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05. Resolution 5559 - Authorizing Refinancing of General Obligation BondsCharles A. Harball Office of City Attorney City Attorney 201 First Avenue East P.O. Box 1997 Kalispell, MT 59903-1997 TO: Mayor Tammi Fisher and Kalispell City Council FROM: Charles Harball, Interim City Manager Tel 406.758.7709 Fax 406.758.7771 charball@kalispell.com SUBJECT: Resolution No. 5559 — A Resolution Authorizing the Refinancing of the City's General Obligation Bonds MEETING DATE: May 7, 2012 — Regular Council Meeting BACKGROUND: The City of Kalispell previously issued debt for the construction of the Woodland Park pool facility as well as for the north end fire station. Currently the market rate for debt is appreciably lower than the rate the City is paying on its existing bonds. Resolution No. 5559 authorizes a committee consisting of the mayor, the city manager and the finance director, with the advice of bond counsel, to investigate and negotiate the refinancing of the existing bonds. The parameters set by the resolution ensure that any refinancing shall result in a significant reduction to the City in its cost of debt and will result in a tax savings to the City tax payer. RECOMMENDATION: City Council should give consideration to and pass Resolution No. 5559. FISCAL IMPACTS: This resolution authorizes the investigation and negotiation for the refinancing of existing debt with parameters clearly delineated. If the parameters are met the Council will then be presented with a final resolution to approve the refinanced debt. At that time it will be possible to itemize the tax savings to the City tax payers. Respectfully submitted, C Charles Harball, Interim City Manager WHEREAS, the City of Kalispell, Montana (the "City") previously issued its (i) General Obligation Bonds, Series 2002 (the "Series 2002 Bonds"), in the original aggregate principal amount of $3,675,000 and (ii) General Obligation Bonds, Series 2005 (the "Series 2005 Bonds" and together with the Series 2002 Bonds, the "Prior Bonds"), in the original aggregate principal amount of $3,000,000; and WHEREAS, the proceeds of the Series 2002 Bonds were used by the City to (i) finance the costs of constructing a recreational facility including a swimming pool, bathhouse, concessions, skate park and related site development and improvements, and (ii) pay costs of issuance of the Series 2002 Bonds; and WHEREAS, the proceeds of the Series 2005 Bonds were used by the City to (i) finance the design, construction and equipping of the North Fire Sub -Station, and (ii) pay costs of issuance of the 2005 Bonds; and WHEREAS, the July 1, 2013 through July 1, 2022 maturities of the Series 2002 Bonds are callable on or after July 1, 2012 for redemption without a premium and the July 1, 2013 through July 1, 2020 maturities of the Series 2005 Bonds are callable for redemption without a premium on January 1, 2013; and WHEREAS, City finance staff has determined that it is advantageous to proceed with a refinancing of the Prior Bonds in order to provide for future interest cost savings and reduce the annual debt service associated with the Prior Bonds. RESOLVEDNOW THEREFORE BE IT O KALISPELL, Section 1. Authorization and Sale; Recitals. 1.01. Statutory Authority. The City is authorized by Montana Code Annotated, Title 7, Chapter 7, Parts 42-43, as amended (the "Act"), to issue general obligation bonds to finance an undertaking that is duly approved by the electors of the City. The City is also authorized to issue refunding general obligation bonds to refinance outstanding general obligation bonds of the City to achieve debt service savings. 1.02. Authorization and Delegation to Award Committee. At a regular election held on November 6, 2001 the electors of the City gave their approval to the issuance by the City of the Series 2002 Bonds. At a regular election held on November 2, 2004 the electors of the City gave their approval for the issuance by the City of the Series 2005 Bonds. The City Council hereby approves the issuance and sale of its General Obligation Refunding Bonds, Series 2012 (the 1 "Bonds") for the purpose of. (i) refunding the Series 2002 Bonds on a current basis and refunding the Series 2005 Bonds on an advance basis; and (ii) paying the costs of issuance of the Bonds. The City Council hereby delegates to the Mayor, City Attorney/Acting City Manager, and the City Finance Director (collectively, the "Award Committee") the authority to accept the sale of the Bonds to D.A. Davidson & Co., Bozeman, Montana (the "Underwriter"), on behalf of the City if the following criteria are met: (i) the purchase price of the Bonds shall not be less than 99.10% nor exceed 105% of the par amount of the Bonds (plus accrued