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HomeMy WebLinkAbout15-Consideration of Documents Associated with the Refinancing of the Special Tax Bonds for Community Facilities District NoAgenda Item #15 To: From: Date: Subject: Board of Directors Robert Mescher January 15, 2014 Consideration of Documents Associated with the Refinancing of the Special Tax Bonds for Community Facilities District No. 03-1 (Old Greenwood CFD) ACTION 1. WHY THIS MATTER IS BEFORE THE BOARD This item involves discussion of a proposed refinancing of the Special Tax Bonds ("2003 Bonds") for the Community Facilities District No. 03-1 (Old Greenwood) ("CFD"). 2. HISTORY At the April 3, 2013 Board meeting, the District staff proposed refinancing the bonds to reduce the overall assessments in Old Greenwood at no cost to the Truckee Donner PUD. The Board directed staff to pursue the refinancing and present documents to the Board for consideration at the June 5, 2013 meeting. In 2003, the District issued $12,445,000 of Special Tax Bonds, the proceeds of which were used to construct and acquire various public improvements related to the proposed development within the CFD. The 2003 Bonds are paid by property owners in the CFD via a special tax levied on the property tax roll. The 2003 Bonds have interest rates that range from 5.00% in 2014 to 6.10% in their final maturity of 2033. The 2003 Bonds are callable on March 1, 2014 at par (no premium). There is approximately $11,610,000 outstanding on the issue. At the April 3, 2013 Board meeting, the District staff proposed refinancing the 2003 Bonds to reduce the overall special taxes in Old Greenwood at no cost to the Truckee Donner PUD. The Board directed staff to pursue the refinancing and present documents to the Board for consideration at the June 5, 2013 meeting. At the June 5, 2013 Board meeting, the Board approved a resolution authorizing the sale and issuance of Special Tax Refunding Bonds in the par amount of not to exceed $12,000,000. It was anticipated that the Refunding Bonds would be sold on or about June 26th, the refunding would close in early July, and the Old Greenwood property would realize benefit beginning with the December 2013 tax bill. Just before the June 5, 2013 Board meeting, treasury and municipal bond rates rose due to the Federal Reserve Chairman notifying Congress that the Federal Reserve was considering to taper the asset purchase program. Subsequent to the Board Meeting, municipal investors continued to pull money from the treasury and municipal bond market in record breaking droves, driving prices down and rates up. On June 25, 2013, the market ended its worst three day loss in a quarter century and the financing team decided to postpone the refinancing. 3. NEW INFORMATION Since July 2013, interest rates have steadied, with modest fluctuation in either direction. The financing team continued to monitor the refunding, and worked to secure an investor for the Refunding Bonds. In November 2013, Western Alliance Public Finance, a qualified buyer, and sophisticated investor as defined by the SEC under Regulation D, expressed interest. Throughout December 2013, Western Alliance conducted their due diligence. No Official Statement is required because, as a sophisticated investor, Western Alliance is responsible for conducting its own due diligence. On January 6, 2014, Western Alliance submitted a term sheet (Attachment 1) to purchase the Refunding Bond. The interest rate quoted and terms provided result in favorable economics for all property owners in Old Greenwood. The financing team has drafted the resolution (Attachment 2), and the trust indenture (Attachment 3). The resolution authorizes the sale and issuance of the 2014 Special Tax Refunding Bonds in the par amount of not to exceed $11,000,000 on or about January 26, 2014. It provides for an authorized officer of the District to provide for all services necessary to effect the issuance of the 2014 Bonds. If the resolution is approved, the financing team will work to close the transaction by February 1, 2014 and Old Greenwood property owners will realize the benefit beginning with the December 2014 tax bill. 4. FISCAL IMPACT The market interest rate as of January 6, 2014 was 4.25%. This is more than 100 basis points of savings in interest rate when compared to the 2003 Bonds. The interest rate is subject to change with market conditions until locked, which is scheduled for January 16, 2014. Since Western Alliance does not require a reserve fund for the Refunding Bond, the existing reserve fund will be utilized to shorten the bond term by one year, maturing September of 2032. The summary of the refunding (Attachment 4) illustrates that property owners in the CFD will save about $180,000 per year. Total savings will be approximately $3.2 million over the life of the issue, and net present value savings are estimated to be $2.2 million or almost 19%. The Old Greenwood Rate and Method of Apportionment (RMA) states that the assessments must be apportioned to the developed parcel owners and, if the developed parcel owners' maximum tax is less than the total special tax levy, then the Robert Mescher Michael D. Holley Administrative Services Manager General Manager remaining amount is apportioned to the undeveloped parcel owners. Currently, all developed parcel owners are being assessed at the maximum tax, and the remaining portion of the special tax levy (about $165,000) is apportioned to the undeveloped parcel owners. After the refinancing, the near term special tax levy is estimated to be about 4% to 7% less than the maximum tax of the developed parcel owners. For example, if a developed parcel owner's assessment is currently $4,000, it would be about $160 to $280 less after the refinancing, and no amount would be apportioned to the undeveloped parcel owners. These savings to the Old Greenwood CFD will be at no cost to the Truckee Donner PUD. 5. RECOMMENDATION Adopt the Resolution 2014-03 authorizing the sale and issuance of its 2014 Special Tax Refunding Bonds, approving documents relating thereto, and authorizing and directing certain related actions.