12-12-16 Regular Meeting of the La Porte City Council

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City of La Porte, Texas November 21, 2016 Page 2 F INANCING A LTERNATIVES: to the public markets as it did with the Series 2015 Certificates of Obligation. However, given the nature of the utility improvements that are the focus of this financing, the City has the additional option of seeking funding through the Texas Water Development Board (TWDB) under the Clean Water State Revolving Fund (CWSRF). The significant advantage of this program is that the State charges below market interest rates on this program on the basis of funds received from the Federal Government under the Clean Water Act. As a result of this subsidy, the TWDB has estimated an interest rate on this loan of 2.5% (please keep in mind this is an estimate provided by the TWDB prior to the Presidential election and is subject to change). Based on this interest rate estimate, the Debt Capacity of the City is increased to approximately $10,800,000. This amount exceeds the $10,635,000 value of the application submitted to the TWDB. It is our recommendation that the City avail itself of this program with its subsidized borrowing rates. C OMPLETING THE F INANCING: City adminis Consequently, resolutions requesting TWDB assistance and applications have already been filed and approved. Of course, the City is not obligated pending City Council approval. Should the Council approve, the next step would be to pass a resolution giving and authorizing publication of a Notice of Intent to issue Certificates. This State law requires this notice be published in a newspaper of local circulation twice, the first publication being not less than 30 prior to the Council taking action to actually issue the Certificates. Given that requirement and the dates of the regularly scheduled City Council meetings, this indicates the action to actually sell the Certificates cannot take place before the January 23, 2017 meeting. If approved by the Council on that date, the issue would close in mid-February at which time the City would take delivery of the full value of borrowing less fees and expenses. As a reminder from previous written plans submitted to the Council, there are three generally prescribed methods for selling public debt; Selling by competitive bid, selling on a negotiated sale basis and conducting a private placement. Selling the Certificates of Obligation to the TWDB constitutes a private placement method. As a result, the City will be able to avoid the costs of ratings, the preparation of public offering documents and the expenses related to an underwriting firm. However, please be aware that the TWDB does charge a fee for this program designed to approximate the avoided costs. It is our opinion that the subsidized interest rates more than offsets the TWDB related fees. T IMING: Timing has largely been discussed above but to recap: Council gives Notice of Intent to Issue: December 12, 2016 Council meets to approve Issuance: January 23, 2016 Anticipated Closing: February 15, 2017 S UMMARY: 303 Pearl Parkway, Suite 220 (210) 805-1118 RBC Capital Markets San Antonio, TX 78215 Member NYSE/SIPC