special meeting of the common council wednesday, january ... · presentation restructuring summary...
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Special Meeting of the Common Council
Wednesday, January 10, 20186:45 PM
Council Chambers, City Hall, 2nd Floor, 27 West Main Street, New Britain, Connecticut
NOTICE - The Common Council of the City of New Britain, Connecticut will hold a special meeting on Wednesday evening, January 10, 2018 at 6:45 p.m. in the Council Chambers, City Hall, 27 West Main Street, New Britain, Connecticut.
PUBLIC PARTICIPATION
ROLL CALL
READING OF WARRANT
WARRANTWarrant
PRESENTATION
RESTRUCTURING SUMMARY PRESENTATIONRestructuring Summar 1.10.18
AGENDA
1. To accept a report of the Standing Bonding Subcommittee of the Common Council Committee onAdministration, Finance and Law regarding a $115,000,000 Appropriation and Bond Authorizationto Refund Any of the City’s Outstanding General Obligation Bonds.Report
2. To act upon a Resolution regarding a $115,000,000 Appropriation and Bond Authorization toRefund Any of the City’s Outstanding General Obligation Bonds.Resolution
ADJOURNMENT1
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January 10, 2018
City of New Britain, CT
John J. Healey
Managing Director
Phone: 860.466.7310
Richard W. Thivierge
Managing Director
Phone: 860.466.7315
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Source: U.S. Department of the Treasury, Bloomberg LP and the Bond Buyer.
Presented below are federal funds effective rates and the 30-year treasury rates shown on December 1st from
1980 through 2017. As evidenced by the graph, rates have declined significantly over the past 37 years.
0.00
5.00
10.00
15.00
20.00
25.00
Federal Funds Effective Rates 30 - Year Treasury Bond Yield 20 -YR Bond GO Index
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Presented below are the yield curves for the 30-Year Treasury over the past 5 years. As apparent from the graph
below, the yield curve has flattened.
Source: Bloomberg LP
0.00%
0.50%
1.00%
1.50%
2.00%
2.50%
3.00%
3.50%
4.00%
4.50%
1 2 3 5 7 10 20 30
Yie
ld
Years Out
US Tsy 1/5/2018 US Tsy 1/5/2017 US Tsy 1/5/2016 US Tsy 1/5/2015 US Tsy 1/6/2014
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Source: Bloomberg LP
Presented below are the yield curves for the AAA MMD yields over the past 5 years. As apparent from the graph
below, the yield curve has flattened.
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30
MM
D Y
ield
s
Years Out
MMD Yields as of 1/5/2018 MMD Yields as of 1/5/2017 MMD Yields as of 1/5/2016
MMD Yields as of 1/5/2015 MMD Yields as of 1/6/2014
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Displayed in the graph below are the 2018 Year-to-Date 10-Year Treasury rates. The 10-Year Treasury
has been trending higher in interest rates.
The value of 1 basis point for the proposed 2018 Restructuring is $111,272.70. This means that each
one basis point increase in interest rates results in an additional cost of $111,272.70 or inversely each
one basis point decrease in interest rates results in a reduced cost of $111,272.70 for the 2018
Restructuring
On Monday, January 8th, the 10-Year Treasury closed at 2.48% and today the 10-Treasury is at 2.56%.
The 8 basis point increase in the 10-Year Treasury rate equates to an increased cost of $890,181.60 for
the 2018 Restructuring.
2.300%
2.350%
2.400%
2.450%
2.500%
2.550%
2.600%
YTD 10-Year Treasury Rate
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10 10
$0
$5,000,000
$10,000,000
$15,000,000
$20,000,000
$25,000,000
$30,000,000
$35,000,000
$40,000,000
$45,000,000
2017C Bonds
2017B Refunding Bonds
2017A Refunding Bonds
2016A Refunding Bonds
Series 2015 POB Refunding Bonds
Series 2015A Bonds
Series 2014A Bonds
Series 2013 Bonds
Series 2012 Bonds
Series 2010B_3 Bonds
Series 2010B_2 Bonds
Series 2010A Bonds
Series 2009 Bonds
Series 2008B Refunding Bonds
Series 2008A GO Bonds
Series 2007 Bonds
Series 2006 Bonds
MERF Bonds
1998 Series POB
Presented below is the current debt profile for the City. The maximum annual debt service payment
which occurs in Fiscal Year 2021 is approximately 62% greater than the annual debt service payment
due for Fiscal Year 2018.
