HomeMy WebLinkAboutAgenda Report - September 1, 2010 D-10AGENDA ITEM V
A% CITY OF LODI
COUNCIL COMMUNICATION
AGENDA TITLE: Adopt Resolution Authorizing Early Payoff of Loan Contract E54402 in the Amount
of $1,433,395.68 with the State Department of Water Resources and Increasing
Appropriations in the Amount of $1,205,370
MEETING DATE: September 1 2010
PREPARED BY: Deputy City Manager
RECOMMENDED ACTION: Adopt resolution authorizing early payoff of loan contract E54402
in the amount of $1,433,395.68 with the State Department of Water
Resources and increasing appropriations in the amount of
$1,205,370.
BACKGROUND INFORMATION: In 1997, the City completed improvements to the water system that
were funded by a loan from the State Department of Water
Resources (DWR) in the amount of $3,129,827.51. The terms of
the loan were semi-annual payments of $114,012.04 for 20 years at a note rate of 3.41 percent. The
regularly scheduled payments for FY 2010/11 have been approved in the budget.
In anticipation of the upcoming financing for the Surface Water Treatment Plant, staff had the City's
financial advisor, Lamont Financial Services, evaluate options with respect to the DWR loan. The
financial advisor looked at options of paying the loan as scheduled over the remaining seven years,
refinancing the loan with bond proceeds and paying off the loan with available cash balances. Lamont
determined there would be a nominal economic advantage in the current rate environmentto refinance
the existing loan with bond proceeds. Further, Lamont and the City's rate consultant determined there
would not be a negative impact to bond coverage ratios if we were to pay the loan in full prior to the next
payment date of October 1, 2010.
Staff has received a pay-off statement from DWR that shows the total pay-off as $1,433,395.68 on
September 30, 2010. Interestsavings from early pay-off total $162,772.80. The Water Fund will need
additional appropriation authority of $1,205,370 to accomplish the early retirement of the loan.
Staff recommends that Council approve the early pay-off of the DWR loan and increase appropriations in
the Water Fund by $1,205,370.
FISCAL IMPACT: Early retirement of the DWR loan will save ratepayers $162,772.80 in
interest costs over the next seven years, which would be partially offset by
lowered interest earnings on a lower cash balance.
FUNDING AVAILABLE: Water Utility Operating Fund (180)
la,al Lacz_
F. Wally 566delin
PublicWorks Director
Jordan Ayers
Deputy City Manager
APPROVED: r
Korira�ct slam, interim City Manager
RESOLUTION NO. 2010-156
A RESOLUTION OF THE LODI CITY COUNCIL
AUTHORIZING EARLY PAYOFF OF LOAN CONTRACT
E54402 WITH THE STATE DEPARTMENT OF WATER
RESOURCES AND INCREASING APPROPRIATIONS
WHEREAS, in 1997, the City completed improvementsto the water system that
were funded by a loan from the State Department of Water Resources (DWR) in the
amount of $3,129,827.51; and
WHEREAS, the terms of the loan were semi-annual payments of $114,012.04 for
20 years at a note rate of 3.41 %; and
WHEREAS, in anticipation of the upcoming financing for the Surface Water
Treatment Plant, the City's financial advisor, Lamont Financial Services, evaluated
options with respect to the DWR loan; and
WHEREAS, the options considered were as follows:
1) Paying the loan as scheduled over the remaining seven years; or
2) Refinancing the loan with bond proceeds; and
3) Paying off the loan with available cash balances.
WHEREAS, Lamont determined that there would be a nominal economic
advantage in the current rate environment to refinance the existing loan with bond
proceeds; and
WHEREAS, Lamont and our rate consultant determined there would not be a
negative impact to bond coverage ratios if we were to pay the loan in full prior to the next
payment date of October 1,2010; and
WHEREAS, staff has received a pay-off statement from DWR that shows the
total pay-off as $1,433,395.68 on September 30, 2010, thus creating an interest savings
from early pay-off totaling $162,772.80; and
WHEREAS, the Water Fund will need additional appropriation authority of
$1,205,370 to accomplish the early retirement of the loan; and
WHEREAS, staff recommends that the City Council approve the early pay-off of
the DWR loan and increase appropriations in the Water Fund by $1,205,370.
NOW, THEREFORE, BE IT RESOLVED that the Lodi City Council hereby
approves the early pay-off of the State Department of Water Resources loan E54402
and further approves an increase in appropriations in the Water Fund by $1,205,370.
Dated: September 1, 2010
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hereby certify that Resolution No. 2010-156 was passed and adopted by the
City Council of the City of Lodi in a regular meeting held September 1, 2010, by the
following vote:
AYES: COUNCIL MEMBERS — Hansen, Hitchcock, Johnson, Mounce, and
Mayor Katzakian
NOES: COUNCIL MEMBERS— None
ABSENT: COUNCIL MEMBERS— None
ABSTAIN: COUNCIL MEMBERS— None
2010-156