Borough of Lansdale

Investment Banking Presentation

February 4, 2015

Edward R Murray
Managing Director
Public Finance
610.684.5402
emurray@boenninginc.com

4 Tower Bridge 200 Barr Harbor Drive

West Conshohocken, PA 19428-2979
Phone: 610.832.1212 Fax: 610.832.1232
www.boenninginc.com
Member FINRA / SIPC

Important Disclosures Concerning the SEC Municipal Adviser Rule

Boenning & Scattergood, Inc. (Boenning) is providing the information contained in this document for discussion
purposes only in anticipation of serving as an underwriter on a potential municipal securities transaction. The
information provided herein is not intended to be and should not be construed as advice within the meaning of
Section 15B the Securities Exchange Act of 1934, as amended.
On September 20, 2013, the SEC passed the Municipal Advisor Rule (the "SEC MA Rule") which contains rules for
the registration of municipal advisors. Boenning wishes to be considered an underwriter when presenting financial
information or proposals concerning the structure, timing, terms, and similar matters concerning the issuance of
municipal securities that Boenning is seeking to underwrite. Boenning & Scattergood is not a municipal advisor, and is
not subject to the fiduciary duty to municipal entities that the Exchange Act imposes on municipal advisors The primary
role of Boenning as an underwriter is to purchase securities for resale to investors, in an arms-length commercial
transaction between the Borough and Boenning.
If the Client has any questions or concerns about differences in the roles and obligations of an underwriter and
municipal advisor, the Client should make those questions or concerns known immediately to Boenning. In addition,
the Client should consult with its own financial and/or municipal, legal, accounting, tax and other advisors, as
applicable, to the extent it deems appropriate.

Market Trends
Bond Buyer 20 Bond Index
past 6 years
6.50
Current: 3.36%
5 Year:
High: 6.01%
Low: 3.27%
Average: 4.35%

6.01

6.00

5.85

5.50

5.41
5.11

5.15

4.52

5.03

4.86

4.83

4.86

4.80

4.50

5.06

5.13

5.00

4.91
4.65

4.51

4.45

4.54

4.48

4.44

4.00

4.74

4.63

4.17

4.15

4.08
3.95

3.94
3.82

4.09

3.79

3.83
3.60

3.50

4.00

3.87

3.61

3.61

3.65
3.29

3.27

3.00

Municipal Interest Rate

Average for the period

Market Trends
By analyzing the Bond Buyer 20 Index, which is a
national collection of high grade municipal bonds,
historical interest rate trends can be identified.
As can be seen from the table to the right, the BBI 20
is now at one of its lowest points since 1994.
In fact, since that time, this index has been lower than
the present 0.274% of the time and has never been
lower by more than 0.25% within the last twenty
years.
This would indicate that the present time is a
historically attractive borrowing environment.

BBI 20 Trend Analysis since 1994

Higher
Higher
Higher
Higher

by
by
by
by

2.00%
1.75%
1.50%
1.25%

24.292%
36.256%
49.498%
59.817%

Higher
Higher
Higher
Higher

by
by
by
by

1.00%
0.75%
0.50%
0.25%

76.438%
88.219%
93.425%
98.265%

Higher than Current BBI 20

Current BBI 20 (3.36%)
Lower than Current BBI 20

99.635%
0.091%
0.274%

Lower
Lower
Lower
Lower

by
by
by
by

0.25%
0.50%
0.75%
1.00%

0.000%
0.000%
0.000%
0.000%

Lower
Lower
Lower
Lower

by
by
by
by

1.25%
1.50%
1.75%
2.00%

0.000%
0.000%
0.000%
0.000%

Market Trends
Bond Buyer 20 Index: 1979-2015
14.00
All-Time High:
13.44% 1/14/1982

12.00

10.00

8.00

6.00

4.00

47-Year Low:
3.27% 12/06/2012

2.00
79 80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15
Current BBI 20 (3.36%)

Average since 1979 (6.27%)

