Memorandum

City of Lawrence

Finance Department

TO:	David L. Corliss, City Manager
FROM:	Bryan Kidney, Finance Director
Date:	March 3, 2015
RE:	Resolution No. 7108 authorizing the issuance of Water and Sewage Revenue Bonds, Series 2015-A.

Background

The City of Lawrence currently has outstanding a $59,900,000 general obligation temporary note that matures May 1, 2015. The note was issued to finance a variety of water and wastewater projects. The projects funded by the note are either substantially complete or are anticipated to be completed within the next 18-24 months. The City needs to definitively fund the projects with long-term financing.

In addition to the projects currently financed with the temporary note, the Utilities Department has identified additional water and wastewater projects that need financing for 2015. We identified a portion of the 2015 projects that have defined costs and will be included in the 2015 permanent bond issue instead of issuing temporary financing. We should be able to lower issuance costs and lock into a lower interest rate due to higher investor in one large bond issue. We plan to consider financing for the remaining 2015 projects in the fall of 2015 as the project costs become more defined.

Projects

Projects included in the 2014 temporary note are:

Project Description	Amount
Kaw WTP Improvements - raw water intake	4,779,809
Oread Storage Replacement and Booster Pump Station	3,960,131
Kaw Transmission Main	7,851,831
Water Tower Maintenance and Pump Station Improvements	2,078,581
Watermain Assessment, Relocation, Rehabilitation, Replacement	9,895,531
Kaw WTP Improvements	1,537,925
Wakarusa WWTP - Influent Pump Station and Force Mains	21,709,727
Inflow & Infiltration Reduction	4,292,982
Sanitary Sewer Rehabilitation	1,851,731
Pump Station 4 and Force Main Improvements	1,142,922
Clinton Intake	1,455,354
Clinton Taste & Odor Process	1,549,748
Sanitary Sewer Relocations and Plant Imp.	728,728
Less: Premium on Note sale	-2,935,000
Total	$59,900,000

These projects were all considered before the temporary notes were issued.

Portion of new projects for 2015 to be financed with Revenue Bond:

Project Description	Amount
Wakarusa 2015 plant improvements	$21,685,000
Watermain Assessment, Relocation, Rehabilitation, Replacement	4,096,900
Sewer Rehabilitation, Assessment, CIPP, Manholes, Relocation, and Replacement	949,900
Total	$26,731,800

The Wakarusa project has been previously authorized by the City Commission. The new water and sewer rehab projects are a subject of a separate resolution to be considered by the City Commission on March 10.

In addition to funding the project costs, we estimate that there will be the additional financing costs and reoffering premium for a total estimated bond issue size of $90,680,000 calculated as follows:

Use of Funds	Amount
2014 temporary note projects	$59,900,000
2015 projects	26,731,800
Accrued interest on 2014 temporary note	1,497,500
Debt Service Reserve Fund	5,762,690
Cost of Issuance	1,089,104
Less: estimated premium	(4,301,094)
Total estimated bond size	$90,680,000

The bonds will be 25 years with level annual debt service starting with an interest only payment in November 2015 and the first principal payment in 2016. The total cost of the projects and debt service for the bonds are under the amounts that were used in the latest rate model update.

The current outstanding temporary notes are due May 1, 2015. In order to pay off the notes the 2015 bonds must be issued on Tuesday, April 7. The bonds will be offered at a competitive sale at 11:00 AM. Staff will bring a bond ordinance and resolution to accept the lowest net interest costs bid to the Commission at that evenings Commission meeting.

Action Requested

The City Commission is requested to adopt Resolution No. 7108, authorizing the sale of water and sewage system improvement revenue bonds, series 2015.