City Council Agenda
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Memo to: |
Manteca City Council |
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From: |
Matthew Boring, Interim Finance Director |
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Date: |
October 21, 2025 |
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Subject: |
2025 Wastewater Revenue Bonds |
Recommendation:
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Adopt a resolution of the City Council of the City of Manteca approving, authorizing and directing execution of certain financing documents and directing certain related actions in connection with financing and refinancing certain improvements to the city’s wastewater system.
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Background:
On May 27, 2009, the Manteca Financing Authority issued $19 million Sewer Revenue Bonds, Series 2009 (the “2009 Bonds”). The 2009 Bonds were issued to assist the City in financing capital costs relating to the upgrade and expansion of the Manteca Wastewater Quality Control Facility Phase III Expansion Project and to pay for the costs of issuance, debt service reserve and reimbursement. The 2009 Bonds are currently outstanding in the amount of $18.44 million, with coupons ranging from 5.00% to 5.75%, and can currently be prepaid on any interest payment date (12/1 or 6/1) without prepayment penalty.
On December 11, 2012, the City of Manteca issued $22.69 million Sewer Revenue Refunding Bonds, Series 2012 (the “2012 Bonds”). The 2012 Bonds were issued to (i) to refinance prior wastewater indebtedness incurred in 2003 and (ii) to pay costs of issuance of the 2012 Bonds. The 2012 Bonds are currently outstanding in the amount of $6.975 million, with coupons ranging from 2.625% to 4.000%, and can currently be prepaid without prepayment penalty.
The Authority and the City are seeking to refinance all the outstanding 2009 and 2012 Bonds for interest rate savings and to finance $30 million of additional improvements to the Wastewater System through issuance of the 2025 Wastewater Revenue Bonds by the Authority. The 2025 Bonds will also pay the costs of issuing the 2025 Bonds. The projects are anticipated to include but are not limited to Dewatering (Centrifuge) Unit No. 3, Sludge Thickener (DAF) Unit No. 3, Side Stream Treatment, Secondary Effluent Equalization Pond Liner, the SCADA System, and improvements to the collection system. The Authority considered a resolution at its meeting on October 21, 2025, to issue the bonds.
Discussion:
The subject Resolutions being recommended for adoption by the City Council and the Authority authorize the issuance of the bonds, hiring of the financing team, and the form of financing documents necessary to provide for the successful issuance of the 2025 Bonds. Certain information in these documents will be finalized after the bond sale.
The financing documents needed to complete this financing are included as attachments and are each briefly described below:
• Indenture of Trust - This document contains the terms of the 2025 Bonds, including payment and redemption provisions, definition and pledge of revenues to pay the 2025 Bonds, rights and duties of the Trustee, remedies upon a default in the payment of the 2025 Bonds, and other provisions.
• Installment Sale Agreement - The agreement under which the Authority agrees to provide for financing and refinancing of the improvements, and the City agrees to purchase the improvements through semi-annual installment payments, to be made from the net revenues of the City’s wastewater system.
• Bond Purchase Agreement- The Bond Purchase Agreement among the Authority, the City, and the Underwriter defines the terms and conditions under which the 2025 Bonds will be purchased by the Underwriter.
• Preliminary Official Statement - This is the City’s document pursuant to which the 2025 Bonds will be offered for purchase by the public by the Underwriter. This document must contain all facts material to the 2025 Bonds, the Authority, the City and the City’s wastewater system (with certain permitted exceptions to be completed in the final Official Statement) and must not omit any such material facts.
• Continuing Disclosure Certificate - Agreement by the City to provide certain annual reports and the occurrence of certain listed events to investors in order to allow the Underwriter to comply with federal securities laws.
The City Resolution and the Authority Resolution also set forth certain not-to-exceed parameters for the 2025 Bonds, including a principal amount not exceeding $60 million, a true interest cost not exceeding 5.25%, and underwriter’s discount not exceeding 0.75% of par. These not-to-exceed parameters are meant to provide some flexibility and cushion in case market conditions change.
Fiscal Impact:
Based on market rates as of October 1, 2025, refinancing the 2009 and 2012 Bonds with a proportional savings structure (and without extending the final maturities) is estimated to yield net present value savings of approximately $3.03 million (or 11.91% of the refunded principal amount). Total cash flow savings are estimated to be $7.95 million through Fiscal Year 2036-37. Savings are net of costs of issuance.
The 30-year new money portion of the financing, structured to generate $30 million in project proceeds with debt service “wrapped around” refunding debt service, is estimated to result in an average annual debt service of $2.0 million. Both the refunding and new money portions are expected to total $3.7 million in debt service from Fiscal Year 2026-27 through Fiscal Year 2036-37 and drop to $2.4 million thereafter (after the refundings mature) through Fiscal Year 2055-56.
Pursuant to Government Code Section 5852.1, good faith estimates (obtained from the underwriter and the municipal advisor) must be disclosed at a public meeting before the authorization of the 2025 Bonds. The table below summarizes those estimates and includes additional information.
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2025 Bonds |
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Principal Amount: Final Maturity: True interest cost: |
$47,975,000 December 1, 2055 4.31% |
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Finance charge: |
$595,723 |
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Amount of project and refunding proceeds received: |
$56,057,170 |
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Average annual debt service: Total debt service payment amount: |
$2,887,728 $86,679,979 |
*These are good faith estimates only and are based on market rates as of October 1, 2025. Final results will likely differ based on market conditions as of the actual sale date and other factors. However, for the financing to proceed, the not-to-exceed parameters described in the previous section must be met.
If the subject Resolutions are approved, sale of the 2025 Bonds is expected to be completed on or about November 13th with a delivery/closing date on or about November 25th so that the 2009 Bonds and 2012 Bonds can be optionally redeemed (paid off) on December 1st.
Documents Attached:
1. Attachment 1 - City Resolution
2. Attachment 2 - Form of Installment Sale Agreement
3. Attachment 3 - Form of Indenture of Trust
4. Attachment 4 - Form of Bond Purchase Agreement
5. Attachment 5 - Form of Preliminary Official Statement (with Form of Continuing Disclosure Agreement attached as Appendix C)