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STRATEGIC OUTCOMES |
ACTION |
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Department: |
☐ Safe & Prosperous |
☐ Motion |
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City Administration |
☐ Active & Appealing |
☐ Resolution |
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☒ Respected & Responsible |
☐ Ordinance - Introduction |
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Division: |
☐ Connected & Engaged |
☒ Ordinance - Adoption |
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Administration |
☒ Unique & Creative |
☐ Public Hearing |
TITLE: t
Tender Offer: Purchase of Certain Obligations of the City
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SUMMARY RECOMMENDATION: Summary Recommendation
Adopt an ordinance approving a tender offer with respect to the purchase of certain obligations of the City (Administration) (Jay Simonton/Douglas Allen)
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STRATEGIC OUTCOME:
This item supports the City Council’s strategic outcome of Respected and Responsible, as it assures the City is being a good steward of public funds.
REPORT:
To address the fluctuating and increasing cost of the Public Safety Personnel Retirement System (PSPRS), the City Council prioritized resolution of the PSPRS Unfunded Actuarial Accrued Liability (UAAL) and:
• On February 19, 2021, the City issued $159,475,000 in taxable pledged revenue bonds to:
o Pay the balance of the PSPRS unfunded liability and
o Establish a reserve account designated to maintain a fully funded PSPRS
• In July 2021, the City fully paid (100%) of the estimated PSPRS UAAL
These PSPRS 2021 Taxable Pledged Revenue Obligations (PROs, aka bonds) had:
• All-In Borrowing Costs of 2.381%
• Net Present Value Expected Savings of $72,793,473 (49.78%)
Since February 19, 2021 and closing of the 2021 PROs (bonds):
• The 10-year U.S. Treasury has risen from 1.34% to 4.26% (currently 3.751% as of October 1, 2024)
• The Dow Jones Industrial Average has risen from $31,494 to $42,287 (as of October 1, 2024)
Please see the attached excerpts from the Bond Buyback (Tendering) presentation by Stifel at the September 4, 2024 City Council meeting.
FISCAL REQUIREMENTS:
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CITY FUNDS: |
$15,000,000.00 |
BUDGETED: |
$ 0.00 |
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STATE FUNDS: |
$ 0.00 |
AVAILABLE TO TRANSFER: |
$ 15,000,000.00 |
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FEDERAL FUNDS: |
$ 0.00 |
IN CONTINGENCY: |
$ 0.00 |
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OTHER SOURCES: |
$ 0.00 |
FUNDING: ACCOUNT/FUND #/CIP |
TOTAL $ 0.00
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General Fund |
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To total; right click number & choose “Update Field” |
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FISCAL IMPACT STATEMENT:
A budget amendment is needed to provide budget authority to execute tendering transactions, as prescribed by the Governmental Accounting Standards Board (GASB). Funding is from the General Fund only.
The Bond Buyback (Tendering) program presents a potential complement to the City’s investment portfolio, with financing from the City’s existing long-term investment pool. This program:
• Does not impact the City’s operations or delivery of services.
• Does not pull cash from the City’s current operating budget.
• As a long-term investment matures, and based on cash flow needs, principal is redeployed to another investment with a 1-5 year duration until maturity:
o Typically, US Treasuries, Agencies, LGIP, or other investments under policy.
o Reducing long-term debt may be more advantageous than a renewing some long-term investment.
o Tendering City bonds is a method to reduce long-term debt, and more impactful than calling bonds early because tendering reduces interest and principal.
Other considerations before tendering include:
• Cash flows for current and future operations.
• Rate of return and duration.
• Other investment opportunities:
o LGIP (Local Government Investment Pool)
o US Agencies (City LT Investment Pool)
o Other investments within City Policy
Actual results from the tender are subject to changes in market conditions and investor appetite.
ADDITIONAL INFORMATION:
SUPPORTING DOCUMENTS NOT ATTACHED TO THE CITY COUNCIL ACTION FORM THAT ARE ON FILE IN THE OFFICE OF THE CITY CLERK:
None
IF CITY COUNCIL ACTION INCLUDES A CONTRACT, LEASE OR AGREEMENT, WHO WILL BE RESPONSIBLE FOR ROUTING THE DOCUMENT FOR SIGNATURE AFTER CITY COUNCIL APPROVAL?
☒ Department
☐ City Clerk’s Office
☐ Document to be recorded
☐ Document to be codified
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Acting City Administrator: |
Date: |
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John D. Simonton |
10/08/2024 |
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Reviewed by City Attorney: |
Date: |
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Richard W. Files |
10/08/2024 |