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P & J... Departmental Matters Indian River County (W Inter -Office Memorandum Office of Management and Budget TO: Members of the Board of County Commissioners DATE: July 9, 2013 SUBJECT: Recreational Revenue Refun ig Bonds, Series 2003 Consideration of Early Pa ff 'th Interfund Loan from General Fund FROM: Jason E. Brown Director, Management & Bud t Background The Recreational Revenue Refunding Bonds were issued for the purpose of refunding the- existing Recreational Revenue refunding Bonds in 2003. These bonds were issued in 1993 to refund two previous issues. The Series 1993 bonds were issued in the original principal amount of $9,875,000, and at the time of the refunding, $6,735,000 in bonds were still outstanding. The Series 1985 and Series 1991 bonds were issued for the construction of the County golf course (Sandridge Golf). (W Payment of the principal and interest on the Series 2003 Recreational Revenue Refunding Bonds is payable and secured by a first lien upon net revenues of the golf club and the "Racetrack and Jai Alai Fronton Funds" (Fronton Funds). The Fronton Funds were subsequently replaced by an equal share of State Sales Tax (Racetrack and Fronton Replacement Revenues) during the 2000 legislative session of the State of Florida. The Series 2003 Bonds are additionally secured by a first lien upon 7% of the Half -Cent Sales Tax revenue received by Indian River County. Analysis Staff has prepared an analysis regarding the payoff of the remaining bonds outstanding during this fiscal year. The bonds are callable on or after September 1, 2013 at par value. Of the $2,120,000 still outstanding, $555,000 reaches maturity on September 1, 2013. This payment is already included in the current year budget. After the September 1St payment, a balance of $1,565,000 will remain. The General Fund currently has sufficient surplus funds to pay off these bonds. The Golf Course will then repay this interfund loan just as if this was a typical bond refinancing. It is important to note that this will be a loan from the General Fund and not a subsidy of the Golf Course. Sandridge has historically been fully supported by user fees. This will continue into the future. This "refinancing" will provide an interest savings for the golf course. In addition, the General Fund will receive higher interest earnings on this loan than available in current short term investments. Staff proposes an interest rate of 2.50%, which is slightly lower than the 10 -year municipal bond rate of 2.73% according to Bloomberg. The remaining bonds outstanding carry interest rates ranging from 3.875% to 4.125%. Therefore, the lower interest rate charged by the General Fund will provide savings of about $44,944 over the remaining three years (please see attached worksheet). The County's short-term investment portfolio is earning approximately 0.50%. Therefore, this loan would provide interest earnings to the (W General Fund substantially higher than alternate investments. The table below illustrates the additional interest earnings for the General Fund based upon an assumed interest rate of 1.0% for the next three years, which are projected to total approximately $43,875. 173