Title
A RESOLUTION DECLARING IT NECESSARY TO AUTHORIZE THE PAYMENT OF THE COSTS OF IMPROVEMENTS TO EXISTING ROADS IN SEDGWICK COUNTY, KANSAS, AND PROVIDING FOR THE ISSUANCE OF GENERAL OBLIGATION BONDS TO PAY THE COSTS THEREOF AND PROVIDING FOR PUBLICATION OF THIS RESOLUTION AS REQUIRED BY LAW (KDOT ROAD REFINANCING).
Presented by: Chris Chronis, Chief Financial Officer.
RECOMMENDED ACTION: Adopt the resolution.
Body
In 2009, the Board authorized improvements to be made to 119th Street West between 29th Street North and 53rd Street North within the county and authorized the execution of a Transportation Revolving Fund Loan Agreement with the Kansas Department of Transportation to provide financing for the improvement. The county subsequently executed TRF Loan #0118 on July 15, 2009 in the amount of $2,500,000 to pay these project costs, and $2,187,976.79 of the loan will remain outstanding after the next scheduled payment.
In several other years the county also executed TRF loan agreements to finance road and bridge projects, including several which were assessed against benefitting property owners. The total balance of such loans currently outstanding is $5,857,872.45, and the total cumulative interest cost to be paid on those balances is estimated to be $1,822,742.70.
Current conditions in financial markets make possible a reduction of county interest cost by selling General Obligation bonds and using the proceeds to repay the TRF loan. The Resolution finds that it is necessary and advisable to provide for the issuance of the bonds to retire the loan.
Alternatives:
The existing loans could be repaid in accordance with the established terms, but doing so would cause the county to pay about $700,000 more than necessary over the remaining 16 years of the loans.
Financial Considerations:
Repayment of the outstanding TRF loans is contemplated in the county's financial forecast. Issuing bonds to repay the loans will reduce the county's costs with a negligible effect on the county's debt capacity. The amount of bonds to be issued is $6,000,000, to repay the $5,857,872 of loans outstanding and pay issuance costs associated with the bond sale. Thus, the county's long term debt will increase about $142,000 as a result of this transaction. On the other hand, the county's savings in annual interest cost are estimated to be about $55,000 yearly through 2019, and then drop gradually until the debt is fully repaid in 2029. Total estimated savings is estimated to be $722,364.
As general obligation debt, the bonds will be secured by a pledge of the County's full faith and credit, meaning bondholders will be able to compel the levy of property taxes if necessary to repay the debt.
Legal Considerations:
K.S.A. 68-1103 authorizes the Board to determine that it is necessary to build or repair any road, bridge or culvert, and to appropriate funds to provide for the payment of such improvements or if the amount appropriated is not a sufficient to issue general obligation bonds of the County to pay the costs thereof; except that no such bonds shall be issued until the Board shall have published a resolution authorizing the issuance of such bonds once each week for three consecutive weeks in the official county newspaper and if within 60 days following the last publication of such resolution, a petition in opposition to the issuance of such bonds, signed by not less than 5% of the qualified electors of the county, is filed with the county election officer, no bonds shall be issued unless a majority of the electors voting on the question of issuing such bonds approve the same at an election called and held in the manner provided for the calling and holding of elections under the general bond law; further provided if no protest is filed, an insufficient protest is filed or if an election is held and the proposition is approved by a majority of those voting thereon, the board of county commissioners may issue the general obligation bonds in the amount specified in the resolution. Bonds issued under this statute do count against the County statutory limits of indebtedness.
Policy Considerations:
These bonds are subject to the County's adopted debt policy. The policy establishes a savings target for refinancing of 5% of refunded debt service on a present value basis. The estimated net present value of debt service savings for this transaction is $9.1%, well above the policy target.
The policy also calls for refunded debt to carry the same period of repayment as the debt being refunded. Both the existing TRF loans and the proposed bond issue that will refund those loans have final repayments in 2029.
Outside Attendees: Joe L. Norton, Gilmore & Bell, PC, Bond Counsel
Multimedia Presentation: