HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 07/05/2016 - FIRST READING OF ORDINANCE NO. 082, 2016, APPROPRIAgenda Item 3
Item # 3 Page 1
AGENDA ITEM SUMMARY July 5, 2016
City Council
STAFF
John Voss, Controller/Assistant Financial Officer
SUBJECT
First Reading of Ordinance No. 082, 2016, Appropriating Proceeds from the Issuance of City of Fort Collins,
Colorado, Wastewater Utility Enterprise, Sewer Revenue Refunding Bonds, Series 2016A, in the Maximum
Aggregate Principal Amount of $21,900,000 in the Wastewater Utility Fund.
EXECUTIVE SUMMARY
The purpose of this item is to appropriate the proceeds from the Revenue Refunding Bond, series 2016A, for
the purpose of refinancing the callable portion of the 2009A Revenue Bonds. Proceeds will be used to pay off
callable bonds as well as pay for cost of issuance fees. The proceeds from the original 2009A bonds of $30.7
million were used to make improvements to the Mulberry Water Reclamation Facility. Savings are anticipated
to be $2.4 million.
STAFF RECOMMENDATION
Staff recommends adoption of the Ordinance on First Reading.
BACKGROUND / DISCUSSION
After passage of the TABOR Amendment by the Colorado voters in 1992, the City’s voters approved an
amendment to the City Charter that authorized the City Council to establish the City’s Wastewater Utility
Enterprise (“Enterprise”), as well as enterprises for the City’s other utilities. In 1993, the City Council adopted
an ordinance establishing the Enterprise. The Charter amendment authorizes the Enterprise to issue its own
revenue bonds on behalf of the City. In doing so, the Enterprise is exempt from the voter-approved
requirements of the TABOR Amendment with respect to the issuance of bonds.
Since that time, all utility bonds have been issued by the appropriate utility enterprise. However, the City
Charter grants only the Council the power to appropriate the funds. Therefore, this action by the Council is
necessary in order to appropriate the bond proceeds for the Wastewater Utility. Authorizing the issuance of
the bonds and appropriating the proceeds are both necessary to complete the bond transaction.
In Proprietary Funds such as the Wastewater Enterprise Fund, the accounting treatment will record this
transaction almost all on the balance sheet. The exception is for cost of issuance fees, which will be recorded
in the income statement as expenses. Types of issuance costs include Financial Advisor services, Bond
Counsel services, rating agency, escrow trustee, bond bidding, and others.
CITY FINANCIAL IMPACTS
Bond proceeds of $21.9 million will be used to pay the cost of issuance fees and defease the callable portion
of the 2009A Wastewater Revenue Bonds. Savings are anticipated to be $2.4 million with a net present value
savings of $2.1 million. The cost of issuance is included in the net savings calculations.
Agenda Item 3
Item # 3 Page 2
$ 000s
Date Old
Debt
Service
New
Debt
Service
Savings Present
Value
Savings
12/1/2016 $ 1,707 $ 1,663 $ 44 $ 42
12/1/2017 2,422 2,270 153 150
12/1/2018 2,425 2,272 153 147
12/1/2019 2,450 2,242 208 195
12/1/2020 2,467 2,256 210 194
12/1/2021 2,486 2,279 207 186
12/1/2022 2,507 2,298 209 184
12/1/2023 2,534 2,324 210 182
12/1/2024 2,557 2,346 211 179
12/1/2025 2,585 2,379 206 171
12/1/2026 2,612 2,403 208 170
12/1/2027 2,623 2,413 211 168
12/1/2028 2,644 2,434 210 164
32,018 29,580 2,438 2,133
BOARD / COMMISSION RECOMMENDATION
At its June 1, 2016 meeting, the Council Finance Committee recommended adoption of the Ordinance to
refinance the 2009 Wastewater Revenue Bonds.
At its June 16, 2016 meeting, the Water Board recommended adoption of an ordinance to allow for the pre-
refunding of the 2009 Wastewater Revenue Bond.
ATTACHMENTS
1. Council Finance Committee minutes, June 1, 2016 (PDF)
2. Water Board minutes, June 16, 2016 (draft) (PDF)
Council Finance Committee
June 1, 2016
C. Wastewater Bond Refinancing
John Voss, Controller
EXECUTIVE SUMMARY: The current market conditions are favorable to refinance the 2009
Wastewater Revenue Bonds and achieve a savings of $2.4 million. Closing is expected to occur
on August 18, 2016.
GENERAL DIRECTION SOUGHT AND SPECIFIC QUESTIONS TO BE ANSWERED
Does CFC support the refinancing and projected timeline?
Mike Beckstead summarized;
$31m (20 year) bond was initiated in 2009 to build Mulberry water reclamation
facility and it is now time to refinance.
Plan is for this to go to Council for first reading on 7/5, then second reading
on 7/19, out for competitive bid on 8/2 with actual transaction occurring
later in August
$24.4m outstanding
$20.8m is eligible for refinancing – we think we can get 2.11% rate
If we waited 2 ½ years we could save an additional $398K, if interest rates do not change
We are recommending we move forward now because of the possibility of rising interest
rates
Ultimately the rate will be what the market is in August
We can’t predict it - function of the market - $2.1M savings will stay inside of waste water utility
Recommending competitive bid process
Greely just went through this and got a 1.74 rate
Council Finance Committee concurred with the recommendation and schedule
moving this forward to the Council.
