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CONSIDERATION OF APPROVAL TO PURSUE THE REFINANCING OF 2004 AND 2006 CERTIFICATES OF PARTICIPATION
A. RESOLUTION NO. 2015-150 OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA MAKING REQUIRED FINDINGS, AUTHORIZING THE EXECUTION AND DELIVERY OF DOCUMENTS RELATING TO THE SALE AND DELIVERY OF NOT TO EXCEED $47,000,000 2015 REFUNDING CERTIFICATES OF PARTICIPATION, (CIVIC CENTER PROJECT), AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH
B. RESOLUTION NO. 2015-001 OF THE PUBLIC FINANCING AUTHORITY OF THE CITY OF CHULA VISTA APPROVING THE EXECUTION AND DELIVERY OF DOCUMENTS IN CONNECTION WITH THE SALE AND DELIVERY OF THE CITY OF CHULA VISTA 2015 REFUNDING CERTIFICATES OF PARTICIPATION, (CIVIC CENTER PROJECT) IN A PRINCIPAL AMOUNT NOT TO EXCEED $47,000,000 AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH
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RECOMMENDED ACTION
Recommended Action
Council adopt Resolution A and Public Financing Authority adopt Resolution B.
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SUMMARY
The Chula Vista Public Financing Authority (the “Authority”) has assisted the City in financing Phases 1 and 2 for the construction of the City’s Civic Center building and other improvements through the execution and delivery of the $37,240,000 City of Chula Vista 2004 Certificates of Participation and the $20,325,000 City of Chula Vista 2006 Certificates of Participation. At this time the financial market conditions appear favorable for a refinancing of the two bond issues.
ENVIRONMENTAL REVIEW
The Development Services Director has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that project, refunding of bonds is not a “Project” as defined under Section 15378(b)(5) of the State CEQA Guidelines because it is a fiscal activity that will not result in a physical change to the environment; therefore, pursuant to Section 15060(b)(4) of the State CEQA Guidelines the actions proposed are not subject to CEQA
BOARD/COMMISSION RECOMMENDATION
Not applicable
DISCUSSION
On August 3, 2004, the City Council of the City of Chula Vista (the “City”) adopted Resolution 2004-266 authorizing the sale of the $37,240,000, 2004 Certificates of Participation (COPs), Civic Center Project Phase 1 to finance the construction, modernizing and equipping of City Hall Building 100 and the Western Chula Vista Infrastructure project (WCVIP). The WCVIP installed and renovated certain infrastructure improvements in the western portion of the City that included streets, drainage and park improvements.
On February 14, 2006 the City Council of the City of Chula Vista adopted Resolutions 2006-051 and 2006-052 authorizing the sale of the $20,325,000, 2006 Certificates of Participation Civic Center Project Phase 2 to finance the remodeling and equipping of City Hall Building 200 and improvements to the Nature Center.
The City has the opportunity to refinance all or a portion of each series of COPs at today’s favorable interest rates, and reduce the annual payments payable from the General Fund and the Public Facilities Development Impact Fee fund. Currently, staff expects that the entire 2004 COPs can be refinanced to produce a savings of 8%, lowering payments by $180,000 annually through the maturity of the 2004 COPs in 2034. For the 2006 COPs, staff expects that 2006 COPs maturing between 2019 and 2026 can be refinanced at a savings of 5.6% or $45,000 annually over the same term. No extension of maturity is contemplated. In the event that interest rates continue their current upward trend when the 2015 COPs are brought to market, staff and the financial advisor will reassess whether or not it is more cost effective to refinance only a portion of the 2004 COPs and if the refinancing of the 2006 COPs meets the debt policy criteria to produce at least a 5% savings. Only that portion of the two series of outstanding bonds that meets the debt policy criteria will ultimately be included in the refinancing.
Approving the resolutions will authorize the execution and delivery of the following documents:
1. First supplement to amended and restated trust agreement
2. Second amendment to assignment agreement
3. Second amendment to lease purchase agreement
4. Escrow agreement
5. Continuing Disclosure Agreement
6. Second amendment to site lease
7. Bond purchase agreement
8. Preliminary Official Statement
The debt service on the 2004 COPs is paid by the General Fund and the Public Facilities Development Impact Fee fund (PFDIF) in a ratio of 18.34% and 81.66% respectively. The net present value savings of the refinancing will be shared in the same ratios between the two funds. If net present value savings of at least 5% cannot be achieved by a full refinancing of the 2004 COPs, then the refinancing will be postponed until market conditions improve sufficiently to achieve the minimum savings threshold.
The debt service on the 2006 COPs is paid by the General Fund and the Public Facilities Development Impact Fee fund (PFDIF) in a ratio of 10.68% and 89.32% respectively. The net present value savings of the refinancing will be shared in the same ratios between the two funds. If net present value savings of at least 5% cannot be achieved either by a full refinancing or a partial refinancing of the 2006 COPs, then the refinancing will be postponed until market conditions improve sufficiently to achieve the minimum savings threshold.
The financing teams assembled for this refunding include the following firms:
• Stradling, Yocca, Carlson & Rauth will act as the City’s Bond and Disclosure Counsel.
• Harrell and Company Associates will serve as the City’s Financial Advisor
• Stifel Nicolas and Company will serve as the City’s Investment Banker providing Underwriting Services
DECISION-MAKER CONFLICT
Staff has reviewed the property holdings of the City Council and has found no property holdings within 500 feet of the boundaries of the property which is the subject of this action. Staff is not independently aware, and has not been informed by any Council member, of any other fact that may constitute a basis for a decision maker conflict of interest in this matter.
LINK TO STRATEGIC GOALS
The City’s Strategic Plan has five major goals: Operational Excellence, Economic Vitality, Healthy Community, Strong and Secure Neighborhoods and a Connected Community. The refunding supports the Economic Vitality goal by lowering interest rates and therefore the cost of borrowing for the General Fund and Public Facilities Development Impact Fee Fund.
CURRENT YEAR FISCAL IMPACT
The estimated costs of issuance associated with this refunding including costs for the underwriting, bond counsel and financial advisor firms are contingent upon actually selling the bonds and are payable from the bond proceeds. Costs of issuance are estimated to be $275,000 with a not-to-exceed amount of $325,000.
ONGOING FISCAL IMPACT
The total annual savings is approximately $225,000. Based on the payment ratios, the total annual savings is approximately $37,818 for the General Fund and $187,182 for the Public Facilities Development Impact Fee Fund.
ATTACHMENTS
1. First supplement to amended and restated trust agreement
2. Second amendment to assignment agreement
3. Second amendment to lease purchase agreement
4. Escrow agreement
5. Continuing Disclosure Agreement
6. Second amendment to site lease
7. Bond purchase agreement
8. Preliminary Official Statement
Staff Contact: Phillip Davis, Assistant Director, Finance Department