Meeting_Body
FINANCE, BUDGET AND AUDIT COMMITTEE
JANUARY 20, 2016
Subject/Action
SUBJECT: PROPOSITION A REFUNDING BONDS
ACTION: AUTHORIZE SALE OF REFUNDING BONDS
Heading
RECOMMENDATION
Title
ADOPT a resolution, Attachment A, that:
A. AUTHORIZES the issuance of bonds by competitive sale to refund the Prop A Series 2008-A1, Series 2008-A2, Series 2008-A3 and Series 2008-A4 Bonds ("the 2008-A Bonds") in one or more transactions through August 31, 2016, consistent with the Debt Policy;
B. APPROVES the forms of Notice of Intention to Sell Bonds, Notice Inviting Bids, Supplemental Trust Agreement, Bonds, and Preliminary Official Statement, all subject to modification as set forth in the resolution; and
C. AUTHORIZES taking all action necessary to achieve the foregoing, including, without limitation, the further development and execution of bond documentation associated with the issuance of the bonds.
(REQUIRES SEPARATE, SIMPLE MAJORITY BOARD VOTE.)
Issue
ISSUE
Lower interest rates offer an opportunity for Metro to lock in low long term rates by refunding the outstanding variable rate 2008-A Bonds and eliminate short term interest rate risk. The 2008-A Bonds refunded the 2005-C bonds, which were issued in combination with interest rate swaps that were intended to produce a synthetic fixed rate of approximately 3.37%. Because the fixed rate based on the interest rate swaps was higher than the current market, we terminated the swaps on July 1, 2015 at no cost to Metro. Metro has entered into agreements with two banks for the 2008-A bonds where we pay a variable interest rate that resets monthly and is tied to one-month London Interbank Offered Rate ("LIBOR") index. A refunding with fixed rate bonds will allow us to lock-in the interest cost over the remaining term of the bonds at currently low interest rates and remove the risk of rising short term rates. We are requesting the authority to sell Proposition A First Tier Senio...
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