Houston CUS Memo 122110 Final | Discounting | Bonds (Finance)

MEMORANDUM

To:
From:
Date:
Purpose:

Jim Moncur and Jennifer Olenick, City of Houston Department of Finance
Bank of America Merrill Lynch Team
December 21, 2010
Market Update

12/14/10

11/14/10

10/14/10

09/14/10

08/14/10

07/14/10

06/14/10

05/14/10

In February 2010, the City of Houston selected 5.00%
Bank of America Merrill Lynch to underwrite a
↑ 62 bps
financing for the Combined Utility System. The 4.50%
↑ 66 bps
deal was scheduled to price in May 2010, with
funds delivered around June. Due to a validation 4.00%
suit the bond sale has been delayed, forcing the
City to draw from its Commercial Paper program 3.50%
over the last seven months and putting the City at
considerable risk for higher financing costs. This 3.00%
is largely attributed to a dramatic increase in longterm interest rates during the past two months
(please see accompanying chart) and the potential
loss of the Build America Bonds financing
20y MMD
30y MMD
program. The BABs program was a temporary
program that was scheduled to expire on
December 31, 2010 and has not been extended. As a result of these market conditions, the City’s cost of
financing has increased dramatically.
This memo is in response to your request for us to provide an estimate of how much the change in
interest rates has cost the City and the ratepayers of the CUS when compared to the market in May 2010.
To simplify our analysis, we focused on a $300 million CP program; however, it is fair to say that the City
could have executed a larger transaction back in May, which means that the dissavings we calculate
below are arguably understated. Due to the delay, the City has funded its capital expenditures using CP,
which has been relatively cost-effective due to historically low short-term rates. The interest cost savings
from issuing CP over the past seven months are factored into our analysis1. If the City had issued longterm debt in May, the all-in cost would have been approximately 4.22%.
The table below summarizes the results of our analysis. By not being able to sell the bonds in May 2010,
the delay has cost the City and Houston ratepayers an estimated $37.72 million over the life of the
issue2. This represents an average cost of $1.26 million per year over the next 30 years.
Tax-Exempt Bonds Tax-Exempt/BABs
Today
in May
Delivery Date
First Principal Payment Date
Par Amount
Construction Fund
Arbitrage Yield
All-in-T.I.C.
Average Annual Debt Service
Gross Savings ($)
Average Annual Savings ($)

1
2

2/1/2011
11/15/2016
$297,540,000
$300,000,000
4.864422%
4.931910%
$20,479,083

6/1/2010
11/15/2016
$302,575,000
$300,000,000
4.150109%
4.216970%
$18,690,324
$37,719,610
$1,257,320

Assumes CP all-in cost of 1.00% (inclusive of credit fees) versus bond yield of 4.15% for seven months
Present Value dissavings amount to approximately $21.07 million assuming a discount rate of 4.15%

Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch

Page 1

SOURCES AND USES OF FUNDS
City of Houston Combined Utility System
Tax-Exempt Bonds
Market Rates as of December 9, 2010
Sources:
Bond Proceeds:
Par Amount
Net Premium

297,540,000.00
4,693,612.45
302,233,612.45

Uses:
Project Fund Deposits:
CP Takeout
Delivery Date Expenses:
Cost of Issuance
Underwriter's Discount

Other Uses of Funds:
Additional Proceeds

300,000,000.00

743,850.00
1,487,700.00
2,231,550.00

2,062.45
302,233,612.45

Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch

Page 2
BOND SUMMARY STATISTICS
City of Houston Combined Utility System
Tax-Exempt Bonds
Market Rates as of December 9, 2010

Dated Date
Delivery Date
Last Maturity

02/01/2011
02/01/2011
11/15/2039

Arbitrage Yield
True Interest Cost (TIC)
Net Interest Cost (NIC)
All-In TIC
Average Coupon

4.864422%
4.911311%
4.945110%
4.931910%
5.000000%

Average Life (years)
Duration of Issue (years)

19.630
12.324

Par Amount
Bond Proceeds
Total Interest
Net Interest
Total Debt Service
Maximum Annual Debt Service
Average Annual Debt Service

