CC PACKET 11231993 - Laserfiche WebLink

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• Restructuring of debt service to accomplish larger jurisdictional financial objectives; and • Refinancing to modify legal constraints on original issue. Of these, the most common objective is to reduce interest costs. The advisability of a given issue being a good candidate for advance refunding to achieve interest cost reduction is based on four key characteristics of the issue. • The differential between the issue's existing interest rates and current market rates; • The amount of outstandingbonds subject toprepayment call ; 1 (call); • The time period over which bonds are subject to prepayment; and • The cash position and estimated income stream of the debt service fund. For this study, we will review each of the City's outstanding bond issues as to potential candidates for advance refunding. For those issues warranting more investigation, we will examine in depth the financial trade-offs of advance refunding. If advance refunding is appropriate for an issue(s), then we would identify that issue(s) for further action by the City. Defeasance Defeasance is the depositing of a sum-of funds with an escrow agent, such that when that sum is invested at legally permitted interest rates, an income stream is created to pay all remaining principal and interest on an outstanding debt obligation. Defeasance does not involve new debt issuance. With defeasance, the outstanding debt ceases to be an obligation of the. jurisdiction, and except for disclosure in the notes to the financial statements, no longer appears on the jurisdiction's balancesheets. In most cases as the debt obligation no longer exists, the jurisdiction has access to any remaining funds as well as future revenues of the debt service fund. The jurisdiction normally can expend those funds for any permitted use. There are a number of major policy questions which a jurisdiction should consider before defeasing an issue. As in all financial decisions, there are more advantageous times regarding market timing to conduct a defeasance. Some of the questions which the jurisdiction should • consider are: