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City of Ashland, Oregon / City Recorder / City Council Information / Packet Archives / Year 2003 / 08/19 / Water Rev. Bonds

Water Rev. Bonds

[Council Communication]  

Council Communication
Title: Report on June 2003 Water Revenue Bond Sale
Dept: Finance Department
Date: August 19, 2003
Submitted By: Lee Tuneberg, Finance Director
Approved By:
...........................		 Gino Grimaldi, City Administrator

Synopsis: In June of this year the city issued $5,625,000 in water revenue bonds to finance capital improvement projects scheduled for fiscal years 2003, 2004 and 2005 and to refund bonds issued in 1994 . The sale provided $2.94 million for the projects consistent with the 2002-03 budget and saved the city approximately $373,500 in interest on the refunded bonds.
Recommendation: No action required since the bond sale was approved in May by Resolution 2003-14.
Fiscal Impact: The 1994 bonds that were refunded had an average interest rate of 6.24%. The all-included true interest cost ( TIC) for the refunding bonds portion is 2.87%. Refunding of the 1994 bonds results in gross savings of $713,659, which is $373,532 in present value savings. The savings level is 15.2% of the amount of the new bonds, which far exceeds the minimum 3% savings required by the State of Oregon.
Background: The 2002 update of the Water Fund rate model identified the potential to finance $2.9 million in projects and potential savings if old bonds were refinanced at a lower rate.

On June 5, 2003, the City of Ashland received eleven bids from investment banking firms to purchase its Water Revenue Bonds, Series 2003. The bids ranged from 3.10% to 3.32%. The City awarded the bonds to Stone & Youngberg, San Francisco, CA, whose bid provided the lowest true interest cost (TIC) to the City. Moody's assigned an "Aaa" rating to the bonds since the bonds are insured. Moody's also assigned an "A3" underlying rating to bonds.

The TIC of the entire bond issue is 3.10%. The City paid $111,432 in costs of issuance, which included all professional services, underwriter's compensation, bond insurance, surety bond premium, rating, printing, and other expenses.

This current portion of this bond issue was budgeted for as part of the Capital Improvements Program for the Water Fund to finance water system improvements including property acquisition and construction of transmission and distribution lines, a reservoir and improvements to the treatment plant.

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