HomeMy WebLinkAbout1997 07 14 Regular Item J
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COMMISSION AGENDA
ADD ON
ITEM J
REGULAR
CONSENT
INFORMATIONAL
xx
July 14, 1997
Meeting
I.A. /D EPT
Authorization
REQUEST: The City Manager request Commission accept the recommendations ofthe City
Financial Advisor and award the financing of General Government Capital Improvements in the
amount of$575,000 to First Union National Bank and the financing of Water & Sewer Capital
Improvements in the amount of$3,025,000 to Regions Bank.
PURPOSE: The purpose of this Board item is for the Commission the accept and approve the
recommendations of the City Financial Advisor.
CONSIDERATIONS:
A. The need to acquire certain capital items, with an extended life, for General
Government purposes and complete Capital Improvements for the Water & Sewer
Utility.
B. To acquire the General Government capital items, short-term financing (5-years)
is the consideration. To acquire and complete the Capital Improvements for the
Utility, a longer period of financing (1 O-years) is the consideration.
C. The need to acquire these Capital Assets and the desire to hold the line on Ad
Valorem Taxes not increase Utility Rates, financing is the consideration with the
least impact on the current fund sources.
ISSUE ANALYSIS:
A. Do we fund the acquisition of Capital Improvements thru current available funds
or consider incurring debt to fund these Capital items.
B. Without considering the financing, we are faced with increasing Ad Valorem
Taxes and Water & Sewer rates to accomplish these projects.
C. Utilitizing financing as a method to acquire and complete these Capital
Improvements, the impact on Revenue sources is greatly reduced.
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FUNDING:
A. GENERAL FUND:
1. SOURCE:
Incurring a 5-year Note with First Union National Bank in the amount of
$575,000 bearing an interest rate of 4.89%.
2. USE:
Those Capital Improvement items listed on Schedule A.
3. REPAYMENT METHOD:
Maximum annual Debt Service payments in the amount of $133,200 to be
funded from Public Service Utility Tax and Electric Franchise Fee.
B. WATER & SEWER UTILITY:
1. SOURCE:
Incurring a lO-year Note with Regions Bank in the amount of$3,025,000
bearing an average interest rate 0 f 5.18 %.
2. USE:
Those Capital Improvement items listed on Schedule B.
3. REPAYMENT METHOD:
Maximum annual Debt Service payments in the amount of$397,261 to be
funded through Revenues from operations.
RECOMMENDATION:
1. Recommend acceptance and awarding as recommended by the City Financial
Advisor.
IMPLEMENTATION SCHEDULE:
1. Awarding of financing as proposed and recommended.
2. Closing on Wednesday, July 16, 1997 beginning at 10:00 AM
....r:------,.J .
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ATTACHMENTS:
I. Schedule "A" - Listing of General Government Capital Items.
2. Schedule "B" - Listing of Water & Sewer Utility Capital Improvements.
3. Proposal from First Union National Bank for 5-year financing in the
,unount of $575,000.
4. Proposal from Regions Bank for 10-year financing in the amount of
$3,025,000.
5. Memo from Mr. Jim Lentz, City Financial Advisor outlining results of
review of Proposals and the resulting recommendations.
