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TO: Mayor Richard C Irvin
FROM: Christopher A. Minick, City Treasurer-Chief Financial Officer
DATE: June 27, 2022
SUBJECT:
A resolution renewing the Line of Credit (LOC) with Fifth Third Bank in the amount of $15 million for a one year term to expire July 22, 2023.
PURPOSE:
To approve a renewal of the Line of Credit (LOC) with Fifth-Third Bank in the amount of $15 million for a one year term to expire July 22, 2023.
BACKGROUND:
The City initially approved LOCs with Old Second Bank and Fifth Third Bank in 2019 for $10.0 million. The City has used the LOC's to provide short-term financing for the City contributions to various land acquisition and economic development projects when bond financing is not practical. Staff anticipates that there will be additional need for short term financing of economic development projects in the future and the LOC's provide a practical and cost effective vehicle for those needs. The City makes periodic payments on the LOC's as appropriate when long term bonds are issued.
Each LOC is renewed separately, and the Old Second LOC renewal was presented at the June 16 Finance Committee Meeting and appears on the Consent Agenda for the June 28, 2022 City Council Meeting for anticipated final consideration.
DISCUSSION:
The attached table shows the activity of the Fifth-Third Bank LOC. The current balance on the LOC is $6,500,000. The LOC is anticipated to be reduced by payments from the recent GO Bond Series 2022B. Additionally, the City will also receive repayments from developers from various costs initially financed by the City, primarily related to historic preservation tax credits. Once received, we will apply these payments to the LOC used to initially finance the short-term timing difference between construction costs and repayment of these credits.
The renewal LOC, has slightly different interest rate terms due to the elimination of the London Interbank Loan Rate (LIBOR) on which the expiring LOC interest rate is based. The rate for the renewed LOC will be based on a floating 30-day Secured Overnight Financing Rate (SOFR) plus 1.02% (102 basis points). SOFR is a published rate and is a common replacement for LIBOR in loans moving forward due to the industry wide elimination of LIBOR. SOFR represents the overnight rate that financial institutions charge each other for overnight loans. The rate generated for the renewed LOC (if calculated today) is currently 2.54%.
IMPACT STATEMENT:
Approval of this resolution will renew this ongoing line of credit, which is necessary for the City's continued economic development project financing when bond financing is not immediately practical.
RECOMMENDATIONS:
Approval of a Resolution authorizing the renewal of the Line of Credit (LOC) in the amount of $15 million with Fifth-Third Bank for a one-year term expiring on July 22, 2023.
cc: Finance Committee
CITY OF AURORA, ILLINOIS
RESOLUTION NO. _________
DATE OF PASSAGE ________________
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A Resolution authorizing the renewal of the Line of Credit (LOC) in the amount of $15 million with Fifth-Third Bank for a one-year term expiring on July 22, 2023.
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WHEREAS, the City of Aurora has a population of more than 25,000 persons and is, therefore, a home rule unit under subsection (a) of Section 6 of Article VII of the Illinois Constitution of 1970; and
WHEREAS, subject to said Section, a home rule unit may exercise any power and perform any function pertaining to its government and affairs for the protection of the public health, safety, morals, and welfare; and
WHEREAS, The City of Aurora entered into a Line of Credit Agreement with Fifth-Third Bank through the approval of resolutions R19-159 and expanded the limit on the Fifth Third LOC to $15 million through the approval of Resolution 21-179, and;
WHEREAS, this line of credit must be renewed on an annual basis, and;
WHEREAS, the renewal of the this line of credit will provide for the continued funding for economic development projects throughout the City of Aurora when long-term bond financing is not immediately practical;)
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Aurora, Illinois, as follows: That the attached amendment to the Line of Credit agreement for $15 million with Fifth-Third Bank extending the agreement for an additional one-year term to expire on July 22, 2023 is hereby approved.