ELECTRIC REVENUE REFUNDING BONDS SERIES 2016A Presented by Matthew Hawkesworth Director of Finance September 12, 2016 Finance Committee/City Council

2016A Series Electric Revenue Refunding Bonds – Executive Summary 1- Refund current outstanding estimated $60 million balance on the existing Bank of America Line of credit 2- Borrow $30 million additional funds to complete improvements on the Electric Distribution System 3- Refund a substantial portion of the 2008 Electric Revenue Bonds to realize significant savings

Background – Line of Credit In 2014, City Council approved the Bank of America Line of Credit (LOC) as a short- term financing mechanism for the construction of the remaining cost of the GT5 repowering project The LOC served its purpose and saved ratepayers approximately $3.4 million in interest expense Staff also indicated in 2014 that upon completion of the project, the LOC will be refunded or “taken out” with a long term fixed rate financing Staff’s recommendation is to refund the LOC by the issuance of the recommended 2016 Electric Revenue Refunding Bonds

New Proceeds for the Distribution System Borrow additional $30 million through this transaction to fund cost related to the Distribution System Distribution Projects that will be funded include: Cable Replacement and Testing Power Distribution Capacity and Reliability Program 4kV Distribution System Conversion Replacement and Upgrade of Electric Equipment/Facilities Proceeds of the 2016A Bonds are expected to be used to finance a portion of the Council adopted 5-year CIP Upgrade distribution components and major facilities Consistent with PWP’s long-term practice to fund capital projects with approximately 30% cash and 70% bond financings.

Refunding the 2008 Series for Economic Benefits Take advantage of current low interest rates Potential to refund $47.13 million of the $48.615 million outstanding bonds in today’s interest rate environment Current rates on the 2008 series range from 4%-5% Potential to refinance them at 2.75% rate Estimated NPV savings of $6.5 million or 13.7% of the outstating debt Refunding is sensitive to interest rates. Every increase or decrease in rates by 0.25% translates to a $1 million shift in NPV savings The Refunding will not extend the current term on the bonds

2016A Electric Revenue Refunding Bonds Not to exceed $140 million Will be sold on a competitive basis with maximum term of 30 years Average life will be 16.7 years with final maturity in FY2046 All-in True Interest Cost is estimated to be 3.06% based on current markets Debt service payments will be made from the Power Fund and are included in the FY2017 budget appropriations

Recommendation 1- Find the proposed action is not a project to CEQA as defined in Section 21065 of CEQA, and as such, no environmental document pursuant to CEQA is required for the project 2. Adopt a resolution authorizing the invitation of bids for the purchase of electric revenue refunding bonds, 2016A series, approving a notice to sell bonds, a preliminary official statement, a notice inviting bids, authorizing the publication of a notice of intention to sell bonds and authorizing certain actions in connection therewith;

Recommendation (continued) 3.Conduct the first reading of “An Ordinance of the City of Pasadena authorizing the issuance by the City of not to exceed $140 million aggregate principal amount of City of Pasadena Electric Revenue Bonds, 2016A series, payable out of the Light and Power Fund, and approving the execution and delivery of a ninth supplement to electric revenue bonds fiscal agent agreement, an escrow agreement and continuing disclosure agreement in connection thereto.