6. Resolution No. 821, Authorizing the Issuance of$575,000 in Subordinate
Improvement Revenue Bonds, Series 1997. (to be supplied by Bond
Counsel on Monday, July 14, 1997)
7. Resolution No. 822, Authorizing the Issuance of$3,025,000 in
Subordinate Water & Sewer Revenue Bonds, Series 1997. (to be
supplied by Bond Counsel on Monday, July 14, 1997)
8. Resolution No. 823, Authorizing the Sale of$575,000 in Subordinate
Improvement Revenue Bonds, Series 1997. (to be supplied by Bond
Counsel on Monday, July 14, 1997)
9. R<:::solution No. 824, Authorizing the Sale of$3,025,000 in Subordinate
Water & Sewer Revenue Bonds, Series 1997. (to be supplied by Bond
Counsel on Monday, July 14, 1997)
COMMISSION ACTION:
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SCHEDULE "A"
GENERAL GOVERNMENT CAPITAL IMPROVEMENTS
Citywide Telephone System $160,000
KIVA Software $150,000
Public Safety Radio System $100,000
City Hall Renovations $100,000
Telecommunications cabling $50,000
Issuance Costs $15,000
TOTAL CAPITAL IMPROVEMENTS $575,000
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SCHEDULE "B"
WATER & SEWER CAPITAL IMPROVEMENTS
Greenspointe Reclaimed Distribution System
Panama/Moss Road Water Main Replacement
North Area Water Main Replacement
East Area Reclaimed Water Line
Tuscawilla Road Water Line
West Plant Surge Tank
Issurance Costs
$210,000
$140,000
$400,000
$1,500,000
$250,000
$500,000
$25,000
$3,025,000
TOTAL CAPITAL IMPROVEMENTS
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Regions
~ Rank
,
July 9, 1997
Mr. Harry Martin
Finance Director
City of Winter Springs
1126 East State Road 434
Winter Springs, Florida 32708
Dear Mr. Martin:
Enclosed please find the executed Exhibit C and C1 from Regions
Bank, N.A. regarding the interest rate bid for the $3,025,000
Water and Sewer Issue for the City of Winter Springs.
We thank you for the opportunity to provide you with financing as
well as any opportunities for depository accounts.
Should you have any questions or require additional information
please do not hesitate to contact me at (407) 695-1024.
,
Sincerely,
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Kar n L. Smith
Vice President
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EXHIBIT C
REQUEST FOR OFFERS
$3,025,000 WATER and SEWER ISSUE
The City of Winter Springs (City) is requesting offers to finalize negotiations
regarding placement of the above financing. Items to be finalized are:
· Call Features
. Final Maturity
1) Call Features. The City prefers to have the option to prepay this obligation
without penalty on October I, 2002, and anytime thereafter. However, since this
will be a fixed rate issue, the Offeror may impose an additional cost for such
feature. Accordingly, should there be a cost to the City, the Offeror may provide
alternative call features and interest rates, which will be considered by the City.
2) Final Maturity. The City wishes to attain approximate level debt services for this
issue. Therefore, the final principal amount will not be determined until the
interest rate is known. The Offerors are to provide a fixed interest rate, on the
attached amortization (F 1) schedule, which will be firm until the closing,
anticipated to be no later then July 18, 1997. The City reserves the right to pay
semi-annual principal. Accordingly, should the Offeror be able to lower the
interest rate for such semi-annual payments, then the Offeror may submit an
alternative proposal, which reflect such lower rates.
Offerors shall pay not less then 99 1/2% of face maturity principal value. Such
discount, and or premium, will have all the Offerors' expenses included. The City will
not pay any additional cost to Offeror.
The City is requesting ascending (lowest interest rate on shortest maturity, to
highest interest rate for longest maturity) interest rates per maturity, which may be
repeated in consecutive order. However, should the Offeror be able to lower the interest
cost to the City, due to couporung, then an alternative proposal and interest rates may be
submitted.
Any alternative proposals should be in the same format as attached Exhibit C 1.
The City reserves the right to select any proposal for any reason or reject any
proposal for any reason, at its sold discretion.
The City Commission will be meeting on the evening of July 15, 1997. At such
time, it is anticipated that approval by the Commission will be made. Reimbursement to
successful Offeror for their expenses must be factored into the purchase price of the loan
at the time of the proposal.
The financial advisor and Ci.ty staff will evaluate the proposals and inform Offeror
of their recommendation within twenty-four (24) hours of receipt of proposals. No
proposal will be considered prior to July 9, 1997, at 3:00 p.m. EDST.