10-Year
Principal
Amortization
Rate: 77%
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Restructuring Objective: To create a comprehensive restructuring of the City’s debt profile including; lowering the
maximum annual debt service payment from ~$40MM to ~$26MM, creating near-and-mid-term relief and gradual
declines in annual debt service payments.
Taking Advantage of Statutory Changes: In the 2017 legislative session, the Connecticut General Assembly passed a
change to the municipal bonding statutes that opens a five-year window whereby municipalities may now restructure
their existing debt obligations out beyond its original final maturity, not to exceed 30 years. This was done to allow
municipalities, like New Britain, to be able to manage their debt without having to look to the state for additional
assistance.
Restructuring Assumptions: 23 year amortization for the 2018 Restructuring will be utilized to minimize dissavings,
based upon the rate environment at the time of pricing; the 2018 Restructuring Bonds would have capitalized interest
utilized through and including Fiscal 2020 in order to enhance the City’s near-term relief. The 2018 Restructuring Bonds
are assumed to be done on a fixed-rate taxable basis.
Accomplishing the Restructuring: The 2018 Restructuring is accomplished by refunding and restructuring existing
principal and interest payments and amortizing them in later years. The debt service on the outstanding bonds that
were selected for the restructuring would be paid from proceeds of the 2018 Restructuring Bonds. The 2018
Restructuring Bonds would amortize in years 2020 through 2040. This approach helps to mitigate the City’s maximum
annual debt service payments.
Component Descriptions:
o Component A: Defeasing selected near-term maturities that are able to be advanced refunded on a taxable
basis.
o Component B: Defeasing interest on outstanding bonds through and including March 2020.
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Presented below in red are the City’s existing annual debt service payments. Shown in green are the
proposed annual debt service payments after the 2018 Restructuring.
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5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
Existing Debt Debt Service after Restructuring
10-Year
Principal
Amortization
Rate: 50%
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Presented below are the results of the 2018 Restructuring shown on an annual basis. The figures
presented below are in thousands.
Component A Component B Total Impact
Existing (Savings) & (Savings) & New Debt Total (Savings) & Present Value
Year End Debt Service Dissavings Dissavings Service Dissavings From Closing Date
6/30/2018 24,296 (1,434) (1,639) 21,224 (3,072) (3,070)
6/30/2019 29,188 (8,008) (3,277) 17,902 (11,285) (10,967)
6/30/2020 36,373 (12,971) (3,075) 20,326 (16,047) (15,070)
6/30/2021 39,357 (14,261) 380 25,477 (13,881) (12,548)
6/30/2022 34,273 (9,029) 380 25,624 (8,649) (7,555)
6/30/2023 31,883 (6,719) 380 25,544 (6,339) (5,353)
6/30/2024 31,466 (6,316) 380 25,530 (5,936) (4,847)
6/30/2025 29,190 (4,010) 380 25,560 (3,629) (2,859)
6/30/2026 20,871 3,724 380 24,975 4,104 3,184
6/30/2027 13,872 4,924 855 19,651 5,779 4,329
6/30/2028 12,165 4,778 857 17,799 5,635 4,085
6/30/2029 11,079 5,185 858 17,122 6,043 4,238
6/30/2030 10,888 5,275 858 17,021 6,133 4,161
6/30/2031 10,745 5,408 857 17,010 6,265 4,113
6/30/2032 9,133 7,233 859 17,225 8,092 5,135
6/30/2033 9,076 7,374 856 17,307 8,230 5,054
6/30/2034 8,048 8,172 857 17,076 9,029 5,363
6/30/2035 8,018 6,911 859 15,787 7,769 4,467
6/30/2036 5,105 10,555 859 16,519 11,414 6,344
6/30/2037 5,108 10,573 858 16,539 11,431 6,147
6/30/2038 15,349 860 16,209 16,209 8,430
6/30/2039 15,347 855 16,202 16,202 8,152
6/30/2040 15,349 859 16,208 16,208 7,889
380,134 63,409 6,296 449,837 69,705 18,821
23-Year Repayment Term
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The information contained herein is intended for informational purposes only and is applicable to Qualified Purchasers only. This is not an offer or sale of securities. Securities are only offered
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CITY OF NEW BRITAINNEW BRITAIN, CONNECTICUT
REPORT OF: STANDING BONDING SUBCOMMITTEE
To Her Honor, the Mayor, and the Common Council of the City of New Britain: the undersigned beg leave to report the following:
ITEM #:
RE: $115,000,000 Appropriation and Bond Authorization to Refund Any of the City’s Outstanding General Obligation Bonds
At a meeting of the Standing Bonding Subcommittee of the Committee onAdministration, Finance and Law (the “Bonding Subcommittee”) held on January 10, 2018 on a motion by Bonding Subcommittee member ________________________ and seconded by Bonding Subcommittee member ________________________, the following resolution was adopted:
