Title
CONSIDERATION OF APPROVAL OF THE REFUNDING OF THE 2002 CERTIFICATES OF PARTICIPATION TO GENERATE DEBT SERVICE SAVINGS TO BE SHARED BETWEEN THE GENERAL FUND AND THE PUBLIC FACILITIES DEVELOPMENT IMPACT FEE FUND
A. RESOLUTION NO. 2014-037 OF THE CITY OF CHULA VISTA MAKING REQUIRED FINDINGS, AUTHORIZING THE EXECUTION AND DELIVERY OF DOCUMENTS IN CONNECTION WITH THE SALE AND DELIVERY OF THE 2014 REFUNDING CERTIFICATES OF PARTICIPATION (POLICE FACILITY PROJECT), IN A PRINCIPAL AMOUNT NOT TO EXCEED $49,000,000 AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH.
B. RESOLUTION NO. 2014-001 OF THE CHULA VISTA PUBLIC FINANCING AUTHORITY APPROVING THE EXECUTION AND DELIVERY OF DOCUMENTS IN CONNECTION WITH THE SALE AND DELIVERY OF THE CITY OF CHULA VISTA 2014 REFUNDING CERTIFICATES OF PARTICIPATION (POLICE FACILITY PROJECT), IN A PRINCIPAL AMOUNT NOT TO EXCEED $49,000,000 AND AUTHORIZING AND DIRECTING CERTAIN ACTIONS IN CONNECTION THEREWITH.
Recommended Action
RECOMMENDED ACTION: Council adopt Resolution A and Authority adopt Resolution B.
Body
SUMMARY
The Chula Vista Public Financing Authority issued $60,145,000 City of Chula Vista 2002 Certificates of Participation for financing the acquisition and construction of the City's police headquarters building. At this time the financial market conditions appear favorable for a refunding of this bond issue.
ENVIRONMENTAL REVIEW
The Environmental Review Coordinator has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that the requested actions are not a "Project" as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change to the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the actions proposed are not subject to CEQA.
BOARD/COMMISSION RECOMMENDATION
Not applicable.
DISCUSSION
On May 14, 2002, the City Council of the City of Chula Vista (the "City") adopted Resolution 2002-162 and the Board of Directors of the Chula Vista Public Financing Authority (the "Authority") adopted Resolution PFA-5, each authorizing the sale of the $60,145,000, 2002 Certificates of Participation, Police Facility Project (the "2002 Certificates") to finance the acquisition and construction of the City's police headquarters.
On August 1, 2013, the 2002 Certificates outstanding bonds became eligible for refunding. The financial market conditions appear favorable to consider a refunding at this time. Under the City's adopted debt policy, a refunding will be considered if a minimum goal of 5% net present value savings of the outstanding par value of the bonds can be achieved. Current market conditions indicate that net present value savings would range between 5.7% if the 2002 Certificates are fully refinanced and 7.5% if some but not all of the 2002 Certificates are refinanced.
Approving the resolutions will authorize the execution and delivery of the following documents:
1. Preliminary Official Statement
2. Amended and Restated Trust Agreement
3. Amended and Restated Assignment Agreement
4. First Amendment to Lease Purchase Agreement
5. First Amendment to Site Lease
6. Escrow Agreement
7. Continuing Disclosure Agreement
8. Purchase Contract
The debt service on the 2002 Certificates is paid by the General Fund and the Public Facilities Development Impact Fee fund (PFDIF) in a ratio of 55.65% and 44.35% respectively. The net present value savings of the refunding 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 refunding or a partial refunding of the 2002 Certificates, then the refunding will be postponed until market conditions improve sufficiently to achieve the minimum savings threshold.
The financing team 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
· De La Rosa 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 Public Financing Authority 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 City Council and Public Financing Authority 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 bond refunding will support the goal of economic vitality by reducing the debt payments for the City's General Fund and Public Facilities Development Impact Fee fund.
CURRENT YEAR FISCAL IMPACT
Refunding the 2002 Certificates of Participation will reduce debt service payments. The resolution being considered by the City Council authorizes the refunding of all or only a portion of the 2002 Certificates, depending on market conditions at the time of sale. If it is not possible to achieve a 5% present value savings by refunding all of the 2002 Certificates, it may be possible to achieve at least a 5% savings by refinancing some of the shorter maturities. An example of the savings that could be achieved today based on either a partial or full refunding of the 2002 Certificates is shown below:
Description |
Partial |
Full |
Par Amount Refunded |
30,890,000 |
48,410,000 |
Annual Savings |
215,000 |
222,000 |
% Payment Reduction |
6.9% |
5.5% |
# of Years |
13.4 |
18.4 |
Total Savings |
2,881,000 |
4,084,800 |
Present Value Savings |
7.4% |
5.7% |
If net present value savings of at least 5% cannot be achieved under any scenario, then the refunding will be postponed until market conditions improve sufficiently to achieve the minimum savings threshold.
The costs of issuance are estimated to range between $376,000 (partial refunding) and $505,000 (full refunding) and will be financed over the remaining life of the bonds. Cost of issuance fees to be paid is contingent upon issuance of the refunding bonds.
ONGOING FISCAL IMPACT
Refunding the 2002 Certificates of Participation will provide total savings that will range between $2.8 million and $4.1 million over the life of the bond issuance. The savings will benefit the General Fund and Public Facilities Development Impact Fee fund in a ratio of 55.65% and 44.35% respectively.
ATTACHMENTS
1. Preliminary Official Statement
2. Amended and Restated Trust Agreement
3. Amended and Restated Assignment Agreement
4. First Amendment to Lease Purchase Agreement
5. First Amendment to Site Lease
6. Escrow Agreement
7. Continuing Disclosure Agreement
8. Purchase Contract