HomeMy WebLinkAboutRes2016-003 Sponsored by: Hunt
CITY OF SEWARD,ALASKA
RESOLUTION 2016-003
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD,
ALASKA, AUTHORIZING THE DEFEASANCE OF $3.5 MILLION OF
2008 LONG-TERM CARE FACILITY REVENUE BONDS IN
CONJUNCTION WITH THE UPCOMING REFUNDING AUTHORIZED
IN THE CITY'S RESOLUTION NO. 2007-050, AND APPROPRIATING
FUNDS
WHEREAS, the City of Seward, Alaska (the "City") issued $27,000,000 principal
amount of Long Term Care Facility Revenue Bonds, 2008 (the "2008 Bonds") pursuant to
Resolution 2006-28 (the "2006 Resolution), as amended by Resolution 2007-050 (the "2007
Resolution"); and
WHEREAS, as of January 18, 2016, the outstanding balance on said bonds is
$23,250,000, with $20,490,000 slated for refunding on February 2, 2016, as authorized by
Resolution 2015-115 which provided for the issuance of long term care facility revenue
refunding bonds in the principal amount of not to exceed $25,900,000 to refund certain
outstanding long term care facility revenue bonds of the City, fixing certain details of such bonds
and authorizing and providing for related matters; and
WHEREAS, the finance director, in consultation with the City's financial advisor and
bond counsel, is recommending the defeasance of$3.5 Million of said bonds, to take advantage
of the timing of a refunding, to reduce the amount of principal borrowed for the bonds in order to
reduce the lifetime borrowing costs associated with this borrowing, and to reduce the annual debt
service payments over the remaining life of the remaining bonds; and
WHEREAS, the Seward Long-Term Care Facility Fund maintains sufficient cash to
make this lump-sum contribution toward debt service, plus provide an adequate bond reserve
equal to one years' annual debt service payments; and
WHEREAS, a contribution of$3.5 Million will reduce the anticipated borrowing from
approximately $20.5 Million to $17 Million and will generate a lifetime savings of$1.3 Million,
resulting in a reduction in the average annual debt service payment of approximately $273,709
over each of the remaining 17.5 years of the bond.
NOW, THEREFORE, BE IT RESOLVED BY THE COUNCIL OF THE CITY OF
SEWARD, ALASKA:
Section 1. The City Council hereby authorizes the defeasance of $3.5 Million of Long
Term Care Facility Revenue Bonds, 2008 as part of the overall refunding of revenue bonds
authorized by Resolution 2015-115, for the purposes of refunding all or a portion of the
outstanding 2008 Bonds.
CITY OF SEWARD, ALASKA
RESOLUTION 2016-003
Section 2. The recitals to this Resolution are incorporated herein, and by this reference,
are made a part hereof as if fully set forth herein.
Section 3. Funds in the amount of$3.5 Million are hereby appropriated from the Long-
Term Care Facility Fund reserve account no. 19200-0000-3400 to the debt service principal
account no. 19200-0000-8300 for the purposes of defeasing a portion of the outstanding Long-
Term Care Facility bonds.
Section 4. This Resolution shall take effect immediately upon adoption.
PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this
18th day of January, 2016.
THE CITY OF SEWARD, ALASKA
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can Bardarson, Mayor
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AYES: Keil, Butts, McClure, Altermatt, Bardarson
NOES: None
ABSENT: Casagranda, Squires
ABSTAIN: None
ATTEST:
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Jo anna Vi , CMC
Ci' Clerk
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(City Seal) e d ;r'�° °'°°`"`
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COUNCIL AGENDA STATEMENT ;40c it,
Meeting Date: January 18,2016 440,t3,
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Through: James Hunt, City Manager •
From: Kristin Erchinger,Finance Director 06
Agenda Item: Requesting Authorization to Defease$3.5 Million Long-Term Care Facility
Bonds
BACKGROUND&JUSTIFICATION:
The City of Seward issued $27 Million principal amount of Long Term Care Facility Revenue bonds in
2008 as authorized by Resolution 2006-28, and as amended by Resolution 2007-050. These bonds were
issued for the purpose of constructing and equipping the Seward Mountain Haven long-term care (LTC)
facility. As of January 18,2016,the outstanding balance of said bonds is$23,250,000.
In December, 2015, the Seward City Council passed Resolution 2015-115 authorizing the refunding of
said bonds, to achieve a net present value savings target of at least 4%. A portion of the outstanding
bonds are not eligible for refunding. The City is slated to go to market on the refunding on January 20,
2016, assuming a favorable interest rate environment, and was prepared to refund approximately $20.5
Million of the outstanding bonds.
In structuring financing for the original LTC facility bonds, the City developed a plan that would
generate a surplus of cash over the early life of the bonds, to be used to make debt service payments in
the final years of the bonds. Given the opportunity and timing of this refinancing, it is advantageous to
pay down the principal on the bonds in order to achieve a significant borrowing cost savings. By
contributing $3.5 Million toward the balance of these bonds, the City will achieve a reduction in annual
debt service payments of $273,709, in addition to the annual reduction expected from the refunding.
This savings will aggregate to generate an additional return to the City of$1.3 Million over the remaining
17.5 year life of the bonds.
CONSISTENCY CHECKLIST: Yes No N/A
1. Comprehensive Plan(document source here): X
2. Strategic Plan(document source here): X
3. Other(list): X
ATTORNEY REVIEW: Yes X No
FISCAL NOTE:
The City currently maintains a cash balance in the LTC Fund of$5.7 Million, including $1.9 Million in
bond reserves. This defeasance would maintain the bond reserve balance, which is equal to the single
highest years' debt service payment, and the Fund would continue to accumulate annual surpluses in the
future. In addition,the cash balance in the Hospital Fund is approximately$650,000.
Approved by Finance Department: 4 ��
RECOMMENDATION:
Council approve Resolution 2016-O2 authorizing the defeasance of$3.5 Million long-term care facility
revenue bonds
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