Staff recommends approval of the Substitution Anticipation Note with Plantation at Leesburg Limited Partnership.
When the City acquired the water and sewer utility at The Plantation at Leesburg, it funded the acquisition by making a down payment of four million dollars and a Utility System Revenue Bond Anticipation Note in the amount of eight million dollars. The latter note was held by the sellers and had a term of three years with an interest rate of 3%. At the time, the City’s intent was to do a bond issue to repay the note prior to its maturity date which was October 1, 2009.
As economic conditions have deteriorated, the municipal bond market has deteriorated badly. After consultation with our financial advisors, it became clear that the timing of a bond issue was not favorable to the city’s interests. Accordingly, the City Attorney was requested to negotiate an extension of the Anticipation Note, which he has successfully accomplished.
This Substitution Anticipation Note is the product of those negotiations. In it, the note holders agree to a three-year term extension at an interest rate of 4.5%. This interest rate reflects current market conditions, and compares favorably to bond interest rates in excess of 6%. In addition, there are no closing costs associated with this note extension, as there would be with other borrowing options.
The increased interest rate will have no significant effect on the water and wastewater utility operations, and is less than the cost which we would otherwise incur. The budget for FY 2009-2010 will reflect the increased cost of debt service.
1. Approve the anticipation note in the form presented; or,
2. Such alternative action as the Commission may deem appropriate
The effective date of the interest rate change is October 1, 2009. The budget for FY 2009-2010 will reflect the increased cost of debt service for the interest rate.
Department: Environmental Services
Prepared by: Ray Sharp
Attachments: Yes X No ______
Advertised: ____Not Required ______
Attorney Review : Yes X No ____
Reviewed by: Dept. Head rss
Finance Dept. __________JB______
Deputy C.M. ___________________
City Manager ___________________
Account No. _________________
Project No. ___________________
WF No. ______________________
RESOLUTION NO. _____
A RESOLUTION OF THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA, AUTHORIZING THE MAYOR AND CITY CLERK TO EXECUTE A SUBSTITUTION ANTICIPATION NOTE BETWEEN THE PLANTATION AT LEESBURG LIMITED PARTNERSHIP AND THE CITY OF LEESBURG; AND PROVIDING AN EFFECTIVE DATE.
BE IT RESOLVED by the City Commission of the City of Leesburg, Florida:
That the Mayor and the City Clerk of the City of Leesburg, Florida, are authorized and directed to execute a Separate Utility System Revenue Bond, Substitution Anticipation Note (Plantation Acquisition Project) Series 2006, in the form attached as Exhibit "A" to this Resolution.
THIS RESOLUTION shall become effective upon its passage and adoption according to law.
PASSED AND ADOPTED at the regular meeting of the City Commission of the City of Leesburg, Florida, held on the __9th___ day of _February ___, 2009.
THE CITY OF LEESBURG
Betty Richardson, City Clerk