HomeMy WebLinkAboutCFD - University Park - Bond Refunding Reinstate TeamCITY OF PALM DESERT
STAFF REPORT
MEETING DATE: September 10, 2020
SUBMITTED BY: Veronica Tapia, Senior Management Analyst
REQUEST: CONSIDERATION TO REINSTATE THE FINANCING TEAM FOR
THE UNIVERSITY PARK COMMUNITY FACILITIES DISTRICT
(CFD) BOND REFUNDING
Recommendation
That the City Council, by Minute Motion:
1) Authorize City Manager and the Director of Finance to reinstate the financing
team to prepare the necessary preliminary documentation for
Refinancing/Financing Bonds for University Park. This will include entering into
engagement letters and agreements with the financing team for their services.
Strateqic Plan
Approval of the University Park Refunding Bond Plan supports the .Land Use, Housing
and Open Space Priority 2 by providing a funding mechanism to assist in financing
further development of University Park.
Executive Summary
The developer, University Park Investor LLC ("UPI"), has once again asked staff to look
into refunding the outstanding bonds of the City of Palm Desert Community Facilities
District No. 2005-1 (University Park) ("CFD") in order to explore any opportunities for
cost savings on the existing debt. The UPI is currently working with the City's bond
counsel and underwriter to determine the best course of action and financing
mechanism to maximize refunding/funding opportunities.
Background
The CFD issued two series of debt in 2006 and 2007 with a combined par amount of
$67.915 million. The repayment of that debt is a burden that is carried by the property
owners within the CFD boundaries.
In early 2016, the City authorized a bond call of all of the outstanding 2007 series and
part of the outstanding 2006 series using unspent bond proceeds. After the bond call,
there was $31,130,000 remaining of the 2006 series, of which $26.400,000 currently
remains outstanding.
STAFF REPORT
UNIVERSITY PARK CFD BOND REFUNDING
SEPTEMBER 10, 2020
PAGE 2 of 3
At the time of issuance, it was anticipated that the properties would be developed with a
mix of residential, commercial, office, and open space. Due to timing, market conditions
and subsequent market downturn, only about 23% of the properties in the CFD have
been developed to date. The remaining 77% is now owned by UPI (63%) and the
remaining 6 parcels (14%), are owned by other parties. UPI has completed the
entitlement process with the Planning Department and submitted their grading plan with
the intent to begin grading in early 2021. While actively engaged in the development
process, UPI has also requested that staff assist with refunding the outstanding debt if
sufficient savings can be recognized.
In 2019, staff began the process of refunding the CFD bonds at the request of the UPI.
However, prior to completing the issuance, UPI decided to delay the refunding to an
unspecified date. Because of UPI's significant share of property within the CFD and
related special tax burden, its participation in the refunding is essential to the issuance
of refunding bonds. UPI has once again contacted staff to request that we move forward
with the refunding. UPI has also requested that multiple scenarios be considered
including adding to the issuance an overlapping community facilities district for its
property with a new debt component to maximize efficiencies.
Based on the current rates and the credit worthiness of the issue, the potential to
recognize great savings exists. In general, a net present value savings of 3.00% or
greater are considered significant. The savings that may be recognized has not yet
been finalized as the structure continues to be adjusted to facilitate the needs of the
UPI. Preliminary analysis by the municipal advisor indicates a potential savings of
about 14.77% or net present value of $3.9 million for the refunding portion only.
Staff agrees that a refunding is warranted and all potential structures to facilitate the
needs of the development should be explored prior to finalizing the refunding plan. In
order to move forward, staff will need to reinstate the financing team.
The team currently consists of the following members who have each put in a
substantial amount of time since their original engagement, and are quite familiar with
the project:
Underwriter
Municipal Advisor
Special Tax Consultant
Bond Counsel
Disclosure Counsel
Appraiser
Market Absorption
Piper Sandler & Co.
Del Rio Advisors
Willdan
Richards, Watson and Gershon
Best, Best & Krieger
Capital Realty Analysts
Empire Economics
WAStaff Reports - Shared\Staff Reports 09-10-2020\4 -City Clerk 9-10-20\University Park Refunding Team\SR CFD Refunding Plan 9-10-20 JM rev 8-31-20.doc
STAFF REPORT
UNIVERSITY PARK CFD BOND REFUNDING
SEPTEMBER 10, 2020
PAGE 3of3
Fiscal Analvsis
The costs of issuance for the Refunding Bonds (including the underwriter's discount,
compensation to the Municipal Advisor, Bond Counsel, Disclosure Counsel, Special Tax
Consultant and other costs, i.e. staff costs, printing costs for the official statement) are
part of the bond issuance. A developer deposit will be requested in order to cover the
City's non -contingent consultant costs in the event that the Refunding Bonds are not
issued for any reason.
The savings generated by the refunding will benefit the current and future property
owners within the University Park CFD.
LEGAL REVIEW DEPT. REVIEW FINANCIAL REVIEW
REVIEWED BY RWG
Janet M. Moore. Janet M. Moore
Legal Counsel Director of Finance Director of Finance
City Manager, Lauri Aylaian:
CONTENTS: Potential Savings Analysis
W.\Staff Reports - Shared\Staff Reports 09-10-2020\4 - City Clerk 9-10-20\University Park Refunding Team\SR CFD Refunding Plan 9-10-20 JM rev 8-31-20.doc
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