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Home My WebLink About6 COPs closing Agenda Item # Public Utility Di ic Memorandum To: Board of Directors From: Mary Chapman, Administrative Services Manager Date: February 16, 2007 SUBJECT: 1. WHY THIS ITEM IS BEFORE THE BOARD With the closing of the 2006 COPs, the project funds were transferred to LAIF for investment. To move these funds to another investment instrument takes the Board's approval. 2. HISTORY At the December 20, 2006 board meeting, Sandra McDonald of McDonald Partners made a presentation to the Board regarding investing a portion of the Donner Lake Assessment Districtfunds into a long term investment until such time as the District needed the funds to make payments on the SRF loan. At the same time, Sandra reviewed her recommendation for investing the pipeline portion of the bond proceeds from the 2006 COP Project Funds which will be spent over the next 3 to 4 years. Since a request for action on this investment was not on the agenda,the Board was unable to act. Sandra will be at the 2/21/07 board meeting to review her recommendation with the Board. 3. NEW INFORMATION LAIF paid 5.156%for the month of January. Since the LAIF interest rates fluctuate,Sandra is recommending that we lock into a rate that is above the arbitrage rate of 4.25%. RECOMMENDATION: To authorize the District's Treasurer to invest the remaining Series 2006 COP construction funds in a fully flexible guaranteed investment contract that meets state law requirements and the criteria of the bond indenture. To further authorize Sandra McDonald of McDonald Partners to guide the District through the investment process for a fee not to exceed $5,000. Truckee Donner Public Utility District Series 2006 COP Construction Fund Investment February 21, 2007 McDonald Partners Series 2006 Bond Proceeds Investments • The Transaction included $12.3 million of pipeline replacement projects that will be constructed over a four year period • Bond issue was "Net Funded" to reduce overall issue size • Bond Proceeds are permitted to earn up to 4.25 — Additional earnings must be rebated to US Treasury • Construction Fund is currently invested in LAIF — Approximate yield is 5.0% — Fluctuates monthly McDonald Partners 2 Series 2006 Bond Proceeds Investments LAIF Interest Rate Comparison 10.00 9.00 8.00 W: 7.00 6.00 5.00 ._ 4.00 m 3.00 .' 2.00 1.00 0.00 O .• N M v� �O t` oo O� O N M �t Ln �O M M cC 03 cd M cZ (z M ce3 cC M �LAI --:37TO. T-Bill 2 year T-Note • Yield can be fixed with full flexibility to withdraw funds as needed with a guaranteed investment contract — Current yield is approximately 4.75%-5.0% McDonald Partners 3 GIC Provides Flexibility • Anticipated draw schedule is provided to potential bidders • Contract will specify the number of draws and deviations from the schedule — Typically two-three draws per month — Full flexibility to deviate from schedule is generally permitted — No termination payment or penalty if projected is accelerated • Funds cannot be withdrawn for any purpose other than permitted in the Trust Agreement — Specifically precludes withdrawals for investment at a higher rate McDonald Partners 4 Eligible Providers • MBIA has strict guidelines to ensure funds are protected • Providers, or their guarantors, must be rated Aa3/AA- Active Providers Bank of America AA-/Aal/AA- FSA AAA/Aaa/AAA AMBAC AAA/Aaa/AAA MBIA AAA/Aaa/AA Calyon Aa2/AA-/AA Rabo Bank AAA/Aaa/AA+ Citigroup AA-/Aal/AA+ Societe Generale AA-/ Aa2/AA Credit Suisse AA4Aa3/AA- UBS AA+ /Aa2/AA+ Depfa Bank AA3/AA-/AA- Wachovia Bank AA-/Aa2/AA- • Contracts must include remedies for downgrade: — Collateral — Assignment — Termination • MBIA does not charge a fee for granting consent McDonald Partners 5 Bidding Process • At least three bids are required to fall under the "safe harbor" rules in the tax code — No question about investment yield for rebate purposes • McDonald Partners is prepared to manage the process for TDPUD — Prepare bid specs — Notify bidders — Explain TDPUD credit — Accept/Negotiate exceptions to bid specs — Take bids/award contract — Negotiate agreement McDonald Partners 6 Anticipated Costs • Stradling will review bid process and require specific certifications from the Provider and McDonald Partners — Stradling will not charge a fee in connection with this process • McDonald Partners does not charge a bidding agent fee — Work is performed at our normal hourly rate and is covered under our financial advisory contract — Estimated fee is in the range of $5,000 • Provider' s legal fees are at their own expense McDonald Partners 7 Anticipated Timing • Week One — Prepare Bid Specifications — Review with Bond Counsel • Week Two — Distribute Specs to Bidders — Provide Credit docs — Review Special Provisions • Week Three — Take Bids — Specific Time — Telephonic, fax Confirm — Award within fifteen minutes • Week Four — Negotiate Agreement, Close McDonald Partners 8 Series 2006 Bond Proceeds - Recommendation • Authorize staff to invest the remaining Series 2006 COP construction funds in a fully flexible guaranteed investment contract that meets state law requirements and the criteria of the bond indenture McDonald Partners 9