The Offeror acknowledges it has agreed to provide a sophisticated investor letter
in substantial form as Exhibit I.
Exhibit C may be signed or faxed to the City prior to receipt of offers. Exhibit C
must be included in offer, with Exhibit Cl, prior to July 9, 1997 at 3:00 p.m., EDST,
attention Mr. Harry Martin, 1126 E. State Road 434, Winter Springs, Florida 32708, FAX
# (407) 327-2977.
Sincerely,
James L. Lentz
Senior Director
ACCEPTED:
Title: President & CEO
Telephone: (407) 695-0425
(407) 695-4563
Facsimile:
Dated: I leI \C\ -.-]
2
EXHIBIT Cl
$3,025,000 WATER and SEWER ISSUE
,
Mr. Harry Martin
Finance Director
City of Winter Springs
1126 East State Road 434
Winter Springs, Florida 32708
Dear Mr. Martin:
The undersigned Regions Bank, N.A. is offering to provide a $3,025,000 fixed rate
loan based upon the following principal repayment schedule. .
Amount
$235,000
$250,000
$260,000
$275,000
$290,000
$310,000
$325,000
$340,000
$360,000
$380,000
Due Date
10-1-1998
10-1-1999
10-1-2000
10-1-200 I
10-1-2002
10-1-2003
10-1-2004
10-1-2005
10-1-2006
10-1-2007
Interest Rate
2.....Q..Q.%
5.05%
5.10%
5.10%
5.15%
5.15%
5.20%
5.20%
5.25%
5.25%
The undersigned will pay $3,022,500 , (not less then $3,009,875), plus accrued
interest, if any, or ~% of par value. The undersigned has furnished a signed copy of
EXHIBIT C to the City and agrees to the conditions contained therein. The fixed rate
interest rate stated above will be good until closing which is anticipated to take place
prior to July 18, 1997.
* 99.917
SUBMITTED:
Alternative Offer Submitted
o ~
Yes No
Title: Pres ident & CEO
Please Check One
Telephone: 407-695-0425
Facsimile: 407-695-4563
. .
First Union National Bank
One Orlando Centre
FL2770
800 North Magnolia Avenue. Suite 800
P O.....eox 1000
Orlari~o. Florida 32801-1000
407 649-5099
f~N'
July 9, 1997
Mr. Harry Martin
City of Winter Springs
1126 E. State Road 434
Winter Springs, FL 32708
Dear Mr. Martin:
First Union National Bank (the "Bank") is pleased to submit the Commitment
described below to the City of Winter Springs, (the "City") subject to the
following terms and conditions.
Borrower:
ThE~ City of Winter Springs, FL
Amount:
$575,000
Facility:
Term Loan
Purpose:
To finance the cost of constructing and acquiring certain capital
improvements for the City and the Police Department.
Term:
The loan will amortize annually over 5 years, with interest
payable semi-annually on each April 1 and October 1
commencing October 1, 1997. Principal shall be payable
annually commencing on October 1, 1998 and each October 1
thereafter through October 1, 2002. Interest on the
outstanding balance of the loan will be calculated on a 30/360
day basis.
Security:
The Loan will be secured by a Junior Lien on Excise Taxes (the
Pledged Revenues).
Interest Rate:
Fixed Rate of 4.89%. This rate will be held until July 18th,
1997, closing date, if Bank is notified by 3:00 PM on July 10th
that Bank has submitted winning bid.
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Prepayment:
, ,
The City may prepay the outstanding balance at any time after
the end of the fifth year with no prepayment penalty. Should
the City prepay during the first 5 years the loan is outstanding,
the City may incur a prepayment penalty.
Conditions
1 . The City by official action, shall approve entering into this Commitment
Letter; shall approve entering into the loan facility described herein; and
shall cause any borrowing under this facility to be designated as a "Qualified
Obligation" pursuant to Section 265(b)(3)(B) Internal Revenue Code of
1986, as amended.
