HomeMy WebLinkAbout11 Pension Bond Refinancingenda Item #
ACT I O N
To: Board of Directors
From: Jeremy Popov
Date. October 05, 2016
Subject: Consideration of the 2011 Taxable Pension Obligation Bonds
Refinancing Approval Documentation
11
1. WHY THIS MATTER IS BEFORE THE BOARD
This action involves consideration of adopting Resolution 2016-24 authorizing the
finalization and execution of certain documents related to the refunding of the District's
Taxable Pension Obligation Bonds, Series 2011 (the "2011 POBs").
2. HISTORY
In 2004, the District joined the California Public Employees' Retirement System
("CaIPERS") pooled pension plan.
As a participating CaIPERS agency with fewer that 100 employees, the District was
moved into an enhanced benefit risk pool known as the Side Fund, The Side Fund
created a pension obligation of the District to pay an amount to catch up to the rest of
the existing participants' contributions in the pension pool. In 2011, the District was
paying an interest cost of 7.75% on the CaIPERS Side Fund,
In 2010, the District and its employees elected to increase the CaIPERS benefit
effective January 2011.
In 2011 the District exercised our ability to refund the Side Fund by issuing the 2011
POBs at a taxable interest rate of 5%. The 5% rate is fixed through June 30, 2021 at
which time it resets based on the prime rate. Final maturity of the side fund is
achieved in 2022. This refunding saved $100,000 per year, or over $1 million in total.
The 2011 POBs are callable on any date after June 29, 2016, however the District will
be required to pay a call premium. The call premium depends on when the bonds are
called, and from now until June 2018, the call premium is 3%.
During a workshop on this matter held August 3, 2016, the Board directed staff to
issue a request for proposals (RFP) to qualified lenders to evaluate potential savings.
Brandis Tallman, the District's full service investment banking firm and broker/dealer,
who assisted the District with the 2011 POBs, issued an RFP to 11 lenders.
Six responses were received. Staff reviewed responses for compliance with the RFP,
lender terms and conditions, and for overall cost savings.
Interest rates varied from 2.47% to 4.75%. BB&T provided the most favorable overall
proposal with a 2.47% interest rate and a rate lock available through anticipated
closing of October 20, 2016. The duration of term remains unchanged with final
maturity in 2022.
BB&T provided two prepayment options:
• At any interest date at 102%
• At any interest date on or after June 30, 2020 at par
The existing 2011 POBs are held by Umpqua bank. Umpqua responded to the RFP
with a 25 basis point reduction in the existing rate and a waiver of the prepayment
penalty on the 2011 POBs. Although the District would save on cost of issuance and
prepayment penalty, an interest rate of 4.75% results in an overall less favorable
proposal.
On September 7, 2016 the Board authorized the General Manager to select BB&T as
the most favorable lender and approved staff to prepare final financing documents for
Board approval.
3. NEW INFORMATION
Staff has prepared final financing documents for Board approval. BB&T, the most
favorable lender, has locked the District's interest rate at the proposed 2.47% through
closing on October 20, 2016.
Final financing documents are available for review and include:
• Resolution (authorizing the refunding of the District's Pension Obligation Bonds)
• Placement Agent Agreement (by and between the District and Brandin Tallman
LLC)
• Bond Purchase Contract (by and between the District and Branch Banking and
Trust)
• Trust Agreement (by and between the District and The Bank of New York
Mellon Trust Company, N.A.)
The District has elected an optional redemption provision that provides for the ability
to pre -pay the outstanding balance on any interest date on or after 6/30/2020 at par
no pre -payment penalty after 6/30/2020). This option was included in the proposal
from BB&T.
Bond counsel, placement agent, bank counsel, and other cost of issuance fees are
included in the bond issue and savings shown include all associated costs. Staff and
counsel are working together to maximize efficiency and reduce overall cost by
leveraging the documentation from the 2011 POBs. A cost of issuance summary is
included as Attachment 1.
4. FISCAL IMPACT
The District will be able to achieve 3.11 % NPV savings, which equates to annual cash
flow savings of approximately $31,124, or $177,547 in total.
The potential savings are not yet included in the 10 year Financial Master Plan.
5. RECOMMENDATION
Adopt Resolution 2016-24 to authorize the finalization and execution of certain
financing documents for the refunding of the District's Pension Obligation Bonds,
Series 2011.
61vr
Jeremy Popov
Administrative Services Manager
Michael D. Holley
General Manager
" Attachment 1
Cost of Issuance
Truckee Donner Public Utility District
2016 Refunding of CaIPERS Side Fund BB&T PROPOSAL
Preliminary Final Numbers
Cost of Issuance
Amount
Bond Counsel
Placement Agent
Lender's Legal
Trustee
CDIAC
Contingency/Miscellaneous
40,000,00
25,OOOM
8/500000
2/885900
838.35
1,594.98
78,818.33