HomeMy WebLinkAboutUniversity Park CFD Bond RefundingMEETING DATE
SUBMITTED BY
REQUEST
Recommendation
CITY OF PALM DESERT/
PALM DESERT FINANCING AUTHORITY
STAFF REPORT
April 11, 2019
Veronica Tapia, Senior Management Analyst
CONSIDERATION OF UNIVERSITY PARK COMMUNITY
FACILITIES DISTRICT (CFD) BOND REFUNDING
That the City Council and Financing Authority, by Minute Motion:
1) Authorize City Manager and the Finance Officer (Director of Finance of the City
of Palm Desert) to begin working with the financing team to prepare the
necessary preliminary documentation for the issuance of the Refunding Bonds
for University Park 2006A Bonds. This will include entering into engagement
letters and agreements with the financing team for their services; and
2) Authorize staff to select an underwriter from the approved Underwriters Pool
based on the criteria established in the Request for Qualifications dated June 4,
2018 and prioritized by the refunding needs of the CFD.
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
A review of University Park Community Facilities District ("CFD") Bonds has identified
potential savings from a refunding of the debt. The properties securing the debt were
recently sold and the new owners desire to explore any opportunities for cost savings
on the existing debt.
Background
The City on behalf of the University Park Community Facilities District (CFD) issued two
series of debt in 2006 and 2007 with a combined par amount of $70 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,
STAFF REPORT
UNIVERSITY PARK CFD BOND REFUNDING
APRIL 11, 2019
PAGE 2
there was $31,130,000 remaining of the 2006 series, of which $28,260,000 currently
remains outstanding.
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 37% of the properties in the CFD have
been developed to date. The remaining 63% is now owned by the University Park
Investor LLC ("UPI"). UPI has completed the entitlement process with the Planning
Department and submitted their grading plan with the intent to begin grading in late
2019. 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.
As the municipal advisor for the outstanding bonds, Del Rio Advisors, LLC was engaged
by the City to determine if any cost savings could be recognized through debt refunding.
Del Rio Advisors determined that there is savings available as of their March 29, 2019
analysis. In general, a net present value savings of 3.00% or greater are considered
significant.
Based on current rates and the credit worthiness of the issue, Del Rio Advisors
determined that the CFD has the potential to realize approximately $273,227 in savings
to annual debt service payments. Of that annual savings, UPI stands to recognize
about $172,133 in annual savings on debt service, which in turn would save any future
owners of the properties within the CFD boundaries. In total, refunding the outstanding
debt may generate savings of approximately $4.65 million over the life of the bond.
That equates to about $3.2 million net present value savings (or 11.45% NPV savings).
Additionally, recent analyses provided by multiple underwriters in the Underwriting Pool
indicate even greater savings may exist depending on the timing of the refunding.
Based on the analysis of Del Rio Advisors, UPI has asked that we expeditiously move
forward with the refunding of the CFD debt. Staff agrees that a refunding is warranted
and in order to move forward, will need to assimilate the refunding financing team. The
current bonds have a call date of September, 2019, so time is of the essence.
In addition to the municipal advisor, there are many other participants involved in the
issuance of refunding bonds. An Underwriter will need to be selected from the
established Pool based on the criteria previously established. The underwriter is
responsible for marketing the bonds to potential investors, buying the Refunding Bonds
from the City at closing, and then sell the Refunding Bonds to the investors.
Other participants include Bond Counsel, who will provide advice from a bond law
perspective, prepare the key legal documents for the transaction and, upon closing,
deliver its opinions regarding the legal validity of the Refunding Bonds. Disclosure
Counsel will assist the City with the preparation of an official statement, the document
which provide disclosure to investors regarding the terms, the source of repayment, and
certain investment risks pertaining to the Refunding Bonds. Some of the key
information in the official statement will be based on the Engineer's Report provided by
G `rda' %eroruca I apia Word Fdes,Sraff Reports\SR CH) Refunding Plan 4-11-19 rev 4-1-19 doe
STAFF REPORT
UNIVERSITY PARK CFD BOND REFUNDING
APRIL 11, 2019
PAGE 3
the Assessment District Enqineer. These are the legal and financial representations
that the buyers of the bonds rely upon to make their investments.
The costs of issuance for the Refunding Bonds (including the underwriter's discount,
compensation to the Municipal Advisor, Bond Counsel, Disclosure Counsel, District
Engineer and other costs (i.e. staff costs, printing costs for the official statement) are
estimated to be under 1.98% of the total principal amount of the Refunding Bonds, or
approximately $560,000.
If the City Council approves this request, the City Manager and the Finance Officer
(Director of Finance) will identify the team and begin working with the financing team to
prepare the necessary preliminary documentation for the issuance of the refunding
bonds. This will include entering into engagement letters and agreements for the
financing team for their services. The estimated value of each of the team members
identified will be well within the City Manager's authority, with the exception of Bond
Counsel and the Municipal advisor (estimated at $65,000 and $62,500 respectively).
Due to their involvement in the original issue, the value associated with their knowledge
of the product provides a cost efficiency for their continued participation in this issue. All
of these costs will be paid through the refunding and are considered in the analysis.
Fiscal Analvsis
As shown in the Plan of Refunding and Savings Analysis, the estimated debt service
savings from the refunding, based on bond market conditions as of end of March 2019,
are as follows:
Outstanding
Principal to be
Refunded
$28,260,000
Expected Total
Debt Service
Savings from
Refunding
$4,644,864
Average Annual
Savings
$273,227
Net Present
Value Savings as
Percentage of
Prior Issue
11.45%
In general, a net present value savings of 3.00% or greater are considered significant
and supports a refunding. The savings will benefit the current and future property
owners within the University Park CFD.
LEGAL REVIEW FINANCIAL REVIEW
! f0✓ GCZy e
Robert W. Hargreaves ` an t Moore
City Attorney erector of Finance
CITY MANAGER
Lauri Aylaian
City Manager
CONTENTS: Plan of Refunding and Savings
G \rda VeronicaTapia, Word idles\Staff Reports\SR CFD Refunding Plan 4.11-19 rev 4-1-19 doc
City of Palm Desert
Refunding Special Tax Bonds, Series 2019
(University Park, Series 2006A)
Sources and Uses of Funds (Public Offering)
Sources of Funds
Par Amount of Bonds
Plus: Accrued Interest
Less: (OID) Plus: OIP
Uses of Funds
Net Proceeds at Closing
Outstanding Reserve Fund
Debt Service Due 9/1/19
Other Source of Funds
Total Other Sources of Funds
Total Sources of Funds
Cost to Payoff Prior Issue
Beginning Escrow Cash Balance
Reserve Fund (')
Underwriter's Discount (2)
Cost of Issuance (3)
Other Use of Funds
Total Uses of Funds
Rounding Adjustment
Reserve Fund Calculation
Maximum Annual Debt Service (MADS)
10.00% of the Net Proceeds of the Bonds
1.25 Times Average Annual Debt Service
Assumptions
(1) Maximum Annual Debt Service (MADS)
(2) 1.00% ($10.00/bond) of the Par Amount of Bonds
(3) Estimated Amount, Budget TBD
Run Date March 30, 2019
Run Time 5:24 AM
25,705,000.00
1,862,010.75
27,567,010.75
2,508,452.50
1,735,062.50
4,243,515.00
31,810,525.75
29,015,062.50
2,233,950.00
257,050.00
304,463.25
31,810,525.75
Dollar Amount
2,233,950.00
2,753,319.78
2,774,662.54
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City of Palm Desert
Refunding Special Tax Bonds, Series 2019
(University Park, Series 2006A)
Estimated Costs of Issuance
Bond Counsel
65,000.00
Bond Counsel Expenses
2,500.00
Disclosure Counsel
30,000.00
Municipal Advisor
62,500.00
Municipal Advisor Expenses
1,500.00
City Administration
80,000.00
Special Tax Consultant
15,000.00
Appraisal
20,000.00
Fiscal Agent/Trustee/Escrow Agent
10,000.00
Verification Report
4,000.00
Miscellaneous / Printing / Regulatory
10,000.00
Rounding Adjustment
3,963.25
Total 304,463.25