297,540,000.00
302,233,612.45
292,030,050.00
288,824,137.55
589,570,050.00
21,289,250.00
20,479,083.17

Underwriter's Fees (per $1000)
Average Takedown
Other Fee

5.000000

Total Underwriter's Discount

5.000000

Bid Price

Bond Component
Serial Bonds
Term Bond due 2035
Term Bond due 2039

101.077473

Par
Value

Price

Average
Coupon

Average
Life

PV of 1 bp
change

143,235,000.00
77,115,000.00
77,190,000.00

106.765
97.223
96.301

5.000%
5.000%
5.000%

13.714
22.889
27.351

120,258.80
104,876.40
111,153.60

19.630

336,288.80

297,540,000.00

TIC

All-In
TIC

Arbitrage
Yield

Par Value
+ Accrued Interest
+ Premium (Discount)
- Underwriter's Discount
- Cost of Issuance Expense
- Other Amounts

297,540,000.00

297,540,000.00

297,540,000.00

4,693,612.45
-1,487,700.00

4,693,612.45
-1,487,700.00
-743,850.00

4,693,612.45

Target Value

300,745,912.45

300,002,062.45

302,233,612.45

02/01/2011
4.911311%

02/01/2011
4.931910%

02/01/2011
4.864422%

Target Date
Yield

Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch

Page 3
BOND PRICING
City of Houston Combined Utility System
Tax-Exempt Bonds
Market Rates as of December 9, 2010

Bond Component

Maturity
Date

Yield to
Maturity

Call
Date

Call
Price

Premium
(-Discount)

Amount

Rate

Yield

Price

11/15/2016
11/15/2017
11/15/2018
11/15/2019
11/15/2020
11/15/2021
11/15/2022
11/15/2023
11/15/2024
11/15/2025
11/15/2026
11/15/2027
11/15/2028
11/15/2029
11/15/2030

6,575,000
6,910,000
7,265,000
7,640,000
8,030,000
8,440,000
8,875,000
9,330,000
9,810,000
10,310,000
10,840,000
11,395,000
11,980,000
12,595,000
13,240,000
143,235,000

5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%

2.380%
2.780%
3.100%
3.400%
3.640%
3.810%
3.960%
4.110%
4.250%
4.380%
4.500%
4.600%
4.700%
4.800%
4.880%

114.086
113.644
113.053
112.062
111.109
110.441
109.053
107.687
106.430
105.279
104.229
103.365
102.509
101.661
100.989

11/15/2031
11/15/2032
11/15/2033
11/15/2034
11/15/2035

13,920,000
14,635,000
15,385,000
16,175,000
17,000,000
77,115,000

5.000%
5.000%
5.000%
5.000%
5.000%

5.200%
5.200%
5.200%
5.200%
5.200%

97.223
97.223
97.223
97.223
97.223

-386,558.40
-406,413.95
-427,241.45
-449,179.75
-472,090.00
-2,141,483.55

11/15/2036
11/15/2037
11/15/2038
11/15/2039

17,875,000
18,790,000
19,755,000
20,770,000
77,190,000

5.000%
5.000%
5.000%
5.000%

5.250%
5.250%
5.250%
5.250%

96.301
96.301
96.301
96.301

-661,196.25
-695,042.10
-730,737.45
-768,282.30
-2,855,258.10

Serial Bonds:

C
C
C
C
C
C
C
C
C

4.027%
4.216%
4.373%
4.506%
4.619%
4.707%
4.788%
4.864%
4.921%

11/15/2021
11/15/2021
11/15/2021
11/15/2021
11/15/2021
11/15/2021
11/15/2021
11/15/2021
11/15/2021

100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000

926,154.50
942,800.40
948,300.45
921,536.80
892,052.70
881,220.40
803,453.75
717,197.10
630,783.00
544,264.90
458,423.60
383,441.75
300,578.20
209,202.95
130,943.60
9,690,354.10

Term Bond due 2035:

Term Bond due 2039:

