FY2016 CCDOA Financial Report as of 6302016.pdf - page 113

Notes to Financial Statements
For the Fiscal Years Ended June 30, 2016 and 2015
On August 3, 2011, the Department refunded the Series 2008 B-1 Bonds and the Series 2008 A-1
Bonds with the Series 2011 B-2 Bonds and the Series 2011 B-1 Bonds, respectively. Upon
refunding, $100.0 million in notional of swap #07A and $100.0 million in notional of swap #07B
were re-associated with the 2011 B-1 Bonds and the 2011 B-2 Bonds, respectively. This re-
association resulted in a revaluation of swaps #07A and #07B to adjust the overall swap rate of
each swap to the market rate, creating a deferred loss on imputed debt for each swap, and
an offsetting liability for each swap, imputed debt, in the amounts of $10.7 million for swap
#07A and $10.7 million for swap #07B. These deferred losses on imputed debt and
corresponding imputed debts are amortized against each other on a straight-line basis over
the remaining lives of the swaps. In November 2013, the Department re-associated swap #07A
with the 2011 B-1 Bonds and re-associated swap #07B with the 2011 B-2 Bonds.
On November 19, 2013, the Department fully terminated swaps #06, #12B, and #17 and
partially terminated swap #14B. Because swap #14B was only partially terminated, its
outstanding notional value was reduced by $56.8 million from $202.0 million to $145.2 million. At
the transaction closing, the fair values of all the terminated swaps or portions thereof, coupled
with their related accrued interest, resulted in a net termination payment of $0. The
Department executed this transaction to lower overall swap exposure, reduce interest rate risk,
increase cash flow, reduce debt service, and tailor its swap portfolio to better match its
variable rate bond portfolio. Upon completion of the termination, the Department re-
associated the investment component of each of swap derivatives #14A and #14B with
variable rate bonds, thereby resulting in the full hedging of these swaps.
(c) Hedging Derivative Instruments
On June 30, 2016 and 2015, the Department had seven outstanding floating-to-fixed interest
rate swap agreements considered to be hedging derivative instruments in accordance with
the provisions of GASB 53.
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