Loading...
2016 07 05 FA Special FINANCING AUTHORITY AGENDA 1 JULY 5, 2016 SPECIAL MEETING FINANCING AUTHORITY AGENDA CITY HALL COUNCIL CHAMBERS 78-495 Calle Tampico, La Quinta SPECIAL MEETING ON TUESDAY, JULY 5, 2016 AT 4:00 P.M. CALL TO ORDER ROLL CALL: Authority Members: Franklin, Osborne, Peña, Radi, Chairperson Evans PUBLIC COMMENT ON MATTERS NOT ON THE AGENDA At this time, members of the public may address the Financing Authority on any matter not listed on the agenda. Please complete a "request to speak" form and limit your comments to three minutes. The Financing Authority values your comments; however in accordance with State law, no action shall be taken on any item not appearing on the agenda unless it is an emergency item authorized by GC 54954.2(b). CONFIRMATION OF AGENDA CONSENT CALENDAR PAGE 1. APPROVE MINUTES OF JUNE 21, 2016 2. ADOPT A RESOLUTION FOR ISSUANCE AND SALE OF SUBORDINATE TAX ALLOCATION REFUNDING BONDS (Resolution No. FA 2016-002) BUSINESS SESSION - NONE STUDY SESSION – NONE PUBLIC HEARINGS – NONE CHAIR AND BOARD MEMBERS' ITEMS 1 FINANCING AUTHORITY AGENDA 2 JULY 5, 2016 SPECIAL MEETING ADJOURNMENT ***************************************** For information about the next special meeting of the Financing Authority, please contact the City Clerk’s Office at 760-777-7000. DECLARATION OF POSTING I, Susan Maysels, Authority Secretary of the La Quinta Financing Authority, do hereby declare that the foregoing agenda for the La Quinta Financing Authority meeting was posted near the entrance to the Council Chambers at 78-495 Calle Tampico and on the bulletin boards at the La Quinta Cove Post Office at 51-321 Avenida Bermudas and at the Stater Brothers Supermarket 78-630 Highway 111, on July 1, 2016. DATED: July 1, 2016 SUSAN MAYSELS, Authority Secretary La Quinta Financing Authority Public Notices  The La Quinta City Council Chamber is handicapped accessible. If special equipment is needed for the hearing impaired, please call the City Clerk’s Office at 777-7103, twenty-four (24) hours in advance of the meeting and accommodations will be made.  If special electronic equipment is needed to make presentations to the Financing Authority, arrangement should be made in advance by contacting the City Clerk's Office at 777-7103. A one (1) week notice is required.  If background material is to be presented to the Financing Authority during a meeting, please be advised that eight (8) copies of all documents, exhibits, etc., must be supplied to the City Clerk for distribution. It is requested that this take place prior to the beginning of the meeting.  Any writings or documents provided to a majority of the Financing Authority regarding any item on this agenda will be made available for public inspection at the City Clerk counter at City Hall located at 78-495 Calle Tampico, La Quinta, California, 92253, during normal business hours. 2 FINANCING AUTHORITY MINUTES 1 SPECIAL MEETING JUNE 21, 2016 FINANCING AUTHORITY MINUTES TUESDAY, JUNE 21, 2016 A regular meeting of the La Quinta Financing Authority was called to order at 8:40 p.m. by Chairperson Evans. PRESENT: Authority Members Franklin, Osborne, Peña, Radi, Chair Evans ABSENT: None PUBLIC COMMENT - None CONFIRMATION OF AGENDA - Confirmed CONSENT CALENDAR 1.APPROVE MINUTES OF JUNE 16, 2015 MOTION – A motion was made and seconded by Authority Members Franklin/Radi to approve the Consent Calendar as recommended. Motion passed unanimously. BUSINESS SESSION 1.ADOPT RESOLUTION TO APPROVE FISCAL YEAR 2016/17 BUDGET MOTION – A motion was made and seconded by Authority Members Radi/Franklin to adopt Resolution No. FA 2016-001 entitled: A RESOLUTION OF THE LA QUINTA FINANCING AUTHORITY APPROVING A BUDGET FOR FISCAL YEAR 2016/2017 Motion passed unanimously. PUBLIC HEARINGS – None CHAIR AND BOARD MEMBERS' ITEMS – None ADJOURNMENT There being no further business, it was moved and seconded by Authority Members Franklin/Radi to adjourn at 8:42 p.m. Motion passed unanimously. Respectfully submitted, SUSAN MAYSELS, Authority Secretary La Quinta Financing Authority CONSENT CALENDAR 1 3 4 City of La Quinta FINANCING AUTHORITY MEETING: July 5, 2016 STAFF REPORT AGENDA TITLE: ADOPT A RESOLUTION FOR ISSUANCE AND SALE OF SUBORDINATE TAX ALLOCATION REFUNDING BONDS RECOMMENDATION