RESOLVED, that the Bonding Subcommittee recommends to the Common Council thatthe sum of $115,000,000 be appropriated for the purpose of paying, funding or refunding prior to maturity any of the City’s outstanding General Obligation Bonds, applicable redemption premiums, if any, with respect thereto, to pay interest costs on such bonds through June 30, 2020, to pay costs with respect to the issuance of such bonds, and to fund one or more escrow accounts, if any, for such purposes, and to meet said appropriation and in lieu of a tax therefor, bonds of the City be issued pursuant to Article XII of the City Charter and Chapter 109 of the Connecticut General Statutes, as amended, or any other provision of law thereto enabling, in an amount not to exceed $115,000,000 or so much thereof as may be necessary after deducting other sources of funds available therefor.
BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the bonds may be sold in a single issue or may be consolidated with other authorized but unissued bonds of the City. The bonds shall be issued in fully registered form, be executed in the name and on behalf of the City by the facsimile or manual signatures of the Mayor and the Treasurer, bear the City seal or a facsimile thereof, be certified and payable at a bank or trust company designated by the Mayor and the Treasurer which bank or trust company may also be designated as the registrar and transfer agent, and be approved as to their legality by Bond Counsel to the City. The bonds may be issued in one or more series and shall bear such rate or rates of interest as determined by the Mayor and the Treasurer. The bonds shall be general obligations of the City and each of the bonds shall recite that every requirement of law relating to its issue has been duly complied with, that such bonds are within every debt and other limit prescribed by law, and that the full faith and credit of the City are pledged to the payment of the principal thereof and interest thereon. The aggregate principal amount of bonds to be issued, the annual installments of principal, the redemption provisions, if any, the interest rate or
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rates, form, manner and date of issuance and sale, and other terms, details and particulars of such bonds shall be determined by the Mayor and the Treasurer.
BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the bonds may be sold by the Mayor and the Treasurer in a public sale, sealed proposal or a negotiated underwriting and the Mayor and the Treasurer are authorized to select the underwriter or underwriters and to enter into, execute and deliver on behalf of the City a contract of purchase for such bonds on such terms and conditions as they shall determine.
BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the Mayor and the Treasurer are hereby authorized, on behalf of the City, to enter into agreements or otherwise covenant for the benefit of bondholders to provide information on an annual or other periodic basis to the Municipal Securities Rulemaking Board or any other municipal securities information repositories or state based information repositories (the “Repositories”) and to provide notices to the Repositories of material events as enumerated in Securities and Exchange Commission Exchange Act Rule 15c2-12, as amended, as may be necessary, appropriate or desirable to effect the sale of the bonds authorized by this resolution. Any agreements or representations to provide information to Repositories made prior hereto are hereby confirmed, ratified and approved.
BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the Mayor and the Treasurer are further authorized to enter into, execute and deliver, on behalf of the City, any agreements they deem reasonable or necessary to provide credit enhancement and liquidity to the bonds. The Mayor and the Treasurer are further authorized to appoint a certifying agent, paying agent, transfer agent, registrar, interest rateadvisor, escrow agent and such other advisors and consultants as they may deem necessary or desirable, and to execute and deliver on behalf of the City any and all bond insurance or credit enhancement, continuing disclosure or other agreements they deem necessary to provide for the issuance of such bonds.
BE IT FURTHER RESOLVED, that the Bonding Subcommittee recommends to the Common Council that the Mayor and the Treasurer are authorized to issue all or any portion of the bonds as bonds the interest on which is includable in the gross income of the owners thereof for federal income tax purposes and it is hereby found and determined that the issuance of any such bonds is in the public interest.
