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Home My WebLink About18 Proposed Refinancing of the Water 2006 COPAgenda Item #18 T o: From: Date: Subject: Board o f Directors Robert Mesc her May 20, 2 015 Discuss io n of Propos e d Refinancing of the Water 2006 Refunding Revenue C ert if icates of Participation (2006 COP) WORKS HO P 1. WHY T HIS MAT T ER IS BEFORE T HE BOARD This item involves discussion of a pro posed refunding ("refinancing") of the W ater 2006 Refundi ng Revenue Certificates of Parti ci pati on (2006 COPs). 2. HIST ORY On October 12, 2006, Truckee Donne r Pub l i c Utility Distri ct Financing Corporati on i ssued $26,570,000 of W ater 2006 Refundin g Revenue Certi ficates of Partici pati on (2006 COPs), which mature in 2036. The 200 6 COPs were i ssued to r efund 100% of the outstanding bal ance of the 1996 COPs, c ompl ete the funding of th e Donner Lake Assessment District water system, and fund water system capital i mpr ovements. The refunding portion of the 2006 COP’s, totaling $8,465,000, has an avera ge i nterest rate of 4.10%. The terms of the Certi ficates call fo r paymen ts to be made only from the net revenue s of the W ater Utility and th e deb t is secu red by this revenue. These revenue s are requi red to be at l east eq ual to 125% of the debt service for each year. The principal bal ance as of today is $20,080,0 00. Since a porti on of the 2006 COPs was used for advance refunding of p revi ous COPs, that portion cannot be advance refunde d aga in. Therefore, the refunding analysis is only for the new money portion of the 2006 CO Ps. 3. NEW INFORMAT ION Brandis Tallman LLC, a ful l service investmen t banking firm and broker/dealer in San Francisco, and the firm that assi sted the Di strict wi th its CalPERS Side Fund refinanci ng in 2011 and the Old Green wood bond refunding in 2014, contacted the District to propose the refunding of the 2006 C OPs. The recent decrea se i n munici pal bond i n terest rates and the terms of th e 2006 COPs makes the refundi ng economi cally feasi ble at this ti me. The District has discussed the time line and fi nancing plan wi th Brandi s Tal l man. The method of sale would be a publ i c offering of b onds maturing i n 2035. Robert Mescher Mi chael D. Holley Admini strati ve Services Mana ger General Manager method of sale would be a publ i c offering of b onds maturing i n 2035. Current market interest rates are estimated to range fr om 2.00% in 20 15 to 5.00% in the final maturity of 203 5, wi th the ave rage i nterest rate being about 2.96%. This is over 100 basis points o f savings in interest r ate when compared to th e 2006 COPs. The detailed analysi s o f the refunding (Attach ment 1) illustrates that the W ater Utility could sa ve approximate l y $100,000 per year through th e term of the bo nds. The steps for refundi ng are: Preliminary proposal -May 20, 2015 (tonigh t), Present the fi nanci ng documents to the Board for approval -June 8, 2015, Meet with rating agencies -June 2015 , Publish the Public Offeri ng Statement -July 2015, Sel l the 2015 Refundi ng Bonds -Jul y 2015 , Close the transacti on and deposit funds with t he Trustee -July 2015, Send the call noti ces for the 2006 COPs -Oct ober 2015, and Cal l the 2006 COPs -November 2015. 4. FISCAL IMPACT The summary of the refinancing (Attachment 1) i l l ustra tes that the W ater Utility could save ap proxi mately $10 0,000 per year. Tota l savings are approximately $2.1 mi l l i on over the life of the issue, and net present val ue saving s are estimated at $1.6 mi l l i on or 10%. 5. RECOMMENDAT ION Direct staff to pursue the proposed refinanc ing of the 2006 COPs and to present financing documents to the Board for their re vi ew and approval at the June 8, 2015 Board Meeting.