File #: 14-240    Version: 1 Name: Staff Report RDA 2014 TAB Refunding Bonds
Type: Staff Report Status: Filed
In control: City Council
Meeting Date: 6/16/2014 Final action: 6/16/2014
Enactment date: Enactment #:
Title: Staff Report for the Approval of the Successor Agency to the Redevelopment Agency of the City of San Leandro 2014 Subordinate Tax Allocation Refunding Bonds
Sponsors: David Baum Finance Director
Attachments: 1. Indenture, 2. Bond Purchase Agreement, 3. 2002 Refunding Instructions, 4. 2004 Refunding Instructions, 5. PowerPoint 10B Action 2014 0616 Tax Allocation Bonds.pdf
Related files: 14-241
Title
Staff Report for the Approval of the Successor Agency to the Redevelopment Agency of the City of San Leandro 2014 Subordinate Tax Allocation Refunding Bonds
 
Staffreport
SUMMARY AND RECOMMENDATION
 
Staff recommends that the Successor Agency approve the resolutions and documents required to issue the Successor Agency to the Redevelopment Agency of the City of San Leandro 2014 Subordinate Tax Allocation Refunding Bonds ("2014 Refunding Bonds"). The proposed 2014 Refunding Bonds will be issued to refund $10,375,000 of Redevelopment Agency of the City of San Leandro Tax Allocation Bonds, Series 2002 ("2002 TABs") and $4,720,000 of Redevelopment Agency of the City of San Leandro Tax Allocation Bonds, Series 2004 ("2004 TABs"). The par amount of the 2014 Refunding Bonds will not exceed $14 million and they will mature September 1, 2034. Annual debt service on the 2014 Refunding Bonds will not exceed the annual debt service currently payable on the outstanding 2002 and 2004 TABs.
 
BACKGROUND
 
In December 2002, $15,935,000 of 2002 TABs were issued to refund the Redevelopment Agency of the City of San Leandro Tax Allocation Bonds, Series 1993 ("1993 TABs"). The 1993 TABs were issued to fund redevelopment activities of benefit to the Plaza Redevelopment Project Area. In June 2004, $5,500,000 of 2004 TABs were issued to fund redevelopment activities of benefit to the West San Leandro/MacArthur Boulevard Redevelopment Project Area. The 2002 and 2004 TABs are secured by property taxes in the Plaza Redevelopment Project Area and the West San Leandro/MacArthur Boulevard Redevelopment Project Area, respectively. The Successor Agency to the Redevelopment Agency of the City of San Leandro ("Successor Agency") has an opportunity to refinance the 2002 and 2004 TABs to realize savings in annual debt service payments. The savings from the 2002 and 2004 TABs will be distributed to affected taxing entities due to the dissolution of the City's Redevelopment Agency. The following table presents the status of the currently outstanding Tax Allocation Bonds:
 
 
Table 1: Tax Allocation Bonds Status
Series Name         Issue Size      Final Maturity      Outstanding Par      Next Call Date
Series 2002        15,935,000          9/1/2032          11,080,000      Currently Callable
Series 2004          5,500,000          9/1/2034            4,850,000      Currently Callable
Series 2008        27,530,000          9/1/2038          25,195,000      Currently Callable
      $48,956,000              $41,125,000
 
 
The current municipal bond market allows the Successor Agency to refinance the 2002 and 2004 TABs, reducing annual debt service and realizing total savings as detailed in Table 2 below:
 
 
      Table 2: 2014 Refunding Bonds Savings Analysis
 
      Description      Amount
      2002 & 2004 TABs Debt Service      $23,679,338
      2014 TABs Debt Service      $18,888,361
      Cash Flow Savings      $  4,790,977
 
      Net Present Value of Savings      $1,652,045
 
      As Percent of Refunded Par      10.94%
 
 
Based on municipal bond market rates effective May 30, staff estimates that the City will realize $4.79 million in total cash flow savings over the life of the 2002 and 2004 TABs. This corresponds to $1.65 million in net present value savings, or 10.94% when taken as a percentage of the refunded par amount. The general rule of thumb is that a refunding financing should be executed if net present value savings exceeds 3%.
 
