HomeMy WebLinkAbout12 Finance District Admin Building Agenda Item #
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Staff Report
To: Board of Directors
From: Mary Chapman, Administrative Services Manager
Date: January 31, 2003
Subject: Consideration of approving the payoff of the 1993 Certerficates of
Participation for the financing of the District's Administration
Building
1. Why this item is before the board
At the January 2, 2003 meeting, the Board directed staff to ask Hugh Black of Bank
of New York to begin the call process to redeem the 1993 Certificates of
Participation. Hugh has begun the process and will be sending the District a letter
describing how much the District will have to deposit and by when in order to
complete the redemption transaction. The transaction is scheduled to take place on
March 3, 2003.
2. History
When the building was constructed, the Board set aside certain cash reserves to
assist in paying for the building. Over the years, the reserve accounts have been
accumulating interest such that there are now sufficient funds available to redeem
the bonds. Because we are earning approximately 2% interest on the building
funds and we are paying between 4.6% and 5.375% on the outstanding bonds, the
Board decided to proceed with the redemption.
The balance in the restricted funds accounts as of December 31, 2002 are:
Electric Building Fund $1,431,358.44
Water Building Fund 465,465.68
Building Reserve Fund 271,333.17
Total funds available $2,168,157.29
The principal balance on the COP's at December 31, 2002 was $2,030,000. There
was a 2% prepayment penalty at the time in the amount of $40,600 for a total payoff
of$2,070,600 plus accrued interest to the date of redemption.
3. New information
Since the Board directed staff to proceed with the bond call, Sandra McDonald, the
investment banker and the underwriter for the $26 million COP's asked us to hold off
for a few days so that they could evaluate whether it would be an advantage or
disadvantage to the District to have the debt on or off our books. They determined
that we should proceed with the payoff. As a result of the delay, we had to proceed
with the loan payment on 2/3/03. The principal balance is now $1,870,000. The 2%
prepayment penalty is now $37,400. We will still owe accrued interest until the
payoff date. However, there will also be additional interest earnings on the restricted
funds and the Reserve Fund. The additional interest earnings along with the
reduction in the prepayment penalty offsets most of the additional interest cost.
I am currently awaiting a payoff from Hugh Black which will describe the details of
the transaction and I will forward it to you as soon as I receive it.
4. Recommendation
To authorize staff to transfer from the restricted funds the amount required to redeem
the 1993 Certificates of Participation on the date required by the Trustee.
FEB, -03' 03 (MON) 15:.'.3 BNY WESTERN TRUST COMPANY TEL:213 620 6216 P. 001
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TIM&W 01'%YOU COMPANY,INC.
February 3, 2003
Mary Chapman
Truckee Donner Public Utility District
11570 Donner Pass Road
Truckee, California 96160
RE: Truckee Donner PL1D '93
Dear Mary Chapman: Refunding COP's
Thank you for your letter of January 24,2003 pertaining to the above
captioned issue. In reply to it,BNY has prepared the appropriate Notice to Bondholders
to present their bonds for payment March 3, 2003 (March i is on Saturday this year).
There are$1,870,000 in bonds outstanding. BNY must redeem at 102%because
of a premium called for by the Trust Indenture. Therefore,the total due plus interest to
March 3, 2003 is $1,916,000, Due to deposits on hand in your account of$269,939,
your net deposit for March 3, 2003 will be$1,646,061, We suggest a deposit by
February 26,2003 so that we can clear funds with the FED for March 3. Your deposit
will cam daily interest until used, and any balance remaining after the redemption will be
returned ro the PUD after March 3,2003. Please deposit funds in your Lease Payment
Fund#364996.
March 3. I believe this covers all the steps we need to take between now and
Please feel welcome to call if there are any questions.
Very Truly Yours,
-0Q.AC"s
Hugh lack
Assistant Vice President
213-630-6243
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