REPORT TO COUNCIL
SUBJECT
Title
Action on a Resolution Authorizing Documents and Actions Relating to Execution and Delivery of Three (3) Loan Agreements with Bank of America, N.A. and the Issuance and Delivery of the City's Subordinated Electric Revenue Refunding Bonds, Series 2020-1, Series 2020-2 and Series 2020-3 [Council Pillar: Deliver and Enhance High Quality Efficient Services and Infrastructure]
Report
BACKGROUND
Historical low interest rates provide an opportunity for the City to refund certain outstanding electric system bonds for debt service savings. In light of tax law changes made under the Tax Cuts and Jobs Act of 2017 which repealed the authority for municipalities to issue tax-exempt advance refunding bonds after December 31, 2017, in order to capitalize on the current market conditions, following a request for qualifications process and a review of proposals received, the Staff is recommending a refinance strategy through a direct placement transaction with Bank of America, N.A. (the "Bank"). In this transaction, the Bank will provide three loans to the City to refund (i) all of the City's outstanding Senior 2011 A Electric Revenue Bonds, (ii) all or a portion of the City's outstanding Senior 2013 A Electric Revenue Bonds, and (iii) the City's 2014 Subordinate Electric Revenue Bond, through the issuance of separate series of subordinated electric revenue bonds, Subordinate 2020-1, 2020-2, and 2020-3 Bonds (defined below), to be delivered to the Bank as evidence of the repayment obligations of the City for the respective loans.
The Subordinate 2020-1 and 2020-2 Bonds will initially be issued on a taxable basis, with the potential to be converted to a tax-exempt rate in the future. This structure allows the City to take advantage of low interest rates currently available in the market to lock in a threshold level of net present value savings with the potential to capture additional savings upon a conversion of the interest rate to a tax-exe...
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