WATER AND
POWER2024 Bond Refunding
City Council
June 4, 2024
Purpose of Bond Issuance
• Issue not to exceed $30M of tax-exempt water
revenue bonds to refund the Water Revenue Bonds,
Series 2010B (Taxable Build America Bonds - BABs)
• Issue not to exceed $60M of tax-exempt electric
revenue bonds to refund the Electric Revenue Bonds,
Series 2010B (Taxable Build America Bonds {BABs})
2 Reasons for Refunding
• Federal sequestration of BAB subsidy ruled
“materially adverse”
• Extraordinary Optional Redemption provision
permitted
• Allows BWP to refund its BABs for debt service
savings, eliminate Federal sequestration risk, and
issue callable bonds
3 Sequestration Risk
4 Fiscal Year 35%
Subsidy
Subsidy Net of 5.7%
Sequestration
Additional
Interest Fiscal Year 35%
Subsidy
Subsidy Net of 5.7%
Sequestration
Additional
Interest
6/30/2024 (534,395) (503,935) 30,461 6/30/2024 (1,153,284) (1,087,547) 65,737 6/30/2025 (516,421) (486,985) 29,436 6/30/2025 (1,105,923) (1,042,885) 63,038 6/30/2026 (497,847) (469,470) 28,377 6/30/2026 (1,056,740) (996,506) 60,234 6/30/2027 (475,711) (448,596) 27,116 6/30/2027 (1,005,521) (948,206) 57,315 6/30/2028 (452,784) (426,976) 25,809 6/30/2028 (952,266) (897,987) 54,279 6/30/2029 (428,968) (404,517) 24,451 6/30/2029 (896,868) (845,747) 51,121 6/30/2030 (404,361) (381,313) 23,049 6/30/2030 (839,220) (791,385) 47,836 6/30/2031 (378,865) (357,270) 21,595 6/30/2031 (779,215) (734,800) 44,415 6/30/2032 (352,381) (332,295) 20,086 6/30/2032 (714,705) (673,966) 40,738 6/30/2033 (322,240) (303,872) 18,368 6/30/2033 (647,538) (610,629) 36,910 6/30/2034 (287,355) (270,976) 16,379 6/30/2034 (577,606) (544,683) 32,924 6/30/2035 (251,186) (236,869) 14,318 6/30/2035 (504,797) (476,023) 28,773 6/30/2036 (213,733) (201,550) 12,183 6/30/2036 (428,889) (404,442) 24,447 6/30/2037 (174,895) (164,926) 9,969 6/30/2037 (349,883) (329,940) 19,943 6/30/2038 (133,606) (125,991) 7,616 6/30/2038 (267,668) (252,411) 15,257 6/30/2039 (90,694) (85,525) 5,170 6/30/2039 (182,023) (171,648) 10,375 6/30/2040 (46,159) (43,528) 2,631 6/30/2040 (92,837) (87,546) 5,292 Total (5,561,604) (5,244,592) 317,011 Total (11,554,985) (10,896,351) 658,634 Water Subsidy Electric Subsidy
• 5.7% sequestration rate through 2031
• Market convention assumes the current level of sequestration continues for the life of remaining BABs issues
• Creates additional interest expense of approximately $317,000 for water and $659,000 for electric
Preliminary Financing Results
5 Water Refunding Bonds
Dated and Delivery Date 6/25/2024
Last Maturity 6/1/2040
True Interest Cost 3.187%
S&P Rating AAA
Par Call Option 6/1/2034
Preliminary Savings
Par amount of Refunded Bonds $26,045,000
Net PV Savings $670,955
% savings of Refunded Bonds 2.58%
Sources and Uses
Par Amount $23,280,000
Premium 3,561,537
Accrued Interest Contribution 98,366
Total Sources $26,939,903
Refunding Deposit $26,576,944
Cost of Issuance 246,560
Underwriter's Discount 116,400
Total Uses $26,939,903
Electric Refunding Bonds
Dated and Delivery Date 7/2/2024
Last Maturity 6/1/2040
True Interest Cost 3.157%
S&P Rating AA-
Par Call Option 6/1/2034
Preliminary Savings
Par amount of Refunded Bonds $50,455,000
Net PV Savings $390,933
% savings of Refunded Bonds 0.77%
Sources and Uses
Par Amount $46,460,000
Premium 6,833,762
2010B Reserve 2,500,741
Accrued Interest Contribution 272,092
Total Sources $56,066,596
Refunding Deposit $53,474,287
2024 Reserve 2,156,250
Cost of Issuance 296,678
Underwriter's Discount 139,380
Total Uses $56,066,596
Preliminary Savings Schedule Water Revenue
• PV savings of approximately $670K or 2.58% of the refunded 2010B BABs • Replaces the 2010 make-whole call with a 10-year par call • Eliminates risk of further Federal subsidy reduction from sequestration 6 2010B Water Revenue Bonds Savings Analysis (1)
Bond
Year
2010B
DS
Funds on
Hand (2) Subsidy (3) 2010B Net
DS
Refunding
Debt Service Savings PV
Savings
6/1/2025 2,560,489 (98,366) (454,519) 2,007,603 1,956,400 51,203 47,646 6/1/2026 2,542,421 (469,470) 2,072,951 2,020,500 52,451 48,562 6/1/2027 2,519,175 (448,596) 2,070,579 2,020,500 50,079 45,052 6/1/2028 2,498,670 (426,976) 2,071,694 2,023,250 48,444 42,362 6/1/2029 2,470,623 (404,517) 2,066,106 2,018,500 47,606 40,487 6/1/2030 2,445,318 (381,313) 2,064,005 2,011,500 52,505 43,545 6/1/2031 2,422,472 (357,270) 2,065,202 2,017,250 47,952 38,623 6/1/2032 2,531,802 (332,295) 2,199,507 2,145,000 54,507 42,840 6/1/2033 2,685,685 (303,872) 2,381,813 2,323,500 58,313 44,666 6/1/2034 2,651,016 (270,976) 2,380,039 2,324,750 55,289 41,206 6/1/2035 2,612,676 (236,869) 2,375,807 2,317,000 58,807 42,725 6/1/2036 2,575,665 (201,550) 2,374,115 2,315,500 58,615 41,481 6/1/2037 2,534,701 (164,926) 2,369,775 2,314,750 55,025 37,917 6/1/2038 2,496,732 (125,991) 2,370,742 2,314,500 56,242 37,768 6/1/2039 2,454,126 (85,525) 2,368,601 2,309,500 59,101 38,688 6/1/2040 2,406,882 (43,528) 2,363,354 2,304,750 58,604 37,388 TOTAL 40,408,452 (98,366) (4,708,192) 35,601,895 34,737,150 864,745 670,955 (1) Proportional solution.
