Item 9 - Debt Defeasance Budget Amendments — original pdf

Backup

Item 9 Water & Wastewater Commission: March 12, 2025 Council: March 27, 2025 Posting Language ..Title Recommend approval of an ordinance amending the Fiscal Year 2024-2025 Austin Water Operating Budget (Ordinance No.20240816-004) for the purpose of defeasing and redeeming outstanding bonds, by amending transfer for an increase in transfer in for a net amount of $2,000,000; an increase expenditures in a net amount of $5,000,000 for a net impact of $(3,000,000) to the ending fund balance; and amending the Fiscal Year 2024-2025 Combined Utility Revenue Bond Redemption Fund (Ordinance No. 20240816-004) to increase the transfer in for a net amount of $7,215,206 and increase expenditures in a net amount of $7,215,206. Funding is available in the ending balances of the FY 2024-2025 Austin Water operating funds. Reduction of these ending balance will maintain Austin Water’s compliance with relevant City financial policies. ..De Lead Department Austin Water Prior Council Action: August 16, 2024 – Council approved an ordinance adopting the Operating Budget for the Fiscal Year 2024-2025. Council Committee, Boards and Commission Action: March 12, 2025 – To be reviewed by the Water and Wastewater Commission. Additional Backup Information: This budget amendment is related to the defeasance item that would authorize Austin Water to pay off certain maturities of the City’s outstanding Water and Wastewater System Revenue Refunding Bonds. A defeasance is a method of using available cash to pay off outstanding debt. The cash is placed in an escrow account held by a trustee to make principal and interest payments on the required payment date for the bonds being defeased until redemption or maturity. Once the defeasance is funded, the obligations payable from the escrow are no longer secured by or payable from the revenues initially pledged to their payment. The proposed related defeasance item seeks authorization to pay off certain maturities of the City’s outstanding Water and Wastewater System Revenue Refunding Bonds. This process allows Austin Water to remove the debt from its books, which reduces debt levels, reduces interest expense, and improves debt service coverage by lowering the burden of debt service payments in the short-term. Also, this proposed defeasance action is in direct relation to achieving a Water and Wastewater System rate stability over the next few years. The total source of funds for the defeasance of $40,215,206 will be provided from a combination of $3,000,000 in Austin Water Operating Funds, $34,000,000 in Impact Fee/CRF collections, $1,000,000 in CIP, and up to $2,215,206 of unspent Texas Water Development Board bond proceeds. The final defeasance transaction and savings amount are dependent upon market conditions.  Item 9 Water & Wastewater Commission: March 12, 2025 Council: March 27, 2025 Impact fee/CRF collections are restricted in use by Texas Local Government Code Chapter 395.012. Allowable uses include paying costs of constructing capital or facility improvements and pledging for payment of debt service issued to finance capital or facility improvements identified in the Impact Fee Capital Improvements Plan 5-Year Update. This budget amendment will transfer the funds into the correct account to make those funds available for this defeasance. For this transaction, PFM Financial Advisors LLC will serve as Financial Advisor, McCall, Parkhurst & Horton L.L.P. will serve as bond counsel and The Arbitrage Group will serve as Verification Agent. City of Austin Council Meeting Backup: March 27, 2025 File ID: 25-0411 OPERATING BUDGET FISCAL NOTE DATE OF COUNCIL CONSIDERATION: DEPARTMENT: FUND: 3/27/25 Austin Water Combined Utility Operating Fund SUBJECT: Approve an ordinance amending the Fiscal Year 2024-2025 Austin Water Operating Budget (Ordinance No. 20240816-004), for the purpose of defeasing and redeeming outstanding bonds by increasing transfers in by $2,000,000 and increasing transfers out by $5,000,000 for a net impact of $(3,000,000) on the ending balance; and amending the Fiscal Year 2024-2025 Combined Utility Revenue Bond Redemption Fund (Ordinance No. 20240816-004) to increase transfers in by a net amount of $7,215,000 and increase expenditures by a net amount of $7,215,000. CIP Austin Water Utility AW CIP - CPM Support Services/Infrastructure Funds Austin Resource Recovery Fund CURRENT YEAR IMPACT: Beginning Balance Revenue Total Revenue Transfers In Total Transfers In Total Available Funds