Should subsequent but currently unforeseen events cause any borrowing
under this facility to be determined to be a "non-qualified" obligation
pursuant to Section 265(b)(3)(B), Internal Revenue Code of 1986, as
amended, the Bank shall adjust the interest rate on any outstandings
hereunder so that it shall receive the same after tax yield equivalent
contemplated as of the time of this commitment.
2. In the event that the interest on any drawing under this Commitment is ever
determined to be taxable for purposes of federal or state income taxation, or
in the event that any or all of the interest on any drawing under this
Commitment is deemed to be included in the gross income of the Bank for
federal or state income taxation, or in the event the Bank is unable to
deduct any other amounts as a result of purchasing or carrying any
borrowings resultant from the Commitment, or in the event of a change in
the marginal tax rate applicable to corporations or the alternative minimum
tax or in the method of calculating the alternative minimum tax to which the
Bank may be subject, or in the event of any action which would otherwise
decrease the after tax or taxable equivalent yield to the Bank, the interest
on .this Commitment shall be subject to a full gross up modification, as
determined by the Bank and its counsel. In no event, however, shall the
interest rate on this Commitment exceed the maximum rate permitted by
law.
3. Legal opinions relating to this facility shall be prepared by Bond Counsel,
Carlton Fields, and shall be in such form and content as are acceptable to
the Bank and its counsel. All costs relating to the preparation of documents
and to otherwise complete this transaction shall be paid for by the City.
Documents shall be available for review at least 3 business days prior to
closing.
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,
4. On an ongoing basis, the City agrees that it shall deliver to the Bank, when
available, or within 180 days of each fiscal year end, which ever is sooner,
(Financial Statements/a Comprehensive Annual Financial Report), a Current
Year Operating Budget and a Capital Improvement Plan.
5. This Commitment shall remain in full force and effect through 3:00 p.m.,
local time, July 18, 1997, at which time, if not accepted by execution of
the acceptance clause below and mailed to the Bank at its 800 N. Magnolia
Avenue, Orlando, Florida, office to my attention, this Commitment shall
expire and shall not be enforceable by either the Bank or the District unless
extended by the Bank in writing. Unless extended by the Bank in writing,
this facility must close on or prior to July 21, 1997, after which this
commitment shall expire.
6. If the Bank chooses to waive any covenant, paragraph, or provision of this
Commitment, or if any covenant, paragraph, or provision of this
Commitment is construed by a court of competent jurisdiction to be invalid,
it shall not affect the applicability, validity or enforceability of the remaining
covenants, paragraphs or provisions.
7. No additional parity subordinate debt shall be issued unless the Pledged
Revenues derived from the immediately preceding fiscal year, preceding the
issuance of the proposed additional parity subordinate debt covers
Maximum Annual Debt Service on existing and prospective subordinate debt
by 1.1 times.
8. No additional parity senior debt shall be issued unless the Pledged Revenues
derived from the immediately preceding fiscal year, preceding the issuance
of the proposed additional parity senior debt, cover Maximum Annual Debt
Service on existing and prospective senior debt by 1.25 times.
9. The preceding terms and conditions are not exhaustive, and this
Commitment is subject to such other covenants, terms and closing
conditions as are customarily required by the Bank for similar transactions.
This Commitment Letter shall survive closing.
10. The City represents and agrees that all information provided to the Bank is
correct and complete. No material adverse change may occur in, nor may
any adverse circumstance be discovered as to, the financial condition of the
City prior to closing. The Bank's obligations under this Commitment are
conditioned on the fulfillment to the Bank's sole satisfaction of each term
and condition referenced by this Commitment.
11 . This Commitment supersedes all prior Commitments and proposals with
respect to this transaction, whether written or oral, including any previous
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loan proposals made by the Bank or anyone acting within its authorization.
