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Home My WebLink AboutA002 - Presale Analysis by Evensen Dodge ' Pl' SALE ANALYSIS $20,660,000 Electric Revenue Refundin Bonds, Series 1993 Cite of Ames, Iowa 1 Proposed gale Dare: March 23, 1993 MM EVENSEN DODGE INC F I NANCIAL CONSULTANTS 650 Town Center Drive Suite 430 Costa Mesa EVENSEN DODGE INC SOQ( 714/545-1212 12 800/322-0171 714/S57-9126 Fax 44 Montgomery Street March 9, 1993 Suite 500 ' San Francisco CA 94104 415/955-2675 415/955-2676 Fax Mr. Steven Schainker, City Manager Ms. Alice Carroll, Finance Director 255 South Orange Avenue City of Ames Suite 1133 515 Clark Avenue Orlando FL 32801 ' Ames, IA 50010 407/841-0757 800/624-8= 407/872-2326 Fax RE: $20,660,000 Electric Revenue Refunding Bonds, Series 1993 City of Ames, Iowa 100 Court Avenue Dear Mr. Schainker and Ms. Carroll: Suite215 Des Moines IA 50309 Attached is our Presale Analysis prepared in connection with the City's 51512 2-61M issuance of$20,660,000 Electric Revenue Refunding Bonds, Series 1993. 515282-0252Fax The refunding is being proposed for the purpose of achieving interest rate 101 West Ohio,20rh Floor savings by reducing future debt service payments. IndianapolislN 462N 800/3211-8M ' The Presale Analysis summarizes the purpose of this issue, describes how the Bonds have been structured and discusses other aspects related to the marketing of the Bonds. We will prepare a Postsale Analysis reporting Wnh Laurel Perk Drive Suite 4 and analyzing the results of the sale after the Bonds have been sold. suite 00E ' Detroit(Livonia)MI 48152 We look forward to a successful offering. 313/591-4040 8WS89-2800 313/591-4554 Fax ' Sincerely, 1951 East Buena Vista EVENSEN DODGE,INC. Springfield MO 65804 t 417/887-1277 ' 417/887-7916 Fax WrBurg ur aff David M. Dirks ' Senior Vice President Senior Vice President Fargo D Lane and Principal Fargo ND 58103 70105-4416 800/328-SM ' /brg 7011739-4597 Fax 379 Federal Circle ' Columbus(Delaware)OH 43015 614/363-5577 8001628-7900 614/363-4887 Fax ' 701 Brazos,Suite 500 Austin TX 78701 ' 5121320-9047 800284-5612 511/320-1419 Fax222 South Ninth Street,Suite 3800 Minneapolis,MN 55402 612/338-3535 800/328-8200 ' 3710372 FAX 612/338-7264 1 TABLE OF CONTENTS ' Page ' Purpose of the Sale..................................................................................................... 1 Sourcesand Uses of Funds.......................................................................................2 ' Proposed Terms and Conditions of Sale.................................................................3 SavingsReport......................................................................................... 1 Bidding Requirements...............................................................................................6 Rating...........................................................................................................................6 ' Federal Tax Considerationse and Regulations........................................................7 Official Statement Disclosure...................................................................................8 GeneralMarket Conditions......................................................................................8 ' Proposed Financing Timetable............................................................................... 10 Listof Participants.................................................................................................... 