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91 <br />To: Jay Hartman — Interim City Manager <br />Roger Larson — Finance Director <br />From: Stacie Kvilvang <br />Date: October 25, 2011 <br />Subject: Refinancing of Public Facilities Lease Revenue Bonds, Series 2003 <br />Overview <br />In 2003, the City issued $5,530,000 in lease revenue bonds to finance the construction of the Fire <br />Station and Public Works Facility. The date on which these bonds can be called (refinanced or paid <br />off) is February 1, 2013. However, the City has the ability to complete what is called an advance <br />refunding on any bond issue, meaning you can refinance it prior to the call date, once in the life of the <br />bond. <br />We are recommending moving forward with an advance refunding on this bond issue due to the very <br />favorable interest rates within the market. In addition, we are recommending refunding these bonds <br />as general obligation bonds to further reduce interest costs, thus increase savings to the City. <br />Primary Issues to Consider: <br />1. Why are we refunding these bonds as General Obligation bonds? <br />2. What is the process for the issuance of these bonds? <br />3. What is the timeline for the issuance of these bonds? <br />Analysis of Issues: <br />1. Why are we refunding these bonds as General Obligation bonds? <br />The reason we are recommending to refinance these bonds as general obligation bonds is to <br />further increase the annual interest savings to the City. Lease revenue bonds have a higher <br />interest rate associated with them because the repayment is based upon a pledge of revenues, <br />which in this case is an annual appropriation in the General Fund budget by the City. Since the <br />bonds are not backed by the City's general obligation pledge of its taxing authority, they are <br />viewed to be more risky because the City could choose in any year not to levy for the payment. <br />Current interest rates on these bonds are 3.2% to 4.15%. If these bonds were refinanced as lease <br />revenue bonds, there would not be adequate interest rate savings to justify refinancing them. <br />Based upon refinancing the bonds as general obligation bonds, the interest rates are estimated to <br />``' (J QQ 3060 Centre Pointe Drive <br />H LE RJ Roseville, MN 55113-1105 <br />e.._.._.__..._.___...______. <br />LEADERS IN PUBLIC FINANCE Phone: 651-697-8506 <br />Fax: 651-697-8555 <br />skvilvang@ehlers-inc.com <br />