297,540,000

Dated Date
Delivery Date
First Coupon

4,693,612.45

02/01/2011
02/01/2011
05/15/2011

Par Amount
Premium

297,540,000.00
4,693,612.45

Production
Underwriter's Discount

302,233,612.45
-1,487,700.00

101.577473%
-0.500000%

Purchase Price
Accrued Interest

300,745,912.45

101.077473%

Net Proceeds

300,745,912.45

Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch

Page 4

BOND DEBT SERVICE
City of Houston Combined Utility System
Tax-Exempt Bonds
Market Rates as of December 9, 2010
Period
Ending
06/30/2011
06/30/2012
06/30/2013
06/30/2014
06/30/2015
06/30/2016
06/30/2017
06/30/2018
06/30/2019
06/30/2020
06/30/2021
06/30/2022
06/30/2023
06/30/2024
06/30/2025
06/30/2026
06/30/2027
06/30/2028
06/30/2029
06/30/2030
06/30/2031
06/30/2032
06/30/2033
06/30/2034
06/30/2035
06/30/2036
06/30/2037
06/30/2038
06/30/2039
06/30/2040

Principal

6,575,000
6,910,000
7,265,000
7,640,000
8,030,000
8,440,000
8,875,000
9,330,000
9,810,000
10,310,000
10,840,000
11,395,000
11,980,000
12,595,000
13,240,000
13,920,000
14,635,000
15,385,000
16,175,000
17,000,000
17,875,000
18,790,000
19,755,000
20,770,000
297,540,000

Coupon

Interest

Debt
Service

Bond
Balance

Total
Bond Value

5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%
5.000%

4,297,800
14,877,000
14,877,000
14,877,000
14,877,000
14,877,000
14,712,625
14,375,500
14,021,125
13,648,500
13,256,750
12,845,000
12,412,125
11,957,000
11,478,500
10,975,500
10,446,750
9,890,875
9,306,500
8,692,125
8,046,250
7,367,250
6,653,375
5,902,875
5,113,875
4,284,500
3,412,625
2,496,000
1,532,375
519,250

4,297,800
14,877,000
14,877,000
14,877,000
14,877,000
14,877,000
21,287,625
21,285,500
21,286,125
21,288,500
21,286,750
21,285,000
21,287,125
21,287,000
21,288,500
21,285,500
21,286,750
21,285,875
21,286,500
21,287,125
21,286,250
21,287,250
21,288,375
21,287,875
21,288,875
21,284,500
21,287,625
21,286,000
21,287,375
21,289,250

297,540,000
297,540,000
297,540,000
297,540,000
297,540,000
297,540,000
290,965,000
284,055,000
276,790,000
269,150,000
261,120,000
252,680,000
243,805,000
234,475,000
224,665,000
214,355,000
203,515,000
192,120,000
180,140,000
167,545,000
154,305,000
140,385,000
125,750,000
110,365,000
94,190,000
77,190,000
59,315,000
40,525,000
20,770,000

297,540,000
297,540,000
297,540,000
297,540,000
297,540,000
297,540,000
290,965,000
284,055,000
276,790,000
269,150,000
261,120,000
252,680,000
243,805,000
234,475,000
224,665,000
214,355,000
203,515,000
192,120,000
180,140,000
167,545,000
154,305,000
140,385,000
125,750,000
110,365,000
94,190,000
77,190,000
59,315,000
40,525,000
20,770,000

292,030,050

589,570,050

Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch

Page 5

BOND SOLUTION
City of Houston Combined Utility System
Tax-Exempt Bonds
Market Rates as of December 9, 2010
Period
Ending
06/30/2011
06/30/2012
06/30/2013
06/30/2014
06/30/2015
06/30/2016
06/30/2017
06/30/2018
06/30/2019
06/30/2020
06/30/2021
06/30/2022
06/30/2023
06/30/2024
06/30/2025
06/30/2026
06/30/2027
06/30/2028
06/30/2029
06/30/2030
06/30/2031
06/30/2032
06/30/2033
06/30/2034
06/30/2035
06/30/2036
06/30/2037
06/30/2038
06/30/2039
06/30/2040

