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HomeMy WebLinkAbout06-16-2015 C10 Naciemento Project RevenueCity of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number FROM: Wayne Padilla, Director of Finance & I.T. Carrie Mattingly, Utilities Director SUBJECT: REFUNDING OF THE NACIMIENTO WATER PROJECT REVENUE BONDS RECOMMENDATION Adopt a resolution approving certain disclosures regarding the City and authorizing certain actions in connection with the refunding of the Nacimiento water project revenue bonds. DISCUSSION Background The City of San Luis Obispo has been a member of the Nacimiento Water Project since August 2004. The physical features of the project include a pump station, two intermediate pump stations, three storage tanks, a control system, and approximately 45 miles of transmission pipeline ranging from 36- to 12-inches in diameter, with the ability to deliver 15,750 acre-feet of raw water each year to communities within the County. The Nacimiento Project became operational on January 7, 2011. In order to fund construction of the improvements needed to make the water project operational, the San Luis County Financing Authority issued $157,845,000 in Nacimiento Water Project Revenue Bonds, (2007 Series A) and $38,565,000 in Nacimiento Water Project Revenue Bonds, (2007 Series B) on September 26, 2007 that were supported by the contributions of the project’s members: City of San Luis Obispo, Atascadero Mutual Water Company , City of Paso Robles, Templeton Community Services District, County Service District Service Area 10, Zone A, and the County Flood Control District. Once the bonds were issued, each participating agency was allocated a portion of the debt and assigned an annual contribution to service that debt. The City’s share of the total annual debt service payment of $12.7 million is $4.7 million or 37%. The Financing Authority has indicated that it intends to refinance a portion of the existing debt (total outstanding is $147.5 million) in order to generate savings for the participants if the net present value of those savings is at least 3.0% which is both the County’s and the City’s minimum savings threshold on a net present value basis. The potential annual savings for the Water Enterprise Fund ranges from $140,000 up to $312,000 depending on the structure of the refinancing. While current market conditions do not provide that level of savings, the financing team is optimistic that the bond market will become more favorable and provide that level of savings in the near future. The action requested here will provide the City’s concurrence to move ahead with the debt financing when and if the required savings level is attainable. It is important to note that the City is not issuing this debt but will be obligated to continue making payments under the existing Take or Pay Water Service Agreement that was entered into at the time the City joined the Nacimiento project. June 16, 2015 C10 C10 - 1 Approve Resolution Regarding Nacimiento Debt Refinancing Page 2 The resolution provided along with this agenda item authorizes the release of a Preliminary Official Statement and approves the form of the Disclosure Agreement. The first document contains information about the City and specifically about the Water Enterprise Fund and its operations, both current and future. The second document establishes the content of future reports that the City will be required to provide for use by the bond market as a means of providing updates on the status of the Water Fund’s ability to continue making its payments to the Project. The resolution also identifies the City Manager, Finance and I.T. Director and the City Attorney as Authorized Representatives of the City to act on its behalf and execute documents related to the refinancing as needed. CONCURRENCES The Finance & I.T. Department along with the Utilities staff have reviewed the particulars of this transaction and concur that this transaction should be approved to move forward, contingent upon its ability to generate net present value savings of approximately 4.5%. FISCAL IMPACT If the refinancing is completed, it will generate at least 4.5% net present value savings. The potential annual cash flow savings range from $140,000 to $312,000. ALTERNATIVES The City Council could decline to approve the City’s participation in the refinancing, however this would prevent the entire transaction from moving forward, since the City has responsibility for the largest portion of the debt (53.3%) before consideration of property tax revenues that are allocated against the City’s share of the annual payment. This is not recommended since the refinancing is intended to generate annual cash flow savings that benefit the Water Enterprise Fund and ultimately the City’s ratepayers. ATTACHMENT 1. Resolution adopting the staff recommendation AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE Draft Preliminary Official Statement- Form of Disclosure certificate is located at page D-16. T:\Council Agenda Reports\2015\2015-06-16\Nacimiento Project Debt Refinancing\Council Agenda Report- Naci Debt Refi.docx C10 - 2 Attachment 1 35208746.2 [City of San Luis Obispo Resolution] ADOPTION COPY RESOLUTION NO. _____ (2015 Series) RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO, IN CONNECTION WITH THE REFUNDING OF THE NACIMIENTO WATER PROJECT REVENUE BONDS, APPROVING CERTAIN DISCLOSURE REGARDING THE CITY AND AUTHORIZING CERTAIN ACTIONS IN CONNECTION WITH SUCH REFUNDING WHEREAS, this Council (the “Council”) of the City of San Luis Obispo (the “City”) has heretofore entered into a Nacimiento Project Water Delivery Entitlement Contract (the “Delivery Contract”) with the San Luis Obispo County Flood Control and Water Conservation District (the “District”), in connection with the Nacimiento Water Project (the “Project”) for the supply of additional water for the use and benefit of the lands and inhabitants served by the City; and WHEREAS, on September 26, 2007, the SLO County Financing Authority (the “Authority”) issued $157,845,000 Nacimiento Water Project Revenue Bonds, 2007 Series A (the “2007A Bonds”) and $38,565,000 Nacimiento Water Project Revenue Bonds, 2007 Series B (Taxable) (the “2007B Bonds,” and together with the 2007A Bonds, the “2007 Bonds”) in order to finance the Project; and WHEREAS, the District and the Authority have determined that it is necessary and desirable to proceed with the refunding of all or a portion of the 2007A Bonds (the “Bond Issue”) through the issuance and sale of Municipal Obligations (as defined in the Delivery Contract); and WHEREAS, in connection with such refunding, the Council has been presented with a form of Preliminary Official Statement, together with an appendix containing statistical and other descriptive information regarding the City (the “Appendix”) and a form of Continuing Disclosure Agreement (the “Continuing Disclosure Agreement”); NOW, THEREFORE, the Council of the City of San Luis Obispo does hereby resolve and determine as follows: Section 1. The foregoing recitals are true and correct. Section 2. Raymond James & Associates, Inc., as underwriter for the Authority (the “Underwriter”) is authorized to use a Preliminary Official Statement and Official Statement, each containing an Appendix A (or a revised form thereof) describing certain statistical and other information of the City in the marketing and sale of the Authority’s Refunding Revenue Bonds (the “Bonds”), based upon information provided and to be provided by the City, with such changes from the form of Preliminary Official Statement submitted to this City Council as the City Administrative Officer, City Attorney, Director of Finance and Information Technology, or a designee thereof (each, an “Authorized Representative”) may determine to be in the best interests of the City. The City shall be responsible for notifying the Authority and the C10 - 3 Attachment 1 35208746.2 2 Underwriter should any information regarding the City in said Appendix materially change from the time of submission to the closing date of the Bond Issue. Section 3. The form of Continuing Disclosure Agreement presented to and reviewed by this meeting of the City Council is hereby approved, and the Authorized Representative of the City is hereby authorized and directed to execute and deliver a Continuing Disclosure Agreement, substantially in the form presented to and approved at this meeting of the Council, with such changes therein as the Authorized Representative and the District may approve, such approval to be evidenced by the signature of said Authorized Representative. Section 4. The Authorized Representatives of the City are hereby authorized and directed, for and in the name and on behalf of the City, to do or cause to be done any and all things and take any and all other actions in support of the issuance of the Bonds, including, without limitation, the execution of certificates and ancillary documents and the delivery of opinions on behalf of the City as may be reasonably required by the District, which they, or any of them, deem necessary or advisable in order to consummate the purposes described herein. [Remainder of page intentionally left blank.] C10 - 4 Attachment 1 35208746.2 3 Section 5. This resolution shall take effect immediately upon its adoption. Upon motion of Council Member ___________, seconded by Council Member __________, and on the following vote: AYES: NOES: ABSTENTIONS: ABSENT: The foregoing resolution was adopted this 16th day of June, 2015. By Name: Title: Mayor ATTEST: By________________________________ Name: Title: Anthony Mejia, CMC City Clerk APPROVED AS TO FORM: By________________________________ Name: Title: City Attorney C10 - 5 THIS PAGE IS INTENTIONALLY LEFT BLANK C10 - 6