Adopt a Resolution authorizing the issuance of Subordinate Tax Allocation Refunding Bonds by the Successor Agency to the La Quinta Redevelopment Agency in the approximate amount of $35,280,0000, 2016 Series A Bonds, and authorizing certain actions in connection therewith. EXECUTIVE SUMMARY In 2011, the La Quinta Redevelopment Agency issued $6,000,000 of Tax Allocation Bonds of which $5,850,000 are currently outstanding and the La Quinta Financing Authority issued $28,850,000 Taxable Revenue Bonds of which $27,225,000 are currently outstanding (together the “2011 Bonds”). Current bond interest rates are at historically low levels and refinancing the 2011 Bonds will reduce annual bond payments, allowing additional property tax revenue distribution to the City and taxing agencies. The Successor Agency has approximately $2.3 million of unspent 2011 Bond proceeds on deposit with the Trustee, which will be used to pay down the principal amount of the 2016 Bonds. The 2011 Bonds are not subject to optional call and redemption until September 1, 2020 so the bond proceeds would be deposited in an escrow fund held by an escrow bank, and used to pay regularly scheduled principal and interest payments on the 2011 Bonds until September 1, 2020 (an advanced refunding). Refinancing the 2011 Bonds will require State Department of Finance approval, which may take up to 60 days. FISCAL IMPACT Lower bond interest costs with yield lower annual debt service savings of approximately $614,000 or $12.82 million over the twenty-three year term of these bonds. CONSENT CALENDAR: 2 5 BACKGROUND/ANALYSIS Starting in 1985, the La Quinta Redevelopment Agency (RDA) issued tax allocation bonds to raise capital for infrastructure, public facility, economic development, and affordable housing investment. Bond debt service payments are funded by property tax revenue. When the RDA was eliminated in February 2012, the Successor Agency assumed the responsibility to ensure that bond debt service payments are made. These payments are classified as enforceable obligations and are tracked on the Recognized Obligation Payment Schedule (ROPS). The Successor Agency may refinance outstanding bonds and other obligations of the RDA. The City’s financial advisors determined that today’s lower bond interest rates would yield cost savings; all bond refinancing must be first approved by the Oversight Board and the DOF. In December 2013, the Successor Agency issued $97,190,000 2013 Series A and $23,055,000 2013 Taxable Series B refinancing bonds. These bonds refinanced the former RDA’s 1998 PA 1 Bonds, 1998 PA 2 Bonds, 2001 Bonds, 2002 Bonds and 2003 Bonds. The 2013 refunding bond program resulted in annual debt service savings of more than $555,000 per year with an overall savings of $10,650,000. In July 2014, the Successor Agency again successfully refinanced $65,600,000 of additional former RDA bonds resulting in annual debt service savings of more than $680,000 per year with an overall savings of $13,700,000. In the current bond market, an opportunity exists to further reduce annual debt service by refinancing the 2011 Bonds. Interest rates for the 2016 refunding bonds are estimated at 3% to 5% with yield potentials 0.50% to 4.50%, on a taxable basis. The 2011 Bonds have interest rates ranging from 5.375% to 8.15% on a taxable basis. By refinancing bonds, debt service payments will be reduced by $12.8 million over 23 years This would free property tax revenue for distribution to other taxing agencies and the City, with approximately $8 million to schools districts, $2.8 million to Riverside County, $922,000 to the Coachella Valley Water District, $634,000 to the City, and $225,000 to parks and recreation over the 23 year period. ALTERNATIVES As refinancing would result in an annual savings on bond debt service, staff does not have an alternative. Prepared by: Gilbert Villalpando, Management Specialist Approved by: Frank J. Spevacek, City Manager Attachments: 1. Summary of 2016 Refinancing 6 RESOLUTION NO. FA 2016 – A RESOLUTION OF THE LA QUINTA FINANCING AUTHORITY AUTHORIZING THE EXECUTION OF THE ESCROW AGREEMENT WHEREAS, the La Quinta Redevelopment Agency (the “Prior Agency”) was a public body, corporate and politic, duly created, established and authorized