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HomeMy WebLinkAboutRes2021-047 CITY OF SEWARD,ALASKA RESOLUTION 2021-047 Sponsored by: Regis A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SEWARD, ALASKA, AUTHORIZING THE PARTICIPATION IN A PROPOSED REFINANCING BY THE ALASKA MUNICIPAL BOND BANK OF ITS GENERAL OBLIGATION BONDS THAT PROVIDED FUNDS TO PURCHASE THE GENERAL OBLIGATION LIBRARY/MUSEUM BONDS, 2011 SERIES A OF THE CITY OF SEWARD, UNDER A LOAN AGREEMENT BETWEEN THE CITY OF SEWARD AND THE ALASKA MUNICIPAL BOND BANK,AND AUTHORIZING THE CITY MANAGER TO APPROVE A REVISED SCHEDULE OF PRINCIPAL AND INTEREST PAYMENTS ON THE CITY OF SEWARD'S 2011A BONDS, IN ACCORDANCE WITH THE LOAN AGREEMENT, IF THE BOND BANK SUCCESSFULLY REFINANCES ITS BONDS. WHEREAS, the City of Seward, Alaska (the "City"), to finance a portion of the cost of certain library and museum capital improvements, issued and sold its General Obligation Library/Museum Bonds, 2011 Series A, in the original principal amount of $3,480,000 (the "2011A Bond") to the Alaska Municipal Bond Bank (the "Bond Bank"), as authorized by Resolution No. 2010-129 and 2011-047 of the City adopted January 24, 2011 and June 13, 2011, respectively(together, the "Bond Resolution"), on the terms and conditions set forth in the Bond Resolution and in a loan agreement between the City and the Bond Bank dated as of September 1, 2011 (the"Loan Agreement"); and WHEREAS, the Bond Bank issued and sold its General Obligation Bonds, 2011 Series Three(the"Bond Bank Bonds"),to provide funds to purchase the 2011A Bond,as provided in the Loan Agreement; and WHEREAS, Section 6 of the Loan Agreement provides that payments of principal and interest on the 2011A Bond maybe adjusted to reduce debt service on the 2011A Bond if the Bond Bank is able to achieve debt service savings by refunding the Bond Bank Bonds; and WHEREAS, the Bond Bank now intends to issue a series of its general obligation refunding bonds(the"Bond Bank Refunding Bonds") for the purpose,among others,of refunding all or a portion of the Bond Bank Bonds and achieving debt service savings; and WHEREAS,the Council wishes to approve the City's participation in this refinancing and to authorize the City Manager or his designee to accept a revised debt service schedule for all or a portion of the outstanding 2011A Bond if the Bond Bank successfully refinances all or a portion of the Bond Bank Bonds; and WHEREAS, the Council approved Resolution No. 2020-063, on August 10, 2020 (the "Original Resolution") which authorized the City's participation in the refinancing; and CITY OF SEWARD,ALASKA RESOLUTION 2021-047 WHEREAS,this resolution will supersede the Original Resolution in all respects. NOW,THEREFORE,BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SEWARD,ALASKA that: Section 1. Approval of Refmancing. The Council hereby approves the City's participation in the Bond Bank's refinancing of the Bond Bank Bonds and authorizes the City Manager or his designee to approve a revised schedule of principal payment amounts and interest rates for all or a portion of the outstanding 2011A Bonds,in accordance with Section 6 of the Loan Agreement, so long as the revised debt service schedule is financially advantageous to the City. The revised schedule of debt service on the 2011A Bond and other provisions,as may be required by the Bond Bank, will be set forth in an amendment to the Loan Agreement (the "Amendatory Loan Agreement") and a refunding bond in a principal amount not to exceed $2,895,000 (the "2021 Refunding Bond")to be issued in exchange for the 2011A Bond. Notwithstanding, if only a portion of the 2011A Bond is refinanced, the 2011A Bond shall be exchanged for a bond reflecting the portion of the 2011A Bond(the"Exchanged 2011A Bond")that was not refunded. The City Manager or Finance Director is hereby authorized to execute and deliver the Amendatory Loan Agreement on behalf of the City and to cause the execution and delivery of the 2021 Refunding Bond and the Exchanged 2011A Bond as the case may be,in accordance with the provisions of the Bond Resolution and this