Legal Documents of Mountain City

The mayor and town recorder, in conjunction with financial professionals, if any, shall have the responsibility to analyze outstanding debt for refunding opportunities. The town recorder will consider the following issues when analyzing possible refunding opportunities:

1. Debt service savings. Absent other compelling considerations such as the opportunity to eliminate onerous or restrictive covenants contained in existing debt documents, the town has established a minimum net present value savings threshold of at least three percent (3%) of the advance refunded debt principal amount. Current refunding opportunities may be considered by the town using any savings threshold if the refunding generates positive net present value savings. The decision to take less than three percent (3%) net present value savings for an advance refunding or to take the savings in any matter other than a traditional year-to-year level savings pattern must be approved by the legislative body or delegated to the town recorder.
2. Restructuring for economic purposes. The town may also refund debt when it is in its best financial interest to do so. Such a refunding will be limited to restructuring to meet unanticipated revenue expectations, achieve cost savings, mitigate irregular debt service payments, release reserve funds or remove unduly restrictive bond covenants or any other reason approved by the legislative body in its discretion.
3. Term of refunding issues. Normally, the town will refund debt equal to or within its existing term. However, the mayor and town recorder may consider maturity extension, when necessary to achieve desired outcomes, provided that such extension is legally permissible and it is approved by the legislative body. The mayor and town recorder may also consider shortening the term of the originally issued debt to realize greater savings. The remaining useful economic life of the financed facility and the concept of inter-generational equity should guide these decisions.
4. Escrow structuring. The town shall utilize the least costly securities available in structuring refunding escrows. In the case of open market securities, a certificate will be provided by a third-party agent, who is not a broker-dealer stating that the securities were procured through an arms-length, competitive bid process, that such securities were more cost effective than State and Local Government Obligations (SLGS), and that the price paid for the securities was reasonable within federal guidelines. In cases where taxable debt is involved, the mayor and town recorder, with the approval of bond counsel, may make a direct purchase as long as such purchase is the most efficient and least costly. Under no circumstances shall an underwriter, agent or any financial professionals sell escrow securities involving tax-exempt debt to the town from its own account.
5. Arbitrage. The town shall take all necessary steps to optimize escrows and to avoid negative arbitrage in its refunding. Any positive arbitrage will be rebated as necessary according to federal guidelines. (Ord. #1269, Jan. 2012)