In accordance with the City of Roseville Swap Policy, a written report detailing the status of all swaps entered into by the City shall be provided to the City Council on an annual basis.

Starting in 2002, Electric began to diversity its debt portfolio with the use of interest rate swaps.  The purpose of these swaps was to reduce debt service cost over fixed rate debt while limiting the unpredictability of variable rate debt. Swaps reduce debt service by taking on additional risks (e.g. basis risk, liquidity renewal risk, and counterparty risk).  These instruments are not executed for speculative reasons.

The City makes fixed interest payments to Morgan Stanley in exchange for floating rate interest payments based on the notional amount of the 2008A Electric bonds.  In 2012, the 2008A Electric bonds were refunded by the 2012 Electric bonds and the 2012 Electric bonds were purchased by U.S. Bank through a direct purchase agreement.  The direct purchase option removed the liquidity banking trading risk, remarketing risk, and any London Inter-Bank Offered Rate (LIBOR) manipulation.  In November 2019, the interest rate swap agreement with the Bank of America Merrill Lynch was terminated with a termination payment of $7,176,500, the 2012 Certificates of Participation were paid down $36,000,000, and U.S. Bank renewed the terms of the direct purchase agreement on the remaining balance for another 3.5 year term based on 80% of one-month LIBOR plus 60 basis points (bps).

The California Environmental Quality Act (CEQA) does not apply to activities that will not result in a direct or reasonably foreseeable indirect physical change in the environment, or is otherwise not considered a project as defined by CEQA Statute §21065 and CEQA State Guidelines §15060(c)(3) and §15378.  The informational report meets the above criteria and is not subject to CEQA. No additional environmental review is required.

Goal A - Remain fiscally responsible in a changing world

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Dominick Casey, City Manager