6.1. ERMU SR 12-11-2007 - Laserfiche WebLink

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F,. ~. -.~ xlver Pre-Sale Report G.O. Water Revenue Refunding Bonds, Series 2008A December, 2007 I'rol:>oscd Issue: $3,045,000 G.O. Water Revenue Refunding Bonds, Series 2008A Pm-pose: Provide for a current refunding of the $395,000 of remaining principal of the $820,000 G.O. Water Revenue Bonds, Series 1998B and a crossover refunding for the $3,590,000 G.O. Water Revenue Bonds, Series 2001A. The 2001A Bonds are not callable until February I, 2010, but proceeds of the Bonds are to be escrowed until the call date. Savings on the 2001A Bonds would begin in 2010 while the 1998B Bonds would be called in early 2008 and savings would commence later that year. 't'erm/Call Fcatiu ~: We do not anticipate changing the original teen of the 2001A or the 1998B Bonds. The first interest payment on the new Bonds will be August 1, 2008. The principal payments will be February 1, 2009, and the final payment is February 1, 2022. We propose a call (pre-payment) date of February 1, 2017, which is in nine years. Proposed Savings: The interest rates on the prior bonds average over 4.75%. We expect interest rates today to be at or below 4%. The savings of the two issues combined is expected to be over $120,000 in future value savings and over $90,000 in present value savings after any fees are paid. State law requires the savings to be at least 3% of refunded principal. If interest rates increase prior to the sale, we will recommend in delay in the sale at no cost to the City. Funding Sources: The funding source will be revenues from the City's water utility system operated by the Elk River Municipal Utilities. State law under Chapter 444 allows the City to pledge its general obligation to water revenue bonds (unlike electric revenue bonds). This means no debt service reserve or other rate covenants are necessary. Because the taxpayers are pledging to pay debt service if revenues are inadequate, G.O. bonds carry the lowest possible interest rates. Other Issues: The Bonds are expected to be rated by Moody's at an "Aa3" level utilizing the City's debt rating rather than the Utilities revenue bond rating. They may be considered for bond insurance up to a "Aaa" level if qualified by private insurance companies and if the winning bidder chooses to purchase bond insurance.