AGENDA MEMORANDUM

 

 

Meeting Date:           October 26, 2009

 

From:                          Jerry Boop, Finance Director, CPA, CGFO

Subject:                      Resolution accepting the proposal of Bank of America to purchase the City's not to exceed $6.5 Million, Tax-exempt Senior Lien Refunding Note, Series 2009, to refinance the City's outstanding Capital Improvement Revenue Bonds, Series 1999, and related costs.

 

 

Staff Recommendation:

Following a City RFP, review by City Staff and our Financial Advisor, Larson Consulting, staff recommends acceptance of the proposal from Bank of America (B of A) to purchase the City’s not to exceed $6.5 Million Senior Lien Refunding Note, Series 2009, to refinance all of the City’s outstanding Capital Improvement Revenue Bonds, Series 1999 and pay for related costs. 

 

Analysis:

In 1999, the City issued Bonds totaling $7,345,000 for the purposes of refunding all of the City’s Refunding and Capital Improvement Revenue Bonds, Series 1987 and to finance the acquisition, construction and equipping of the new Police facility for the City.  The first Call Date for the Bonds,  October 1, 2009, has prompted review by the City’s Financial Advisor to determine savings, if any, to the City should the Outstanding Bonds totaling $6,015,000 as of October 26th be called and refunded.  The current Coupon Rates on the Series 1999 issue, range from 5.00% to 5.50%.  Analysis reveals a total estimated cost savings of $449,782 if the City were to call the Bonds, accept the proposal from B of A and refinance at the current indicative rate of 4.635%.  Estimated average annual Debt Service Savings of approximately $22,000 can be generated, due to the current structure of the maturities associated with the Bond Issue, with annual savings ranging between $14,573 and $28,903 over the life of the loan.  The savings is primarily related to the difference between the fixed interest rate of 4.635% offered by B of A and the maximum coupon rate of 5.5%, or a reduction of 86.5 basis points or 0.86%.  We are not either (1) issuing any new bonds for projects, or (2) extending the current final maturity date of October 1, 2029. Estimated Present Value Savings of 4.71% exceed the City’s minimum 3% savings levels on current refunding per its Debt Management Policy No. 1108 adopted in 2004.

 

 

 

 

 


Options:

1.  Approve the Resolution and Interest Rate Lock Agreement accepting the proposal of B of A to purchase the City’s not to exceed $6.5 Million Senior Lien Refunding Note, Series 2009, to refinance the City's outstanding Capital Improvement Revenue Bonds, Series 1999 and related costs, and cement a rate via the Interest Rate Lock Agreement targeted for October 27th, Or;

2.  Such alternative action as the Commission may deem appropriate

 

 

Fiscal Impact

If approved, the City may realize estimated savings of $449,782 over the life of the new issue, with the final savings determined once interest rates are set via Interest Rate Lock Agreement. These savings are net of all expenses on this refunding.

 

Submission Date and Time:    10/23/2009 3:25 PM____

 

Department: ___Finance_____________

Prepared by:  ___Jerry Boop_______                     

Attachments:         Yes_X___   No ______

Advertised:   ____Not Required ______                     

Dates:   __________________________                     

Attorney Review :       Yes___  No ____

                                                

_________________________________           

Revised 6/10/04

 

Reviewed by: Dept. Head __JB____

 

Finance  Dept. __________JB______                                     

                              

Deputy C.M. ___________________                                                                         

Submitted by:

City Manager ___________________

 

Account No. _________________

 

Project No. ___________________

 

WF No. ______________________

 

Budget  ______________________

 

Available _____________________


RESOLUTION NO. _____

A RESOLUTION OF THE CITY OF LEESBURG, FLORIDA AUTHORIZING A LOAN IN THE PRINCIPAL AMOUNT OF NOT EXCEEDING $6,500,000 IN ORDER TO REFUND ALL OF THE CITY’S OUTSTANDING REFUNDING AND CAPITAL IMPROVEMENT REVENUE BONDS, SERIES 1999; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION BY THE MAYOR OR MAYOR PRO‑TEM OF A PROMISSORY NOTE AND A LOAN AGREEMENT IN SUBSTANTIALLY THE SAME FORM ATTACHED HERETO AS EXHIBIT “A” WITH BANK OF AMERICA, N.A.; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION BY THE MAYOR OR MAYOR PRO‑TEM OF A RATE LOCK AGREEMENT IN SUBSTANTIALLY THE SAME FORM ATTACHED HERETO AS EXHIBIT “B” WITH BANK OF AMERICA, N.A.; DESIGNATING THE PROMISSORY NOTE AS “BANK QUALIFIED;” PROVIDING FOR SEVERABILITY; PROVIDING FOR REPEALER; PROVIDING AN EFFECTIVE DATE.

