| | | | | | | | DATE:
| 4/15/2024
| MEMO:
|
| TO:
| Honorable Mayor Moore Wolfe and
City Council Members
| FROM:
| Scot Wrighton, City Manager
Ruby James, City Treasurer & Chief Financial Officer
|
|
| | | | | | | | | SUBJECT: An Ordinance providing for the issuance of not to exceed $36,800,000 General Obligation Bonds of the City of Decatur, Macon County, Illinois, to refund certain current and outstanding bonds and to finance water system infrastructure improvements, authorizing the sale of said bonds to the purchaser thereof, providing for the levy and collection of a direct annual tax sufficient for the payment of the principal of and interest on said bonds, further providing for the execution of an escrow agreement in connection with such issuance, and authorizing the City Manager and Chief Financial Officer to lock-in rates and terms most favorable to the City of Decatur, which is likely to be the end of the summer, 2024. |
|
| | | | | | | | | SUMMARY RECOMMENDATION: City Administration recommends City Council approve authorizing bond authority to refund bond series 2014 and 2015 for those issues that can be redeemed with lower interest rates at the time of redemption. Furthermore, the City Administration recommends the City Council approve authorizing bond authority to issue tax exempt bonds for the purpose of water system infrastructure improvements. |
|
| | | | | | | | | BACKGROUND: The City of Decatur engages financial consultants to assist in evaluating opportunities that exist in the market to issue debt and reduce expenses. As bond issues are eligible for redemption, financial consultants advise the City of the financial viability of redeeming bond issues, and when would be the best timing to redeem bonds in the market.
General Obligation Bond Series 2014 is currently eligible to be redeemed and Series 2015 will be eligible to be redeemed as of June 2024. Both bond series have individual bond interest rates higher than current market rates. Therefore, it would be in the best financial interest of the City to redeem those bond issues that hold higher interest rates than the market at the time of redemption. It is estimated that the City could save between $1.2 and $1.8 million in interest if the current market conditions hold or improve later in the year.
In addition, the City Administration is recommending taking out an additional $5.3 million in tax exempt bonds for water system infrastructure improvements to be completed in the next two years. The City has a long list of water system infrastructure improvements that will be needed in the coming years and since the City is currently issuing bonds this year, it makes sense to include a portion of the water projects in the current bond issue to economize on debt issuance expenses.
It is anticipated that bonds will be issued in mid to late summer, depending on changing market conditions. |
|
| | | | | | | | | POTENTIAL OBJECTIONS: None Anticipated |
|
| | | | | | | | | INPUT FROM OTHER SOURCES: Dalena Wilkomer, Baird Financial Services
Dan Forbes, Speer Financial
Kyle Harding, Chapman and Cutler LLP |
|
| | | | | | | | | STAFF REFERENCE: Scot Wrighton, City Manager
Ruby James, City Treasurer & Chief Financial Officer |
|
| | | | | | | | | BUDGET/TIME IMPLICATIONS: Approval of this ordinance will allow the City to save between $1.2 million and $1.8 million in long-term interest costs, depending on market conditions and interest rates at the time of issuance. It will also allow the City to provide funding for current and anticipated water system infrastructure improvements. |
|
|