to transact business and exercise its powers under and pursuant to the provisions of the Community Redevelopment Law (Part 1 of Division 24 (commencing with Section 33000) of the Health and Safety Code of the State of California) (the “Law”), and the powers of the Prior Agency included the power to issue Bonds for any of its corporate purposes; and WHEREAS, a Redevelopment Plan for a redevelopment project known and designated as the “La Quinta Redevelopment Project Area No. 1” has been adopted and approved by Ordinance No. 43 of the City of La Quinta on November 29, 1983, and all requirements of the Law for and precedent to the adoption and approval of the Project Area No. 1 Redevelopment Plan, as amended, have been duly complied with; and WHEREAS, a Redevelopment Plan for a redevelopment project known and designated as the “La Quinta Redevelopment Project Area No. 2” has been adopted and approved by Ordinance No. 139 of the City of La Quinta on May 16, 1989, and all requirements of the Law for and precedent to the adoption and approval of the Project No. 2 Redevelopment Plan, as amended, have been duly complied with; and WHEREAS, the Authority on behalf of the Prior Agency has previously issued $28,850,000 La Quinta Financing Authority, Local Agency Subordinate Taxable Revenue Bonds, 2011 Series A (the “2011 Taxable Housing Bonds”) and loaned the proceeds to the Prior Agency pursuant to the terms of a loan agreement dated February 3, 2004 and a Second Supplemental Loan Agreement, dated as of March 1, 2011 (the “2011 Loan Obligation”); and WHEREAS, Assembly Bill AB XI 26, effective June 29, 2011, together with Assembly Bill 1484 (“AB 1484”) (collectively, the “Dissolution Act”) resulted in the La Quinta Redevelopment Agency being dissolved as of February 1, 2012; and WHEREAS, the authority, rights, powers, assets, duties and obligations of the Prior Agency were transferred on February 1, 2012 to the Successor Agency; and WHEREAS, AB 1484 specifically authorizes the issuance of refunding bonds by the Successor Agency to refund the bonds or other indebtedness of the Prior Agency to provide savings to the Successor Agency, provided that (A) the total interest cost to maturity on the refunding bonds plus principal amount of the refunding bonds shall 7 Resolution No. FA 2016- Escrow Agreement Adopted: July 5, 2016 Page 2 of 3 not exceed the total remaining interest cost to maturity on the bonds to the be refunded plus the remaining principal of the bonds to be refunded, and (B) the principal amount of the refunding bonds shall not exceed the amount required to defease the refunded bonds, to establish customary debt service reserves, and to pay related costs of issuance; and WHEREAS, the Successor Agency deems it necessary and proper to issue taxable tax allocation refunding bonds to refund and defease the Refunded Bonds. WHEREAS, for the corporate purposes of the Successor Agency, the Successor Agency deems it necessary to issue at this time tax allocation refunding bonds in a principal amount of not to exceed Thirty-Nine million dollars ($39,000,000) (the “Bonds”), and to irrevocably set aside a portion of the proceeds of such Bonds in a separate segregated trust fund which will be used to refund the outstanding Refunded Bonds of the Prior Agency, to pay costs in connection with the issuance of the Bonds, and to make certain other deposits as required by the Indenture (defined herein); and WHEREAS, as part of the issuance of the bonds and the refunding of the 2011 Taxable Housing Bonds, there has been prepared an Escrow Agreement to which the Authority is a party; and WHEREAS, the Board of Directors of the La Quinta Financing Authority wishes at this time to approve certain matters relating to the refunding of the Loan Obligations; NOW, THEREFORE, BE IT RESOLVED by the La Quinta Financing Authority to adopt, as follows: SECTION 1. The Chairperson, Vice-Chairperson and Executive Director, and any other proper officer of the Authority, acting singly, be and each of them hereby is authorized and directed to execute and deliver any and all necessary documents and instruments, relating to the refunding of a portion of the 2011 Taxable Housing Bonds, including, without limitation any necessary Escrow Agreement, the form