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City of Lino Lakes, Minnesota April 1, 2010 411 12. Attachments • Refunding Schedules . Terms of Proposal DISCUSSION As noted previously, Moody's Investors Service has announced that it will be recalibrating U.S. municipal ratings to its "global scale." The purpose of this action is to "enhance the comparability of ratings" across the credits that Moody's rates. Recalibration will be done by sectors beginning in the middle of April. A schedule for the recalibrations is published which currently calls for ratings of local governments in the state of Iowa to be recalibrated on April 19. We expect that as a result of this recalibration, the City's rating for its general obligation bonds will recalibrate to "Aa1," an increase of one notch. In conjunction with the sale of the Bonds, we will be working with City staff to present relevant information to Moody's for consideration in its review of the City's rating. Proceeds of Bonds will be used to refund the February 1, 2011 through February 1, 2020 maturities of the City's General Obligation Improvement and Utility Revenue Bonds, Series 2004A, dated November 15, 2004 (the "Refunded Bonds ") and currently outstanding in the aggregate principal amount of $965,000. The issuance of the Bonds is being conducted as a "current" refunding, in which the proceeds of the Bonds are used within ninety days of bond settlement to redeem the outstanding principal of the Refunded Bonds. The refunding transaction is being undertaken to achieve interest cost savings. The Refunded Bonds were orginally issued to finance various street improvements (the "Street Improvement Portion ") and sanitary sewer and water utility improvements projects (the "Water Utility Portion ") within the City. • On July 1, 2010, the call date, the City will use the proceeds of the Bonds to redeem the remaining $965,000 outstanding principal on the Refunded Bonds. Beginning with the February 1, 2011 principal & interest payment, the City will begin to make debt service payments on the Bonds, realizing the interest cost savings. The City will need to invest the proceeds of the Bonds for the period between the closing date and the July 1, 2010 call date in order to achieve the savings level estimated for this transaction. • Based on current interest rate estimates, the refunding is projected to result in the City realizing an average cash flow savings of approximately $4,260 per year. This results in future value savings of approximately $45,410, with a net present value benefit to the City of approximately $41,120. These estimates are net of all costs associated with the refunding. We have attached a set of schedules that summarize the refunding statistics and the projected savings resulting from the sale of the Bonds. These schedules include the following information about the Bonds: • Preliminary Feasibility Summary: shows the detailed sources and uses of funds for the Bonds and statistical information relating to the refunding transaction — page 7. • Prior Original Debt Service: shows the existing debt service requirements on the Refunded Bonds without a refunding — page 8. • Debt Service to Call and to Maturity: shows the Refunded Bonds' remaining debt service to the call date and to maturity — page 9. • Debt Service Schedule: shows the new projected debt service on the Bonds, based on current estimated interest rates — pages 10 -12. • Debt Service Comparison: shows the debt service comparison and the projected annual cash flow savings of the Bonds to the Refunded Bonds — page 13. Page 5