TITLE
Recommendation to adopt resolution to issue Second Lien Water Revenue Bonds Series 2012A, in an amount not to exceed $15,000,000, acting through its Board of Water Commissioners to refund the City of Long Beach Subordinate Water Revenue Commercial Paper Notes, Series A. (Citywide)
DISCUSSION
Bonds Series 2012A (Series 2012A Bonds) in an aggregate principal amount not to exceed $15,000,000, for the purpose of refunding the $11,000,000 of Water Revenue Commercial Paper Notes, Series A (Commercial Paper Notes), and to pay for the cost of issuing the Series 2012A Bonds. As with the Commercial Paper Notes, the Series 2012A Bonds will be secured by, and payable from the revenues of the Water Enterprise Fund. The Series 2012A Bonds shall not be a debt of the City, nor shall the credit or taxing power of the City be pledged in support of the Series 2012A Bonds. The objective of this debt restructuring is to take advantage of the current historically low fixed bond rates, and provide the Water Department certainty in its future debt service payment requirements.
There is $11,000,000 of Commercial Paper Notes currently outstanding. The Commercial Paper Notes were authorized in an aggregate amount not to exceed $15,000,000 to finance the design, construction and acquisition of improvements to the Water Department. Short-term commercial paper notes, regularly mature and then are resold, exposing the issuer to interest rate uncertainty. The Series 2012A Bonds are targeting a fixed yield of approximately 2.5 to 3.0 percent for a 15-year term and no credit facility fee, versus the current variable yield of 0.19 percent and a credit facility fee of 0.23 percent per annum on a $15,000,000 on the expiring Line of Credit.
The Board of Water Commissioners approved Resolution WD-1300 on July 12, 2012, authorizing the issuance of Second Lien Water Revenue Bonds, Series 2012A (Attachment A).
This matter was reviewed by Assistant City Attorney Charles Parkin on July 9, 2012, and Budget Management Officer Victoria Bell on July 3, 2012.
TIMING CONSIDERATIONS
City Council action is requested on July 24, 2012 in order to facilitate processing of required documents and benefit from the currently advantageous interest rates.
FISCAL IMPACT
There is no impact on the General Fund, as this is an obligation of the Water Enterprise Fund (EF 310) in the Water Department (WA). The average annual debt service payment is estimated to be approximately $915,000 to $950,000 over the next 15 years. There are no local jobs impacted by this recommendation.
SUGGESTED ACTION
Approve recommendation.
BODY
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LONG BEACH APPROVING THE ISSUANCE OF SECOND LIEN WATER REVENUE BONDS BY THE BOARD OF WATER COMMISSIONERS OF THE CITY OF LONG BEACH, ON BEHALF OF THE CITY OF LONG BEACH
Respectfully Submitted,
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
KEVIN WATTIER
GENERAL MANAGER, WATER DEPARTMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER