DATE: December 7, 2016
TO: Board of Mayor and Aldermen
FROM: Eric Stuckey, City Administrator
Russ Truell, Assistant City Administrator
SUBJECT:
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*Consideration of Resolution 2016-93, an Amended and Restated Resolution Authorizing the Issuance, Sale and Payment of up to $12,000,000 in Aggregate Principal Amount of Water and Sewer System Revenue Bonds of the City of Franklin, Tennessee and Making Provision for the Operation of the Municipality and the Collection and Disposition of its Revenues
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Purpose
The purpose of this memo is to provide information to the Franklin Board of Mayor and Aldermen (BOMA) concerning certain changes to the previously adopted Resolution 2016-85.
Background
As a result of the action of the Tennessee Local Development Authority (TLDA) regarding policies on subordination and parity with State Revolving Loans, and after discussion with our financial advisory firm, Public Financial Management (PFM), we have reviewed the adopted resolution and the rating criteria for the pending revenue bond issue. Two changes are proposed:
1) Adjust the Additional Bonds Test to match the rate covenant at 1.25X.
2) After further review of the Section on Reserve Requirements, we would like to remove the springing reserve concept within the definition and in any other reference within the Resolution. Our suggestion is based on a concern that the springing reserve could be onerous in the future and may negatively impact the w/s fund and the credit. In the event net revenues are not producing 1.25, then the issuer will be forced to raise rates due to a rate covenant default. If this credit also has to fund a reserve, it will require additional funds be raised or diverted from Operations &Maintenance at a time when resources are already limited. We do believe it is in the best interest of the City to evaluate a reserve requirement or a springing reserve for each bond issue; however, based on what we know today, the ...
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