Mayor and Council

   For the meeting on:

  February 4, 2013
   Department:   Finance
   Responsible staff:  Gavin Cohen, Chief Financial Officer
  phone: (240) 314 - 8402

Adoption of bond ordinance to authorize the competitive sale of tax-exempt 2013A General Obligation Bonds in an amount not to exceed $20,000,000 for the purpose of financing the construction of water, sewer, and stormwater system improvements as reflected in the City's FY 2013 Capital Improvement Program (CIP) and related issuance costs.

Staff recommends that the Mayor and Council adopt the bond ordinance authorizing the sale of tax exempt 2013A General Obligation Bonds.

The adoption of the ordinance (Attachment A) will allow staff to proceed with the sale of General Obligation Bonds to finance water, sewer, and stormwater system improvements in accordance with the Mayor and Council's adopted FY 2013 Capital Improvement Program. The projects to be financed are listed in Exhibit A to the ordinance; Attachment B includes the CIP project sheets for the relevant projects. Attachment C is the proposal from the City's financial advisor, PFM, and provides information relative to costs, debt service schedules, and calendar for the upcoming sale.

The City has ongoing capital investment needs in its water, sewer, and stormwater systems. The bonds sold will have a term of 20 years, with a level principal repayment schedule. The debt will finance water system facility improvements, the water main rehabilitation program, the payments to Blue Plains Wastewater Treatment Plant, and modification of the Horizon Hill stormwater ponds.

As seen on Attachment B, the bond proceeds will be utilized for FY 2013 and FY 2014 projects.

Mayor and Council History
A notice of intent to sell bonds was approved by the Mayor and Council on May 21, 2012. In addition, the Mayor and Council adopted the FY 2013 CIP budget on May 21, 2012. The FY 2013 CIP budget reflected that debt would be needed to finance and proceed with the projects referenced above. The Mayor and Council introduced the ordinance on January 28, 2013.

Fiscal Impact
Issuance costs for the transaction will be approximately $270,000 and will be paid from the proceeds of the bonds. This cost covers the fees for financial advisors, bond counsel, underwriter, rating agencies, etc.

The bonds will be issued as General Obligation Bonds and will be backed by the full faith and credit of the City government, although water, sewer, and stormwater bonds are repaid through the utility rates charged to customers. They are therefore obligations of the users of the systems, not the general taxpayer.

Pages C-5 through C-19 of Attachment C reflect the debt service costs and issuance costs to the City's Water, Sewer, and Stormwater Funds. The City's rate setting models and financial projections incorporate the new debt issue.

The new money issue is enterprise debt so net tax debt supported per capita does not change from what was published in the FY 2013 adopted budget book ($1,194). This amount is below the $1,200 net tax debt per capita Mayor and Council guideline. Including all tax and non-tax supported debt, total approximate outstanding debt per capita at June 30, 2013 will be approximately $2,354, inclusive of this new bond issue.

Next Steps
Staff will work with bond counsel, the City's financial advisor, and the rating agencies to market and sell the bonds.

Attachment A - Bond Ordinance 2013A

Attachment A-Rockville 2013 New Money Ordinance.pdf

Attachment B - CIP Projects being financed

Attach B-CIP Sheets for FY 2013 Bond Issue.pdf

Attachment C - PFM Proposal for new money issue

Attach C-Rockville_City_of_MD_Proposal_01-15-13_Revised 2013A.pdf

Department Head:

Gavin Cohen, Chief Financial Officer
Approved on: 01/29/2013

City Manager:

Approved on: 01/29/2013