Proposed
Principal

Proposed
Debt Service

Total Adj
Debt Service

6,575,000
6,910,000
7,265,000
7,640,000
8,030,000
8,440,000
8,875,000
9,330,000
9,810,000
10,310,000
10,840,000
11,395,000
11,980,000
12,595,000
13,240,000
13,920,000
14,635,000
15,385,000
16,175,000
17,000,000
17,875,000
18,790,000
19,755,000
20,770,000

4,297,800
14,877,000
14,877,000
14,877,000
14,877,000
14,877,000
21,287,625
21,285,500
21,286,125
21,288,500
21,286,750
21,285,000
21,287,125
21,287,000
21,288,500
21,285,500
21,286,750
21,285,875
21,286,500
21,287,125
21,286,250
21,287,250
21,288,375
21,287,875
21,288,875
21,284,500
21,287,625
21,286,000
21,287,375
21,289,250

4,297,800
14,877,000
14,877,000
14,877,000
14,877,000
14,877,000
21,287,625
21,285,500
21,286,125
21,288,500
21,286,750
21,285,000
21,287,125
21,287,000
21,288,500
21,285,500
21,286,750
21,285,875
21,286,500
21,287,125
21,286,250
21,287,250
21,288,375
21,287,875
21,288,875
21,284,500
21,287,625
21,286,000
21,287,375
21,289,250

297,540,000

589,570,050

589,570,050

Dec 21, 2010 4:15 pm Prepared by Bank of America Merrill Lynch

Page 6

NET DEBT SERVICE
City of Houston Combined Utility System
Tax-Exempt Bonds
Market Rates as of December 9, 2010
Period
Ending
06/30/2011
06/30/2012
06/30/2013
06/30/2014
06/30/2015
06/30/2016
06/30/2017
06/30/2018
06/30/2019
06/30/2020
06/30/2021
06/30/2022
06/30/2023
06/30/2024
06/30/2025
06/30/2026
06/30/2027
06/30/2028
06/30/2029
06/30/2030
06/30/2031
06/30/2032
06/30/2033
06/30/2034
06/30/2035
06/30/2036
06/30/2037
06/30/2038
06/30/2039
06/30/2040

Total
Debt Service

Net
Debt Service

4,297,800
14,877,000
14,877,000
14,877,000
14,877,000
14,877,000
21,287,625
21,285,500
21,286,125
21,288,500
21,286,750
21,285,000
21,287,125
21,287,000
21,288,500
21,285,500
21,286,750
21,285,875
21,286,500
21,287,125
21,286,250
21,287,250
21,288,375
21,287,875
21,288,875
21,284,500
21,287,625
21,286,000
21,287,375
21,289,250

4,297,800
14,877,000
14,877,000
14,877,000
14,877,000
14,877,000
21,287,625
21,285,500
21,286,125
21,288,500
21,286,750
21,285,000
21,287,125
21,287,000
21,288,500
21,285,500
21,286,750
21,285,875
21,286,500
21,287,125
21,286,250
21,287,250
21,288,375
21,287,875
21,288,875
21,284,500
21,287,625
21,286,000
21,287,375
21,289,250

589,570,050

589,570,050

Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch

Page 1

SOURCES AND USES OF FUNDS
City of Houston Combined Utility System
Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010
Sources:
Bond Proceeds:
Par Amount

302,575,000.00
302,575,000.00

Uses:
Project Fund Deposits:
CP Takeout
Delivery Date Expenses:
Cost of Issuance
Underwriter's Discount

Other Uses of Funds:
Additional Proceeds

300,000,000.00

756,437.50
1,815,450.00
2,571,887.50

3,112.50
302,575,000.00

Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch

Page 2
BOND SUMMARY STATISTICS
City of Houston Combined Utility System
Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010
Dated Date
Delivery Date
Last Maturity

02/01/2011
02/01/2011
11/15/2039

Arbitrage Yield
True Interest Cost (TIC)
Net Interest Cost (NIC)
All-In TIC
Average Coupon

4.150109%
4.197222%
6.461858%
4.216970%
6.430627%

Average Life (years)
Duration of Issue (years)

19.212
15.663

Par Amount
Bond Proceeds
Total Interest
Net Interest
Total Debt Service
Maximum Annual Debt Service
Average Annual Debt Service

302,575,000.00
302,575,000.00
373,808,369.19
375,623,819.19
676,383,369.19
26,565,175.00
23,494,597.93

Underwriter's Fees (per $1000)
Average Takedown
Other Fee

6.000000

Total Underwriter's Discount

6.000000

Bid Price

Bond Component
Serial Bonds
Term Bond due 2030
Term Bond due 2039

99.400000

Par
Value

Price

Average
Coupon

Average
Life

PV of 1 bp
change

91,945,000.00
61,215,000.00
149,415,000.00

100.000
100.000
100.000

5.507%
6.500%
6.650%

10.572
17.873
25.076

71,480.15
67,948.65
189,757.05

19.212

329,185.85

302,575,000.00

TIC

All-In
TIC

Arbitrage
Yield

Par Value
+ Accrued Interest
+ Premium (Discount)
- Underwriter's Discount
- Cost of Issuance Expense
- Other Amounts

302,575,000.00

302,575,000.00

302,575,000.00

-1,815,450.00

-1,815,450.00
-756,437.50

Target Value

300,759,550.00

300,003,112.50

302,575,000.00

02/01/2011
4.197222%

02/01/2011
4.216970%

02/01/2011
4.150109%

Target Date
Yield

Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch

Page 3
BOND PRICING
City of Houston Combined Utility System
Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010

Bond Component

Maturity
Date

Amount

Rate

Yield

Price

11/15/2016
11/15/2017
11/15/2018
11/15/2019
11/15/2020
11/15/2021
11/15/2022
11/15/2023
11/15/2024
11/15/2025

7,920,000
8,140,000
8,385,000
8,655,000
8,945,000
9,250,000
9,585,000
9,950,000
10,345,000
10,770,000
91,945,000

4.020%
4.420%
4.800%
4.950%
5.100%
5.300%
5.600%
5.850%
6.100%
6.350%

4.020%
4.420%
4.800%
4.950%
5.100%
5.300%
5.600%
5.850%
6.100%
6.350%

100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000

11/15/2026
11/15/2027
11/15/2028
11/15/2029
11/15/2030

11,230,000
11,715,000
12,220,000
12,750,000
13,300,000
61,215,000

6.500%
6.500%
6.500%
6.500%
6.500%

6.500%
6.500%
6.500%
6.500%
6.500%

100.000
100.000
100.000
100.000
100.000

11/15/2031
11/15/2032
11/15/2033
11/15/2034
11/15/2035
11/15/2036
11/15/2037
11/15/2038
11/15/2039

13,880,000
14,490,000
15,130,000
15,800,000
16,500,000
17,225,000
17,990,000
18,785,000
19,615,000
149,415,000

6.650%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%

6.650%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%

100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000
100.000

Serial Bonds:

Term Bond due 2030:

Term Bond due 2039:

302,575,000

Dated Date
Delivery Date
First Coupon

02/01/2011
02/01/2011
05/15/2011

Par Amount
Original Issue Discount

302,575,000.00

Production
Underwriter's Discount

302,575,000.00
-1,815,450.00

100.000000%
-0.600000%

Purchase Price
Accrued Interest

300,759,550.00

99.400000%

Net Proceeds

300,759,550.00

Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch

Page 4

BOND DEBT SERVICE
City of Houston Combined Utility System
Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010
Period
Ending
06/30/2011
06/30/2012
06/30/2013
06/30/2014
06/30/2015
06/30/2016
06/30/2017
06/30/2018
06/30/2019
06/30/2020
06/30/2021
06/30/2022
06/30/2023
06/30/2024
06/30/2025
06/30/2026
06/30/2027
06/30/2028
06/30/2029
06/30/2030
06/30/2031
06/30/2032
06/30/2033
06/30/2034
06/30/2035
06/30/2036
06/30/2037
06/30/2038
06/30/2039
06/30/2040

