(1)AR 061207 Issuance of Revenue Bonds

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Bonds is expected to provide the Electric System interest cost savings greater than 3% (the "Refunding") and help to offset the impact of the interest costs for the Project. In addition, the new annual debt service will be approximately the same as the existing debt service. The new debt will be fixed rate for a period of 30 years. DISCUSSION/ANALYSIS: It is requested that the City Council authorize the issuance of the 2007 Bonds for the purpose of financing the Project and the Refunding and to take various related actions. The issuance of the 2007 Bonds will allow the City to amortize the costs of the Project over a period not to exceed 30 years. This approach has the least impact on the electric rates of the Utility and effectively allocates the costs of the Project to those customers who benefit from it over the useful life of the assets. The 2007 Bonds issued for the Refunding will generate annual interest cost savings as compared to the existing 1997 Bonds. Bond Size. The maximum 2007 Bond size of $17 million will include the estimated Project cost, Refunding cost, and associated costs of issuance. Annual Debt Service. The annual installment purchase agreement payments associated with the Project are estimated at approximately $250,000 per year from 2008 to 2021 and approximately $485,000 per year from 2022 to 2037. Bonds associated with the Project are not scheduled to amortize until 2022. The Project bonds are expected to amortize after the existing 1997 Bonds to minimize the rate impact in the near term to customers. The annual installment purchase agreement payments associated with the Refunding are estimated at approximately $450,000 per year from 2008 to 2012 and approximately $1,345,000 per year from 2013 to 2021. Payments associated with the Refunding are designed to mirror the original payments on the 1997 Bonds only at a lower overall cost. It is estimated that the refunding will generate approximately $400,000 in net present value savings. Manner of Sale. The 2007 Bonds will be sold by way of a negotiated sale, currently scheduled for June 21 st. The underwriter was chosen through a formal competitive RFP process. Bond Documents. The issuance of the 2007 Bonds will require the City Council to approve the following Bond documents: Installment Purchase Agreement. This is an agreement between the City and the Authority. It requires the City to make annual Purchase Payments to the Authority for the purpose of repaying the 2007 Bonds. The Purchase Payments are payable and secured solely from the net Revenues of the Electric System. The Installment Purchase Agreement follows the flow of funds established by the City Council under the 2007 Ordinances. The Installment Purchase Agreement establishes a rate covenant and the requirement for the issuance of additional bonds. The City has agreed to a rate covenant and additional bonds test restriction in connection with its previous electric bond obligation, most recently in the Installment Purchase Agreement, dated August 1, 2002. Indenture of Trust. This is an agreement between the Authority and the Union Bank of California, as Bond Trustee. The Indenture of Trust sets forth the terms under which the 2007 Bonds are issued and repaid and establishes the responsibilities of the Trustee. Preliminary Official Statement. This document is the public offering statement for the issuance of the 2007 Bonds. This document describes the terms of the 2007 Bonds, the security and sources of repayment for the 2007 Bonds, the Electric System, the electric utilities industry in general and provides certain demographic and financial information about the City.