The refunding of the 2002 TABs is expected to generate $4.24 million in gross savings, corresponding to $1.23 million in net present value savings (11.91% of refunded par). The final maturity will match the 2002 TABs maturity of 9/1/2032. Similarly, refunding the 2004 TABs is expected to generate $551,000 in gross savings, corresponding to $416,000 in net present value savings (8.82% of refunded par). The final maturity will match the 2004 TABs maturity of 9/1/2034.
 
Sources and Uses of Funds
The estimated sources and uses of funds for the 2014 Refunding Bonds are as follows:
 
Sources of Funds
Par Amount of 2014 Refunding Bonds      $ 13,255,000
Release from 2002 TABs Escrow Fund       1,427,880
Release from 2002 TABs Reserve Fund       1,130,064
Release from 2004 TABs Reserve Fund       400,817
Original Issue Premium       682,362
Total Sources of Funds      $ 16,896,123
 
Uses of Funds
Refunding Escrow Deposit      $ 15,270,840
Costs of Issuance       368,288
Underwriter's Discount       69,214
Debt Service Reserve Fund      1,187,781
Total Uses of Funds      $ 16,896,123
 
Sources of funds include the par and premium amount of the 2014 Refunding Bonds as well as the funds available to be released from the 2002 and 2004 TABs debt service reserve and escrow funds. It is currently expected that a debt service reserve fund will be funded. The underwriter's discount is a fee paid to the underwriter for structuring and marketing the 2014 Refunding Bonds. The costs of issuance pay for legal, financial advisor, City staff, trustee, printing and other issuance costs.
 
The Financing Team
Staff has been working with the firms listed below to bring this financing transaction to the Successor Agency for approval. Therefore, the resolution of issuance to be adopted by the Successor Agency directs staff to enter into agreements for services with the following firms in the following roles:
 
Name of Firm      Role
Public Financial Management      Financial Advisor
Jones Hall, APLC      Bond Counsel
Jones Hall, APLC      Disclosure Counsel
Stifel Nicolaus      Underwriter
U.S. Bank National Association      Trustee
 
Public Financial Management ("PFM") was chosen via a request for proposals to serve as the City's financial advisor. PFM most recently served as financial advisor for the City's 2013 Refunding Lease Revenue Bonds.
 
Jones Hall, APLC, has been the City's bond counsel since 1979. Jones Hall ranks among the top two bond counsel in the number of state and local bond issues in California during each of the past ten years. Similarly, during the past ten years, Jones Hall has been among the top two as disclosure counsel.
 
Stifel Nicolaus ("Stifel") was chosen via a request for proposals. Stifel was deemed to be the strongest underwriter from a group of five proposals received. The primary reason for Stifel's selection is its experience with Tax Allocation Bonds in California, particularly since the dissolution of redevelopment agencies.
 
U.S. Bank is currently the bond trustee for the City's 2002 and 2004 TABs. U.S. Bank is one of the top five municipal bond trustees in the country and most recently served as trustee for the City's 2013 Refunding Lease Revenue Bonds. U.S. Bank also serves the City with two local branch offices.
 
All fees associated with issuing the 2014 Refunding Bonds will be paid from bond proceeds.
 
Current City Council Policy
 
The City Council and Successor Agency must approve municipal debt issues that impact their financial position.
 
Summary of Public Outreach Efforts
 
The meeting was properly noticed in accordance with California law.
 
Legal Analysis
 
The bond documents listed above have been reviewed and approved by the City's Bond Counsel and City Attorney, which they believe represent legal documents in substantially final form.
 
Fiscal Impact
 
The par value of the Refunding Bonds will not exceed $14,000,000 and they will mature in 2034.  The Refunding Bonds will have an average interest cost of less than 5% and average annual debt service on the Refunding Bonds will be approximately $1,000,000.  Annual debt service on the Refunding Bonds will not exceed the combined annual debt service currently payable on the outstanding 2002 and 2004 TABs.
 
Budget Authority
 
City of San Leandro Charter
 
ATTACHMENTS
 
·      Indenture of Trust
·      Bond Purchase Agreement
·      Irrevocable Refunding Instructions (2002 TABs)
·      Irrevocable Refunding Instructions (2004 TABs)
 
PREPARED BY:  David Baum, Finance Director, Finance Department