resolution,to the Bond Bank in exchange for the 2011A Bond. The City Manager, City Finance Director, and other appropriate officers and employees of the City are also hereby authorized to provide financial information about the City that the Bond Bank may require for the official statement for the Bond Bank Refunding Bonds. Notwithstanding the foregoing, principal installments of the 201 IA Bond to be refunded by the terms of this resolution are each subject to an aggregate realized debt service savings of at least three percent (3%), net of all issuance costs and underwriting discount, on a present value basis. Section 2.Tax Matters.The 2011A Bond was issued on a tax-exempt basis under Section 103 of the Internal Revenue Code of 1986, as amended (the "Code"). Subject to applicable law, the 2021 Refunding Bond may be issued on a tax-exempt or taxable basis, as determined by the City Manager, Finance Director, or Acting Finance Director. The Exchanged 2011A Bond shall retain its original tax treatment under the Code. If the 2021 Refunding Bond is issued on a tax-exempt basis: (i) the City covenants not to take or omit to take any action that would cause interest on such Bond to be includable in gross income for federal income tax purposes, and (ii) without limiting the generality of the foregoing, the City covenants that it will not take or permit any action that would cause such 2021 Refunding Bond to be a "private activity bond" as defined in Section 141 of the Code. Furthermore, if the CITY OF SEWARD, ALASKA RESOLUTION 2021-047 2021 Refunding Bond is issued on a tax-exempt basis,the City's bond counsel is hereby authorized to rely on the City's tax covenants herein contained and as set forth in related documents. Section 3.General Authorization.The City Manager, Finance Director, City Clerk,City Attorney, and any other appropriate officers, agents, attorneys and employees of the City are each hereby authorized and directed to cooperate with the Bond Bank and to take such steps, and execute such letters, certificates, agreements, papers, financing statements, assignments or instruments as in their judgment may be necessary, appropriate or desirable to carry out the terms and provisions of, and complete the transactions contemplated by this resolution. Section 4. Prior Acts. Any and all acts heretofore taken by officers, agents, attorneys, and employees of the City in connection with refinancing all or a portion of the 2011 A Bond are hereby ratified and confirmed. Section 5. Resolution Supersedes the Original Resolution. This resolution supersedes the Original Resolution in all respects, and all actions taken by the City pursuant to the Original Resolution are hereby ratified and confirmed. Section 6. Recitals. The recitals to this resolution are hereby incorporated into this resolution as if fully set forth herein. Section 7. Effective Date. This resolution shall take effect immediately upon adoption. 11 PASSED AND APPROVED by the City Council of the City of Seward, Alaska, this 26`1' day of April, 2021. f T i 7 Or . , • RD :. _ • SKA .01 / 41111011r • r �,'erry, Mayor AYES: Osenga, Seese, Baclaan, Casagranda, DeMoss, McClure, NOES: None ABSENT: None ABSTAIN: None CITY OF SEWARD, ALASKA RESOLUTION 2021-047 ATTEST: Brenda J. Ballou, MMC A c 4 , „ y C , y C /P r K City Clerk (City Seal) A,�di�Y�lBnviyC OF SE' (> ••'pttPOF •. Ie • SEAL • • A 1 ' DF14.11"• 3 43 44 45 46 47 48 49 From:Jennifer Pae To:Brenda Ballou Cc:Viana Hammon;Sam Hickok;Norm Regis;Stephen Sowell Subject:Library Bond Refunding Information, Mid-Cycle Budget and My Schedule Date:Wednesday, March 17, 2021 10:36:12 AM Attachments:Seward 2021 Refunding Recommendation.docx Hi Brenda – We just had a conference call with the City’s Financial Advisor and Bond Counsel regarding the th Library Debt Refunding. They recommended that the attached letter be included on the April 12 th Agenda as informational, and the debt legislation will be ready for the docket deadline of April 6 so th it will be included on the April 26 Agenda for consideration by Council. On another note, Sam will be preparing and presenting the