Market Trends
Bond Buyer 20 Bond Index
5.25

Past 12 Months
Current:3.36%
52 Week:
High: 4.51%
Low: 3.29%
Avg: 4.12%

5.00
4.75

Interest Rate

4.50
4.25
4.00
3.75
3.50
3.25
3.00

Municipal Interest Rate

One Year average

Executive Summary
Current Market and Refunding Candidates

Boenning & Scattergood constantly monitors the tax-exempt interest rate markets and the Borough of Lansdales
debt for opportunities to lower the Boroughs interest costs. Our firm has identified a refunding candidate which
may potentially offer significant interest cost savings to the Borough.
The bond issue which presents this potential refunding opportunity is the currently outstanding General Obligation
Bonds, Series of 2010. The 2010 Series will be callable (or pre-payable) on October 1, 2015.
We have prepared two refunding options for the Borough to consider. The first option would be to currently refund
the entire Series of 2010 when it becomes currently callable, by scheduling a bond sale in June, and a closing
sometime after July 1st (or less than 90 days from the call date of the Series of 2010).
The second option would be to advance refund a portion of the Series of 2010. Approximately 80% of the Series
of 2010 can be advance refunded in March, as per federal tax law. The remaining portion of the Series of 2010
would be refunded in June when it could be defined as a current refunding similar to the option 1 analysis.

Estimated Potential Net Savings After Costs of Issuing the Bonds

In todays market, the Boroughs estimated potential debt service savings for option one is projected to be
$814,000 in net present valued savings, after paying all costs of issuance (real cash savings).
The Boroughs estimated potential debt service savings for option two is projected to be $633,000 for step one
and approximately $79,000 for step two. The combined estimated savings for option two is projected to be
approximately $712,000 in net present valued savings, after paying all costs of issuance (real cash savings).
The benefit of option 1 is higher total savings and the fact that the Borough would only be required to undertake
one refunding action.
The benefit of option two is the Boroughs ability to undertake the refunding as early as late March taking the risk
of higher interest rates off the table. The estimated savings is $85,000 less than option one but the Borough will
have to wait until June to undertake the refunding on a current basis.

Current Debt Service All Bond Issues

Current Debt Service All Bond Issues

2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
Total

Loan of 1997 Loan of 1999 Series of 2010 Series of 2012

85,632
12,562
1,501,639
261,890
85,632
12,562
1,496,839
401,840
85,632
12,562
1,501,689
400,390
12,562
1,500,689
488,940
1,498,739
499,240
1,499,794
499,240
1,498,634
499,140
1,497,859
498,940
1,500,081
498,309
1,501,331
497,571
1,499,064
496,728
1,498,814
500,288
1,500,994
498,618
996,833
996,833
996,333
999,073
996,150
994,600
997,300
999,100

256,896 $

50,248 $

19,496,164 $

Series of
2014*
188,298
371,495
371,395
371,295
371,195
371,095
370,995
370,845
370,695
370,545
370,395
370,245
1,045,095
1,044,695
1,042,995
1,039,595
1,044,805
1,048,240
1,042,840
1,041,490
2,039,000
2,043,600

Total
1,861,723
2,185,170
2,371,768
2,373,586
2,369,274
2,370,229
2,368,869
2,367,794
2,369,235
2,369,598
2,366,336
2,369,496
2,369,856
2,041,928
2,041,528
2,039,328
2,038,668
2,040,955
2,042,840
2,040,140
2,040,590
2,039,000
2,043,600

14,017,353 $ 16,700,848 $ 50,521,508

* Net Debt service

Option 1 Bond Sale on June 1st

The Borough can call (or pre-pay) the Series of 2010 on October 1, 2015. Therefore, the Bonds can
be currently refunded at any point after 7/1/2015 (90 days prior to call date). This refunding structure
would be considered current refunding. If interest rate environment between now and the sale date
remains unchanged, the estimated savings detailed below will be available to the Borough.
Date

Net New D/S

Old Net D/S

Savings

12/31/2015
12/31/2016
12/31/2017
12/31/2018
12/31/2019
12/31/2020
12/31/2021
12/31/2022
12/31/2023
12/31/2024
12/31/2025
12/31/2026

1,173,441.56
1,423,816.26
1,422,573.76
1,421,173.76
1,422,373.76
1,424,898.76
1,421,198.76
1,422,098.76
1,426,268.76
1,422,918.76
1,422,400.00
1,424,800.00

1,250,919.38
1,501,688.76
1,500,688.76
1,498,738.76
1,499,793.76
1,498,633.76
1,497,858.76
1,500,081.26
1,501,331.26
1,499,063.76
1,498,813.76
1,500,993.76

77,477.82
77,872.50
78,115.00
77,565.00
77,420.00
73,735.00
76,660.00
77,982.50
75,062.50
76,145.00
76,413.76
76,193.76