            WHEREAS, the City of Leesburg (the “City”), a municipal corporation, is duly created and existing pursuant to the Constitution and Laws of the State of Florida; and

 

            WHEREAS, the City did on September 16, 1999 issue its Refunding and Capital Improvement Revenue Bonds, Series 1999 (the “Prior Bonds”); and

 

            WHEREAS, the City in response to a request for proposals has received a proposal from Bank of America, N.A. (the “Bank”) to refund the Prior Bonds; and

 

            WHEREAS, the City’s Financial Advisor, Larson Consulting Services, LLC (the “Financial Advisor”), the City’s selection committee and senior staff of the City have recommended that the City accept the Bank’s proposal; and

 

            WHEREAS, the City Commission of the City (the “City Commission”) finds and determines that it is in the best interest of the City that the City borrow the funds to refund the Prior Bonds; and

 

            WHEREAS, the Financial Advisor has recommended that due to the current volatility in interest rates for obligations such as the Promissory Note (as hereafter defined) that it is in the best interests of the City to enter into at this time a Rate Lock Agreement with the Bank in substantially the form attached hereto as Exhibit “B” in order to fix the interest rate on the Promissory Note; and

 

            WHEREAS, this Resolution is adopted pursuant to the Constitution and Laws of the State of Florida;

 

NOW THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA, AS FOLLOWS:

Section 1.                Authority for this Resolution

.  This Resolution is adopted pursuant to provisions of Chapter 166, Florida Statutes, the Florida Constitution, and other applicable provisions of law.

 

Section 2.                Incorporation of Recitals

.  The foregoing recitals are hereby ratified and confirmed as being true and correct and are hereby made a specific part by this Resolution upon adoption hereof.

 

Section 3.                Definitions

.  Words and phrases used in capitalized form in this Resolution and not otherwise defined herein shall have the meanings ascribed hereto in the Loan Agreement (hereinafter defined) and, in addition, the following words and phrases shall have the following meanings when used herein:

“Authorized Signatory” means any one of the Mayor, Mayor Pro‑Tem, or City Manager of the City.

“Loan Amount” means not exceeding $6,500,000.00.

 

Section 4.                Authorization of Transaction

.  In order to obtain funds to refund the Prior Bonds, the City is authorized to obtain a loan (the “Loan”) from and to borrow from the Bank the Loan Amount.

The City Commission finds and determines as recommended by the City’s Financial Advisor and staff that a negotiated borrowing and sale to be undertaken in the form of the Loan from the Bank as described in the Loan Agreement and herein is in the best interest of the City (rather than a sale through competitive bidding) because the Loan offers (i) borrowing at lower costs than available alternatives and (ii) flexibility of financing that could not be obtained in a sale through competitive bidding.

Section 5.                Loan Agreement and Promissory Note

.  The City is authorized to execute a Loan Agreement with the Bank in substantially the form attached hereto as Exhibit “A” (the “Loan Agreement”) and to execute the Promissory Note (the “Promissory Note”) in substantially the form attached to the Loan Agreement. The forms and terms of the Loan Agreement and Promissory Note (jointly, the “Loan Documents”) attached hereto are hereby approved by the City and the Authorized Signatory is authorized to execute the same, with such changes as may be approved by the Authorized Signatory, such approval to be conclusively evidenced by the execution thereof by the Authorized Signatory.

 

Section 6.                Rate Lock Agreement

.  The City is authorized to execute a Rate Lock Agreement with the Bank in substantially the form attached hereto as Exhibit “B” (the “Rate Lock Agreement”). The form and term of the Rate Lock Agreement attached hereto is hereby approved by the City and the Authorized Signatory is authorized to execute the same, with such changes as may be approved by the Authorized Signatory, such approval to be conclusively evidenced by the execution thereof by the Authorized Signatory.

 

Section 7.                Authorization of Other Documents to Effect Transaction

.  To the extent that other documents, certificates, opinions, or items are needed to effect any of the transactions referenced in this Resolution, the Loan Documents and the security therefore, the Mayor, the City Clerk, the City Manager, the City Finance Director and the City Attorney are hereby authorized to execute and deliver such documents, certificates, opinions, or other items and to take such other actions as are necessary for the full, punctual, and complete performance of the covenants, agreements, provisions, and other terms as are contained herein and in the documents included herein by reference.

 

Section 8.                Paying Agent and Registrar

.  The City hereby accepts the duties to serve as Registrar and Paying Agent for the Promissory Note.

 


Section 9.                Bank Qualified

.  The City hereby designates the Promissory Note as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code.  The City and any subordinate entities of the City and any issuer of “tax-exempt” debt that issue on behalf of the City do not reasonably expect during the calendar year 2009 to issue more than $30,000,000 of “tax-exempt” obligations including the Promissory Note, exclusive of any private activity bonds as defined in Section 141(a) of the Code (other than qualified 501(c)(3) bonds as defined in Section 145 of the Code).

 

Section 10.            Severability

. If any provision of this Resolution shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable in any context, the same shall not affect any other provision herein or render any other provision (or such provision in any other context) invalid, inoperative or unenforceable to any extent whatever.

 

Section 11.            Repealer

.  All resolutions of the City or parts thereof in conflict herewith are hereby repealed.

 

Section 12.            Effective Date

. This Resolution shall take effect immediately upon its adoption.

 

PASSED, APPROVED AND ADOPTED this 26th day of October, 2009.

 

CITY OF LEESBURG, FLORIDA

 

                                                                                   
Mayor

ATTEST:

 

 

____________________________________

City Clerk

 

 

 

APPROVED AS TO FORM

AND CORRECTNESS

 

 

____________________________________

City Attorney