Mid-Cycle Budget information for Monday’s (3/22) work session. We hope to have that completed by the end of day today / tomorrow a.m. at the latest. Finally, I will be out of the office and traveling from March 19 – March 26, so Sam will be filling in for th me at meetings during my absence. I will be back and start working remote on Tuesday, March 30. Please let me know if you have any questions, or there is anything else you need. Thanks, ~ Jenn Jennifer Pae Finance Director City of Seward (w)907-224-4064 (c)907-491-0803 jpae@cityofseward.net www.cityofseward.us 50 Blitch Associates, Inc. Don W. Grimes, Sr. Vice President 32 Pirate’s Cove Lane, P.O. Box 66 St. Marks, Florida 32355 (850)570-8528 Don@blitchassociates.com March 16, 2021 Ms. Jennifer Pae, Finance Director City of Seward P.O. Box 167 410 Adams Street Seward, Alaska 99664 Subject: Recommendation Letter relating to 2021 Bond Refunding Through Alaska Municipal Bond Bank Authority (“AMBBA”) Dear Jennifer: Welcome to your new post as Finance Director for the City of Seward. I have been working with the City on all of its bond issues since the early 1980’s and look forward to working with you. We have worked with Sam Hickok both while he served under the Finance Director and while he served as Acting Director including all the preliminary work on this refunding issue. During the summer of 2020, preparations were underway for the refunding transaction and we almost brought it to market but had to pause while litigation was under review in the Supreme Court of the State of Alaska concerning the “moral obligation” pledge of the State of Alaska as it pertains to the Alaska Municipal Bond Bank Authority. Interestingly, the delay will allow the City of Seward’s refunding bonds to be issued on a tax-exempt basis rather than taxable because the bonds to be refunded ($2,660,000) have a call option on September 1, 2021, which will be within 90 days of the proposed delivery date of the refunding bonds (early June, 2021). While interest rates have increased during the delay timeframe, they have not increased enough tooffset the benefit of going tax- exempt so the estimated savings from the transaction have increased during the delay, at least so far. The bonds proposed to be refunded are the 2011 General Obligation bonds for the Library/Museum which were issued through AMBBA. 51 Based on current tax-exempt interest rate levels as estimated by AMBBA bond underwriters (Senior Manager is Bank of America Merrill Lynch),the net present value of the interest rate savings on Seward’s bonds will be approximately $525,979 or 19.8% of the par amount of the bonds to be refunded ($2,660,000). They estimate that if interest rates increase by 35 basis points (about 1/3 of 1%), the savings would decrease to an estimated $441,543 or 16.6% of the refunded bonds. Alternatively, should interest rates decrease by the same percentage (35 basis points), savings are estimated at $613,572 or 23.1% of the refunded bonds. We think these estimates are reasonable in today’s market. Generally, net present savings thresholds for tax-exempt refundings have been in the 3% to 5% range so these levels of savings are tremendous. The net present value savings percentage, calculated on an individual maturity basis, are all above those thresholds so we recommend that all the maturities from 2022 to 2036 be included in this refunding issue. The estimated reoffering yields to investors range from 0.43% for one year to 2.25% for 15 years. We agree with many economists who feel interest rates may wellbe on the increase as the economy recovers. Waiting for improvement in the market does not seem prudent. Issuing the refunding bonds on a tax-exempt basis will require an additional resolution at one of your City Council meetingsin Aprilas Resolution 2020-063 passed August 10, 2020 was based on the assumption that the bonds would be taxableand issued in 2020.We would be pleased to answer any questions or concerns you or the City Council may have. We recommend proceeding with this refunding bond issue as proposed by AMBBA. Sincerely, Don W. Grimes Sr. Vice President 52