kuck (651) 697-8527
The Official Statement for this financing will be mailed to the Council Members at their home address for review
prior to the sale date.
EHLER~
i ASSOCIATES INC
of Elk River, MN
$3,590,000 G.O. Water Revenue Bonds, Series 2001A
Prior Original Debt Service
Date Principal Coupon Interest Total P+I Fiscal Total
08/01/2008 - - 60,397.50 60,397.50 -
02/Ol/2009 - - 60,397.50 60,397.50 120,795.00
08!01/2009 - - 60,397.50 60,397.50 -
02/Ol/2010 - - 60,397.50 60,397.50 120,795.00
08/01/2010 - - 60,397.50 60,397.50 -
02/O1/2011 160,000.00 4.100% 60,397.50 220,397.50 280,795.00
08/01/2011 - - 57,117.50 57,117.50 -
02/O1/2012 170,000.00 4.250% 57,117.50 227,117.50 284,235.00
08/01/2012 - - 53,505.00 53,505.00 -
02/O1/2013 180,000.00 4.350% 53 505.00 233 505 00 .,287,010.00
08/01/2013 - - 49,590.00 49,590.00 -
02/O]/2014 185,000.00 4.600% 49,590.00 234,590.00 284,180.00
08/01/2014 - - 45,335.00 45,335.00 -
02/O1/2015 195,000.00 4.600% 45,335.00 240,335.00 285,670.00
08/01/2015 - - 40,850.00 40,85000 -
_._.
02/Ol/2016 205,000.00 4.750% 40,850.00 245,850.00 286,700.00
08/01/2016 - - 35,981.25 35,981.25 -
02/O1/2017 2 ] 5,000.00 4.750% 35,981.25 250,981.25 286,962.50
08/01/2017 - - 30,875.00 30,875.00 -
02/O1/2018 230,000.00 4.850% ..30,875.00
__. 260,875.00
___ 291,750.00
08/01/2018 - 25,297.50 25,297.50 -
02/O1/2019 240,000.00 4.850% 25,297.50 265,297.50 290,595.00
08/01 /2019 - - 19,477.50 19,477.50 -
02/O1/2020 250,000.00 4.900% 19,477.50 269,477.50 288,955.00
08/01/2020 - - 13,352.50 13,352.50 -
02/01/2021 265,000.00 4.900% 13,352.50 278,352.50 291,705.00
08/01/2021 - - 6,860.00 6,860.00 -
02/O1/2022 280,000.00 4.900% 6,860.00 286,860.00 293,720.00
Total $2,575,000.00 - $1,118,867.50 $3,693,867.50 -
Yield Statistics
Average Life __
Weighted Average Maturity (Par Basts)
__ __
Refunding Bond Information
9.093 Years
___
9.093 Years
4.7784220%
Refunding Dated Date _ 2/01/2008
Refunding Delivery Date 2/01/2008
Ser 01A $3.59M GO Wtr Rev ~ SINGLE PURPOSE ~ 11/ 1/2007 1 11:51 AM
City of Elk River, MN
$820,000 G.O. Water Revenue Bonds, Series 1998B
Prior Original Debt Service
Date Principal Coupon Interest Total P+I Fiscal Total
oz/o 1 /zoos - - - - -
08/01 /2008 - - 9,407.50 9,407.50 -
02/Ol/2009 60,000.00 4.500% 9,407.50 69,407.50 78,815.00
08/01/2009 - - 8,057.50 8,057.50 -
02/Ol/2010 60,000.00 4.600% 8,057.50
.. 68,057.50 _ 76,115.00.