No modification shall be valid unless in writing and signed by an authorized
Officer of the Bank. This Commitment is not assignable and no entity other
than the City shall be entitled to rely on this Commitment.
First Union National Bank of Florida appreciates the opportunity to submit this
Commitment to you and looks forward to your favorable response. Should you
have any questions, please do not hesitate to contact me at (407) 649-5375.
Best Regards,
FIRST UNION NATIONAL BANK
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:--------
Randy porc
Vice President
ACCEPT ANCE
The above Commitment is hereby accepted on the terms and conditions outlined
therein by authority of the Governing Board of the City:
By:
Date:
Its:
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EXIllBIT F
REQUEST FOR OFFERS
$500,000 IMPROVEMENT ISSUE
The City of Winter Springs (City) is requesting offers to finalize negotiations
regarding placement of the above financing. Items to be finalized are:
. Call Features
. Final Maturity
1) Call Features. The City prefers to have the option to prepay this obligation
without penalty and at any time. However, since this will be a fixed rate issue, the
Offeror may impose an additional cost for such feature. Accordingly, should
there be a cost to the City, the Offeror may provide alternative call features and
interest rates, which will be considered by the City.
2) Final Maturity. The City wishes to attain approximate level debt services for this
issue. Therefore, the final principal amount will not be determined until the
interest rate is known. The Offerors are to provide a fixed interest rate, on the
attached amortization (F 1) schedule, which will be finn until the closing,
anticipated to be no later then July 18, 1997. The City reserves the right to pay
semi-annual principal. Accordingly, should the Offeror be able to lower the
interest rate for such semi-annual payments, then the Offeror may submit an
alternative proposal, which reflect such lower rates.
Dfferors shall pay not less then 99 1/2% of face maturity principal value. Such
discount, and or premium, will have all the Offerors' expenses included. The City will
not pay any additional cost to Offeror.
The City is requesting ascending (lowest interest rate on shortest maturity, to
highest interest rate for longest maturity) interest rates per maturity, which may be
repeated in consecutive order. However, should the Offeror be able to lower the interest
cost to the City, due to couponing, then an alternative proposal and interest rates may be
submitted.
Any alternative proposals should be in the same format as attached Exhibit Fl.
The City reserves the right{o select any proposal for any reason or reject any
proposal for any reason, at its sold di~cretion.
The City Commission will be meeting on the evening of6uly 15, 1997. At such
time, it is anticipated that approval by the Commission will be made. Reimbursement to
successful Offeror for their expenses must be factored into the purchase price of the loan
at the time of the proposal.
The financial advisor and City staff will evaluate the proposals and inform Offeror
of their recommendation within twenty-fo~ (24) hours of receipt of proposals. No
proposal will be considered prior to July 9, 1997, at 3:00 p.m. ED ST.
The Offeror acknowledges it has agreed to provide a sophisticated investor lettet
in substantial form as Exhibit I.
Exhibit F may be signed or faxed to the City prior to receipt of offers. Exhibit F
must be included in offer, with Exhibit Fl, prior to July 9, 1997 at 3:00 p.m., EDST,
attention Mr. Harry Martin, 1126 E. State Road 434, Winter Springs, Florida 32708, FAX
# (407) 327-2977.
Sincerely,
James L. Lentz
Senior Director
ACCEPTED:
Fbrrn: First Union Bank
z4~
By'. ~-
'. andy ~o c .-
Title: Vice President
Telephone: 407/649-5375
Facsimile: 407/649-5732
Dated:
7hA1
I I
2
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EXHIBIT Fl
$500,000 IMPROVEMENT ISSUE
Mr. Harry Martin
Finance Director
City of Winter Springs
1126 East State Road 434
Winter Springs, Florida 32708
Dear Mr. Martin:
The undersigned First Union Bank is offering to provide a $500,000 fixed rate
loan based upon the following principal repayment schedule.
