CITY WIDE IMPLICATIONS CITY OF HAMILTON FINANCE AND CORPORATE SERVICES DEPARTMENT Corporate Management Services - Investments Report to: Mayor and Members Submitted by: Joseph L. Rinaldo, Committee of the Whole General Manager Date: July 10, 2002 Prepared by: Gerry T. Boychuk x4321 Joseph Spiler x4519 SUBJECT: City of Hamilton Refinancing Sinking Fund Debenture, Issue 92-085 Maturing July 22, 2002, as per 2002–2011 Capital Budget Financing Plan (FCS02087) (City Wide) RECOMMENDATION: (a) That report FCS02087 City of Hamilton Refinancing Sinking Fund Debenture, Issue 92-085, Maturing July 22, 2002, for the amount of approximately $27,530,000 be received for information. (b) That the City’s Legal Counsel be authorized to prepare and submit to Council the necessary By-Laws for approval. __________________________________ Joseph L. Rinaldo, General Manager Finance & Corporate Services EXECUTIVE SUMMARY: The former Region of Hamilton-Wentworth issued 10-year sinking fund debentures July 22, 1992 in the amount of $75,000,000 maturing July 22, 2002. The debenture repayments and associated debt charges were amortized over 20 years, therefore the outstanding principle at maturity on July 22, 2002 requires refinancing by way of a new debenture issue. It is estimated the principal outstanding (net of sinking funds) requiring refinancing will be approximately $27,530,000 as of July 22, 2002. SUBJECT: City of Hamilton Refinancing Sinking Fund Debenture, Issue 92-085, Maturing July 22, 2002 (FCS02087) (City Wide) Page 2 of 4 BACKGROUND: In accordance with Bylaw 92-085, the former Region of Hamilton-Wentworth issued 10 year sinking fund debentures July 22, 1992 in the amount of $75,000,000 on behalf of the City of Hamilton, Town of Ancaster, Hamilton and Wentworth School Boards, Hamilton Health Sciences Corporation (H.H.S.C.) and the former Region. Table 1 below indicates the amount of issue for each. The costs associated with the debentures issued on behalf of the School Boards and the H.H.H.C., including principal and interest payments, are recovered from those entities. The debenture repayments, by way of sinking fund contributions, were amortized over 20 years, whereas the debentures were a 10-year term. Therefore at the time of maturity on July 22, 2002, it is estimated there will be outstanding principal of approximately $27,530,000 (refer to Table 1 below). The outstanding principal will require refinancing by way of a new debenture issue. The amount to refinance for the City of Hamilton’s portion is approximately $27,161,000. The balance of $369,000 is the estimated amount to be refinanced on behalf of the Hamilton-Wentworth School Board. TABLE 1 ESTIMATED REFINANCING AT MATURITY JULY 22, 2002 SINKING FUND DEBENTURES Issued July 22, 1992 - Bylaw 92-085 ESTIMATED ESTIMATED ESTIMATED ESTIMATED SINKING FUND (SURPLUS) ISSUE TOTAL SINKING FUND BALANCES REFINANCING PARTICIPANT AMOUNT CONTRIBUTIONS EARNINGS AT MATURITY AT MATURITY Hamilton 22,000,000 8,100,900 4,645,344 12,746,244 9,253,756 Ancaster 3,000,000 1,104,670 633,454 1,738,124 1,261,876 Region of Hamilton-Wentworth 39,572,500 14,571,495 8,355,812 22,927,307 16,645,193 HW Board of Ed. (Wentworth) 1,127,500 830,340 476,150 1,306,490 (178,990) HW Board of Ed. (Hamilton) 1,300,000 478,690 274,497 753,187 546,813 Civic Hospital (Henderson) 8,000,000 6,310,782 1,689,218 8,000,000 0 Total 75,000,000 31,396,877 16,074,475 47,471,352 27,528,648 The Hamilton Health Sciences Corporation (H.H.S.C.) paid the former Region a total of $11,533,110 between the years 1992 to 1997 to cover principal and interest costs for their debenture portion ( $8 million). The monies received from the H.H.S.C. should be sufficient to retire their portion of the debenture on July 22, 2002. Any shortfall will be recovered from the Hamilton Health Sciences Corporation, conversely, any surplus will SUBJECT: City of Hamilton Refinancing Sinking Fund Debenture, Issue 92-085, Maturing July 22, 2002 (FCS02087) (City Wide) Page 3 of 4 be returned. The actual sinking fund balance will be calculated on or about July 22, 2002. TABLE 2 HAMILTON HEALTH SCIENCES CORP. Sinking Fund / Deferred Revenue Account Balances $8 Million Debenture Issue Deferred Revenue Account Balance as of 12/31/01 4,045,771 Less: 2002 SF Contribution & Interest (889,156) Total (before 2002 interest earned) 3,156,615 Sinking Fund Balance as of 12/31/01 4,288,617 Add: 2002 SF Contribution 189,156 Total (before 2002 interest earned) 4,477,773 Total Deferred Revenue and Sinking Fund 7,634,388 Earned Interest / Additional Funding Required 365,612 Total Debenture Redemption 8,000,000 ANALYSIS OF ALTERNATIVES: FINANCIAL/STAFFING/LEGAL IMPLICATIONS: FINANCIAL Debt costs (principal & interest) associated with the City’s portion of debt refinancing are included in the approved 2002 Budget and the 2002 – 2011 Capital Financing Plan and Forecasts. POLICIES AFFECTING PROPOSAL: Refer FCS020036, 2002 – 2011 Capital Financing Plan and Forecasts. SUBJECT: City of Hamilton Refinancing Sinking Fund Debenture, Issue 92-085, Maturing July 22, 2002 (FCS02087) (City Wide) Page 4 of 4 CONSULTATION WITH RELEVANT DEPARTMENTS/AGENCIES: The Hamilton-Wentworth School Board has advised the City of Hamilton to refinance the outstanding principal amount on their behalf. Hamilton Health Services Corp. will be advised of any surplus/deficit and monies returned/payment requested, once the final balances are calculated on or about July 22, 2002. CITY STRATEGIC COMMITMENT: In summary, the refinancing of this debenture issue reflects the continuing confidence of investors in the City of Hamilton.
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