City Finance Department to Ask Council to Authorize $50 Million Water Revenue Refunding Bonds

At a special meeting Thursday, the Pasadena City Council’s Finance/Audit Committee is scheduled to discuss a proposal from the Finance Department for the City Council to authorize the invitation of bids for the purchase of 2020A series water revenue refunding bonds

The authorization also includes approval of a notice of intention to sell bonds, a preliminary official statement, and a notice inviting bids. The council would then be asked to authorize the publication of a notice of intention to sell bonds, and authorize other actions related to the 2020A series water refunding bonds.

In addition, the Finance Department is recommending the first reading of an ordinance that will authorize the issuance of up to $50.425 million worth of water revenue refunding bonds 2020A series, payable out of the city’s water fund. The proposed ordinance will also approve the execution and delivery of a sixth supplement to the city’s water revenue bond indenture, as well as a continuing disclosure agreement.

As background, the city issued its 2010A Water Revenue Bonds in 2010 in accordance with the Water System Master Plan adopted by the City Council. The 2010A bonds included funding for capital projects both inside and outside the Master Plan – including installation of water mains, meters, and services and upgrading of facilities; design and installation of chloramine disinfection facilities to replace existing chlorine stations; and design and preparation of environmental review documents.

A Finance Department report showed the 2010A Water Revenue Bonds were issued as Build America Bonds, or BABs. These were issued with a “call” feature that provides the option to refund the bonds in December 2020 prior to their stated maturity.

The department’s current recommendation is to refinance the outstanding 2010A bonds without extending the June 1, 2040 final maturity date and to borrow up to $25 million in new proceeds to finance capital improvement projects to the water system, with maturities from June 1, 2021 through June 1, 2050.

The new proceeds of the 2020A Water Revenue/Refunding Bonds will be used to finance the installation of new and replacement water mains, including all other necessary improvements to water flows for fire protection and water quality, the Finance Department’s report showed.

These new proceeds will also finance the replacement of sunset reservoirs, including the replacement of disinfection facilities, upgrading of the Glorietta Booster Station, and treatment to address water quality deficiencies for wells in the area and improvements to the appearance of the site.

Currently, the Water Fund pays an average taxable rate of 7.19 percent on the outstanding 2010A bonds with an equivalent tax-exempt rate of 4.67 percent the BABs subsidy from the Internal Revenue Service.

At today’s market rates – as of Aug. 25, 2020 – the city could refund these bonds at an estimated true interest cost of 2.43 percent and realize a net present value savings of $7.66 million, or 30 percent of the refunded bonds, the Finance Department said.

Since competitive bidding of the proposed refunding bonds is not scheduled until Nov. 16, the department is recommending that the City Council proceed with the refunding and the competitive sales of the 2020A Water Revenue Refunding Bonds as long as the city anticipates a net present value savings of a minimum of $1.27 million, or 5 percent of the refunded bonds.

Members of the community may access the discussion on Thursday through www.pasadena.granicus.com/MediaPlayer.php?publish_id=9 and on www.pasadenamedia.org.

Public comments may be sent by email to gacevedo@cityofpasadena.net before Thursday. During the meeting, comments of up to 200 words may be sent through www.cityofpasadena.net/commissions/public-comment.

Thursday’s online public meeting begins at 2 p.m.