Minutes 10/29/2002 - Laserfiche WebLink

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October 29, 2002 Recommendation: · Adoption of two resolutions authorizing the execution of interest rate protection agreements to protect the City against future increases in interest rates. Purpose and Need: · The City has approximately $25 million in variable rate debt outstanding for the construction of the Performing Arts Center, the acquisition of Parcels 1 and 2 of Fairwood Homes, and the PortCentre I bonds that have been substituted for Victory Crossings development. · The variable rate structures have saved the City hundreds of thousands of dollars, but does expose the City to some risk should interest rates rise quickly. · Currently market conditions exist that make the cost of interest rate protection very affordable as the costs of these products are at historic lows. · It is recommended that an interest rate "swap" be put in place for each of these bond issues. An interest rate "swap" will convert the interest rate to a fixed amount for the period of time indicated by the agreement. The estimated time period and rates for each of the bond issues is: Bond Issue Period of Interest Estimated Fixed Rate Protection Rate Fairwood Homes 3 years 2.10% PortCentre I 5 years 3.33% Performing Arts Center 8 years 3.95% · Due to the fact the Performing Arts Center and Fairwood Homes bonds carry general obligation guarantees by the City, the City Council must authorize the City Manager to enter into these agreements. It is expected that the IDA will take action on the Performing Arts Center bonds in November. Financial Impact: · In the short-term, interest will decrease due to the current variable rates being less than the "swap" (fixed) rates. In the long-term, given that rates are not expected to remain at current levels, the City's liability will be fixed and not subject to significant increases once interest rates begin to rise. · This action is one of prudent financial management that is cost-beneficial due to current market conditions and one that will be viewed positively by the rating agencies as future risk is being limited. 1. Mark Geduldig-Yatrofsky, 363 Middle Street, asked detailed questions on this item. Motion by Mr. Moody, and seconded by Ms. Randall, to defer consideration of 02-325 to the meeting of November 12, 2002, and was adopted by unanimous vote. 02 - 326 - Adoption of a resolution authorizing the extension of the $7,500,000 General Obligation Parking Note to Finance the Acquisition of the Middle Street Parking Garage. The parking note will be extended until November 2003 with the ability to prepay the note at any time. The note will be paid off upon issuance of the permanent bonds. Recommendation: · Adoption of a resolution authorizing the extension of the $7,500,000 general obligation parking note to finance the acquisition of the Middle Street Parking Garage.