HomeMy WebLinkAbout3 - JOINT - SAFA - WATER SYS BONDSREQUEST FOR
COUNCIL /SANTA ANA
FINANCING AUTHORITY ACTION
CITY COUNCIL MEETING DATE:
JULY 15, 2014
TITLE:
RESOLUTIONS EXECUTING
AGREEMENTS AND FINANCING
DOCUMENTS RELATED TO REFINANCING
THE 2004 WATER SYSTEM BONDS
<-��' /-C,�
CITY MANAG
RECOMMENDED ACTION
CITY COUNCIL ACTION
CLERK OF COUNCIL USE ONLY:
•c• o,
❑ As Recommended
❑ As Amended
❑ Ordinance on 11" Reading
❑ Ordinance on 2nd Reading
❑ Implementing Resolution
❑ Set Public Hearing For
CONTINUED TO
FILE NUMBER
Adopt a resolution authorizing the execution of financing documents and related actions necessary
for the refinancing of the 2004 Water System Bonds in an aggregate amount not to exceed $17
million.
SANTA ANA FINANCING AUTHORITY ACTION
Adopt a resolution authorizing the execution of financing documents and related actions necessary
for the refinancing of the 2004 Water System Bonds in an aggregate amount not to exceed $17
million.
DISCUSSION
The City of Santa Ana Mayor and City Council unanimously adopted the City's 5 -year Strategic
Plan which includes a goal to ensure financial stability. Under goal number four, two strategies are
outlined: 2d) Conduct an assessment of the City's debt and refinancing options to achieve savings;
and 3c) Implement a plan to achieve a General Fund reserve balance of 20 percent. In an effort to
implement these strategies, on January 21, 2014, the City Council approved the use of four
financial advisory firms to assist staff in reviewing existing debt, identify opportunities for potential
savings, or to assist in financing future projects. On April 1, 2014, the team comprised of Urban
Futures, Inc. (financial advisor), Stifel /De La Rosa & Co. (underwriters) and Best, Best & Krieger
LLP (bond counsel), was selected to review the 2004 Water Revenue Bonds.
The 2004 Water Revenue Bonds were issued to refinance the original 1994 Bonds which were
used to finance capital projects relating to the City's water system. More specifically, the funds
were used for the Garthe Reservoir Project, the South Reservoir Booster Station, as well as
3 -1
Reso to Refinancing of
2004 Water System Bonds
July 15, 2014
Page 2
various water main replacement projects throughout the City. The 2004 Bonds are currently
outstanding in the amount of $12,785,000 with interest rates ranging from 3.5% to 5.0 %. The final
term of the 2004 Bonds is September 1, 2024.
With interest rates on US Treasury Bonds having decreased from 3.0% to 2.5% since the
beginning of the year, the municipal bond market has followed suit and has correlated into
increased attention in the municipal bond market by investors. In order to benefit from this
opportunity, staff is recommending several actions. The item before the City Council relates
specifically to refinancing the 2004 Water System Bonds and the financing of an additional $5.8
million for capital related improvements.
By taking advantage of low interest rates currently available in the market, staff worked with Urban
Futures Inc. (financial advisors) and Stifel /De La Rosa & Co. (underwriters) to develop a financing
model whereby long term savings could still be achieved while obtaining additional capital
financing for immediate water system needs. The recommended proposal balances those two
objectives. As a result, the City will issue approximately $16 million of 2014 Water Revenue
Refunding Bonds. Of the $16 million, approximately $12 million will be allocated to the refunding
of the 2004 Bonds and approximately $5.8 million will be allocated to finance capital improvements
related to the City's water system. The balance of funds will be gained through an estimated
premium to be received as a result of the issuance as well as current payment reserves. The
recommended action provides for a bond authorizing resolution of a not -to- exceed issuance
amount of $17 million, which provides additional cushion in case of unforeseen market fluctuations
as well as structuring flexibility to achieve the lowest interest rates possible.
The City will save approximately $1.5 million over the life of the bonds which equates to 10% in
present value savings of the refinanced bond amount. The recommended action does not increase
the term of the current bonds. Like the 2004 Bonds, the 2014 Bonds will be secured by net system
revenues of the City's water system less maintenance and operation costs.
To date, City staff has been working with the project team and bond counsel to prepare and
develop the Preliminary Official statement and all related documents for release. Upon approval,
staff will direct the Stifel /De La Rosa & Co. to distribute the official statement and conduct the
offering and sale of the 2014 Water System Bonds.
STRATEGIC PLAN ALIGNMENT
Approval of this item supports the City's effort to meet Goal #4 City Financial Stability, Objective #2
(provide a reliable five -year financial forecast that ensures financial stability in accordance with the
strategic plan), Strategy D (conduct an assessment of the City's debt and refinancing options to
achieve savings).
3 -2
Reso to Refinancing of
2004 Water System Bonds
July 15, 2014
Page 3
FISCAL IMPACT
Total savings are estimated at approximately $1.5 million during the term of the Water System
Bonds. In addition, $5.8 million will be received as bond proceeds for water related capital projects.
Upon closing of the bond issuance, staff will present the City Council an appropriation adjustment
to authorize the allocation of proceeds for the water system projects.
ar 2t .
Francisco Gutierrez
Executive Director
Finance and Management Services Agency l
3 -3
PLEASE SEE JULY 15, 2014
CITY COUNCIL AGENDA ITEM 80A FOR
ALL EXHIBITS
3 -4