Page 91 - 2018 Comprehensive Annual Financial Report - City of Winston-Salem

Using rates as of June 30, 2018, debt service requirements of the variable rate debt and net swap payments, assuming current
interest rates remain the same for the term of the Series 2015 A-1, B-1 and C-1 Bonds are as follows:

Series 2015 Business-type Activities Net Interest
A-1, B-1 and C-1 Fiscal Variable Rate Rate Swap
Year Ending June 30 Principal Interest Payments * Total
2019 $ 1,700,000 $ 751,814 $ 902,028 $ 3,353,842
2020 1,760,000 717,355 860,684 3,338,039
2021 1,835,000 681,680 817,882 3,334,562
2022 1,905,000 644,485 773,254 3,322,739
2023 1,980,000 605,870 726,924 3,312,794
2024-2028 11,135,000 2,394,799 2,873,286 16,403,085
2029-2030 16,775,000 513,338 615,904 17,904,242
Total $ 37,090,000 $ 6,309,341 $ 7,569,962 $ 50,969,303
* Computed using the 4.459% net interest rate swap payment to the City times $37,090,000, less accumulated annual reductions, if any.

Series 2015
A-1, B-1 and C-1
Changes in Fair Value Change from Actual
for Fiscal Year Ended Fair Value Prior Year Synthetic Rate
June 30, 2016 $ (9,997,626) $ (2,402,636) 4.107%
June 30, 2017 (6,905,021) 3,092,605 4.103
June 30, 2018 (4,834,154) 2,070,867 4.459

The Series 2015 A-1, B-1 and C-1 interest rate swap was an e ective hedge under the Dollar-O set Method in scal year 2017-2018
with an inception to-date variance of 82.28%, so the swap is recorded at fair value on the Statement of Net Position as a deferred
in ow and a noncurrent liability. No investment gains or losses are recorded for mark-to-market changes for this e ective hedge.
Variable Rate Water and Sewer System Revenue Refunding Bonds, Series 2015A-2, Series 2015B-2 and Series 2015C-2 The City
entered into an interest rate swap agreement (the “swap agreement”) with Citigroup, Inc. on November 12, 2002, which became
e ective on December 4, 2002, with the issuance of $71,305,000 Water and Sewer System Revenue Refunding Bonds, Series 2002C
(the “Series C Bonds”). In August 2015, the City issued variable rate water and sewer system revenue refunding bonds. The net
proceeds were used to refund the Water and Sewer Revenue Bonds, Series 2002C. At the same time, the interest rate swap
agreement was amended and restated. The 2015 interest rate swap transaction was structured to establish a swap oating rate
equal in all material respects to the oating rate for the Series 2015 Bonds. The underlying variable index for each of the Series 2015
Bonds and 2015 Swaps is 69% of one-month LIBOR. Therefore, when taken together, the oating rate on the Series 2015 Bonds, the
oating rate on the 2015 Swaps and the xed rates on the 2015 Swaps will produce a “synthetic” xed rate. The synthetic xed rate
for the Series 2015 A-2, 2015 B-2 and 2015 C-2 is 2.96%.
Under the swap agreement e ective August 19, 2015, beginning on the rst Wednesday in September 2015, and continuing on a
monthly basis, the City pays Citigroup, Inc. interest at the xed rate of 2.96% on the notional amount of the Series 2015A-2, B-2, and C-2
Bonds. On or after August 19, 2015, Citigroup, Inc. pays the City an alternative oating rate of 69% of the USD-LIBOR-BBA. The notional
amount of the swap reduces annually; the reductions began on June 4, 2003, and end on the termination date of June 1, 2028.

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