HomeMy WebLinkAboutIR 7583 -f INFORMAL. REPORT TO CITY COUNCIL. MEMBERS No 7583
4{EOSr � To the Mayor and Members of the City Council February 25, 1992
Subject: ALLAS-FORT WORTH INTERNATIONAL AIRPORT PROPOSED
"' REFUNDING IES 19-72, 1375—AND-1477 JOINT
REVENUE BONDS °--
BACKGROUND:
The Dallas-Fort Worth International Airport currently has outstanding
$876,510,000 of fixed rate Joint Revenue Bonds. Prior to the passage of the
federal 1986 Tax Act, the Airport and its financial advisor, First Southwest
Company, have refinanced high interest rate debt when low interest rate markets
made refinancing feasible. Under the 1986 Tax Act, the outstanding bonds, like
all Airport debt, are characterized as "private activity" debt and, as such,
cannot be refinanced prior to 90 days immediately preceding the initial optional
call date. Therefore, the Airport has not been able to take advantage of the
tax-exempt interest rates available in the market today, except by using "Forward
Delivery" products and interest rate "Swap Agreements" such as was completed just
over one year ago. The REDS/SWAPS transaction produced over $43 million in debt
service savings.
PROPOSAL:
In order to maintain a competitive landing fee rate for the Dallas-Fort Worth
International Airport, the staff of the Airport and the financial advisor have
reviewed techniques which would provide some meaningful assistance in controlling
and reducing that fee in future years. In that regard and further as a result
of the 14-pear lows in interest rates, the Airport Board's finance staff and
their financial advisor have been studying over the past few months various pos-
sibilities available in the current financial environment. A financing technique
has been developed that may result in substantial savings.
This new proposed refinancing program will refund all or major portions of the
Series 1972, 1976 and, possibly, 1977 Joint Revenue Bonds. Additionally, the
Board's Joint Revenue Hands Reserve Fund will be restructured in accordance with
applicable provisions of the 1976 Bond Ordinance. Subsequently, this refinancing
should produce savings in the $40 million area (including the coverage factor)
and allow for landing fee reductions of between 5 and 15 cents.
BENEFITS:
This strategy will provide for the refunding of some $330,105,000 in currently
outstanding Joint Revenue Bonds. It will have the combined effect of reducing
the overall debt service of the Airport by approximately $32,841,306, including
a $10,083,631 cash contribution from the Interest and Sinking Fund which is
available as a result of the reduced debt service requirement. The debt service
savings will equate to a landing fee savings in the range of 5 cents to 15 cents
per thousand pounds. The major airlines serving the Airport have been briefed
in detail on the above program, and it is understood that those airlines are
fully supportive of this program.
ACTION REQUIRED:
In order to accomplish this refinancing and take advantage of today's low
interest rates, the Airport Board will hold a special Board meeting on the
morning of February 25, 1992. The Airport staff, bond attorneys and financial
advisor would like to present the results of the above mentioned Board meeting
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS
INFORMAL REPORT TO CITY COUNCIL MEMBERS No 7583
a4EORrw To the Mayor and Members of the City Council February 25, 1992
Subject: DALLAS-FORT WORTH INTERNATIONAL AIRPORT PROPOSED
REFUNDING OF SERIES 1972, 1976 AND 1977 JOINT
REVENUE BONDS Page 2
to the Fort Worth City Council at its regularly scheduled meeting on February 25,
1992, and to the Dallas City Council at its regularly scheduled meeting on
Wednesday, February 26, 1992. The City Councils will be briefed in detail about
this transaction. The rapid timing of this whole process is necessitated by the
call provisions for the bonds to be retired and by the current very favorable
interest rate environment.
If additional information is required, it will be furnished upon request.
DAVID I {CRY
CITY MANAGER
ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS----