Pella Chronicle

February 1, 2014

$3.5 million Electric Revenue Capital Loan Notes discussed

By Clint Brown
The Chronicle

Pella — The Pella City Council approved several resolutions last week in relation to the $3,500,000 Electric Revenue Capital Loan Notes, Series 2014.

On January 7, 2014, the City Council received bids and directed the sale of Electric Revenue Capital Loan Notes, Series 2014 in the amount of $3,500,000 to D.A. Davidson & Co. of Denver, Colorado. It is important to note, the true interest cost for the bond sale to D.A. Davidson was 2.44% over a ten year term. Equally important to note, the proceeds from the Notes will be used to fund improvements to the municipal electric utility. This includes demolition of the existing power plant, acquisition and installation of control systems upgrade for the diesel plant, conversion of a portion of the electrical overhead distribution system to an underground distribution system, construction of the underground distribution system and related site improvements.

In order to facilitate the bond sale to D.A. Davidson, the City Council  needed to approve the following items:

-Appointing Bankers Trust as Paying Agent, Note Registrar, and Transfer Agent

This resolution appoints Bankers Trust Company of Des Moines as paying agent, note registrar and transfer agent and authorizes the Mayor and City Clerk to sign the Agreement with Bankers Trust on behalf of the City. As background, this agreement is necessary to comply with the requirements for governing the registration, transfer and payment of registered notes. It is important to note, the term of this agreement is over the life of the bond issue; however, it can be canceled by either party via a ninety day notice. In addition, the annual fee charged by Bankers Trust for these services is $500.

-Approval of Tax Exemption Certificate

The Tax Exemption Certificate sets out in detail a number of facts, promises and obligations which must be met and agreed to by the City in order to maintain these Notes as tax exempt. These requirements primarily include arbitrage requirements for the bond proceeds and restrictions for private duty use. It is important to note, staff has reviewed these requirements with legal counsel and we are recommending approval of the tax exemption certificate.

-Approval of Continuing Disclosure Certificate

The Continuing Disclosure Certificate requires the City to provide annual financial information and operating data to certain information repositories so long as the Notes are outstanding. In addition, the City is also obligated to provide notice to the repositories if certain material events occur which could impact the Municipal Electric Utility's ability to pay the principal and interest on the Notes. Potential material events include the following items:

1. Bond payment delinquencies or other material non-payment related defaults.

2. Unscheduled draws on debt reserve funds.

3. Adverse bond tax-exempt opinions issued by the IRS.

4. Bond rating changes.

5. Modifications to the rights of the bond holders.

-Approving Form of Loan Document and Authorize Issuance of $3,500,000 in Electric Revenue Capital Loan Notes, Series 2014.

This resolution approves the terms and conditions for a Form of Loan Document and authorizes the issuance of $3,500,000 in Electric Revenue Capital Loan Notes, Series 2014.