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HomeMy WebLinkAboutItem 2E-Res.for Trojan ProjectEUGENE CITY COUNCIL AGENDA ITEM SUMMARY Resolution 4808 Authorizing the Issuance and Sale of Trojan Project Revenue Bonds in the Aggregate Principal Amount Not to Exceed $55,000,000 for the Purpose of Refunding Trojan Nuclear Project Revenue Bonds, Series of 1977, and Providing for Related Matters Meeting Date: September 13, 2004 Agenda Item Number: 2E Department: Finance and Court Services Staff Contact: Sue Cutsogeorge www. cl. eugene, or. us Contact Telephone Number: 682-5589 ISSUE STATEMENT The Eugene Water and Electric Board (EWEB) is requesting authority to proceed with a refunding of the 1977 Trojan Project Revenue bonds. Bonneville Power Administration (BPA) pays all principal and interest on the bonds. EWEB is contractually required to consider the feasibility and advisability of refunding the Trojan bonds when requested to do so by BPA. The refunding transaction would not benefit EWEB customers directly but would do so indirectly by lowering BPA costs. BACKGROUND The authorization for the original Trojan Project bonds was a charter amendment approved by voters on November 5, 1968. The refunding of these bonds would have an indirect impact on electric rates because the related interest cost savings would be reflected in BPA wholesale rates. The Trojan Nuclear Plant (Trojan Project) is jointly owned by Portland General Electric Company (67.5%), EWEB (30%), and Pacific Power and Light Company (2.5%). In 1993, PGE ceased com- mercial operation of Trojan. Prior to ceasing operations, EWEB assigned to BPA and other public agency participants its 30% share of output. As part of this assignment, BPA is obligated to pay EWEB's 30% share of all Trojan Project costs, including decommissioning and debt service. There are $45 million of Trojan Project bonds outstanding, carrying a tax-exempt interest rate of 5.9% and maturing in 2009. The refunding bonds would also mature by 2009 and carry an interest rate of approximately 3%, resulting in gross interest cost savings of approximately $3.6 million or almost 8% of the refunding bond amount in net present value savings. RELATED CITY POLICIES There are no City policies related to this item. L:\CMO\2004 Council Agendas\M040913\S0409132E.doc COUNCIL OPTIONS The council can approve or not approve the resolution. The net billing contract with BPA carries a provision that requires EWEB to consider the feasibility and advisability of refunding the bonds when requested to do so. If the council does not approve the resolution, EWEB will not be able to authorize the refunding. As a result, BPA will not be able to realize the cost savings from the refunding bond issue, and any benefit to ratepayers will not be achieved. CITY MANAGER'S RECOMMENDATION Staff recommends approval of the proposed resolution. SUGGESTED MOTION Move to adopt Resolution 4808 authorizing the issuance and sale of Trojan Project Revenue Bonds in the aggregate principal amount not to exceed $55,000,000 for the purpose of refunding Trojan Nuclear Project Revenue Bonds, Series of 1977, and providing for related matters. ATTACHMENTS A. Resolution FOR MORE INFORMATION Staff Contact: Sue Cutsogeorge Telephone: 682-5589 Staff E-Mail: sue.l.cutsogeorge~ci.eugene.or.us EWEB Contact: Jim Origliosso Telephone: 484-3753 E-Mail: jim. origliosso~eweb, eugene, or.us L:\CMO\2004 Council Agendas\M040913\S0409132E.doc ATTACHMENT A RESOLUTION NO. A RESOLUTION AUTHORIZING THE ISSUANCE AND SALE OF TROJAN PROJECT REVENUE BONDS IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $$$,000,000 FOR THE PURPOSE OF REFUNDING TROJAN NUCLEAR PROJECT REVENUE BONDS, SERIES OF 1977 AND PROVIDING FOR RELATED MATTERS The City Council of the City of Eugene finds that: A. On November 5, 1968, the voters of the City of Eugene approved a Charter Amendment authorizing the City, acting by and through the Eugene Water & Electric Board ("EWEB"), to issue up to $225 million of revenue bonds for the construction of nuclear or other thermal power plants. Pursuant to that Charter amendment and resolutions adopted by EWEB, but without any additional action by the City Council, EWEB issued the City of Eugene, Trojan Nuclear Project Revenue Bonds, Series of 1977 (the "Series 1977 Bonds"). B. The outstanding Series 1977 Bonds are callable as to principal and interest at any time without premium. C. The Bonneville Power Administration ("Bonneville") has requested EWEB to consider the feasibility of refunding the Series 1977 Bonds. D. Under the Trojan Nuclear Project Agreement, dated October 5, 1970, between the City, acting by and through EWEB, and Bonneville, commonly referred to as the "Two Party Net Billing Agreement", the City is obligated to use its best efforts in good faith to proceed with such a refunding when requested by Bonneville unless EWEB determines that such refunding is not feasible or advisable. E. EWEB has requested the City Council to authorize and to set the terms for the issuance of not to exceed $55,000,000 principal amount of Trojan Project Revenue Bonds, Series 2004, for the purpose of currently refunding all or a portion of the outstanding Series 1977 Bonds, to fund any reserves deemed necessary for the Series 2004 Bonds and to pay the costs of issuance of the Series 2004 Bonds. F. The interest on a portion of the Series 2004 Bonds is expected to be taxable for federal income tax purposes, Resolution- 1 L:\CMO\2004 Council Agendas\M040913\S0409132E-attA. doc NOW, THEREFORE, BE IT RESOLVED BY THE CITY OF EUGENE, a Municipal Corporation of the State of Oregon, as follows: Section 1. Authorization of Bonds; Purpose of Issue; Conditions of Issuance. Based on the above findings, the Council hereby authorizes EWEB, on behalf of the City, to issue and sell "City of Eugene, Trojan Project Revenue Bonds" (the "Bonds") in one or more series