HomeMy WebLinkAbout0401.000\
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HONORABLE CITY COUNCIL
Palo Alto, California
l' B 5 UTI'I1'Y pUNY: BOND as FINANCING
Members of the Council:
The purpose of this report is to. update the City Council on the
stat.us of the refunding of tl::!e 1985 series A utility Revenue Bonds.
This is an informational repo·rt and no Council action is required.
Background
In February 1990, the Finance and Public Works Committee reviewed
staff I s proposal (CMR 151: 0) to. retain Stone and Youngberg and
Jones.. Hall, Hill and lI.lhite to serve as underwriters and bond
counsel respectively for refunding the lSS5 Series A Adjcstable
Convertible Extendable Securities {ACES). The purpose of the
refundinq was to. lock in a low-long-term rate to. protect the City
from interest rate exposure. The committee directed staff to.
proceed with the plan to. refund the bonds, providing that the issue
can be marketed at a rate not to exceed 7.1 percent.
Qiscussion
Staff ~orked with the underwriter and bond counsel to prepare the
Prelillinary Official statement Jl IndentUre of i'rust Jl and other
documents and agreements required, assuming that the issue could be
taken to the market in late Mayor early .June 1990. Bids were
receIved and evaluated for trustee services JI and Security Pacific
Bank was selected. The feasibility of incloding the storm drain
enterprise into the definition of ·utilities· for purposes of the
refunding was revie'Wed with Moody's and Standard and Poors, and it
vas determined that this would no~ be viewed as a negative factor
in Utilities Enterprise reviews, while clearly enhancing tile credit
rating for a Storm Drai~age debt issuance. staff was informed at
t.he t.ilDe of these d.iscussions that Moody· s had independently
undertaken another review of Palo Alto·s credit rating in light of
the fixing of Northern California Power Agency (NePAl debt and
completion of major NCPA projects, and in co~junction with the
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rating upgrade of the City of Santa Clara for the sam~ reasons.
Moody's halted its review process when it was inforEed that the
city was planning to come to t.he market in the near term to fix the
1985 ACES, preferring to complete both reviews at the same time.
staff has also been workl~ with t.he cities of Mountain View and
Los Altos to revise the Principles of Understanding between the
cities on repayment of the debt. The revised agreement reflects
the cbange to a fixed debt service scbedule. 'The city of Mountain
View has requested that an earl:r call provision be included in the
agreement, to allow Mountain View to retire all or any portion ot
its share of the refunde~ debt after the first optional call date.
The revised agreement, which is subject to City council approval,
provides a methodology for exercising this optlon~
In wid-April 19"90, tile muniCipal market declined significantly, and
it did not appear that the City could meet its goal of achievin9 an
average interest cost under 1 percE'nt~ The refundinq .. as discussed
with the Partners on May 9, and all the cities concluded that the
1 percent target vas reasonable and that ~e should wait until the
market vas propitious to attempt the refunding. within the last
three weeks, the bond market bas moved back into the range to make
a refunding effective~ Appended to this report (Exhibit A) is a
qraphic presentation of the change in bond yields between February
and June 1990. Also appended (Exhibit B) is a debt sen;ice
schedule :based on a 6.803 percent averaqe interest cost as of June
23, 1990.
FInally, a revised schedule is appended showing: staff returning to
the Council on July 23, 1990 for approval of the Indent.ure -of
Trust, Preliminary Official Statement and related resolutions, and
the Principles of Understanding with the Cities of Mountain View
and Los Altos (Exhibit Cj. The Finance and Public Works committee
revie~ed the project in conjunction with the approval of underwrit
inq and. bond counsel services, and indicated that approval of the
Official documents should go directly to the City Council.
Director of
ZANER
nager
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(WPP~II4S)
CITY 01' PALO ALTO
1990 U1UITY RI!VE'IUE JtEP\JNDING BONDS
TOIIbdoe S<f!ednIe of_
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3.5.71.
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242S262?2I!lo2S:.:l
(_ of Juoc ZS, 1990)
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C"orcuI.tion of ",vised financing cIocumenu and !'OS
Meeting willl Regional Water Qualily Coruroll'lant Panner> regarding
Principles of UnderstlInding
rmal x:eview of financing documents and POS &:: outIine <Jf raling
presentation
final legal documents and POS 10 Cily and mailed 10 rating agencies
Jtating agency and surety bood p<ovideE p<esentations in
New Yad: or San Francisco
City Council approval of Indenture. POS and ",I.ted ",solutions and
amended Principles or Understanding on 1985 Palo Aho UtiliJy RoveD"e
Bonds
Receipt of CJedit wingo
Earliest date ro< preliminary pricing
Earliest ~ foe actual pricing of boods and approval of purchase conttacl
wliest date fo< closing
ONE CAllfOONIA STREH· SAN: FAANCISCO, CAU:OI=!NJA 94111 . ''''51 981-13'14
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