FROM: Robert Thompson, General Manager
Originator: Wally Ritchie, Director of Finance
SUBJECT:
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BUILD AMERICA BONDS PREPAYMENT
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GENERAL MANAGER'S RECOMMENDATION
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RECOMMENDATION:
Adopt Resolution No. OC SAN 24-03 entitled: "A Resolution of the Board of Directors of the Orange County Sanitation District authorizing prepayment of Orange County Sanitation District Wastewater Revenue Obligations, Series 2010A (Federally Taxable Build America Bonds) and Orange County Sanitation District Wastewater Revenue Obligations, Series 2010C (Taxable Build America Bonds) and authorizing the execution of necessary documents and related actions", in a not to exceed amount of $225,000,000.
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BACKGROUND
In May 2010, Orange County Sanitation District (OC San) issued $80,000,000 of fixed rate (5.58%) Wastewater Revenue Obligations, Series 2010A (Federally Taxable Build America Bonds).
In December 2010, OC San issued $157,000,000 of fixed rate (6.40%) Wastewater Revenue Obligations, Series 2010C (Federally Taxable Build America Bonds).
The U.S. Treasury provides a subsidy to offset a portion of the interest bringing the effective rate on the Series 2010A to 3.68% and on the Series 2010C to 4.11%.
RELEVANT STANDARDS
* Ensure the public's money is wisely spent
* Sustain 1, 5, 20-year planning horizons
PROBLEM
Current interest rates make it advantageous to pay off debt and save money over time.
PROPOSED SOLUTION
Prepay certain portions of the Series 2010A and Series 2010C Revenue Obligations to achieve long term interest cost savings.
TIMING CONCERNS
If the prepayment is not executed in a timely manner, interest rates may move and the potential cost savings may diminish.
RAMIFICATIONS OF NOT TAKING ACTION
OC San will continue to pay the current cost of the debt obligations.
PRIOR COMMITTEE/BOARD ACTIONS
October 2010 - Approved Resolution No. OCSD 10-19, authorizing the execution and delivery by the District of an Installment P...
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