Total

$16,827,962.90

$17,748,605.74

$920,642.84

PV Analysis Summary (Net to Net)

Gross PV Debt Service Savings

809,201.69

Net PV Cashflow Savings @ 2.434%(AIC)

809,201.69

Contingency or Rounding Amount

Net Present Value Benefit
Actual positive or (negative) arbitrage
Net PV Benefit / $14,425,000 Refunded Principal
Net PV Benefit / $14,540,000 Refunding Principal

4,974.03
$814,175.72
(79,442.43)
5.644%
5.600%

Sensitivity
Interval

Total $
Savings

Total %
Savings

-0.900%
-0.800%
-0.700%
-0.600%
-0.500%
-0.400%
-0.300%
-0.200%
-0.100%
0.100%
0.200%
0.300%
0.400%
0.500%
0.600%
0.700%
0.800%
0.900%
1.000%

1,599,155.53
1,509,041.98
1,419,657.72
1,330,995.82
1,243,049.39
1,155,811.66
1,069,275.90
983,435.44
898,283.71
814,175.62
734,047.96
654,586.94
575,786.26
497,639.68
420,141.02
343,284.17
267,063.08
191,471.77
116,504.32
42,154.86

11.086%
10.461%
9.842%
9.227%
8.617%
8.013%
7.413%
6.818%
6.227%
5.644%
5.089%
4.538%
3.992%
3.450%
2.913%
2.380%
1.851%
1.327%
0.808%
0.292%

10

Option 2 step 1 Bond Sale in March

A portion (80%) of the 2010 Bonds are eligible to be advance refunded, per federal tax law. Option 2
shows a partial bank-qualified advance refunding (under $10M of par) as of Mach 2015. If market
conditions permit, the remaining Bonds could be refunded at any point after July 1, 2015 (90 days
prior to the call date). Bank Qualified deals have two advantages: lower interest rates and shorter
optional redemption (5 years).
Date

Net New D/S

Old Net D/S

Savings

10/01/2015
10/01/2016
10/01/2017
10/01/2018
10/01/2019
10/01/2020
10/01/2021
10/01/2022
10/01/2023
10/01/2024
10/01/2025
10/01/2026

669,584.52
874,480.00
875,385.00
867,885.00
1,070,445.00
1,062,995.00
1,066,295.00
1,439,195.00
1,438,050.00
1,439,475.00
1,438,600.00
1,440,400.00

729,371.88
937,843.76
938,968.76
926,868.76
1,129,043.76
1,123,603.76
1,125,078.76
1,500,081.26
1,501,331.26
1,499,063.76
1,498,813.76
1,500,993.76

59,787.36
63,363.76
63,583.76
58,983.76
58,598.76
60,608.76
58,783.76
60,886.26
63,281.26
59,588.76
60,213.76
60,593.76

Total

$13,682,789.52

$14,411,063.24

$728,273.72

PV Analysis Summary (Net to Net)

Gross PV Debt Service Savings

632,794.17

Net PV Cashflow Savings @ 2.551%(AIC)

632,794.17

Contingency or Rounding Amount

Net Present Value Benefit
Actual positive or (negative) arbitrage
Net PV Benefit / $9,750,000 Refunded Principal
Net PV Benefit / $9,755,000 Refunding Principal

965.17
$633,759.34
(100,684.65)
6.500%
6.497%

Sensitivity
Interval

Total $
Savings

Total %
Savings

-0.900%
-0.800%
-0.700%
-0.600%
-0.500%
-0.400%
-0.300%
-0.200%
-0.100%
0.100%
0.200%
0.300%
0.400%
0.500%
0.600%
0.700%
0.800%
0.900%
1.000%

1,327,833.71
1,247,764.56
1,168,399.77
1,089,732.35
1,011,755.35
934,461.92
857,845.28
781,898.72
706,615.60
633,759.24
564,218.71
495,317.96
427,050.62
359,410.44
292,391.19
225,986.73
160,190.99
94,997.95
30,401.67
(33,603.73)

13.619%
12.798%
11.984%
11.177%
10.377%
9.584%
8.798%
8.019%
7.247%
6.500%
5.787%
5.080%
4.380%
3.686%
2.999%
2.318%
1.643%
0.974%
0.312%
-0.345%

11

Option 2 step 2 Bond Sale on June 1st

If market condition between now and July 1, 2015, remain unchanged, a current refunding of the
remaining 2010 Bonds would be possible with an estimated savings of $79,521. The second
refunding will also be bank qualified and have a short 5 year optional redemption.
Date