08/O 1 /2010 _ 6,677.50 6,677.50
02/01/2011 65,000.00 4.700% 6,677.50 71,677.50 78,355.00
08/01 /2011 - - 5,150.00 5,150.00 -
02/Ol/2012 65,000.00 4.800% 5,150.00 70,150.00 75,300.00
08/01/2012 - - 3,590.00 3,590.00 -
02/01/2013 70,000.00 4.900% 3,590.00 73,590.00 77,180.00
08/01/2013 - - 1,875.00 1,875.00 -
02/Ol/2014 75,000.00 5.000% 1,875.00 76,875.00 78,750.00
Total $395,000.00 - $69,515.00 $464,515.00 -
Yield Statistics
Average Life 3.633 Years
Weighted Avera a Maturi Par Basis 3 633 Years
°_
n r,.,,.,,.., 4.8442509 /°
Refunding Bond Information
Dated Date
......._..._._...____________
Delivery Date
z/o vzoos
2/01 /2008
Ser 986 $820K GO Wtr Rev ~ SINGLE PURPOSE ~ 11/ 1/2007 ~ 11:51 AM
City of Elk River, MN
Proposed Crossover Refunding of
$3,590,000 G.O. Water Revenue B onds, Series 2001A &
Current Refunding of $820,000 G.O. Water Revenue Bonds, Series 1998B
Debt Service Schedule
Date Principal Coupon Interest Total P+I Fiscal Total
oz/o 1 /zoos - - - - -
08/Ol/2008 - - 55,725.50 55,725.50 -
02/01/2009 60,000.00 3.400% 55,725.50 115,725.50 171,451.00
08/01/2009 - - 54,705.50 54,705.50 -
02/01 /2010 65,000.00 3.400% 54,705.50
._ 119,705.50
_ _ ] 74,411.00
08/01/2010 _ 53,600.50 53,600.50
02/01/2011 245,000.00 3.400% 53,600.50 298,600.50 352,201.00
08/01/2011 - - 49,435.50 49,435.50 -
02/01/2012 255,000.00 3.450% 49,435.50 304,435.50 353,871.00
08/01/2012 - - 45,036.75 45,036.75 -
02/01/2013 265,000.00 3.500% 45,036.75 310,036.75 355,073.50
08/01/2013 - - 40,399.25 40,399.25 -
02/O1/2014 270,000.00 3.550% 40,399.25 310,399.25 350,798.50
08/01/2014 - - 35,606.75 35,606.75 -
02/O1/2015 205,000.00 3.600% 35,606.75 240,606.75 276,213.50,
08/01/2015 - - 3],916.75 31,916.75 -
02/O1/2016 215,000.00 3.650% 31,916.75 246,916.75 278,833.50
08/01/2016 - - 27,993.00 27,993.00 -
02/O1/2017 220,000.00 3.700% 27,993.00 247,993.00 275,986.00
08/01 /2017 - - 23,923.00 23,923.00 _ -
02/01/2018 230,000.00 3.750% 23,923.00 253,923.00 277,846.00
08/01 /20 ] 8 - - 19,610.50 19,610.50 -
02/O1/2019 240,000.00 3.800% 19,610.50 259,610.50 279,221.00
08/01/2019 - - 15,050.50 15,050.50 -
02/O1/2020 250,000.00 3.850% 15,050.50 265,050.50 280,101.00
__ __
08/01/2020 -
-
10,238.00
10,238.00
-
02/01/2021 260,000.00 3.880% 10,238.00 270,238.00 280,476.00
08/01 /2021 - - 5,194.00 5,194.00 -
02/Ol/2022 265,000.00 3.920% 5,194.00 270,194.00 275,388.00
Total $3,045,000.00 - $936,871.00 $3,981,871.00 -
Yield Statistics
Bond Year Dollars $25,055.00
__ _ __.
Average Life __ _ 8.228 Years
Average Coupon 3 7392576%
Net Interest Cost (NIC) 3.8850968%
_.
True Interest Cost (TiC)
_
3.9066732%
Bond Yield for Arbitrage Purposes 3.7302036%
All Inclusive Cost (AIC)
_ _... _ 4.0784896%
IRS Form 8038
Net Interest Cost 3.7392576%
Weighted Average Maturity 8.228 Years
08 xover of Ser 01A & cur ~ Issue Summary ~ 11/ 1/2007 ~ 11:51 AM
~ / ~ • ~
.~' ~ • .~-
City of Elk River, MN
Proposed Crossover Refunding of
$3,590,000 G.O. Water Revenue Bonds, Series 2001A &
Current Refunding of $820,000 G.O. Water Revenue Bonds, Series 1998B
Total Issue Sources And Uses
Dated 02/01/2008 ~ Delivered 02/01/2008
Ser 01A Ser 98B
$3.59M $820K Issue
XOVER CURR Summary
Sources Of Funds
Par Amount of Bonds $2,645,000.00 $400,000.00 $3,045,000.00
Total Sources $2,645,000.00 $400,000.00 $3,045,000.00
Uses Of Funds
Total Underwriter's Discount (1.200%) 31,740.00 4,800.00 36,540.00
Costs of Issuance 30,402.30 4,597.70 35,000.00
Deposit to Current Refunding Fund 2,578,078.12
__ 395,000.00 2,973,078.12
Rounding Amount......... __ _ _ 4,779.58. _ (4,397.70) 381.88..