ATTACHMENT 1
Water Board minutes excerpt
June 16, 2016
2009 Wastewater Revenue Bond Advanced Refunding
(Attachments available upon request)
Financial Analyst Chris Donegon summarized the information he presented at the June 2 Water
Board Work Session regarding refinancing 2009 wastewater revenue bonds, and requested the
board recommend City Council adopt an ordinance to allow for pre-refunding of the 2009
Wastewater Revenue Bond.
• Revenue bonds were issued January 29, 2009
• 20-year bonds, final payment in 2028
• Coupon interest varied from 2.0% to 5.0%
• Not callable until December 1, 2018
• Original issue: $30,655,000
• Current outstanding: $24,405,000
• Eligible for prepayment: $20,080,000
• Estimate new rate of 2.11%
• Savings of $2.4 million
• Net Present Value savings of $2.1 million
• Percentage Savings of refunded bonds: 10.6%
o Debt Policy requires at least 5% savings before refinancing
• Waiting until December 2018 to refinance would only yield another $398,000
• That assumes market interest rates do not change over the next 2.5 years
Timeline
• June 16 Water Board provides recommendation to City Council
• July 5 Bond Ordinance first reading at City Council meeting
• July 19 Bond Ordinance second reading at City Council meeting
• July 21 Publish:
o Preliminary Official Statements
o Notice of Sale
• August 2 Competitive bond sale (online auction)
• August 18 Projected Closing and Delivery of Bond Proceeds
Board Member Steve Malers made a motion that the Water Board recommends the
adoption of the ordinance by City Council to allow for the pre-refunding of the 2009
Wastewater Revenue Bond.
Board Member Phyllis Ortman seconded the motion.
Vote on the motion: It passed unanimously, 6-0.
Discussion Highlights
Board members inquired about related topics, including whether there was any way to get the
bond refinanced faster, due to the possible change in interest rates because of the possibility of
Great Britain pulling out of the European Union. Mr. Donegon replied there is not, but the
process has moved fairly quickly.
ATTACHMENT 2
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ORDINANCE NO. 082, 2016
OF THE COUNCIL OF THE CITY OF FORT COLLINS
APPROPRIATING PROCEEDS FROM THE ISSUANCE OF CITY OF FORT
COLLINS, COLORADO, WASTEWATER UTILITY ENTERPRISE, SEWER
REVENUE REFUNDING BONDS, SERIES 2016A, IN THE MAXIMUM AGGREGATE
PRINCIPAL AMOUNT OF $21,900,000 IN THE WASTEWATER UTILITY FUND
WHEREAS, upon passage on first and second reading of Ordinance No. 006 of the Board
of the City of Fort Collins, Colorado, Wastewater Utility Enterprise (the “Board Ordinance”), the
Enterprise intends to issue City of Fort Collins, Colorado, Wastewater Utility Enterprise, Sewer
Revenue Refunding Bonds, Series 2016A, to be issued during 2016, in the Maximum Aggregate
Principal Amount of $21,900,000 (the “Bonds”); and
WHEREAS, the issuance of the Bonds, and the appropriation of the proceeds thereof, is
necessary to complete the refunding of the City’s Sewer Revenue Refunding Bonds, Series
2016A; and
WHEREAS, proceeds from the Bonds of $21,900,000 were not included in the 2016
budget, and the appropriation of these proceeds is necessary for the payment to the refunded
bond escrow agent and of bond issuance costs; and
WHEREAS, Section 19.3(b) of Article V of the City Charter provides that an enterprise
board of the City shall not exercise powers reserved to the Council by the City Charter or
otherwise (other than the power to issue revenue bonds and other obligations); and
WHEREAS, Article V, Section 9, of the City Charter authorizes the City Council to
make supplemental appropriations by ordinance at any time during the fiscal year, provided that
the total amount of such supplemental appropriations, in combination with all previous
appropriations for that fiscal year, does not exceed the current estimate of actual and anticipated
revenues to be received during the fiscal year; and
WHEREAS, City staff has determined that the appropriation of the previously
unappropriated proceeds of the Bonds in the amount of $21,900,000 will not cause the total
amount appropriated in the relevant funds to exceed the current estimate of actual and anticipated
revenues to be received during the fiscal year; and
WHEREAS, the City Council hereby determines that the adoption of this Ordinance is
necessary for the public’s health, safety and welfare and finds that it is in the best interests of the
City and its Wastewater Utility.
NOW, THEREFORE, BE IT ORDAINED BY THE COUNCIL OF THE CITY OF
FORT COLLINS as follows:
Section 1. That the City Council hereby makes and adopts the determinations and
findings contained in the recitals set forth above.
-2-
Section 2. That the previously unappropriated proceeds of the Bonds in the amount
of TWENTY ONE MILLION NINE HUNDRED THOUSAND DOLLARS ($21,900,000) are
hereby appropriated in the Wastewater Fund for payment to the refunded bond escrow agent and
bond issuance costs contingent upon the final adoption of the Bond Ordinance and the final sale
and issuance of the Bonds by the Enterprise.
Introduced, considered favorably on first reading, and ordered published this 5th day of
July, A.D. 2016, and to be presented for final passage on the 19th day of July, A.D. 2016.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk
Passed and adopted on final reading on the 19th day of July, A.D. 2016.
__________________________________
Mayor
ATTEST:
_______________________________
City Clerk