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March 8, 2016 <br /> <br />Background: <br /> <br /> Interest rates for tax-exempt borrowing remain at historically favorable levels <br />which can present favorable environment to refund existing debt. <br /> <br /> The city’s debt management principles state that the city shall aggressively <br />initiate refinancing of debt when economically feasible and advantageous. <br /> <br /> The city’s policy for proceeding with refunding is to generate an overall net <br />present value savings equal to at least 3% of the refunded par amount on any given <br />transaction. <br /> <br /> As of 6/30/15, the city had total debt outstanding of $615,580,233 of which <br />$456,144,455 is paid for by governmental activities and $159,435,778 is paid for by <br />business type activities. <br /> <br /> A public hearing is not required for refunding. <br /> <br />Discussion: <br /> <br /> As of February 12, 2016, up to $71 million of outstanding debt appeared to be a <br />candidate to refinance for savings purposes. Based on current market interest rates, the <br />savings is well above the 3% net present value policy. <br /> <br /> Refunding given current market conditions would allow the City to reduce the <br />existing interest rate(s) on select outstanding bond issues thus saving money over time <br />via reduced interest cost. <br /> <br /> The reduced interest cost will provide additional financial flexibility to the City in <br />future years. <br /> <br /> The refunding does not extend the life of the bond issues involved. <br /> <br />Financial Impact: <br /> <br /> Depending on market conditions the city may realize from $3 to $4.5 million <br />interest savings over the remaining life of the bonds. <br /> <br />Staff Recommends: <br /> <br /> Adoption of an ordinance authorizing the refunding of up to $75 million of <br />outstanding debt. Vision Principle: Efficient Service Delivery. <br /> <br />Next Steps Following Council Action: <br /> <br /> Prepare the necessary documents for rating agency and bond sale. <br /> <br /> April - Obtain credit rating. <br /> <br /> May - Refund bonds if market still favorable. <br /> <br />1. Mark Geduldig-Yatrofsky, P. O. Box 50141, asked that City Council defer this item <br /> until questions regarding costs for refinancing are answered. <br /> <br />Motion by Ms. Psimas, and seconded by Mr. Moody, to adopt the following <br />ordinance, and was adopted by the following vote: <br /> <br />“ORDINANCE AUTHORIZING THE ISSUANCE AND SALE OF CITY OF <br />PORTSMOUTH, VIRGINIA, GENERAL OBLIGATION REFUNDING BONDS.” <br /> <br />Ayes: Edmonds, Meeks, Moody, Psimas, Whitaker, Wright <br />Nays: None <br /> <br />- New Business - <br /> <br />16 - 79 - Boards and Commissions <br /> <br />There were no appointments. <br /> <br />16 - 80 - Items Submitted by Council Members <br /> <br /> Mayor Wright deferred to City Manager Patton regarding information that has been <br /> <br />reported in the media. <br /> <br /> <br /> <br /> <br /> <br /> <br /> <br />