The City’s Finance Team and Financial Advisor have identified the following savings opportunity, which is discussed in greater detail below. The refunding of these obligations was recommended to the FERC on May 8, 2020, and the FERC recommended that Administration move forward with the refinancing.
The City’s $40 million in Outstanding Series 2009 Bonds became callable on December 1, 2020, and have interest rates ranging from 4.375-5.00% with a final maturity on December 1, 2039. A public offering of the Series 2021A Bonds enables the City to lock in savings with a fixed rate through the final maturity of the Series 2021A Bonds. The Administration and its Financial Advisor reviewed the possibility of refinancing the Outstanding Series 2009 Bonds with a bank loan, but determined that the ability to lock in the debt service through the final maturity of the refunding is the best alternative for utility rate setting.
Based on current market conditions, the net present value savings from refinancing the Outstanding Series 2009 Bonds would be approximately $11 million, which is 28% of bonds refunded. The total savings over 18 years would be approximately $13 million. The final maturity of the refunding will not be later than 2039, which is the final maturity of the Outstanding Series 2009 Bonds.
Municipal bond underwriting firms assist the City through the bond issuance process and serve as a liaison between the City and investors in the sale of its bonds. The underwriters’ main role is to generate investor demand and to market, price and sell the City’s Series 2021A Bonds to retail and institutional investors.
On January 22, 2021, the City Commission approved the selection of PNC Capital Markets LLC as the Senior Managing underwriter and Hilltop Securities Inc. as the Co-Managing underwriter for the Series 2021A Bonds.
Because of the character of the Series 2021A Bonds, current market conditions, the uncertainty inherent in a competitive bidding process and the recommendations of the Financial Advisor, it was determined that a negotiated sale of the Series 2021A Bonds rather than a sale through a competitive bid is in the best interest of the City.
The Resolution authorizing the issuance of the Series 2021A Bonds delegates to the City Manager, after consultation with, or relying upon the recommendation of, the Chief Financial Officer and the Financial Advisor, the determination of various terms of the Series 2021A Bonds, including whether to secure one or more Credit Facilities with respect to the Series 2021A Bonds and the final award of the Series 2021A Bonds.
Pursuant to the Resolution, (1) the Mayor is authorized to enter into a Bond Purchase Agreement with the Underwriters awarding the Series 2021A Bonds to the Underwriters, and (2) in connection with the City’s continuing disclosure obligations, the Chief Financial Officer is authorized to enter into a Disclosure Dissemination Agent Agreement with Digital Assurance Certification, L.L.C. (“DAC”), which is appointed as disclosure dissemination agent under the Resolution. U.S. Bank National Association is appointed as Bond Registrar for the Series 2021A Bonds under the Resolution.
The pricing of the bonds is anticipated to take place in mid May 2021 and an LTC will be distributed to the City Commission summarizing the final terms for the sale of the bonds.