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CASE # 6 Distributed October 29, 1991 By: G.O. REFUNDING BONDS Sandra Ashley Helling, Finance Officer Background: Springsted, the City's Financial Adviser, has reviewed the status of outstanding debt and is proposing the City refund the following bond issues: Total Net Savings Due to Refunding Present Value of These Savings G.O. Improvement Bonds, 1984 G.O. Tax Increment, Series 1987A $21,951 $20,109 $66,409 $39,450 The forecasted savings are based on a change, in interest rate; the NIC (Net Interest Cost) is projected to drop from 7.102% to 6.154% on the 1987A issue and from 9.35% to 5.36% on the 1984 issue. In addition to the above, the City has financing pending on several improvement projects for which assessments were certified in October of 1990. The assessments total $421,137. A few months ago the U.S. Treasury proposed regulations which basically would have prevented our City (along with many other Cities) from bonding for these particular projects as the regulations prohibit bonds issued (settled) after September 7, 1991 from being used to reimburse expenditures made before September 8, 1989 or to reimburse expenditures paid on projects which have been in service for more than one year upon date of issuance. As several of the projects had been in service for more than one year by August of 1991, the city would have been prohibited from bonding for same. But the Internal Revenue Service received so many negative comments on the regulations, it has postponed the effective date from September 8 to 30 days following issuance of the regulations in final form. While there is no assurance, we have been advised this date will most likely be sometime during or after January of 1992. Observations: Bob Thistle of Springsted has stated his firm can have written recommendations (confirming the above) available for the November 26, 1991 Council meeting. This would provide for a December 17 sale date with closing most likely in early 1992. He also pointed out his projections of savings to the City would be increased somewhat by handling the three issues together due to lower issuance cost. In addition, Mr. Thistle reminded me that if the market moves away from the interest rates his firm is projecting and as a consequence, refunding is less attractive, the City ~ill incur no cost from Springsted fortheir efforts.Staff Recommendation: ~~x~'~~xlD' ~ ~[~ It is recommended that Springsted proceed with the two refunding issues and a new issue for the financing of special assessment projects certified in October of 1990.