in the aggregate principal amount of not to exceed $55,000,000 subject to the following terms and conditions prescribed by the City Council: (a) The Bonds of each series shall: (i) mature not later than September 1, 2009; (ii) be sold at par or with a net original issue discount/premium that does not exceed twelve percent (12%) of the aggregate principal amount thereof; and (iii) have an effective interest rate of not to exceed five and three quarters percent (5 3/4 %) per annum; (b) The proceeds of the Bonds shall be used only to currently refund all or a portion of the Series 1977 Bonds, provided that such refunding shall result in a net present value debt service savings of at least 2%, to fund any necessary reserves, and to pay the costs of issuance of the Bonds issued for such purpose. Section 2. Delegation of Authority for Terms of Bonds; Provisions for Issuance. EWEB, or any individual designated by EWEB, is hereby authorized and directed to determine, with respect to the Bonds, the form of bond and series designation, the manner of disbursement of proceeds of the Bonds, the maturity dates, principal amount, interest rates, denominations, form and authorized signatory and other terms and conditions of the Bonds because the same cannot be determined by the Council at this time. Prior to the issuance of any Bonds, EWEB shall: (i) prepare a plan showing that the estimated revenues are sufficient to pay the estimated debt service on the Bonds; (ii) adopt a Bond Resolution and provide a copy of such resolution to the City; and (iii) provide to the City a resolution demonstrating that the Bonds will contain a recital to the effect that any and all acts, conditions and things required to exist, to happen and to be performed precedent to and in the issuance of the Bonds exist, have happened and have been performed in due time, form and manner as required by the Constitution and statutes of the State of Oregon, the Charter of the City of Eugene and this Resolution. Section 3. Bonds Payable Solely from Revenues. The Bonds shall not be general oblige- tions of the City, nor a charge upon its tax revenues, or general revenues of EWEB, but shall be payable solely from (i) all payments to EWEB pursuant to the Two Party Net Billing Agreement referred to above and the thirteen Trojan Nuclear Project Agreements, each of which is dated October 5, 1970 and is among the City, Bonneville and a preference customer of Bonneville, (ii) any other amounts received by EWEB and directly attributable to the Trojan Project and (iii) any income received by EWEB as a result of the investments of such amounts. Section 4. Statement on Form of Bond. All Bonds shall include a statement on their face to the effect that: Resolution - 2 L:\CMO\2004 Council Agendas\M040913\S0409132E-attA. doc (a) They do not in any manner constitute a general obligation of EWEB or of the City, or create a charge upon the tax revenues of the City, or upon any other revenues or property of the City, or property of EWEB, but are charges upon and are payable solely from the revenues and funds pledged to the payment thereof; and (b) The holders thereof may look for repayment only to the revenues that are pledged to the payment thereof; and may not directly or indirectly be paid or compen- sated through the property of the City, or EWEB, or by or through the taxing power of the City. Section 5. Provisions for Sale of Bonds at Private Negotiated Sale. The Council hereby authorizes EWEB to sell the Bonds at a private negotiated sale based upon written recommenda- tion of EWEB's independent financial advisor, provided that such financial advisor makes a written evaluation of the terms and conditions of the sale and the pricing thereof. Section 6. Bonds Reporting. EWEB shall submit to the City by May 1 of each year the following annual reports commencing after the first sale of any Bonds or other evidences of indebtedness hereunder and each year thereafter until the Bonds have been paid and retired: (a) A report on the funds for each series of Bonds describing the funds estab- lished, the amounts in each fund, expenditure from each fund, the manner in which the monies in each fund have been invested, the income from such investments and the appli- cation of such income; and (b) A report on bond payments describing amounts paid and amounts sched- uled to be paid and the source of such payments. If the contents of the reports required by subsections (a) and (b) above are in- cludeed in the EWEB's yearly audit report, EWEB may comply with this section by transmitting a copy of its yearly audit report to the City. Section 7. Appointment of Professionals. EWEB is authorized to appoint bond counsel, underwriters, financial advisors, a registrar and paying agent, an escrow agent and any other pro- fessional assistance that EWEB determines is necessary or convenient to accomplish the issuance and sale of the Bonds. Section 8. Official Statement. EWEB or any party designated by EWEB is authorized to prepare and distribute or direct the preparation and distribution of a preliminary official state- ment or other disclosure document for the Bonds, as determined to be necessary by EWEB, to obtain bond insurance or other credit enhancement, if required, and to obtain a rating on the Bonds from Moody's Investors Service, Inc., Standard & Poor's and/or Fitch Ratings, if required. Section 9. Taxable Bonds. The City hereby consents to the issuance of a portion of the Bonds as bonds the interest on which is taxable for federal income tax purposes. Section 10. Effective Date of Resolution. This Resolution shall become effective im- mediately upon its adoption. Resolution - 3 L:\CMO\2004 Council Agendas\M040913\S0409132E-attA. doc The foregoing Resolution adopted by the City Council this __ day of , 2004. City Recorder Resolution - 4 L:\CMO\2004 Council Agendas\M040913\S0409132E-attA. doc