HomeMy WebLinkAboutA001 - Council Action Form dated September 8, 2026ITEM #:28
DATE:09-08-26
DEPT:FIN
SUBJECT:PUBLIC HEARING ON THE PROPOSAL TO ENTER INTO AN ELECTRIC
REVENUE LOAN AND DISBURSEMENT AGREEMENT AND BORROW
MONEY THEREUNDER IN A PRINCIPAL AMOUNT NOT TO EXCEED
$53,930,000
COUNCIL ACTION FORM
BACKGROUND:
On August 25, 2026, the City Council reviewed the revised financing plan for the new thermal
generation project for the Ames Municipal Electric Utility. The project includes the purchase
and installation of new reciprocating internal combustion engine (RICE) generation units and
the associated site, electrical, mechanical, and other improvements necessary to place the
units into service.
The revised financing plan is intended to align the City’s borrowing with the project’s
contractual payment requirements and anticipated construction cash flows. The plan
includes the following financing phases:
Financing Anticipated Timing Project Funding
Electric Revenue Bonds October 2026 $50,533,000
Electric Revenue Bonds March 2028 $71,550,000
Construction Draw-Down Loan April 2029 $70,580,000
Electric Revenue Bonds to repay the
construction loan October 2030 $70,580,000
The action currently under consideration relates only to the first phase of the financing
plan.
At its August 25 meeting, the City Council adopted a resolution setting September 8, 2026, as
the date of the public hearing on the proposal to enter into an Electric Revenue Loan and
Disbursement Agreement and borrow money thereunder in a principal amount not to exceed
$53,930,000. The required notice of public hearing was subsequently published in accordance
with Iowa law.
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The proposed Series 2026D Electric Revenue Bonds are currently estimated as follows:
Series 2026D Financing Estimated
Amount
Project funding $50,533,000
Costs of issuance $827,000
Preliminary bond amount $51,360,000
Max authorized principal
amount $53,930,000
The difference between the preliminary bond amount and the maximum authorized
amount provides flexibility for changes in market conditions, final bond sizing, required
reserves, issuance costs, and other financing adjustments that may occur before the
bonds are sold.
Proceeds from this first financing phase would be used primarily for the RICE engines
and other thermal generation project costs anticipated through approximately February
2028. The bonds are expected to close on October 29, 2026, with a 30-year repayment
schedule.
Estimated debt service for the Series 2026D Bonds is approximately:
$1.51 million in FY 2026/27
$2.57 million in FY 2027/28
Approximately $3.44 million to $3.45 million annually thereafter
Principal payments are currently expected to begin in 2029, with final maturity in 2056.
The Series 2026D Bonds would be payable solely from the net revenues of the City’s
Electric Utility. They would not be General Obligation Bonds and would not be
supported by the City’s property tax levy.
At the September 8 meeting, the City Council should conduct the public hearing and
receive any oral or written objections regarding the proposed financing. After
considering any objections, the City Council may adopt the resolution instituting proceedings
to take additional action for the proposed Electric Revenue Loan and Disbursement
Agreement and issuance of the bonds.
Adoption of the resolution would allow staff, PFM Financial Advisors LLC, and bond
counsel to continue preparing the Preliminary Official Statement and other documents
necessary for the Series 2026D financing. No bonds will be sold as a result of the
September 8 action. The Preliminary Official Statement and bidding procedures will be
presented to the City Council on September 22, and the final bond bids and proposed
issuance will be presented to the City Council on October 13.
This action also does not authorize the Electric Revenue Bonds anticipated in March
2028, the construction draw-down loan anticipated in April 2029, or the Electric
Revenue Bonds anticipated in October 2030. Each of those financing phases will
require separate future City Council action.
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ALTERNATIVES:
1. Following the public hearing, adopt the resolution instituting proceedings to take
additional action for the authorization of an Electric Revenue Loan and Disbursement
Agreement and the issuance of Electric Revenue Bonds, Series 2026D, in a principal
amount not to exceed $53,930,000.
2. Do not adopt the resolution. This Alternative would prevent the City from proceeding
with the first financing phase under the current schedule and would require staff
and PFM to develop an alternative method of funding the project’s near-term
contractual and construction costs.
CITY MANAGER'S RECOMMENDED ACTION:
The first phase of the revised financing plan is needed to provide funding for the RICE engines
and other project costs anticipated through approximately February 2028. The phased
financing plan more closely aligns the City’s borrowing with the project’s anticipated cash
flows.
The proposed Series 2026D Bonds would be payable solely from the net revenues of the
Electric Utility and would not be supported by the City’s property tax levy.
Adoption of the resolution will allow the City to continue preparing the financing while
preserving the City Council’s authority to approve the Preliminary Official Statement
and bidding procedures on September 22 and the final bond issuance on October
13. Therefore, it is the recommendation of the City Manager that the City Council adopt
Alternative No. 1, as described above.
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