11 i ' 371037/3 1 i PURPOSE OF THE SALE iThis Presale Analysis presents background information for the City's use in considering the issuance of$20,660,000* Electric Revenue Refunding Bonds, Series ' 1993 at a public sale tentatively set for March 23, 1993. The Refunding Bonds will be issued to refinance the outstanding callable maturities of Electric Revenue Bonds issued in 1978. The callable maturities, which are outstanding in the amount of $19,535,000 will be replaced with an issue of approximately $20,600,000. The i refunding is expected to generate actual cumulative savings (depending upon interest rates on the day the Bonds are sold) of approximately $1,304,078. The savings occur by replacing interest rates that range from 5.5% to 6.75% with interest rates that are iexpected to range from 2.65% to 5.55%. The amounts and maturities to be refunded are presented below: i BONDS TO BE REFUNDED Issue Amount Years i1978 Electric Revenue $19,535,000 7/94-08 1 " Subject to change. i 1 1 1 1 i371037/1 1 SOURCES AND USES OF FUNDS - BONDS A schedule presenting the estimated sources and uses of funds for this financing follows. Amount SOURCES: ' Par Amount of Bonds $20,660,000.00 Cash Contribution 1,986,010.00 Accrued Interest 51,503.59 Total Sources $22,697,513.59 ' USES: Cost of Redemption ' Par Amount of 1978 Bonds $19,535,000.00 Redemption Premium (2% of par) 3909700.00 Accrued Interest (1/1/93 through 4/20/93) 3749249.99 Costs of Issuance 150,000.00 ' Underwriter's Discount ($10/$1,000) 206,600.00 Reserve Fund 19986,010.00 ' Accrued Interest 517503.59 Miscellaneous 3,450.01 Total Uses $22,697,513.59 ' 3710372 2 PROPOSED TERMS AND CONDITIONS OF SALE ' Principal Amount of Issue: $20,660,000* Dated Date of Bonds: April 1, 1993 Proposed Sale Date: March 23, 1993 ' Type of Sale: Competitive. First Interest Payment: January 1, 1994 ' Maturity Date and Amounts: June 1 as follows: Year Amount ' 1994 $1,225,000 1995 17020,000 ' 1996 1,060,000 1997 1,105,000 1998 1,155,000 ' 1999 1,210,000 2000 1,255,000 2001 1,320,000 2002 1,3901000 ' 2003 1,455,000 2004 1,530,000 2005 1,605,000 ' 2006 116851000 2007 1,775,000 2008 118701000 ' Call Feature: Bonds maturing on January 1, 2003 and thereafter are subject to redemption prior to maturity on January 1, 2002 ' and on any date thereafter at a price of par plus accrued interest. ' Not Qualified Tax-Exempt Obligation: Not Bank Qualified. Security: Net revenues of the Electric Utility. ' Subject to change. ' 371037/3 3 ' SAVINGS REPORT ' The following table compares the debt service on the Refunding Bonds to the debt service on the Refunded Bonds. ' 371037/4 q CITY OF AMES, IOUA $20,660,000 ELECTRIC REVENUE REFUNDING BONDS, SERIES 1993 SCENARIO: CASH DEPOSITED TO RESERVE FUND ' SAVINGS REPORT - - - - - - - - PROPOSED DEBT SERVICE - - - - - - - - PRIOR CUMULATIVE ' DATE - --PRINCIPAL COUPON - ---INTEREST - ----- TOTAL ------ D/S -- SAVINGS - - SAVINGS 1/ 1/94 1,225,000.00 2.650000 731,893.13 1,956,893.13 2,041,055.00 135,665.47 135,665.47 7/ 1/94 471,697.50 ' 1/ 1/95 1,020,000.00 3.400000 471,697.50 1,963,395.00 2,047,755.00 84,360.00 220,025.47 7/ 1/95 454,357.50 1/ 1/96 1,060,000.00 3.800000 454,357.50 1,968,715.00 2,051,155.00 82,440.00 302,465.47 7/ 1/96 434,217.50 1/ 1/97 1,105,000.00 4.100000 434,217.50 1,973,435.00 2,055,340.00 81,905.00 384,370.47 ' 7/ 1/97 411,565.00 1/ 1/98 1,155,000.00 4.300000 411,565.00 1,978,130.00 2,059,890.00 81,760.00 466,130.47 7/ 1/98 386,732.50 1/ 1/99 1,210,000.00 4.500000 386,732.50 1,983,465.00 2,064,890.00 81,425.00 547,555.47 ' 7/ 1/99 359,507.50 1/ 1/ 0 1,255,000.00 4.700000 359,507.50 1,974,015.00 2,059,960.00 85,945.00 633,500.47 7/ 1/ 0 330,015.00 1/ 1/ 1 1,320,000.00 4.850000 330,015.00 1,980,030.00 2,064,760.00 84,730.00 718,230.47 7/ 1/ 1 298,005.00 ' 1/ 1/ 2 1,390,000.00 4.950000 298,005.00 1,986,010.00 2,068,185.00 82,175.00 