Total Uses $2,645,000.00 $400,000.00 $3,045,000.00
O8 xover of Ser 01A & cur ~ Issue Summary ~ 11/ 1/2007 ~ 11:51 AM
~ ~ ~ ~ ~
.~' ~ • .~-
City of Elk River, MN
Proposed Crossover Refunding of
$3,590,000 G.O. Water Revenue Bonds, Series 2001A &
Current Refunding of $820,000 G.O. Water Revenue Bonds, Series 1998B
Debt Service Comparison
Date Total P+I PCF Existing D/S Net New D/S Old Net D/S Savings
02/01/2008 - - - (381.88) - 381.88
02/01/2009 171,451.00 (97,641.00) 120,795.00 194,605.00 199,610.00 5,005.00
02/01/2010 174,411.00 (2,672,641.00) 2,695,795.00 197,565.00 196,910.00 (655.00)
02/01/2011 352,201.00 - - 352,201.00 359,150.00 6,949.00
02/01/2012 353,871.00 - - 353,871.00 359,535.00. 5,664.00
02/01/2013 355,073.50 - - 355,073.50 364,190.00 9,116.50
02/01/2014 350,798.50 - - 350,798.50 362,930.00 12,131.50
02/01/2015 276,213.50 - - 276,213.50 285,670.00 9,456.50
02/0]/2016 278,833.50 - - 278,833.50 286,700.00 7,866.50
02/01/2017 275,986.00 - - 275,986.00 286,962.50 10,976.50
02/01/2018 277,846.00 - - 277,846.00 291,750.00 13,904.00
02/01/2019 279,221.00 - - 279,221.00 290,595.00 11,374.00
02/01/2020 280,101.00 - - 280,101.00 288,955.00 8,854.00
02/01/2021 280,476.00 - - 280,476.00 291,705.00 11,229.00
02/01/2022 275,388.00 - - 275,388 00 293,720.00 18,332.00
Total $3,981,871.00 (2,770,282.00) $2,816,590.00 $4,027,797.12 $4,158,382.50 $130,585.38
PV Analysis Summary (Net to Net)
Gross PV Debt Service Savings ..... ...... _ __ _ 95,883.57..
Net PV Cashflow Savings @ 3.730%(Bond Yield)..... 95,883.57
Contingency or Rounding Amount ......... _ _
_ .. 381.88
_.
Net Present Value Benefit $96,265.45
Net PV Benefit / $2,954,378.20 PV Refunded Debt Service ,3.258%
Net PV Benefit / $2,575,000 Refunded Principal... 3.738%
Net PV Benefit / $3,045,000 Refunding Principal. 3.16 ]
Refunding Bond Information
Refunding Dated Date 2/01/2008
Refunding Delivery Date 2/01/2008
08 xover of Ser 01A & cur ~ Issue Summary ~ 11/ 1/2007 ~ 11:51 AM
~ ~ 1 ~
.~~ ~ • ~~.
City of Elk River, MN
Proposed Crossover Refunding of
$3,590,000 G.O. Water Revenue Bonds, Series 2001A &
Current Refunding of $820,000 G.O. Water Revenue Bonds, Series 1998B
Current Refunding Escrow
Date Principal Rate Interest Receipts Disbursements Cash Balance
02/01/2008 - - - 395,770.12 395,000.00 770.12
08/01/2008 - - 48,050.97 48,050.97 48,820.50 0.59
02/0]/2009 1,539.00 - 48,050.97 49,589.97 48,820.50 770.06
08/01/2009 - - 48,050.97 48,050.97 48,820.50 0.53
02/01/2010 2,575,769.00 3.731% 48,050.97 2,623,819.97 2,623,820.50 -
__
Total $2,577,308.00 - $192,203.88 $3,165,282.00 $3,165,282.00 -
Investment Parameters
Investment Model [PV, GIC, or Securities] Securities
_..
