Accepting an offer that was too good to refuse, at a special meeting Monday night the board of the Cameron Park Community Services District approved the refinancing of the general obligation bonds on the community center.
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The general obligation bonds were first issued in 2005 for $8.7 million with an interest rate that varied from 3.5 to 5 percent.
The amount that will be refinanced is $7.6 million at 3 percent interest (arbitrage yield) or 3.12 percent (all-in true interest cost).
The all-in true interest cost is the real cost of the bond, including ancillary fees and costs, such as finance charges, possible late fees, discount points and prepaid interest, along with factors related to the time value of money.
Refinancing is expected to save the district $892,000 over the life of the bonds, which matures in 2030.
The board first heard of the refinancing proposal on May 21 from the investment banking firm of Brandis Tallman. At the meeting, the firm asked the board to approve the proposal in order to lock in the 3 percent interest rate.
However, uncomfortable making the decision on such short notice, the board put it off until the directors could study it further.
Monday night, Rick Brandis and Nicki Tallman reviewed the proposal once again for the board and answered questions that had been brought up at the previous meeting.
Brandis reiterated that the 3 percent interest rate was still good if the board voted to move ahead that night, noting that Umpqua was the bank that offered the best rate.
The cost of refinancing the bond is $78,000, which includes bond counsel, placement agent, investor’s counsel and other services.
In response to objections brought up at the last meeting, Brandis discussed some of the benefits of a private versus a public placement, including a reduced costs of issuance; locked in interest rate; no requirement for a credit rating, official statement or continuing disclosure during the life of the bond; streamlined financing and reduced staff time; and the burden of due diligence being on the investor rather than the district.
The board also heard from Richard Han, a managing director with the investment firm of Edward Jones. At the May meeting, Han indicated his company’s interest in bidding on placing the bond. However, at Monday’s meeting, Han said it would be a disservice to the district and the community to make a proposal since their cost for the placement would be higher and they couldn’t guarantee a lower interest rate than the one offered by Brandis and Tallman in the 45 t0 60 days it would take them to put together a deal.
Director Shiva Frentzen raised the idea of hiring a third-party consultant to review the process and guide the board. However, the idea gained little traction after it was pointed out that Brandis and Tallman and the bond counsel would be providing that service as part of the cost of refinancing the bond.
The board then voted unanimously to proceed with the placement with the refinancing expected to be completed by July 2.
Contact Dawn Hodson at 530-344-5071 or [email protected] Follow @DHodsonMtDemo on Twitter.