Net New D/S

Old Net D/S

Savings

10/01/2015
10/01/2016
10/01/2017
10/01/2018
10/01/2019
10/01/2020
10/01/2021
10/01/2022
10/01/2023
10/01/2024

265,821.25
307,137.50
305,680.00
308,030.00
304,790.00
305,740.00
300,240.00
309,740.00
303,650.00
307,125.00

273,371.25
314,842.50
313,967.50
316,767.50
314,017.50
315,857.50
311,582.50
316,997.50
312,022.50
316,437.50

7,550.00
7,705.00
8,287.50
8,737.50
9,227.50
10,117.50
11,342.50
7,257.50
8,372.50
9,312.50

Total

$3,017,953.75

$3,105,863.75

$87,910.00

PV Analysis Summary (Net to Net)

Gross PV Debt Service Savings

78,641.20

Net PV Cashflow Savings @ 2.642%(AIC)

78,641.20

Contingency or Rounding Amount

Net Present Value Benefit
Net PV Benefit / $2,625,000 Refunded Principal
Net PV Benefit / $2,755,000 Refunding Principal

879.99
$79,521.19
3.029%
2.886%

Sensitivity
Interval

Total $
Savings

Total %
Savings

-0.500%
-0.450%
-0.400%
-0.350%
-0.300%
-0.250%
-0.200%
-0.150%
-0.100%
-0.050%
0.050%
0.100%
0.150%
0.200%
0.250%
0.300%
0.350%
0.400%
0.450%
0.500%

142,283.25
135,897.37
129,533.14
123,190.47
116,869.28
110,569.49
104,290.99
98,033.72
91,797.59
85,582.50
79,521.19
73,681.39
67,862.26
62,063.72
56,285.69
50,528.08
44,790.82
39,073.81
33,376.99
27,700.27
22,043.56

5.420%
5.177%
4.935%
4.693%
4.452%
4.212%
3.973%
3.735%
3.497%
3.260%
3.029%
2.807%
2.585%
2.364%
2.144%
1.925%
1.706%
1.489%
1.272%
1.055%
0.840%

$1,694,975.58

12

Important Disclosure
Boenning & Scattergood, Inc. (Boenning) is providing the information contained in this presentation for discussion purposes
only in anticipation of serving as underwriter, not as a financial advisor, including a Municipal Advisor (as such term is defined in
Section 975(e) of the Dodd-Frank Wall Street Reform and Consumer Protection Act). The primary role of the underwriter will be
to purchase the bonds as principal, in a commercial arms length transaction. If selected as your underwriter, Boenning &
Scattergood will be acting as a principal and not as your agent or your fiduciary. We may have financial and other interests that
differ from those of the Issuer. Additionally, in connection with the proposed transaction, Boenning may provide incidental advice
with respect to the structure, timing, terms and other matters concerning the issuance of securities. However, Boenning does not
assume any financial advisory or fiduciary responsibilities and any such services provided by Boenning as they relate to our role
as underwriter or placement agent should not be construed as those of a Municipal Advisor.
This presentation was prepared exclusively for the benefit and internal use of the Boenning & Scattergood client to whom it is
directly addressed and delivered in order to assist the client in evaluating, on a preliminary basis, the feasibility of a possible
transaction or transactions and does not carry any right of publication or disclosure, in whole or in part, to any other party. This
presentation is for discussion purposes only and is incomplete without reference to, and should be viewed solely in conjunction
with, the oral briefing provided by Boenning & Scattergood . Neither this presentation nor any of its contents may be disclosed or
used for any other purpose without the prior written consent of Boenning & Scattergood .
Boenning & Scattergood s opinions and estimates constitute Boenning & Scattergood s judgment and should be regarded as
indicative, preliminary and for illustrative purposes only. In preparing this presentation, we have relied upon and assumed,
without independent verification, the accuracy and completeness of all information available from public sources or which was
provided to us by or on behalf of the client or which was otherwise reviewed by us. Boenning & Scattergood makes no
representations as to the actual value which may be received in connection with a transaction nor the legal, tax or accounting
effects of consummating a transaction. Prior to entering into any transaction, you should determine, without reliance upon
Boenning, the economic risks and merits, as well as the legal, tax and accounting characterizations and consequences of the
transaction. The ultimate decision to proceed with any transaction rest solely with the client.

13