Default investment yield target Unrestricted
Cash Deposit 395,770.12
Cost of Investments Purchased with Bond Proceeds 2,577,308 00
Total Cost of Investments
__
_._ $2,973,078.12_
Target Cost of Investments at bond yield
_..... $2,973,033 75
Actual positive or (negative) arbitrage (44.37),
Yield to Receipt
_ - 3.7298651%
_...._
Y1eld for Arbitrage Purposes 3.7302036%
State and Local Government Series (BEGS) rates for 10/30/2007
08 xover of Ser 01A & cur ~ Issue Summary ~ 11/ 1/2007 ~ 11:51 AM
~ / ~ ~ ~
of Elk River, MN
Proposed Crossover Refunding of
$3,590,000 G.O. Water Revenue Bonds, Series 2001A
Debt Service Comparison
Date Total P+I PCF Existing D/S Net New D/S Old Net D/S Savings
02/01/2008 - - - (4,779.58) - 4,779.58
02/01/2009 97,641.00 (97,641.00) 120,795.00 120,795.00 120,795.00 -
02/O1/20I0 97,641.00 (2,672,641.00) 2,695,795.00 120,795.00 120,795.00 -
02/O1/2011 277,641.00 - - 277,641.00 280,795.00 3,154.00
02/01/2012 276,521.00 - - 276,521.00 284,235.00 7,714.00
02/01/2013 280,138.50 - 280,138.50 287,010.00 6,871.50
02/01/2014 278,313.50 - - 278,313.50 284,180.00 5,866.50
02/01/2015 276,213.50 - - 276,213.50 285,670.00 9,456.50
02/01/2016 278,833.50 - - 278,833.50 286,700.00 7,866.50
02/01/2017 275,986.00 - - 275,986.00 286,962 50 10,976.50
02/01/2018 277,846.00 - - 277,846.00 291,750.00 13,904.00
02/01/2019 279,221.00 - - 279,221.00 290,595.00 11,374.00
02/01/2020 280,101.00 - - 280,101.00 288,955.00 8,854.00
02/01/2021 280,476.00 - - 280,476.00 291,705.00 11,229.00
02/01/2022 275,388.00 - - 275,388.00 293,720.00 18,332.00
Total $3,531,961.00 (2,770,282.00) $2,816,590.00 53,573,489.42 $3,693,867.50 $120,378.08
PV Analysis Summary (Net to Net)
Gross PV Debt Service Savings.... ..... __ 82,989.98„
_ _._...
Net PV Cashflow Savings @..3.730%(Bond Yield)..... _ _ _ _ 82,989.98_
Contingency or Rounding Amount ................
Net Present Value Benefit
4,779.58
$87,769.56
Net PV Benefit / $2,544,815.22 PV Refunded Debt Service
Net PV Benefit / $2,575,000 Refunded Principal...
Net PV Benefit / $2,645,000 Refunding Principal..
Refunding Bond Information
Dated Date
________ .._ ..............._..__.
Delivery Date
3.449%
_ _ . 3.409%
_ __ __ 3.318%
z/o1/2008
2/Ol /2008
08 xover of Ser 01A & cur ~ Ser 01A $3.59M ROVER ~ 11/ 1/2007 ~ 11:51 AM
City of Elk River, MN
Proposed Current Refunding of
$820,000 G.O. Water Revenue Bonds, Serie s 1998B
Debt Service Comparison
Net New
Date Total P+I D/S Old Net D/S Savings
02/01 /2008 - 4,397.70 - (4,397.70)
02/01 /2009 73,810.00 73,810.00 78,815.00 5,005.00
02/01 /2010 76,770.00 76,770.00 76,115.00 (655.00)
02/01 /2011 74,560.00 74,560.00 78,355.00 3,795.00
02/01/2012 77,350.00 77,350.00 75,300.00 (2,050.00)
02/01 /2013 74,935.00 74,935.00 77,180.00 2,245.00
02/01 /2014 72,485.00 72,485.00 78,750.00 6,265.00
Total $449,910.00 $454,307.70 $464,515.00 $10,207.30
PV Analysis Summary (Net to Net)
Gross PV Debt Service Savings .. .............
_.._ _
_. _ _ _ _ 12,893.58__
Net PV Cashflow Savings @ 3.730%(Bond Yield)...., _ _ _ _ _ 12,893 58
Contingency or Rounding Amount . ............
- - _
_._ _ (4,397 70)
__
Net Present Value Benefit $8,495.88
_. _.__
Net PV Benefit / $409,562.98 PV Refunded Debt Service .2.074%
Net PV Benefit / $395,000 Refunded Pnncipal.. _ _ 2.151%
_.
Net PV Benefit / $400,000 Refunding Principal..
_
__ 2,.,124%
Refunding Bond Information
Refunding Dated Date 2/01/2008
Refunding Delivery Date 2/01/2008
OS xover of Ser 01A & cur ~ Ser 986 $820K CURR ~ 11/ 1/2007 ~ 11:51 AM
~ ~ ~ • ~