Minutes 12/09/2008 - Laserfiche WebLink

Home Browse Search

December 9, 2008 4. That the City Manager is further authorized and directed to take all such further actions and execute and deliver all such other instruments as may be needed to perform all the City's duties and to protect and enforce all the City's interest, rights and powers under the Agreement. The City Manager shall report periodically to City Council in a timely manner on all material progress and activity under the Agreement. 5. That Resolution No. R-07-09, adopted February 27, 0007, IS hereby rescinded. 6. That this resolution shall take effect on the date of its adoption." Ayes: Moody, Psimas, Randall, Smith, Whitehurst, Holley Nays: Heretick 08 - 533 - Adoption of an ordinance authorizing the issuance and sale of up to a $30,000,000 General Obligation Bond Anticipation Note to provide funding for Council- approved Fiscal Years 2008 and 2009 Capital Improvement Projects. Vision Principle: Thriving Neighborhoods and a Sense of Community, and a Robust and Prospering Economy. Background: . Portsmouth requires funding for several Capital Improvement Program projects authorized in the Fiscal Year 2008 and 2009 budgets. The City Council recently met to prioritize and amend this list of projects to reduce the overall level of borrowing to approximately $30 million. Davenport & Company LLC ("Davenport"), Portsmouth's Financial Advisor, developed and presented to City Council a Plan of Finance that recommends pursuing a three-year General Obligation Bond Anticipation Note ("BAN") through Wachovia Bank, Portsmouth's primary depository institution. Discussion: . The credit markets have been extremely volatile for the past several months, leading to an overall increase of 1.0% in the general level of tax-exempt municipal interest rates. In addition, Portsmouth is currently at risk of violating its debt management policy calling for debt service to be kept at or below 12% of General Fund revenues. Taken together, these two facts lead Davenport and Staff to recommend that the City not pursue a long-term fixed rate financing at this time. . By issuing a BAN to acquire the necessary funds from Wachovia Bank, Portsmouth would be able to make Interest-Only payments for up to Three Years, thereby minimizinq the cash flow strain on subsequent year budqets and maintaininq the City's compliance with its Debt Service-to-Revenues policy. . The BAN strategy also takes advantage of a significant drop off in debt service in Fiscal Year 2013. Portsmouth would be able to permanently finance the maturing BAN in two to three years and blend the debt service seamlessly into its existing debt structure. . The BAN strategy allows the City to maintain its high debt payout ratio (ie; the proportion of principal paid over the next ten years) at above 60%, which is a level the Rating Agencies deem to be favorable. . Wachovia Bank has offered Portsmouth a Three-Year BAN, prepayable after two years, at an indicative (preliminary) rate of 4.5% as of October 28, 2008. The final interest rate, which is fixed for the life of the loan, will not be set until the City Council approves the financing after a public hearing and the City Manager executes a Commitment Letter with Wachovia on or about December 10th. The indicative interest rate as of November 21 st, the last business day before this Report was due to the City Clerk, was 3.9 8%. The rate may change again, either lower or higher, before the City Manager executes the Commitment Letter. The resolution authorizing the issuance of the BAN (and eventual long-term bonds) set maximum interest rates of 6% and 7%, respectively.