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Updates from the PAC meeting Aug 6, 2003 Bond Refinance Q; Buying down the bond? How much? Where from? Why? Impact on our cash able to be spent? A: OCDA is working on a refinancing of the outstanding bond debt for the SAH Project Area. Currently the bond principal amount is $49.6 million. The Agency Board has directed staff to examine the feasibility of reducing the principal debt by $10 million. This money would come from the amounts currently held in reserve in the SAH funds. Refinancing and reducing the bond debt allows the agency to reduce the amount of money spent on debt service and increase the cash flow to the agency. It is similar in concept to refinancing your home mortgage. It would reduce the amount of cash on hand but increase the future cash flow to the agency. Q: Old vs. new interest rate A: The current interest rate on the bonds is 6.1% on average. The rate that is being discussed is 4.3%. Rates fluctuate depending on the market conditions. In the last two months, rates have increased by more than 0.5% and may continue to increase. Q: Term changes? A: The Board did request that changes to the term be examined but based on probable State ERAF requirements for the next several years; the existing final bond maturity date of 9/01/23 will probably be maintained. Q: Cash flow impact? A: The annual debt service for the existing bonds is approximately $4.2 million. Pursuant to the July 1 Board directive, with a $10 million principal reduction, the annual debt service for $39.6 million of new bonds will be approximately $2.9 million (estimated $1.3 million annual savings based on lower interest rate of new bonds, insurance and reduced principal debt amount). |
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