05.02 - USDA Water Bond Refunding

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Statutorv Requirements: Pursuant to Minnesota Statutes, Chapter 444 and the resolution � authorizing the Bonds, the City will covenant to maintain water rates in an amount sufficient to generate revenues to support the operation of the water utility and to pay debt service. The City is required to annually review the budget of the water utility to determine whether current rates and charges are sufficient and to adjust them as necessary. �... At the time of the settlement of the Bonds, the City will not have any outstanding bond issues which are also being repaid from net revenues of the City's water utility. The table below shows the net revenues available for debt service payable from the City's water utility for fiscal year ending 2011. The projected maximum annual debt service for the Bonds, is projected to be $88,460. 2011 Net Revenues of the Water Fund Operating Re�nue $240,810 Operating Expenses 169,711 Net Income $410,521 Add: Depreciation 62,953 Add: Interest Income 5,725 Net Revenue Available for Debt Service $479,199 SECURITY AND The Bonds will be general obligations of the City secured by its full faith and credit and SOURCE OF taxing power and will be repaid with net revenues of the City's water fund. PAYMENT: STRUCTURING On October 1, 2012, the call date, the City will use the proceeds of the Bonds along with a SUMMARY: City cash contribution of $150,000 to redeem the remaining $1,325,604 outstanding principal on the Series 2000A Bonds. Beginning with the February 1, 2013 principal and interest payment, the City will begin to make debt service payments on the Bonds, realizing the interest cost savings. SCHEDULES ATTACHED: RISKSISPECIAL CONSIDERATIONS: Based on current interest rate estimates, the refunding is projected to result in future value savings of approximately $570,740, with a net present value benefit to the City of approximately $178,800. These estimates are net of all costs associated with the refunding. Per direction from the City, principal and interest on the Bonds has been structured to match the current debt seroice payments on the Series 2000A Bonds resulting in a repayment term that has been shortened by nine years. Consequently, the projected savings as a result of this repayment structure will be in years 2032 through 2040. Schedules attached include preliminary feasibility summary, debt service schedule and a debt service comparison schedule. The outcome of this financing will rely on the market conditions at the time of the sale. Any projections included herein are estimates based on current market conditions. SALE TERMS AND Variabilitv of Issue Size: A specific provision in the sale terms permits modifications to the MARKETING: issue size and/or maturity structure to customize the issue once the price and interest rates � are set on the day of sale. �� Springsted Page3