ORDINANCE supplementing the City of Houston, Texas Combined Utility System Master Ordinance; authorizing and approving the issuance of one or more series and Subseries, in several Subseries designations, of the City of Houston, Texas, Combined Utility System Third Lien Extendable Commercial Paper Notes, Series B-5 in an aggregate principal amount not to exceed $250,000,000; approving and authorizing certain authorized officials and designated employees to act on behalf of the City in the selling and delivery of such notes and the issuance of Combined Utility System First Lien Revenue Refunding Bonds to refund the same, each within the limitations and procedures specified herein; making certain covenants and agreements in connection therewith; resolving other matters incident and related to the issuance, sale, delivery and security of the notes, including the approval of an issuing and paying agency agreement, an offering memorandum and a dealer agreement and the engagement of co-bond counsel; making certain findings and determinations regarding such extendable commercial paper note program; and declaring an emergency

An Ordinance Supplementing Ordinance No. 2009-1118 relating to the issuance of the City of Houston, Texas Combined Utility System Third Lien Extendable Commercial Paper Notes, Series B-5.

RECOMMENDATION:

Approve an Ordinance supplementing the City of Houston, Texas Combined Utility System Ordinance No. 2009-1118; Authorizing and Approving the issuance of one or more series and subseries, in several subseries designations, of the City of Houston, Texas, Combined Utility System Third Lien Extendable Commercial Paper Notes, Series B-5 in an aggregate amount not to exceed $250,000,000; authorizing the execution and delivery of an Issuing Paying Agency Agreement, a Dealer Agreement, the engagement of co-bond counsel and the approval of an Offering Memorandum.

SPECIFIC EXPLANATION:

The existing letter of credit that supports the current Series B-5 commercial paper (CP) program has an upcoming expiration date of January 30, 2019. This program currently supports capital expenditures related to the Combined Utility System’s Capital Improvement Plan projects. The City is considering replacing the current facility with an extendable commercial paper (ECP) notes program, in a not to exceed amount of $250 million, which will accommodate appropriations capacity.

Morgan Stanley has been selected to provide the ECP notes program, which provides a similar expedient, cost-effective method of accessing cash and providing interim financing as a traditional commercial paper program, but will not require a bank liquidity facility. The ECP Notes have a lower “all-in” cost compared to traditional CP (based on the expected use of the program) and provide the system timing flexibility for a take-out financing when necessary. This recommended alternative to a letter of credit will provide a good opportunity to reduce dependence on bank letters of credit.

This transaction was presented to the Budget and Fiscal Affairs Committee on August 7, 2018.

Recommendation:

The Finance Working Group recommends the approval of this item.

______________________________                                              ___________________________

Tantri Emo, Chief Business Officer and Finance Director                Chris Brown, Houston City Controller

N/A

Melissa Dubowski                                      Phone: 832-393-9101

Charisse Mosely                                         Phone: 832-393-3529