of which Escrow Agreement, by and among the Successor Agency, the Authority and U.S. Bank National Association, has been submitted at this meeting and made a part hereof as though set forth in full herein; and SECTION 2. This Resolution shall take effect immediately upon its adoption. PASSED, APPROVED, and ADOPTED at a regular meeting of the La Quinta Financing Authority held on this 5th day of July, 2016, by the following vote: AYES: 8 Resolution No. FA 2016- Escrow Agreement Adopted: July 5, 2016 Page 3 of 3 NOES: None ABSENT: None ABSTAIN: None LINDA EVANS, Chairperson La Quinta Financing Authority ATTEST: SUSAN MAYSELS, Secretary La Quinta Financing Authority (Authority Seal) APPROVED AS TO FORM: __________________________________________ WILLIAM IHRKE, Authority Counsel La Quinta Financing Authority 9 10   2533 S. Coast Highway 101, Suite 250 ∙ Cardiff By The Sea, CA 92007 ∙ www.hilltopsecurities.com  ATTACHMENT 1      Summary of 2016 Refinancing   Successor Agency to the La Quinta Redevelopment Agency/La Quinta Oversight Board    In December, 2013, the Successor Agency completed the refinancing of its 1998, 2001, 2002 and  2003 Tax Allocation financings issued by the former Redevelopment Agency.  Issued in a tax‐exempt  and a taxable series, this refinancing program resulted in annual debt service savings in excess of  $555,000 and overall savings of more than $10,650,000 over the remaining life of the refinanced  Bonds.  In July, 2014, the Successor Agency completed the refinancing of its 2014 Tax Allocation  financing issue by the Financing Authority.  Issued in a tax‐exempt series, this refinancing resulted in  annual debt service savings in excess of $680,000 and overall savings of more than $13,700,000 over  the remaining life of the refinanced Bonds.  These debt service savings result in excess revenues to  various taxing agencies as well as increased residual revenues to the City.    There is now an opportunity to refinance the Agency’s last two financings issued prior to  redevelopment dissolution, for economic savings.  The financings consist of $6,000,000 La Quinta  Redevelopment Project Area No. 2, Subordinate Taxable Tax Allocation Bonds, Series 2011 of which  $5,850,000 are currently outstanding and $28,850,000 Local Agency Subordinate Taxable Revenue  Bonds, 2011 Series A of which $27,225,000 are currently outstanding.  These Bonds were issued just  prior to dissolution in June, 2011 and carry extremely high interest rates ranging from 5.375% to  8.15% on a taxable basis.  Following the issuance of the 2016 Bonds, the Agency would have its final debt in place and is  expected to be as follows:    Savings Analysis  Original Outstanding Final Interest Rate Principal Principal Maturity Range Project Areas 1 and 2 2013 Tax Exempt Bonds 97,190,000$       89,095,000$       2033 3.00% to 5.00% 2013 Taxable Bonds 23,055,000         21,010,000         2032 0.76% to 5.82% 2014 Tax Exempt Bonds 65,600,000         63,875,000         2034 2.00% to 5.00% 2016 Taxable Bonds * 35,280,000         35,280,000         2039 1.50% ‐ 4.50% * 2016 Taxable  Bonds assumptions are all  estimates. 11   2533 S. Coast Highway 101, Suite 250 ∙ Cardiff By The Sea, CA 92007 ∙ www.hilltopsecurities.com  The 2011 Bonds to be refinanced will be payable on the same dates (March 1 and September 1) and  will mature on their regularly scheduled date without extension (September 1, 2039).  Refunding numbers on the 2011 Bonds show that based on current interest rates and yields, the  Successor Agency can achieve annual debt service savings of approximately $614,000 from 2017  through 2035 and $285,000 from 2036 through 2039 with overall savings of $12,822,000 over the  remaining life of the 2011 Bonds.  At this time, the refunding of the 2011 Bonds results in present  value savings of about 16.25%.  The overall estimated savings are after ALL costs associated with the  financing have been paid.  