Okaloosa County BOCC — February 17, 2015 — Request Authorization to Refund the County’s Outstanding Water and — agenda request

BOARD OF COUNTY COMMISSIONERS AGENDA REQUEST DATE: February 17, 2015 TO: Honorable Chairman and Members of the Board FROM: Jeff Littrell SUBJECT: Request Authorization to Refund the County’s Outstanding Water and Sewer Bonds DEPARTMENT: Water and Sewer BCC DISTRICT: All STATEMENT OF ISSUE: As a result of current historically low interest rates, FirstSouthwest, the County’s financial advisor, has identified a refunding opportunity relating to the County’s outstanding Water and Sewer Revenue Bonds, Series 2004, 2006, and 2012. By refunding these bonds the County has the opportunity to obtain significant debt service savings, release the existing Debt Service Reserves ($7.4 million) on the outstanding bond issues and to dedicate approximately $3 million for partial funding of the County's meter replacement program, which is already in the current approved 5 year Capital Improvement Program (CIP). There is also an opportunity to change the bond covenants to remove restrictions on renting space in the Water & Sewer building to private sector entities. Most importantly, as a result of these actions, the amount of planned future rate increases can be reduced. Staff seeks authorization for the County’s financial advisor and financing team to move forward with the preparation of all of the necessary documentation and reports to refund the bonds and to bring back the appropriate documents for the Boards future approval. BACKGROUND: The County’s water and sewer system currently has two outstanding bond issues and one outstanding bank loan totaling $81,185,000. The Series 2006 issue is currently outstanding in the aggregate principal amount of $60,875,000. The bonds mature annually through 2036 and have interest rates ranging from 4.00% to 5.00%. The bonds are callable beginning July 1, 2016 at par. Based on current interest rates, refunding the Series 2006 Bonds, the County would save approximately $377,034 annually, $7,959,397 over the life of the issue and $5,959,397 on present value basis. In addition, the current low interest rate environment gives the County the ability to refund the Series 2004 and Series 2012 issues and to free up approximately $7.4 million from its existing Debt Service Reserves (DSR). Under this alternative the estimated savings would increase to over $900,000 annually, $19,400,000 over the life and $6,646,000 on present value savings basis. If the County decides to dedicate approximately $3 million of DSR savings for partial funding of the meter replacement program, the estimated annual debt service savings would be approximately $720,622 annually and $15,315,000 over the life of the issue. The above amounts do not include the additional savings of $652,000 which the County is required to fund as part of its existing DSR replenishment requirements on October 25, 2015. Interest rates are still at historic lows, but they are volatile and the exact savings will be dependent upon the rates in effect on the date of the bond issue. See attachment for refunding options. OPTIONS: Approve or Deny. RECOMMENDATIONS: Staff recommends BCC authorization for Staff and the County’s financial advisor and financing team to proceed to move forward with the preparation of all of the necessary documentation and reports to refund the bonds and to bring back the appropriate documents for the Board's future approval. Staff also recommends the BCC approve the financing structure of using $3 million from the Debt Service Reserve savings to fund a portion of the County’s meter replacement program. RECOMMENDED BY: APPROVED BY: John Hofstad, County Administrator