2004-64 AUTHORIZING AND DIRECTING ONE OR MORE SUPPLEMENTAL INVESTMENT DIRECTIONS

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� ! COUNCIL COMMUNICATION FORM Financial Management Department Memorandum No. 2004 - 32 August 11, 2004 TO: Honorable Mayor Osborne and City Council FROM: Steve Ga n, City Manager ;� Ron E. N ld,Director of Financial Management SUBJECT: Propose Restructuring of Escrow SUMMARY RECOMMENDATION: Staff recommends that the City Council approve the attached Ordinance authorizing and directing the execution of one or more Supplemental Investment Directions to the Escrow Agreement, dated March 15, 2004. BACKGROUND: The City of Decatur entered into an escrow agreement dated March 12, 2004, with BYN Midwest Trust Company, Chicago, Illinois. Under the escrow agreement the escrow agent agreed to hold and invest certain proceeds derived from the City's $29,070,000 General Obligation Refunding Bonds, Series 2004B, and to apply amounts derived from such investment to payments of certain bonds of the City. The escrow agreement provides that the escrow agent shall, upon written direction of the City sell or redeem the government securities held pursuant to the escrow agreement and purchase other government securities to be held pursuant to the agreement and pay out any excess cash not needed to pay the refunded bonds in accordance with such direction. The escrow funded by the City's Series 2004B Bonds incurred significant ne a� t` arbitrage of $1,268,293. Speer Financial feels that the time is right for the City to take action to allow a restructuring of this escrow and to increase the yield on these securities and it would be in the best interest of the City to authorize the execution and delivery of one or more written direction of the City to the escrow agent. Speer Financial estimates that the net negative arbitrage saved would be about$200,000.