Program Requirements Other Requirements Debt Service Transfers Out Trf CRF to Debt Defeasance Trf Operating to Debt Defeasance Trf WWW Reserve Fund to Debt Defeasance Trf to Reclaimed Water CIP Fund Other Trf Total Transfers Out Total Requirements 2024-25 Proposed 272,584,308 This Action 2024-25 Amended 272,584,308 0 704,951,514 0 704,951,514 2,000,000 2,000,000 35,000,000 24,131,651 4,543,678 300,582 74,884 64,050,795 767,002,309 2,000,000 769,002,309 33,000,000 24,131,651 4,543,678 300,582 74,884 62,050,795 317,508,963 37,683,622 178,219,809 33,000,000 0 1,000,000 4,000,000 8,000,823 202,151,081 243,151,904 5,000,000 776,564,298 5,000,000 781,564,298 317,508,963 37,683,622 178,219,809 34,000,000 4,000,000 0 8,000,823 202,151,081 248,151,904 Excess (Deficiency) of Total Available (9,561,989) (3,000,000) (12,561,989) Ending Balance 263,022,319 (3,000,000) 260,022,319 FIVE-YEAR ESTIMATED IMPACT: FY 2025 FY 2026 FY 2027 FY 2028 FY 2029 Total Available Funds Total Requirements Net Budget Impact 2,000,000 5,000,000 (3,000,000) 0 0 0 0 0 0 0 0 0 0 0 0 ANALYSIS / ADDITIONAL INFORMATION: Capital Improvement Program (CIP) transfers in are from impact fee/capital recovery fee (CRF) collections that are restricted in use by Texas Local Government Code Chapter 395.012. Allowable uses include paying costs of constructing capital or facility improvements, and pledging for payment of debt service issued to finance capital or facility improvements identified in the Impact Fee Capital Improvements Plan 5-Year Update. The transfers out from CRF to debt defeasance of $34,000,000, Operating to debt defeasance of $4,000,000, and Unspent Texas Water Development Board bond proceeds to debt defeasance of up to $2,215,206 for a combined total of up to $40,215,206 will be used to reduce Austin Water existing debt service. City of Austin Council Meeting Backup: March 27, 2025 File ID: 25-0411 OPERATING BUDGET FISCAL NOTE DATE OF COUNCIL CONSIDERATION: DEPARTMENT: FUND: 3/27/25 Austin Water Combined Utility Revenue Bond Redemption Fund SUBJECT: Approve an ordinance amending the Fiscal Year 2025-25 Austin Water Operating Budget (Ordinance No. 20240816- 004) to increase the transfer in from the Capital Improvement Program (CIP) by $2,000,000, increase the transfer out from CRF to Debt Defeasance by $1,000,000, and increase the transfer out from Operating to Debt Defeasance by $4,000,000 for a net effect of $(3,000,000) on the ending balance; and amending the Fiscal Year 2024-25 Combined Utility Revenue Bond Redemption Fund (Ordinance No. 20240816-004) to increase the transfers in from the Austin Water Operating Budget by $5,000,000, and increase other bond debt service requirement expenditures by $2,215,206 and increase the operating requirement expenditures by $7,215,206 to fund the debt defeasance. CURRENT YEAR IMPACT: Beginning Balance Revenue Total Revenue Transfers In Other Funds Austin Energy Austin Water Utility Total Transfers In Total Available Funds Other Requirements Interest payment D/S funds Principal payment D/S funds Trf Austin Water Utility to Debt Defeasance Total Other Requirements Total Requirements ( y) Over Total Requirements Ending Balance FIVE-YEAR ESTIMATED IMPACT: 2024-25 Approved 164,419,097 This Action 2024-25 Amended 164,419,097 0 4,404,220 0 4,404,220 0 177,486,682 201,194,233 378,680,915 2,215,206 5,000,000 7,215,206 2,215,206 177,486,682 206,194,233 385,896,121 383,085,135 7,215,206 390,300,341 360,075,980 7,215,206 367,291,186 182,890,980 144,185,000 33,000,000 360,075,980 23,009,155 187,428,252 182,890,980 144,185,000 40,215,206 367,291,186 23,009,155 187,428,252 0 0 0 7,215,206 7,215,206 0 0 0 0 0 FY 2024 FY 2025 FY 2026 FY 2027 FY 2028 Total Available Funds Total Requirements Net Budget Impact 7,215,206 7,215,206 0 0 0 0 0 0 0 ANALYSIS / ADDITIONAL INFORMATION: Capital Improvement Program (CIP) transfers in are from impact fee/capital recovery fee (CRF) collections that are restricted in use by Texas Local Government Code Chapter 395.012. Allowable uses include paying costs of constructing capital or facility improvements, and pledging for payment of debt service issued to finance capital or facility improvements identified in the Impact Fee Capital Improvements Plan 5-Year Update. The transfers out from CRF to debt defeasance of $34,000,000, Operating to debt defeasance of $4,000,000, and Unspent Texas Water Development Board bond proceeds to debt defeasance of up to $2,215,206 for a combined total of up to $40,215,206 will be used to reduce Austin Water existing debt service.