§ 3.11.100. Refinancing Outstanding Debt.

The Assistant General Manager ("AGM") shall have the responsibility to evaluate potential refunding opportunities. The District will consider the following issues when analyzing potential refinancing opportunities:

A.

Debt Service Savings — The District shall establish a target savings level greater or equal to three percent of the par of debt refunded on a net present value (NPV) basis (after payment of all costs associated with the issuance) for a current refunding and 5% for advanced refunding transactions. This figure will serve only as a guideline and the District may determine that a different savings target is appropriate; the District shall evaluate each refunding opportunity on a case-by-case basis. In addition to the savings guideline, the following shall be taken into consideration:

a.

Remaining time to maturity.

b.

Size of the issue.

c.

Current interest rate environment.

d.

Annual cash flow savings.

e.

The value of the call option.

f.

Revision of restrictive or onerous covenants.

g.

Other factors approved by the applicable member District.

B.

Restructuring — The District may seek to refinance a bond issue on a non-economic basis, in order to restructure debt, to mitigate irregular debt service payments, accommodate revenue shortfalls, to achieve a proper matching of debt service with revenues, release reserve funds, or comply with and/or eliminate rate/bond covenants.

C.

Term/Final Maturity — The District may consider the extension of the final maturity of the refunding bonds in order to achieve a necessary outcome, provided that such extension is legal. The term of the debt should not extend beyond the reasonably expected useful life of the asset being financed. The District may also consider shortening the final maturity of the bonds. The remaining useful life of the assets and the concept of inter-generational equity will guide these decisions.

D.

Defeasance — Defeasance is when a debt financing is refinanced or paid off through an escrow where certain authorized investments and cash are deposited to pay the redemption price, principal and interest until such time the debt is fully redeemed. On the date when proceeds are deposited into the escrow, the debt will no longer be deemed outstanding and is defeased.

There are two types of defeasances: legal and economic. A legal defeasance ends all of the rights and interest of the debt holders provided under the governing documents, including the pledge of revenues or other security interest. An economic defeasance does not end the rights and interest of the debt holders until such debt is fully redeemed.

When evaluating an economic versus legal defeasance, the District shall take into consideration both the financial impact on a net present value basis as well as the rating/credit impact. The District shall take all necessary steps to optimize the yield on its refunding escrows investments and avoid negative arbitrage.

( Policy No. 8.5, 10-14-2014 ; Res. No. 2016-10-3 , § 1(Exh. A), 10-25-16; Res. No. 2018-8-3 , § 1(Exh. A, § 10), 8-28-2018)