Amount
$ 90,000
$ 95,000
$100,000
$105,000
$110,000
Due Date
10-1-1998
10-1-1999
10-1-2000
10-1-2001
10-1-2002
Interest Rate
4.89 %
4...Jt2... %
4.89 %
U2... %
4.89 %
The undersigned will pay $500,000.00 . (not less then $497,500), plus accrued
interest, if any, or ~% of par value. The undersigned has furnished a signed copy of
EXHIBIT F to the City and agrees to the conditions contained therein. The fixed rate
interest rate stated above will be good until closing which is' anticipated to take place
prior to July 18, 1997.
SUBMlTIED:
Finn: First Union Bank
Alternative Offer Submitted
Bd!::!):-
Title: Vice President
o
Yes
~
No
Please Check One
Telephone: 407/649-5375
Facsimile: 407/649-5732
,-,
:-JI FIRST SOUTffi\~ST COMPANY
Ceiebratfng 50 Ye.a."s o./Service
,
MEMORANDUM
DATE:
July 10, 1997
TO:
Ron McLem re
SL"BJECT:
FROM:
Jim Len :
The City of Winter Springs solicited proposals from the local banks to provide financing
for tv\'o (2) issues.
1) $3,025,000 loan for the Water and Sewer System for long term capital needs of
the System, and
2) $575,000 loan for various capital improvements of the Cil)'.
The City received five (5) proposals for the Water and Sewer System and I will be
making the recommendation at the Commission meeting to select Regions Bank,
(formerly First Mercantile) to provide the fmancing. This recommendation is supported
by Mike Williams, Bond Counsel (Carlton Fields) and Harry Martin.
The reason for this recommendation is Regions Bank agreed to all the terms and
conditions imposed by the City during the Request for Proposal process. Regions'
average interest rate is 5,18%. Sun Bank offered a lower interest rate of 5.06%.
However,' it was not a commitment and was subject to a number of conditions which,
when added together, vo,-as not worth the approximately S20,000 of total interest cost that
Regions' proposed. Additionally, since approval had not been granted, other conditions
may be requested which we cannot measure, or the loan may not receive final approval.
The Regions' proposal is straightforward and not complicated and, therefore, assures us a
favorable interest rate. Prior estimates on the interest rate had been 5.50% vs. the 5.18%
being proposed.
Barnett Bank submitted a proposal which would have saved approximately $7,000 or a
5.14% interest rate over the ten (10) year period, but would have required a swap
instrument be utilized. The amount of additional dollar cost to the City for Bond
~N'lESTh~ BANKERS S::NCS : 946
~
651 B,:vn A/awl' Stwn . Orlando, Florida 32804..J42/ . 4()7-426- 9611 . F..IX ~r; 7-./26-783j
Counsel, Financial Adviser fees and Local Counsel cost would have far exceeded the
~avings. Also, the swap doc\.Ul1ent would have contained a pre-payment penalty which
the Regions' proposal does not have, Other bidders were First Union at 5.22% and
NationsBank at 5.35%.
On the $575,000 loan request, Barnett offered the lowest rate of 4.75%. However, they
advised me that their proposal was all or nothing for both issues. When you factor into
the savings another $2,000, which represents the difference bern.-een their proposal and
the one submitted by First Union Bank, it still did not effect a savings because of the cost
of the swap described above. Sun Bank offered a 4.78% rate. However, it was not a
commitment and, for reasons previously described, was rejected. Our recommendation
\\-ill be to have First Union provide the fmancing at 4.89%. NationsBank also proposed
at a 5.10%. Our estimate had previously projected a 5% cost.
To summarize the above, it is our recommendation to award the $3,025,000 Water and
Sewer loan to Regions Bank at 5.18% and the $575,000 loan for general improvements to
First Union Bank at 4.89%.
I will be at the meeting Monday should there be questions relating to the above.
cc: Harry Martin
Frank Kruppenbacher
Mike Williams
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