City staff outlines excise‑tax refunding and possible cash defeasance to lower debt service; ordinance on voting agenda

Glendale finance staff presented a refinancing and defeasance plan for the city’s excise‑tax debt portfolio at the April 22 workshop and said a related ordinance would be on the voting‑meeting agenda that evening.

Levi Gibson, director of budget and finance, described an opportunity to refund 2015A excise‑tax obligations and to use existing cash to defease higher‑cost, taxable maturities in conjunction with a new issuance. Gibson said refinancing the 2015A series alone produced an estimated savings of about $1.6 million based on current market conditions. He noted staff and the city’s underwriter had identified additional savings potential by using budgeted cash to defease certain outstanding higher‑interest obligations and replacing that cash with new‑money issuance at lower rates—an approach the city used in 2023 to save roughly $2.5 million in debt service.

Kurt Freund, the city’s underwriter with RBC, provided detail on the mechanics and scale. He said the plan contemplates using up to $32,000,000 of cash to defease selected maturities and to refinance economically viable portions of several bond series. Freund identified two outstanding series of taxable excise‑tax bonds as candidates: the series 2008B (about $29 million outstanding) and series 2015B (about $13.7 million outstanding). Both had been issued as taxable obligations and therefore carried higher average coupons. Freund said new debt could be priced at an estimated true interest cost near 3.42% (staff estimates), replacing outstanding maturities with stated rates in the 4–6% range; at the levels shown, Freund said gross debt‑service savings across the combined refinancing/defeasance exercise were approximately $3.7 million (about $3.1 million in present‑value terms), but stressed that actual savings would depend on market conditions when the city executes the transaction.

Staff emphasized several points: (1) the ordinance on the voting agenda would authorize using up to $32,000,000 in cash to defease selected maturities and to issue new debt to replace that cash; (2) staff will monitor bond markets and will move forward only if the transaction produces acceptable savings; (3) the plan would “cherry‑pick” maturities that are most economically viable to refund or defease rather than targeting all outstanding amounts; and (4) defeasance requires placing cash in an escrow account and informing bondholders per existing documents; once escrowed the city’s legal obligation on those maturities is extinguished and the escrowed funds are invested to pay the called debt on its call date.

Gibson and Freund said the city expects to market obligations in the late May–early June timeframe and to close about two weeks later if market conditions are favorable. Ratings expectations mentioned during the presentation included Standard & Poor’s (S&P) and Fitch references; staff indicated expected ratings in the double‑A range by S&P and an investment‑grade rating by Fitch. Gibson said the council will see an ordinance on the voting meeting agenda that night to authorize the cash defeasance and issuance; staff will only execute if market prices permit the projected savings.