HomeMy WebLinkAbout10 COP 1993 Agenda Item # ��
Memorandum
To: Board of Directors
From: Peter Holzmeister
Date: December 27, 2002
Subject: Redemption of COP Issue of 1993
I. WHY THIS ITEM IS BEFORE THE BOARD
During review of the budget we talked briefly about redeeming the COPs on the headquarters
building. The Board expressed interest in pursuing this matter further. Exercising the option to
redeem a COP issue is a Board function.
2. HISTORY
When the headquarters building was constructed we issued debt in the form of Certificates of
Participation (COP). In 1993 we refinanced the earlier COPs. We also set up a reserve fund to
help pay for the building, and that reserve fund currently stands as follows.
Water building fund $ 465,465
Electric building fund 1,431,358
COP reserve fund _271 109
Total $2,167,932
We are currently investing this $2,167,932 in LAIF at a rate of approximately 2%. The COPs carry
an interest rate ranging from 4.625% to5.375%. We are losing money on the investment.
3. NEW INFORMATION
The cost to pay off the COPs at this time including a 2% early payment penalty and accrued
interest to February 1, 2003, $2,122,736. However, we will also incur costs to process the call of
the COPs, We have a proposal from Bank of New York, the current Trustee of the COP issue, to
facilitate the call for a fee of$1,000. We can expect to incur some out-of-pocket expenses. The
total costs will surly be lower that the $45,169 difference between the available funds and the pay
off amount.
If the Board wishes to proceed, which I recommend, you should consider authorizing Bank of New
York, Trustee of the COP, to begin the process.
4. RECOMMENDATION
s
I recommend that the Board authorize Hugh Black of the Bank of New York, Trustee of the 1993
COP Issue, to begin the process of redeeming the COPs.