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Refunding Police Revenue Bonds Series 1994A January 20, 2004 financing mechanism proposed for the debt issuance of the bonds required that the Authority issue bonds, with the City covenanting to make annual lease payments from the general fund equal to the debt service on the bonds. On February 22, 1994, the City Council and the Authority adopted resolutions approving a ground lease, Lease and Purchase Contract, as well as other actions in connection with the Police Administration and Holding Facility financing. The interest rates on these bonds range from 5.25 to 6.25 percent. Periodically, due to the interest rate fluctuations in the bond market, it becomes advantages to refinance or restructure existing bond issues to the fiscal benefit of the City. At this time staff recommends refinancing a portion of the outstanding Police Administration and Holding Facility Lease Revenue Bonds if interest rates are favorable at the time of sale. This refinancing will allow the City to realize a,one-time advance savings of $2.5 to $2.8 million with average interest rates not exceeding 4.10 percent. The existing terms will remain the same. Staff further recommends that Citigroup Global Markets Inc. be retained to underwrite the bond refinancing. Citigroup Global Markets Inc., formerly Smith Barney Shearson Inc., has extensive experience structuring complex bond financings and an excellent ability to market the bonds. Staff also recommends that Northcross, Hill, & Ach be retained as financial advisor and Orrick Herrington & Sutcliffe LLP be retained as bond counsel. These firms served on the financing team for this original issue in 1994 as well as for other City, Authority and Community Redevelopment Agency financings. Underwriter fees will not exceed $220,000 and financial advisor fees will not exceed $35,000. Bond counsel fees will not exceed $50,000. The documents also appoint BNY Western Trust Company as Trustee. These fees are all contingent upon the sale of the bonds. The closing will occur when interest rates reach the level needed to achieve the projected savings mentioned above. If interest rates rise to the detriment of the City prior to the bond sale date, the City will have the option to terminate the proposed financing. FISCAL IMPACT It is projected that the City will realize a minimum one-time savings of $2.5 million as a result of reduced interest rates. Executive Director Finance'& Management Services Agency advance 75C