PURPOSE

The purpose of this report is to request City Council approval of the issuance of Wastewater Treatment Revenue Bonds, 2004 Series A in an amount not-to-exceed $21,000,000.

BACKGROUND/ANALYSIS

On April 27, 2004 the City Council appointed the following Financing Team to review the potential refunding of the Wastewater Treatment Revenue Bonds, 1995 Series A with a bond issue that would include $5 million of funds for planned capital expenditures:

Peter Ross, Ross Financial                                            Financial Advisor

Rich DeProspo, E.J. De La Rosa & Co., Inc.               Underwriter

Brian Quint � Quint & Thimmig, LLP                              Bond Counsel

The advantages of refunding existing debt and issuing $5 million in new money would be to reduce annual debt service on the 1995 Series A Bonds and to restore available cash balances.  The bonds would only be issued if the net present value of the savings from the refunding of the 1995 issue were at least 3%.  The current interest rate market supports the issuance of these bonds.  The approval of the bond resolution will allow the Financing Team to complete the bond issuance if interest rates continue to support the 3% net present value savings.  The proposed bond issue is expected to have a final maturity on June 1, 2034.  In the current market, the bond yield would be 4.4%.  At the April 27, 2004 meeting the City Council adopted a reimbursement resolution which allows the City to reimburse itself for capital expenditures already incurred should the bonds ultimately be issued.

The current financing plan refunds all maturities of the 1995 bonds from the June 1, 2007 through June 1, 2025 (final maturity date).  The refunding piece of the proposed 2004 bonds is anticipated to generate gross savings of $760,980 through 2025 and present value savings of $449,697.  The new money piece of the bonds has a final maturity date of June 1, 2034.  The average annual debt service for the new money piece approximates $334,000.

Public Works is constructing phase two of a nitrogen removal project.  The total cost of this project is estimated to be $5 million.  This project includes the conversion of the disinfection process, modification of the return activated sludge pump system, construction of a new chemical storage building, modifications to the existing chlorine contact chamber, and electrical demolition, relocation and replacement.  It will allow the Burbank Water Reclamation Plant to treat wastewater more safely and effectively.

FISCAL IMPACT

Compensation for the Financing Team will be paid as part of the bond issuance if the bonds are issued.  The debt service related to the Wastewater Treatment Revenue Bonds, 2004 Series A can be accomplished under the current rate structure.  It should be noted that the Wastewater Treatment Refunding Revenue Bonds of 1993 Series A are due to be fully repaid on June 1, 2007, which means that the Sewer Fund will have bonding additional capacity for future capital projects at the Wastewater Treatment Plant.

RECOMMENDATION

It is recommended that the City Council adopt the following resolution entitled:

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BURBANK AUTHORIZING THE ISSUANCE OF NOT TO EXCEED $21,000,000 PRINCIPAL AMOUNT OF WASTEWATER TREATMENT REVENUE  BONDS, 2004 SERIES A, APPROVING AND AUTHORIZING AND DIRECTING EXECUTION OF A THIRD SUPPLEMENTAL INDENTURE OF TRUST RELATING TO SUCH BONDS, AND AN ESCROW DEPOSIT AND TRUST AGREEMENT RELATING TO THE REFUNDING OF ALL OR A PORTION OF THE CITY�S OUTSTANDING WASTEWATER TREATMENT REFUNDING REVENUE BONDS, 1995 SERIES A, AUTHORIZING THE SALE OF BONDS, APPROVING THE FORM, AND AUTHORIZING DISTRIBUTION, OF AN OFFICIAL STATEMENT FOR USE IN CONNECTION WITH THE SALE OF SUCH BONDS AND AUTHORIZING OFFICIAL ACTION.

Attachments � Draft Bond documents including Preliminary Official Statement, Third Supplemental Indenture of Trust, and Bond Purchase Agreement

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