800,405.47 7/ 1/ 2 263,602.50 1/ 1/ 3 1,455,000.00 5.050000 263,602.50 1,982,205.00 2,066,085.00 83,880.00 884,285.47 7/ 1/ 3 226,863.75 1/ 1/ 4 1,530,000,00 5.150000 226,863.75 1,983,727.50 2,068,460.00 84,732.50 969,017.97 7/ 1/ 4 187,466.25 1/ 1/ 5 1,605,000.00 5.250000 187,466.25 1,979,932.50 2,063,140.00 83,207.50 1,052,225.47 7/ 1/ 5 145,335.00 1/ 1/ 6 1,685,000.00 5.350000 145,335.00 1,975,670.00 2,061,550.00 85,880.00 1,138,105.47 7/ 1/ 6 100,261.25 1/ 1/ 7 1,775,000.00 5.450000 100,261.25 1,975,522.50 2,058,030.00 82,507.50 1,220,612.97 7/ 1/ 7 51,892.50 1/ 1/ 8 1,870,000.00 5.550000 51,892.50 1,973,785.00 2,057,250.00 83,465.00 1,304,077.97 -------------- -------------- -------------- -------------- -------------- ' 20,660,000.00 8,974,930.63 29,634,930.63 30,887,505.00 1,304,077.97 ACCRUED 51,503.59 51,503.59 20,660,000.00 8,923,427.04 29,583,427.04 30,887,505.00 1,304,077.97 Dated 4/ 1/93 with Delivery of 4/20/93 Bond Years 176,035.000 Average Coupon 5.098379 Average Life 8.520571 N I C % 5.215742 % Using 99.0000000 N 0 T E : Savings on 1/ 1/94 Include Accrued Interest of 51,503.59 Net Present Value Savings at: 5.1200% Equals 953,364.51 or 4.6145% of Par of the Current Issue ' or 4.8803% of Par of the Prior issue Prepared by Evensen Dodge, Inc. ' RUNDATE: 03-09-1993 @ 09:21:17 FILENAME: AED KEY: REF78 ' BIDDING REQUIREMENTS ' The bidders will be required to submit their bids in accordance with requirements outlined in the Notice of Sale. Bidders will be required to purchase the Bonds at a price not less than 99.0% of Par. The discount is a marketing feature which allows the purchaser to take its profit in the discount bid on the Bonds and to reoffer the Bonds at Par. ' The estimated compensation for issues of this size and maturity length should run between .80% and 1.0% depending on market conditions. The appropriate compensation of a purchaser varies depending upon the issue size, rating and market conditions. The competitive bid process assures that bidders will keep their profit margins at appropriate levels. A second requirement is that interest rates must be bid in ascending order. This bidding restriction is designed to protect the call feature on the Bonds. The call feature, which occurs first in 2002, gives the City the flexibility to refund or call the Bonds at an earlier date if interest rates drop significantly or if the conditions affecting debt repayment change. ' RATING The City will request a rating on the Bonds from Moody s Investors Service. Evensen Dodge will assist the City with its rating application. 371037/6 6 ' FEDERAL TAX CONSIDERATIONS AND RE ULATIONS ' The following paragraphs present a brief summary of federal tax regulations and rulings which impact the tax status of the Bonds, as well as allowable uses of proceeds. In reference to the following paragraphs, it is our understanding that the Bonds: 1. will be issued as governmental purpose Bonds; 2. will not be designated as qualified tax-exempt obligations; ' 3. will not be used in whole or in part for reimbursement of previously expended funds. The Bond proceeds are subject to special provisions under federal law. One provision of the Internal Revenue Code of 1986 is a 100% disallowance of the interest deduction for banks which purchase tax-exempt Bonds. An exception to this provision allows banks to deduct interest earned on governmental bonds when the Jurisdiction issues no more than $10 million of tax-exempt debt in the calendar year. When possible, it is to the City's advantage to designate its tax-exempt debt as Qualified Tax-Exempt Obligations because such debt is slightly more marketable under current market conditions. The City