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Date
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June 23, 2008
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Agenda
Item No. 19 Roll
Call No. 08-
Communication No. 08-388 Submitted by: Allen
McKinley, Finance Director/Treasurer |
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AGENDA
HEADING:
Approving extension of Airport’s Commercial Paper Series C Program,
including Letter of Credit with Bank of America, for one (1) year through June
30, 2009
SYNOPSIS:
Recommend
approval of the Airport’s Commercial Paper Series C Program. The City of Des Moines Aviation Department
has implemented a Commercial Paper Program consisting of a debt obligation not
to exceed $12 million. The program
includes a program dealer, a letter of credit, and paying agent agreement, and
is set to expire on June 30, 2007.
The Airport’s
plan in creating the Series C was to fund capital projects until large enough
cumulative requirements had developed to justify selling an issue of long-term
bonds. Because the Airport has impending
debt needs, and is not yet prepared to formalize Airport Revenue Bonds or other
long-term debt, it is desirable to continue the Commercial Paper Program for
one additional year.
FISCAL
IMPACT:
Amount: Interest rates on the Letter of
Credit are variable and have ranged from 1.60% to 3.80% over the past
year. The current outstanding balance on
the Letter is $8.7 million. In addition
to interest charges, Bank of America charges a fee of 0.1% of the authorized
amount each quarter. During the fiscal
year ended June 30, 2008, interest payments for the commercial paper program
will total $265,373.80.
Funding Source: Fiscal Year
2008-09 Operating Budget, Airport Operations Fund EN002, AIR010100, page 62. Costs of the program are recovered through
rates and charges assessed against commercial airlines and other users of the
Airport facilities.
ADDITIONAL
INFORMATION:
On August 21, 2000, the City Council established the Airport’s Commercial
Paper (Series C) Program. The Series C
portion of the Commercial Paper Program is secured by a subordinated pledge of
the Airport’s net revenues.
In 2003 the Airport’s financial advisor (Fullerton & Friar, Inc.)
provided projections reflecting funding of the various capital projects as
shown in the Airport’s approved Capital Improvement Program. Their analysis indicated that in order to
fund projects an increase in the Series C Commercial Paper was needed. Fullerton & Friar’s projections also
indicated that a bond issue would likely be required within five years to repay
the Series program. Fullerton &
Friar also advised that it would then be efficient for the Airport to
contemplate a bond issue with debt rising to that level.
On April 7, 2003 the City Council approved the expansion of the
Commercial Paper Series C Program from $5 million to $12 million and an
extension of time for the underlying credit with Bank of America from June 30,
2003 to June 30, 2007. The Paying Agent
Agreement with US Bank and the Program Dealer Agreement with Merrill Lynch are
open-ended and thus did not require a formal extension.
On June 18, 2007 the City Council approved the extension of time for the
underlying credit with Bank of America from June 30, 2007 to June 30, 2008
since the Airport was not yet ready to transition the Commercial Paper Series C
Program to other long-term debt.
Currently, the Airport still plans to repay the full amount of the
outstanding Series C Commercial Paper from the proceeds of a future revenue
bond issuance. The City is still in the
process of attempting to refinance existing Airport Revenue bonds and the need
for additional Airport Revenue Bonds remains to facilitate construction of
parking facilities and possibly certain other projects. In light of the timing of the expiration of
the line of credit, City staff has communicated to Bank of America its desire
to extend the existing letter of credit for one year, to June 30, 2009, and
received written approval from the bank.
PREVIOUS
COUNCIL ACTION(S):
Date: June 18, 2007
Roll Call
Number: 07-1181
Action: Extension of the expiration date (to July
1, 2008) of the Letter of Credit regarding outstanding subordinate Airport
Commercial Paper Revenue Notes, Series C.(Council Communication No. 07-371) Moved by Coleman to adopt. Motion
Carried 6-1.
Date:
April 7, 2003
Roll Call
Number: 03-792
Action: Amending Roll Call 00-3504, to authorize and
provide for issuance and securing payment of subordinate Airport Commercial
Paper Revenue Notes, Series C. (Council Communication No. 03-165). Moved by Vlassis to adopt.
Motion Carried 4-2-1. Nays: Coleman and Brooks. Absent: Hensley.
Date:
August 21, 2000
Roll Call
Number: 00-3502
Action: On authorization and issuance of not to
exceed $5,000,000 Subordinate Airport Commercial Paper Revenue Notes, Series C.
(Council Communication No. 00-344 of 7-24-00).
Moved by
Brooks to adopt. Motion Carried 5-2. Absent: Flagg and Hensley.
BOARD/COMMISSION
ACTION(S):
Date:
June 3, 2008
Roll Call
Number: N/A
Action: The Airport Board recommended to City Council
the Extension of the Commercial Paper Series C Program for one (1) year to June
30, 2009
Date: June
5, 2007
Roll Call
Number: N/A
Action: The Airport Board recommended to City Council
the Extension of the Commercial Paper Series C Program for one (1) year to June
30, 2008
ANTICIPATED
ACTIONS AND FUTURE COMMITMENTS:
This program will be re-evaluated for long-term viability prior to June
30, 2009, and any further Council action will be requested based on the staff
recommendation.
For more information on this and other agenda items,
please call the City Clerk’s Office at 515-283-4209 or visit the Clerk’s Office
on the second floor of City Hall,