The following sets forth the detailed annual savings:                                Since the reduced debt service after refunding will reduce the amount of property taxes deposited in  the Redevelopment Property Tax Trust Fund required to be paid to the Successor Agency, there will  be additional “residual” property tax that can be distributed to taxing agencies that overlap the  boundaries of the Redevelopment Project Areas in accordance with their share of the general  property tax levy shown below. The City may be able to use up to 50% of the additional residual  Total Total Bond Year Current Proposed Ending Debt Service Debt Service Savings 9/1/2017 18,217,372.76$    17,602,829.90$     614,542.86$         9/1/2018 18,213,679.00      17,599,194.26       614,484.74           9/1/2019 18,220,271.50      17,604,211.76       616,059.74           9/1/2020 18,218,892.76      17,604,204.26       614,688.50           9/1/2021 18,226,867.76      17,614,554.26       612,313.50           9/1/2022 18,220,804.00      17,607,116.76       613,687.24           9/1/2023 18,214,156.00      17,602,348.76       611,807.24           9/1/2024 18,214,888.00      17,602,049.50       612,838.50           9/1/2025 18,213,618.00      17,597,104.50       616,513.50           9/1/2026 18,217,494.00      17,603,140.50       614,353.50           9/1/2027 18,219,624.00      17,608,850.50       610,773.50           9/1/2028 18,212,696.50      17,597,865.50       614,831.00           9/1/2029 18,209,594.00      17,594,748.00       614,846.00           9/1/2030 18,218,324.00      17,603,188.00       615,136.00           9/1/2031 18,216,853.00      17,603,327.00       613,526.00           9/1/2032 18,217,267.00      17,605,641.00       611,626.00           9/1/2033 8,858,778.50        8,243,060.00         615,718.50           9/1/2034 8,895,858.50        8,284,310.00         611,548.50           9/1/2035 3,625,136.50        3,007,675.00         617,461.50           9/1/2036 933,397.00            646,675.00            286,722.00           9/1/2037 936,007.50            646,250.00            289,757.50           9/1/2038 935,697.50            644,700.00            290,997.50           9/1/2039 335,497.50            47,025.00               288,472.50           Total 315,992,775.28$ 303,170,069.46$ 12,822,705.82$  Present Value Savings %16.25% 12   2533 S. Coast Highway 101, Suite 250 ∙ Cardiff By The Sea, CA 92007 ∙ www.hilltopsecurities.com  generated by the refunding first to repay certain City advances to the former Agency, and if so, the  taxing agencies will receive their percentage of the remaining residual after such payment estimated  as follows.   School Districts:  62.50%   Riverside County:  22.18%   Water District:  7.21%   City of La Quinta:  5.29%   Recreation and Parks:  2.82%  The following table sets forth the estimated Costs associated with the 2016 financing.    Underwriter’s discount estimated at 0.750%, costs of issuance estimated at 0.60%, bond insurance  estimated at 0.31% and a debt service reserve surety bond fee of 0.14% for all in costs of 1.80%  which is in line with the percentage of costs associated with the refunding programs. As previously  mentioned, the savings discussed above are after all costs of issuance associated with the financing.                          The Financing Team expects the Bonds to be rated “A+” by Standard and Poor’s.  Purchasing  insurance will bring the bond rating up to “AA” although based on the current market, insurance will  not be necessary for all maturities.  The increase in rating should offset the insurance premium  through reduced interest rates and yields on the refunding bonds.  The Financing Team will prepare  a stress test at the time the refunding bonds are marketed to determine the actual savings  generated by using bond insurance.  If the insurance premium isn’t justified by savings, bond  insurance will not be utilized.  Estimated 2016  Bonds             Costs of  Issuance Rutan & Tucker, Bond Counsel 75,000.00$           Stradling Yocca Carlson & Rauth, Disclosure  Counsel 42,000.00              Harrell  & Company, Financial Advisor 40,000.00              Standard & Poor’s Ratings Group, Rating Services 30,000.00              Grant  Thornton, Verification Consultant         2,500.00                US  Bank National Association, Trustee  and Escrow  Bank 4,500.00                Avia Communications, Financial Printing 2,500.00                Miscellaneous 3,500.00                Subtotal Costs of I ssuance 200,000.00$         Underwriter's Discount 264,600.00           Bond Insurance Provider 171,635.00           Total  Costs of Issuance 636,235.00           Percentage  of Bond Financing 1.80% 13   2533 S. Coast Highway 101, Suite 250 ∙ Cardiff By The Sea, CA 92007 ∙ www.hilltopsecurities.com  The Prior Agency’s Bonds all carry a reserve fund surety bond in lieu of cash for the reserve funds.   