will not designate the Bonds as Qualified Tax-Exempt Obligations, since the City expects to issue more than$10,000,000 of tax-exempt debt in calendar 1993. ' 371037n 7 ' OFFICIAL STATEMENT DISCLOSURE The Securities Exchange Commission issued rule 15(c)2-12 in 1990 which states that underwriters cannot bid on issues of $1,000,000 or more unless they have first ' reviewed an official statement which has been designated by the issuing municipality as a "near final official statement." Though the rule places an obligation on the underwriter, it is &enerally understood that the ultimate responsibility for the quality of disclosure provided in an official statement rests with the issuer. ' Evensen Dodge will assist the City with the preparation and dissemination of a "nearly final official statement" to the underwriting community prior to the issuance ' of the Bonds. A draft will be provided to the City for review and confirmation as to the accuracy of the Official Statement. After the sale, Evensen Dodge will prepare an addendum for the Official Statement which contains the information determined at the sale, such as the purchaser and the interest rates on the Bonds. Up to 150 copies of the Official Statement and Addendum will be provided to the Purchaser of the Bonds GENERAL MARKET CONDITIONS A graph showing The Bond Buyer's Index (BBI) dated March 4, 1993 follows. This graph shows the movement of tax-exempt rates since 1981. As presented in the graph, tax-exempt rates have fallen to a thirteen year low of 5.47% on March 4, 1993. ' We have estimated, based on current market conditions, that the Bonds will receive a net interest rate of between 5.20% and 5.40%. Nevertheless, the possibility of ' sudden shifts in the market exist because of its sensitivity to events that cannot be foreseen. Therefore,we cannot predict what the actual rate of interest will be when the Bonds are sold on March 23, 1993. 1 371037/8 8 qo uvf n �.l m O O \ � O 1 0 0 °° o O 0 O Inf u s oui cc �I ld a� N CO co O M �aaoiad Q� cc o 1Iona ° co 1 0 F c co .. Ln m m LOIUGOIGd C v w z u w 1 1 PROPOSED FINANCING TIMETABLE (Assuming March 23 Sale Date) ' Date Task February 26 Sale memorandum to Bond counsel. March 10 Presale Analysis delivered to City by Evensen Dodge. ' March 12 Draft Official Statement delivered to City and Bond Counsel. March 1-16 Evensen Dodge prepares Official Statement. March 16 Council resolution to set hearing. ' March 16 City and Bond Counsel supply Evensen Dodge with comments on Official Statement. March 16 Application for rating and official statement filed with rating agencies. March 16 Official Statement distributed to potential bidders. March 19-20 Evensen Dodge contacts potential bidders, answers rating questions. ' March 23 Bond sale. Council acts on the resolution. April 4 Evensen Dodge prepares final Official Statement. ' April 4-19 Evensen Dodge coordinates closing arrangements. April 20 Bond closing. April 21 Postsale Analysis prepared by Evensen Dodge. ' 371037/10 10 ' LIST OF PARTICIPANTS ' Issuer City of Ames Mr. Steven Schainker 51S Clark Avenue City Manager Ames,IA 50010 Ms. Alice Carroll ' 515 239-5113 Finance Director �515� 239-5325 (FAX) Ms. Sue Rybolt Assistant Finance Director Financial Consultant Evensen Dodge,Inc. Mr. Wayne S. Burggraaff Suite 3800 Senior Vice President 222 South Ninth Street and Principal Minneapolis, MN 55402 �612 338-3535 612� 338-7264 (FAX) ' 100 Court Avenue David M. Dirks Suite 215 Senior Vice President Des Moines, IA 50309 �515 282-6138 515� 282-0252 (FAX) ' Bond Counsel Dorsey&Whitney Mr. Robert Helmick 801 Grand Suite 3900 Des Moines,IA 50309 �515 515) 283-1000 283-1060 (FAX) ' 371037/11 11