______________________________________Richard Reyes, ChairmanBonding Subcommittee of the Committee on Administration, Finance and Law
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RESOLUTION
Item # RE: $115,000,000 Appropriation and Bond Authorization to Refund Any of the City’s Outstanding General Obligation Bonds
To Her Honor, the Mayor, and the Common Council of the City of New Britain:the undersigned beg leave to recommend the adoption of the following:
At a meeting of the Common Council held on January 10, 2018 on a motion by Council member ____________________ and seconded by Council member _________________ the following resolution was adopted:
RESOLVED, by the Common Council of the City of New Britain on the recommendation of the Standing Bonding Subcommittee of the Committee on Administration, Finance and Law adopted at its meeting held on January 10, 2018, that the sum of $115,000,000be appropriated for the purpose of paying, funding or refunding prior to maturity any of the City’s outstanding General Obligation Bonds, applicable redemption premiums, if any, with respect thereto, to pay interest costs on such bonds through June 30, 2020, to pay costs with respect to the issuance of such bonds, and to fund one or more escrow accounts, if any, for such purposes, and to meet said appropriation and in lieu of a tax therefor, bonds of the City be issued pursuant to Article XII of the City Charter and Chapter 109 of the Connecticut General Statutes, as amended, or any other provision of law thereto enabling, in an amount not to exceed $115,000,000 or so much thereof as may be necessary after deducting other sources of funds available therefor.
BE IT FURTHER RESOLVED, that the bonds may be sold in a single issue or may be consolidated with other authorized but unissued bonds of the City. The bonds shall be issued in fully registered form, be executed in the name and on behalf of the City by the facsimile ormanual signatures of the Mayor and the Treasurer, bear the City seal or a facsimile thereof, be certified and payable at a bank or trust company designated by the Mayor and the Treasurer which bank or trust company may also be designated as the registrar and transfer agent, and be approved as to their legality by Bond Counsel to the City. The bonds may be issued in one or more series and shall bear such rate or rates of interest as determined by the Mayor and the Treasurer. The bonds shall be general obligations of the City and each of the bonds shall recite that every requirement of law relating to its issue has been duly complied with, that such bonds are within every debt and other limit prescribed by law, and that the full faith and credit of the City are pledged to the payment of the principal thereof and interest thereon. The aggregate principal amount of bonds to be issued, the annual installments of principal, the redemption
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provisions, if any, the interest rate or rates, form, manner and date of issuance and sale, and other terms, details and particulars of such bonds shall be determined by the Mayor and the Treasurer.
BE IT FURTHER RESOLVED, that the bonds may be sold by the Mayor and the Treasurer in a public sale, sealed proposal or a negotiated underwriting and the Mayor and the Treasurer are authorized to select the underwriter or underwriters and to enter into, execute and deliver on behalf of the City a contract of purchase for such bonds on such terms and conditions as they shall determine.
BE IT FURTHER RESOLVED, that the Mayor and the Treasurer are hereby authorized, on behalf of the City, to enter into agreements or otherwise covenant for the benefit of bondholders to provide information on an annual or other periodic basis to the Municipal Securities Rulemaking Board or any other municipal securities information repositories or state based information repositories (the “Repositories”) and to provide notices to the Repositories of material events as enumerated in Securities and Exchange Commission Exchange Act Rule 15c2-12, as amended, as may be necessary, appropriate or desirable to effect the sale of the bonds authorized by this resolution. Any agreements or representations to provide information to Repositories made prior hereto are hereby confirmed, ratified and approved.
BE IT FURTHER RESOLVED, that the Mayor and the Treasurer are further authorized to enter into, execute and deliver, on behalf of the City, any agreements they deem reasonable or necessary to provide credit enhancement and liquidity to the bonds. The Mayor and the Treasurer are further authorized to appoint a certifying agent, paying agent, transfer agent, registrar, interest rate advisor, escrow agent and such other advisors and consultants as they may deem necessary or desirable, and to execute and deliver on behalf of the City any and all bond insurance or credit enhancement, continuing disclosure or other agreements they deem necessary to provide for the issuance of such bonds.
BE IT FURTHER RESOLVED, that the Mayor and the Treasurer are authorized to issue all or any portion of the bonds as bonds the interest on which is includable in the gross income of the owners thereof for federal income tax purposes and it is hereby found and determined that the issuance of any such bonds is in the public interest.
_______________________________
Alderman Richard Reyes
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