Boards & Commissions Supporting Documents - 05/26/2009 - Board of Trustees1 01-1
AGENDA ITEM
Regular Board of Trustees Meeting
of
May 26, 2009
f eK sz # > 3 z
SUBJECT: Bond Refunding - 2001 Installment Contract Certificates
FROM: Sharon Dangles, Acting Finance Director
BUDGET SOURCE /BUDGET IMPACT: Program 281- Installment Contract Debt Service
RECOMMENDED MOTION: I move that the Village President and Board of Trustees
accept the proposal from Speers Financial, Inc. for refunding bonds on' the 2001
Installment Contract Certificates and extending the term from December 1, 2015 to
December 1, 2017.
Backlzround /Histor_y:
The 2009 Budget proposes refinancing the installment contract utilized to finance a portion of
the Village Hall expansion by lowering the interest rate and extending the remaining term from 7
to 9 years. This is expected to save an estimated $75,000 - $90,000 annually. Refunding the
bonds will lessen the strain on the annual budget because principal and interest payments will be
less for the next 7 years (Years 2009 through 2015). In years 2016 and 2017 there will be no
savings since we are extending the term of the debt.
The total amount of certificates originally issued was $4.0 million at rates ranging from 4.625%
to 4.70% and was used to finance approximately 40% of the Municipal Complex Project. The
current principal remaining is $2,225,000 and the interest remaining is $386,928 with a 4.70%
coupon rate with the final payment being scheduled on 12/01/2015.
After 12/01/2008 our certificates are now considered "callable ". In our case, the Village would
"call" the bond since it is paying a higher coupon than the current market interest rates and the
same bonds would be bought at a lower interest rate, saving the Village money on all the coupon
payments; this process is called "refunding ". Since interest rates have declined on the bonds that
were originally issued, it is advantageous for the Village to refinance this debt at a lower rate of
interest.
Last saved by administrator L\FINANCE \DLANGLOI \WORD \Bond Refunding 052609.doc NA�
Last printed 5/18/2009 3.48 PM
Proposals:
We had three companies that submitted proposals to the Village, they were First Trust, Speers
Financial, Inc., and Robert W. Baird & Co.. The current market interest rates are ranging from
1.25% to 3.50 %. These rates will vary and -the company we select will continue to monitor the
rates so the Village locks in a low interest rate.
❑ First Trust's proposal new debt service is estimated to be $2,576,000 with
the average coupon rate of 3.382%. Compared to our existing debt of
$2,611,927.50, the total savings would be $35,928 or net present value
cash flow savings of $92,467. The issuance costs and underwriting fees
total $44,800 for the transaction.
❑ Speers Financial, Inc. proposal new debt service is estimated to be
$2,511,026 through 12/01/2017 for principal and interest. The average
coupon rate is 2.182 %, for a total savings of $100,901 or net present
value cash flow savings of $152,500. The total issuance costs and
underwriting fees amount to $51,400.
❑ Robert W. Baird & Co. proposal new debt service was estimated for
principal and interest at $2,550,584 through 12/01/2017. The average
coupon rate is 2.915 %, for a total savings of $61,343 or net present value
cash flow savings of $112,358. Total issuance costs and underwriting
fees amount to $56,125.
Robert W.
Current First Trust Speers Financial Baird
Total Principal &
Interest
$ 2,611,928
$ 2,576,000
$ 2,511,026
$ 2,550,584
Avg. Coupon Rate
4.700%
3.382%
2.182%
2.915%
Issuance Costs & Fees
44,800
51,400
56,125
Total Savings
35,928
100,901
61,343
NPV Cash Flow
Savings
92,467
152,500
112,358
The issuance costs and underwriting fees are built into the bond refunding therefore no out -of-
pocket costs will need to be made. Also, the savings as noted above includes the issuance costs
and fees.
Recommendation:
We recommend that the Village Board accept the proposal from Speer Financial, Inc. based on a
competitive bid on its rates which offers the Village the most savings. Speer Financial Inc. has
been in business since 1954 and has excellent references in the DuPage County area.
Last saved by administrator L\FINANCE \DLANGLOI \WORD \Bond Refunding 052609.doc
Last printed 5/18/2009 3.52 PM