04-14-2014 Council Minutes - Laserfiche WebLink

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MINUTES OF THE ORONO CITY COUNCIL MEETING Monday, April 14, 2014 7:00 o’clock p.m. _____________________________________________________________________________________ Page 25 of 30 (18. POLICE GARAGE AND ADDITION PROJECT, 2750 KELLEY PARKWAY, Continued) (b) Supplemental Capital Improvement Plan and Confirm Intent to Issue Bonds - (Public Hearing) – RESOLUTION NO. 6385, Continued Kimmel stated the overall bond issue for all three purposes is approximately $5,388,000. The last four maturities on the existing bond issue have interest rates ranging from 3.75 to 4 percent. It is projected that the refunding portion of the new bond issue will have interest rates ranging from .5 to 1.05 percent. The significant drop in interest rates will save the City an approximate $46,000 over the remaining four years of the bond issue. Kimmel stated they are not proposing to change the term of the bonds in any way for the refunding and that it is basically swapping new interest rates for the old interest rates. Kimmel pointed out the police portion and the water portion of the bonds is for a 15-year term and will be paid in the years 2015 through 2029. The bonds maturing on and after February 1, 2014, will be subject to call at the City’s option with no prepayment penalty. Those six maturities total $2.15 million of the proposed bond issue, which is almost 40 percent. Kimmel stated the City will have some significant flexibility in future years to either refinance if interest rates permit or to pay off the bonds. Kimmel stated as it relates to the method of sale, he would recommend a competitive bid process, which is what the City has utilized for previous bond issues. Kimmel stated with the City’s AAA credit rating, they anticipate strong interest in the bonds. A discount bid will be allowed, which is like allowing points on a mortgage and is basically an allowance for an underwriter’s commission. Kimmel stated they actually expect a premium bid and on the date of sale the City will likely see coupons on the bonds that are higher than the actual yields, which means there should be some extra proceeds that can be used to reduce the amount of the bond issue. Kimmel stated instead of having a bond issue for $5.38 million, they expect it to be closer to $5 million. Kimmel stated as part of the bond sale, Ehlers is obligated to list any and all risk factors. One such risk factor is if the City did not have sufficient water revenues to pay the water portion of the debt, the City may have to raise the property tax levy or generate other revenues to pay that debt. Kimmel stated he does not envision that being a problem. Following the action by the City Council tonight, Kimmel stated he would propose to work with the City’s Finance Director and City Administrator on moving forward with the bond issue, organizing a rating agency conference the week of May 19, take bids, and then award the bonds on May 27. The proceeds would then be to the City by the end of June. Kimmel noted they have also included a number of bond schedules that show the use of the funds, the total of the bonds, and the estimated coupons, which are related more to the yields that are being anticipated. The City’s all inclusive interest costs will be 2.75 percent for this 15-year bond issue. Kimmel stated the bond issue is also broken out for the CIP portion, which includes the police project, the water portion, and the refunding. Kimmel noted the refunding is four years in duration. McMillan asked as it relates to the water funds, whether the City has a time period in which the projects need to be completed.