(2) Accrued interest contribution.
(3) 35% Federal Subsidy net of 5.7% sequestration.
Preliminary Savings Schedule Electric Revenue
• PV savings of approximately $390K or 0.77% of the refunded 2010B BABs • Replaces the 2010 make-whole call with a 10-year par call • Eliminates risk of further Federal subsidy reduction from sequestration 7 Bond
Year
2010B
DS
Funds on
Hand (2) Subsidy (3) 2010B
DSRF (4)
2010B Net
DS
Refunding
DS
2024
DSRF (5)
Refunding
Net DS Savings PV
Savings
6/1/2025 5,454,780 (272,092) (953,081) (118,384) 4,111,223 4,132,964 (55,791) 4,077,173 34,049 28,470 6/1/2026 5,409,257 (996,506) (129,538) 4,283,213 4,312,500 (61,048) 4,251,452 31,760 28,297 6/1/2027 5,357,917 (948,206) (129,538) 4,280,172 4,308,000 (61,048) 4,246,952 33,220 28,900 6/1/2028 5,305,761 (897,987) (129,538) 4,278,235 4,303,500 (61,048) 4,242,452 35,783 30,443 6/1/2029 5,252,481 (845,747) (129,538) 4,277,196 4,303,750 (61,048) 4,242,702 34,493 28,529 6/1/2030 5,197,772 (791,385) (129,538) 4,276,849 4,303,250 (61,048) 4,242,202 34,647 27,929 6/1/2031 5,141,328 (734,800) (129,538) 4,276,990 4,306,750 (61,048) 4,245,702 31,288 24,457 6/1/2032 5,077,013 (673,966) (129,538) 4,273,508 4,298,750 (61,048) 4,237,702 35,806 27,450 6/1/2033 5,010,110 (610,629) (129,538) 4,269,943 4,299,500 (61,048) 4,238,452 31,490 23,389 6/1/2034 4,940,303 (544,683) (129,538) 4,266,082 4,293,250 (61,048) 4,232,202 33,880 24,615 6/1/2035 4,872,276 (476,023) (129,538) 4,266,715 4,295,000 (61,048) 4,233,952 32,762 23,183 6/1/2036 4,795,397 (404,442) (129,538) 4,261,417 4,289,000 (61,048) 4,227,952 33,464 23,122 6/1/2037 4,714,666 (329,940) (129,538) 4,255,188 4,285,250 (61,048) 4,224,202 30,986 20,843 6/1/2038 4,634,767 (252,411) (129,538) 4,252,817 4,278,250 (61,048) 4,217,202 35,615 23,490 6/1/2039 4,550,067 (171,648) (129,538) 4,248,880 4,277,750 (61,048) 4,216,702 32,178 20,679 6/1/2040 4,460,250 (87,546) (2,630,279) 1,742,425 3,948,000 (2,217,298) 1,730,702 11,722 7,137 TOTAL 80,174,145 (9,719,000) (4,562,200) 65,620,853 68,235,464 (3,127,755) 65,107,709 513,144 390,933 (3) 35% Federal Subsidy net of 5.7% sequestration.
(4) 2010B Reserve earnings of 5.18% as of May 2024.
(5) 2024 Reserve earnings at the arb yield of 2.83%
2010B Electric Revenue Bonds Savings Analysis (1)
(1) Proportional solution assuming reserves as cashflow to maturity earning at respective yields. (2) Accrued interest contribution.
(3) 35% Federal Subsidy net of 5.7% sequestration.
Refunding Schedule
8 Recommendation
Staff requests that the City Council adopt a resolution approving the issuance of the 2024 water refunding
bonds not to exceed $30 million to refund the
outstanding 2010B water BABs, adopt a resolution
approving the issuance of the 2024 electric refunding
bonds not to exceed $60 million to refund the
outstanding 2010B electric BABs, and to authorize the
approval and execution of certain documents in
connection with such issuances in accordance with the
resolutions.
9 CONTACT
Mark Young
Managing Director
KNN Public Finance
[email protected]
(310) 348-2901 office
10