Number
111567
Version
Substitute 2
Reference
Sponsor
The Chair
Title
Substitute resolution authorizing the issuance of General Obligation Multi-Modal Notes and Bonds, and related agreements.
Sections
Analysis
Resolution 111076 authorizes the issuance of fixed rate general obligation bonds for various corporate purposes. Over the long term, it has been historically beneficial to have a portion of long-term debt in variable rate, short-term interest rate, mode. This resolution permits the issuance of up to $60 million of bonds for purposes authorized by that resolution as variable rate debt.
Since 2005, the City has had outstanding the $25 million of Series 2005 V8 General Obligation Bonds as variable rate bonds. Over that period of time, variable interest rates have been significantly lower than fixed rate debt. The Series 2005 V8 Bonds were secured by a Stand-by Bond Purchase Agreement (SBPA) that expires in December of this year. Because of the changes in the market since the 2008 Lehman Bankruptcy, it is anticipated that an extension of the SBPA would be at a significantly higher cost. In anticipation of the expiration of the SBPA, the Series 2005 V8 Bonds were refinanced to fixed rate debt with the Series 2012 N2 Notes.
In anticipation of the expiration of the SBPA, alternative methods to access variable rate debt have been developed. The Extendable Municipal Commercial Paper (EMCP) program approved with file 111565 was the first such program developed. With this file, two other methods are proposed. This resolution authorizes GO Bonds with multiple modes. $15 million of the bonds are proposed to be issued as Floating Rate Notes (FRN), and $15 million as Rolling Tender Variable Rate (RTV) Bonds.
The RTV’s are like the Series 2005 V8 Bonds where the interest rate is determined weekly. In the event the investor no longer desires to hold the RTV, and the Remarketing Agent cannot find alternative investors, the RTV’s have an “Extension” feature sim...
Click here for full text