HomeMy WebLinkAboutIR 7574 INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 7574
f Rp To the Mayor and Members of the City Council January 7, 1992
Subject:
DALLAS-FORT WORTH AIRPORT JOINT RMITF. BOND
- SERIES 19_9_2 AND_1 2A DELIVERY
Background
In the summer of 1990 with the substantial drop in interest
rates, the Dallas-Fort Worth Airport Board staff began exploring
refunding possibilities for its Series 1982 and Series 1982A Bonds.
The interest rate on these series of bonds was as high as 10.75%
Joint Revenue Bonds issued by the Cities for the purpose of
funding the Dallas-Fort Worth Airport are "private activity" bonds
for purposes of the Federal Internal Revenue Code (the "Code" ) .
The Code prevents an advance refunding (more than 90 days prior to
the call date) of private activity bonds. The Series 1982 and
Series 1982A Bonds were not callable until May 1, 1992 so it was
determined to authorize two series of bonds in the Fall of 1990 for
delivery in the Spring of 1992 in order to lock in the savings
offered by the market at that time.
0101 One series,I the Series 1992A Bonds, were authorized at a fixed
rate and sold pursuant to a forward purchase agreement for delivery
on February 5, 1992. Under the forward purchase agreement, the
Cities agreed to deliver the bonds to the purchasers and to take
all action necessary for the delivery thereof.
The other series, the Series 1992 Bonds were authorized to be
delivered as variable rate bonds with an initial delivery of March
25, 1992. An interest rate swap was entered into in connection
with the authorization of the Series 1992 Bonds with Merrill Lynch
& Co. , pursuant to which Merrill would make payments to the Airport
Board prior to March 25, 1992 in an amount so as to lower the debt
service due on the Series 1982 Bonds to 7.9976% and pay to the
Airport Board a variable rate after March 25, 1992 based on an
index in exchange for the Airport Board paying a fixed rate of
7.9976% . This interest rate swap results in fixed borrowing cost
since the variable rate paid by Merrill and owed on the Series 1992
Bonds cancel each other out. In connection with the Series 1992
Bonds, the Cities approved the initial sale thereof to Merrill and
agreed to take all action necessary for the delivery thereof and
Merrill agreed to initially purchase and thereafter remarket the
Series 1992 Bonds.
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ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No.- 7574
4114,
0 January 7, 1992
To the Mayor and Members of the City Council
so Page Two
xay Subject:
DALLAS-FORT WORTH AIRPORT JOINT REVENUE BOND
SERIES 1992 AND 1992A DELIVERY
The Airport Board staff is currently negotiating with National
Westminster Bank for a five year, direct-pay Letter of Credit and
Reimbursement Agreement for the Series 1992 Bonds . A credit
facility is required by the market for variable rate debt and such
arrangement was contemplated in the Sixteenth Supplemental Bond
Resolution authorizing the. Series 1992 Bonds. Once negotiations
are complete, the Airport Board will be requesting the Cities to
approve the reimbursement agreement with the Bank.
These transactions have resulted in substantial savings to the
Airport; the present value savings are in excess of 15% of the
amount of the refunding bonds.
Section 147 of the Internal Revenue Code requires that within
one year prior to the delivery of a private activity bond, a public
hearing should be held by a hearing officer appointed by the issuer
and that after such hearing, the highest elected official of the
issuer approve the Bonds solely for the purposes of Section 147 of
the Code. This joint resolution appoints Richard S. Williams as
the designated Hearing Officer and authorizes the Mayor of each
City to approve the Bonds. This same procedure was used in October
of this year with respect to the Series 1991 and Series 1991A Joint
Revenue Bonds and was also used for the American Airlines, Inc. and
Delta Air Lines, Inc. Bonds earlier. This technical requirement
must be met to insure these substantial savings.
Prior Action
October 10, 1990--Adoption of ordinance No. 20757, the
Sixteenth Supplemental Regional Airport Concurrent Bond ordinance
authorizing the Series 1992 Bonds and Ordinance No. 20759
authorizing an Escrow Agreement and a Forward Purchase Agreement
for the Series 1992 Bonds.
November 14, 1990--Adoption of Ordinance No. 20789, the
Eighteenth Supplemental Regional Airport Concurrent Bond Ordinance
authorizing the Series 1992A Bonds and Ordinance No. 20790
authorizing an Escrow Agreement and a Forward Purchase Agreement
for the Series 1992A Bonds.
000,
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No, 757+
JanuarY 7, 1992
To the Mayor and Members of the City Council Page Three
0
Subject:
DALLAS-FORT WORTH AIRPORT JOINT REVENUE BOND
SERIES 1992 AND 1992A DELIVERY
Current Action
January 22, 1992--Adoption of a Joint Resolution appointing a
TEFRA hearing officer and authorizing the Mayor to approve the
Series 1992 and 1992A Bonds for TEFRA purposes.
Future Action
February or early March 1992--Adopt an ordinance approving the
execution and delivery of a Reimbursement Agreement with the Letter
of Credit Bank for the Series 1992 Bonds.
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ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS