Introduction of bond ordinance to authorize the competitive sale of tax-exempt 2013B General Obligation Bonds in an amount not to exceed $7,000,000 for the purpose of refunding outstanding debt previously issued in 2003 and related issuance costs.
Staff recommends that the Mayor and Council introduce the attached ordinance authorizing the sale of tax exempt 2013B General Obligation Bonds.
Adoption of the ordinance is scheduled for February 4, 2013.
Adoption of the ordinance (Attachment A) will allow staff to proceed with the sale of General Obligation Bonds to refund outstanding debt previously issued in 2003. The interest rates obtainable today are lower than when the bonds were issued in 2003; consequently, the City can reduce its debt service payments by refinancing.
Mayor and Council guidance for refinancing debt is set forth in the City's Financial Management Policies and states that refinancings will be considered when there is a net economic benefit. More specifically, the policy states the following:
"In general, refinancings for economic benefit will be undertaken whenever net present value savings of at least 5 percent of the refunded debt can be achieved."
The proposed refinancing of the 2003 bonds exceeds this threshold.
This transaction meets the intent of a Mayor and Council goal. "We will make additional debt service payments to reduce long-term debt, where feasible."
Mayor and Council History
This is the first time this item has been brought before the Mayor and Council.
The sale of the refunded debt will be done at the same time as the City's new money issue takes place, thereby achieving economies of scale for both transactions.
The City will save approximately $627,452 on a present value basis over ten years or a $62,745 present value savings of over 9%.
The fiscal impact can be seen on Attachment B, pages B-12 through B-15.
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 2013B
Attachment A-Rockville 2013 Refunding Ordinance.pdf
Attachment B- PFM Proposal to refund 2003 debt.
Attach B-Rockville_City_of_MD_Proposal_01-15-13_Revised 2013B.pdf
Gavin Cohen, Chief Financial Officer
Approved on: 01/18/2013
Barbara B. Matthews, City Manager
Approved on: 01/23/2013