Principal

7,920,000
8,140,000
8,385,000
8,655,000
8,945,000
9,250,000
9,585,000
9,950,000
10,345,000
10,770,000
11,230,000
11,715,000
12,220,000
12,750,000
13,300,000
13,880,000
14,490,000
15,130,000
15,800,000
16,500,000
17,225,000
17,990,000
18,785,000
19,615,000
302,575,000

Coupon

Interest

Debt Service

4.020%
4.420%
4.800%
4.950%
5.100%
5.300%
5.600%
5.850%
6.100%
6.350%
6.500%
6.500%
6.500%
6.500%
6.500%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%
6.650%

5,432,372.69
18,804,367.00
18,804,367.00
18,804,367.00
18,804,367.00
18,804,367.00
18,645,175.00
18,306,089.00
17,924,955.00
17,509,503.75
17,067,195.00
16,593,972.50
16,080,467.50
15,521,050.00
14,914,490.00
14,257,020.00
13,550,097.50
12,804,385.00
12,026,497.50
11,214,972.50
10,368,347.50
9,474,587.50
8,531,285.00
7,546,420.00
6,517,997.50
5,444,022.50
4,322,666.25
3,151,767.50
1,928,998.75
652,198.75

5,432,372.69
18,804,367.00
18,804,367.00
18,804,367.00
18,804,367.00
18,804,367.00
26,565,175.00
26,446,089.00
26,309,955.00
26,164,503.75
26,012,195.00
25,843,972.50
25,665,467.50
25,471,050.00
25,259,490.00
25,027,020.00
24,780,097.50
24,519,385.00
24,246,497.50
23,964,972.50
23,668,347.50
23,354,587.50
23,021,285.00
22,676,420.00
22,317,997.50
21,944,022.50
21,547,666.25
21,141,767.50
20,713,998.75
20,267,198.75

373,808,369.19

676,383,369.19

Bond
Balance

Total
Bond Value

302,575,000
302,575,000
302,575,000
302,575,000
302,575,000
302,575,000
294,655,000
286,515,000
278,130,000
269,475,000
260,530,000
251,280,000
241,695,000
231,745,000
221,400,000
210,630,000
199,400,000
187,685,000
175,465,000
162,715,000
149,415,000
135,535,000
121,045,000
105,915,000
90,115,000
73,615,000
56,390,000
38,400,000
19,615,000

302,575,000
302,575,000
302,575,000
302,575,000
302,575,000
302,575,000
294,655,000
286,515,000
278,130,000
269,475,000
260,530,000
251,280,000
241,695,000
231,745,000
221,400,000
210,630,000
199,400,000
187,685,000
175,465,000
162,715,000
149,415,000
135,535,000
121,045,000
105,915,000
90,115,000
73,615,000
56,390,000
38,400,000
19,615,000

Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch

Page 5

BOND SOLUTION
City of Houston Combined Utility System
Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010
Period
Ending
06/30/2011
06/30/2012
06/30/2013
06/30/2014
06/30/2015
06/30/2016
06/30/2017
06/30/2018
06/30/2019
06/30/2020
06/30/2021
06/30/2022
06/30/2023
06/30/2024
06/30/2025
06/30/2026
06/30/2027
06/30/2028
06/30/2029
06/30/2030
06/30/2031
06/30/2032
06/30/2033
06/30/2034
06/30/2035
06/30/2036
06/30/2037
06/30/2038
06/30/2039
06/30/2040

Proposed
Principal

Proposed
Debt Service

Debt Service
Adjustments

Total Adj
Debt Service

7,920,000
8,140,000
8,385,000
8,655,000
8,945,000
9,250,000
9,585,000
9,950,000
10,345,000
10,770,000
11,230,000
11,715,000
12,220,000
12,750,000
13,300,000
13,880,000
14,490,000
15,130,000
15,800,000
16,500,000
17,225,000
17,990,000
18,785,000
19,615,000