interest, if any to the date of issuance), (ii) the average coupon rate on the Bonds shall not exceed 2.75% percent (which would mean a reduction in average interest cost of at least an estimated 1.75% with the refunding) provided that the original aggregate principal amount of Bonds does not exceed $4,200,000 and the Bonds do not have a final maturity later than July 1, 2022, and (iii) the combined interest rate on the Bonds is more than one-half of one percent (0.5%) less than the combined interest rate on the Prior Bonds as required by the Act and the net present value savings of debt service on the Prior Bonds is greater than or equal to 5%. The Award Committee is hereby authorized to determine the maturity dates, principal amounts of the stated maturities of the Bonds, mandatory redemption provisions with respect to the Bonds, and such other terms of the Bonds as the Award Committee deems most appropriate and in the best interests of the City. The appropriate members of the Award Committee are hereby authorized to execute and deliver a bond purchase agreement with the Underwriter for the sale of the Bonds. The final bond resolution will be approved by the City Council after the execution of the bond purchase agreement by the Award Committee. 1.03. Debt Limitations. All acts, conditions and things required by the Constitution and laws of the State of Montana, including the Act, in order to make the Bonds valid and binding general obligations in accordance with their terms and in accordance with the terms of this resolution have been done, do exist, have happened and have been performed in regular and due fon i, time, and manner as so required. The indebtedness to be evidenced by the Bonds and all other indebtedness of the City does not exceed the limitation set forth in Section 7-7-4201 of the Act. The City has full power and authority to issue the Bonds and refund the Prior Bonds. 1.04 Refunding Findings. It is hereby found and determined that based upon information presently available from the Underwriter, that the issuance of the Bonds will result in a reduction of debt service cost to the City on the Prior Bonds, such that the combined interest rate on the Bonds is more than one-half of one percent (0.5%) less than the combined interest rate on the Prior Bonds and the present value of such debt service or interest cost savings (the "Reduction") is at least three percent (3.00%). The Reduction, after inclusion of all authorized expenses of refunding in the computation of the effective interest rate on the Bonds is adequate to authorize the issuance of the Bonds as provided by Title 7, Chapter 7, Section 4304 of the Act. Section 2. General Terms of the Bonds. Pursuant to the Act and Montana law, the City Council hereby authorizes the issuance and sale of the Bonds. The Bonds will be denominated "General Obligation Refunding Bonds, Series 2012," of the City for the purposes of (i) refinancing the Prior Bonds, and (ii) paying the costs of issuance for the Bonds. The Bonds shall be dated, as originally issued, and shall bear interest payable semiannually on January 1 and 2 July 1 of each year, commencing January 1, 2013, at a rate or rates designated by Underwriter and approved by this City Council in the Bond Resolution. The Bonds are expected to mature on July 1 of each of the years from 2013 through 2022 which will approximately level debt service payments, as adjusted in the final bond resolution. The Bonds will be issued in minimum denominations of $5,000 each or any integral multiple thereof of single maturities. The maturity schedule of the Bonds may provide for a combination of serial bonds and term bonds, provided that no serial bond may mature on or after the first mandatory sinking fund redemption date of any term bond. All term bonds, if any, shall be subject to mandatory sinking fund redemption at a price of par plus accrued interest to the date of redemption. The Bonds are to be issued in "book entry" form as fully registered bonds and shall be executed by the manual or facsimile signatures of the Mayor, the City Clerk, and the City Finance Director. Section 3. Official Statement. The Underwriter and the City Finance Director and other officers and employees of the City, in cooperation with Kennedy & Graven, Chartered, P.C., as Bond Counsel, are hereby authorized and directed to prepare on behalf of the City an official statement relating to the Bonds. Such official statement shall contain information as shall be advisable and necessary to describe accurately the City and the security for, and terms and conditions of, the Bonds. PASSED AND APPROVED BY THE CITY COUNCIL AND SIGNED BY THE MAYOR OF THE CITY OF KALISPELL,DAY OF i Judi Funk Deputy City Clerk Tammi Fisher Mayor 3