Using cash at this point would greatly increase the amount of refunding bonds required to be issued  in order to cash fund the new reserve funds.  The use of a reserve fund surety bond will be required  in order to achieve the reported savings.  Underwriter’s Discount will be based in part on the rating of the refunding bonds.  If bond insurance  is utilized the underwriter’s discount would be reduced over a standalone rating only.  This is  predominately due to the amount of takedown (commission) necessary to pay salespeople to sell  the bonds.  The higher the rating, the less takedown required.  Cash Contributions  As part of the 2016 Bonds refunding program, the Financing Team has included approximately  $2,800,000 of unspent proceeds remaining with US Bank as Trustee for the Project Area No. 2 2011  Bonds, initially issued in the amount of $6,000,000.  These moneys have been designated by DOF as  available for two purposes: 1) purchasing Agency bonds on the open market or 2) reducing bonded  debt amounts in a refinancing.  Over the past 24 months, there has been less than $100,000 of these  PA 2 Bonds available on the open market (bonds being offered for sale to the general public).  It has  therefore been determined that the best use of these moneys is in the refinancing process.  The  unspent proceeds will be transferred to the Escrow Bank and deposited in the Project No. 2  refunding escrow which in turn reduces the amount of bonds necessary to be issued for said  refunding.  In addition, certain cash reserves are currently on deposit with the 2011 Bonds Trustee.  These  moneys have also been used to reduce the principal amount of bonds necessary to be issued for the  refunding.  As previously discussed, the Agency will purchase a reserve surety policy to satisfy its  debt service reserve requirements.  2011 Bonds Escrow Accounts  Proceeds from the financing will be held in an escrow that will pay regularly scheduled principal and  interest on the prior 2011 Bonds until their first optional call date of September 1, 2020.  The escrow  fund will also hold funds to redeem all remaining maturities on September 1, 2020.  The proceeds  held in the escrow will be invested in either State and Local Government Securities or Open Market  Securities, whichever are more efficient.  The prior 2011 Bonds will be considered fully defeased on  the date the 2016 Bonds are issued.  Conclusion  There is no way of knowing if the municipal market will maintain current interest rates and yields  long enough for the Successor Agency to complete the approval and DOF review process estimated  to require 60 to 75 days.  We believe your Financing Team should be able to steer the refinancing  thru the approval process at little or no cost to the Successor Agency, should the refunding bonds  not be economically feasible following the approval and review process.   In addition, prior to the  issuance of refunding bonds, the Financing Team will return to the Successor Agency Board for the  14   2533 S. Coast Highway 101, Suite 250 ∙ Cardiff By The Sea, CA 92007 ∙ www.hilltopsecurities.com  approval of a substantially final Preliminary Official Statement and to provide an update of refunding  numbers and financing costs at that time.      Timeline  The following is a general timeline for the proposed refinancing.  This schedule will be updated  based on DOF approval actions and market conditions.    Scheduled Event Date to Complete  Successor Agency Board adopts Resolution approving Financing Documents May 3  Oversight Board adopts Resolution approving Financing Documents  Submit Revised OB Resolution and Documents to DOF May 4  DOF Approval of Financing July 5  Submit Documents to Rating Agency/Insurer July 6  Receive Rating/Insurance July 27  Successor Agency Board adopts Resolution deeming Preliminary Official Statement  Substantially Final August 2  Bond Sale ‐ Successor Agency signs Purchase Contract August 24  Bond Closing September 14    15 16