5,432,373
18,804,367
18,804,367
18,804,367
18,804,367
18,804,367
26,565,175
26,446,089
26,309,955
26,164,504
26,012,195
25,843,973
25,665,468
25,471,050
25,259,490
25,027,020
24,780,098
24,519,385
24,246,498
23,964,973
23,668,348
23,354,588
23,021,285
22,676,420
22,317,998
21,944,023
21,547,666
21,141,768
20,713,999
20,267,199

-1,901,330
-6,581,528
-6,581,528
-6,581,528
-6,581,528
-6,581,528
-6,525,811
-6,407,131
-6,273,734
-6,128,326
-5,973,518
-5,807,890
-5,628,164
-5,432,368
-5,220,072
-4,989,957
-4,742,534
-4,481,535
-4,209,274
-3,925,240
-3,628,922
-3,316,106
-2,985,950
-2,641,247
-2,281,299
-1,905,408
-1,512,933
-1,103,119
-675,150
-228,270

3,531,042
12,222,839
12,222,839
12,222,839
12,222,839
12,222,839
20,039,364
20,038,958
20,036,221
20,036,177
20,038,677
20,036,082
20,037,304
20,038,683
20,039,419
20,037,063
20,037,563
20,037,850
20,037,223
20,039,732
20,039,426
20,038,482
20,035,335
20,035,173
20,036,698
20,038,615
20,034,733
20,038,649
20,038,849
20,038,929

302,575,000

676,383,369

-130,832,929

545,550,440

Dec 21, 2010 4:13 pm Prepared by Bank of America Merrill Lynch

Page 6

NET DEBT SERVICE
City of Houston Combined Utility System
Build America Bonds (10y Par Call)
Market Rates as of May 14, 2010
Period
Ending
06/30/2011
06/30/2012
06/30/2013
06/30/2014
06/30/2015
06/30/2016
06/30/2017
06/30/2018
06/30/2019
06/30/2020
06/30/2021
06/30/2022
06/30/2023
06/30/2024
06/30/2025
06/30/2026
06/30/2027
06/30/2028
06/30/2029
06/30/2030
06/30/2031
06/30/2032
06/30/2033
06/30/2034
06/30/2035
06/30/2036
06/30/2037
06/30/2038
06/30/2039
06/30/2040

Total
Debt Service

35% BABs Subsidy

Net
Debt Service

5,432,372.69
18,804,367.00
18,804,367.00
18,804,367.00
18,804,367.00
18,804,367.00
26,565,175.00
26,446,089.00
26,309,955.00
26,164,503.75
26,012,195.00
25,843,972.50
25,665,467.50
25,471,050.00
25,259,490.00
25,027,020.00
24,780,097.50
24,519,385.00
24,246,497.50
23,964,972.50
23,668,347.50
23,354,587.50
23,021,285.00
22,676,420.00
22,317,997.50
21,944,022.50
21,547,666.25
21,141,767.50
20,713,998.75
20,267,198.75

-1,901,330.44
-6,581,528.46
-6,581,528.46
-6,581,528.46
-6,581,528.46
-6,581,528.46
-6,525,811.26
-6,407,131.16
-6,273,734.26
-6,128,326.32
-5,973,518.25
-5,807,890.37
-5,628,163.62
-5,432,367.50
-5,220,071.50
-4,989,957.00
-4,742,534.13
-4,481,534.75
-4,209,274.12
-3,925,240.37
-3,628,921.62
-3,316,105.62
-2,985,949.75
-2,641,247.00
-2,281,299.12
-1,905,407.87
-1,512,933.19
-1,103,118.63
-675,149.56
-228,269.56

3,531,042.25
12,222,838.54
12,222,838.54
12,222,838.54
12,222,838.54
12,222,838.54
20,039,363.74
20,038,957.84
20,036,220.74
20,036,177.43
20,038,676.75
20,036,082.13
20,037,303.88
20,038,682.50
20,039,418.50
20,037,063.00
20,037,563.37
20,037,850.25
20,037,223.38
20,039,732.13
20,039,425.88
20,038,481.88
20,035,335.25
20,035,173.00
20,036,698.38
20,038,614.63
20,034,733.06
20,038,648.87
20,038,849.19
20,038,929.19

676,383,369.19

-130,832,929.27

545,550,439.92

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