FROM: James D. Herberg, General Manager
Originator: Lorenzo Tyner, Assistant General Manager
SUBJECT:
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WASTEWATER REFUNDING REVENUE OBLIGATIONS, SERIES 2022A
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GENERAL MANAGER'S RECOMMENDATION
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RECOMMENDATION: Recommend to the Board of Directors to:
Authorize the General Manager to issue new fixed rate Certificates of Participation, to be referred to as Wastewater Refunding Revenue Obligations, in an amount sufficient to refund (1) up to $100,645,000 of Wastewater Refunding Revenue Obligations, Series 2012A and (2) up to $6,670,000 of Wastewater Refunding Revenue Obligations, Series 2012B.
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BACKGROUND
A portion of the Orange County Sanitation District's (OC San) Wastewater Refunding Revenue Obligations Series 2012A and Series 2012B (2012 Revenue Obligations) are subject to optional redemption on February 1, 2022. As interest rates are now lower than in 2012, there is the potential opportunity to refinance some of the outstanding 2012 Revenue Obligations to reduce interest costs for OC San. Under current market conditions, a refunding of $107,315,000 of the 2012 Revenue Obligations would generate more than 3% net present value savings (the minimum percentage required by OC San's debt policy).
RELEVANT STANDARDS
* OC San Debt Policy - Financial Management Policy and Procedure 201-3-1; Net present value savings are at least three (3) percent of the par amount of the refunded bonds from refunding outstanding bonds
* Easy access to low cost credit
PROBLEM
$107,315,000 of the 2012 Revenue Obligations are currently accruing interest at rates ranging from 3.00% to 4.00%, which are higher than current market yields, and will soon be available for optional redemption on February 1, 2022. Not refunding the 2012 Revenue Obligations subject to optional redemption by February 1, 2022 would result in OC San paying above market rates on $107,315,000 of 2012 Revenue Obligations.
PROPOSED SOLUTION
OC San could refund up to $107,...
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