DATE:
March 15, 2022
TO:
Mayor and Council Members
FROM:
Nils Bentsen, City Manager
BY:
Casey Brooksher, Director of Administrative Services
SUBJECT:
Resolution Approving Institution of Proceedings to Issue 2022 Refunding Lease Revenue Bonds to Refinance the Outstanding 2012 Lease Revenue Bonds (Water Rights Acquisition) of the Hesperia Public Financing Authority
RECOMMENDED ACTION
It is recommended that the City Council adopt Resolution No. 2022-21 Approving Institution of Proceedings to Refinance Outstanding 2012 Lease Revenue Bonds (Water Rights Acquisition) of the Hesperia Joint Public Financing Authority, and engaging professional services relating thereto.
BACKGROUND
In 2012, the Hesperia Joint Public Financing Authority (Authority) issued the following bonds (2012 Bonds) to assist the City with the acquisition of water rights Issue Outstanding Par
Hesperia Joint Public Financing Authority, 2012 Lease Revenue Bonds (Water Rights Acquisition) (1) $ 26,735,000
(1) Callable any date after 10/1/2022 at par. Current outstanding principal balance is $21,350,000 The 2012 Bonds are payable from lease payments made by the City to the Authority from the City’s General Fund for use and occupancy of the City’s Police Station, Civic Plaza Park and Hesperia Branch Library.
The City’s municipal advisor, in consultation with the proposed underwriter, estimates that, based on current market conditions:
(i) the projected debt service savings from issuing refunding bonds (Refunding Bonds) to refinance the outstanding 2012 Bonds is $3,077,450, or an average annual reduction in debt service payments of $153,873 over the next twenty (20) years, (ii) the projected true interest cost is estimated to be 2.91%, and (iii) the principal amount of outstanding bonds is projected to be reduced by $3,730,000, from $21,350,000 to $17,620,000.
The final maturity date of the Refunding Bonds would be the same as the final maturity date of the 2012 Bonds: October 1, 2042.
The City’s Debt Policy requires a threshold of at least 3% net present value savings to be met in order to refund bonds. Under current market conditions, the proposed refunding which includes the costs of issuing the Refunding Bonds, results in projected net present value savings of 5.60% of the outstanding principal amount of the 2012 Bonds.
Below is a table summarizing the details of the 2022 Refunding Bonds:
*Preliminary subject to change. Based on interest rates as of March 3, 2022.
The adoption of the Resolution authorizes staff to initiate the proceedings for a refunding of the 2012 Bonds; approves professional services related to the refunding; and directs City officials to execute related documents as needed. The City’s bond issuance team has been in place for many years and staff recommends these firms to continue providing those services for this refunding issue. The Resolution authorizes the following firms to participate in the transaction and the City Manager and/or the Director of Administrative Services to execute agreements as necessary:
Bond/Disclosure Counsel Services – Jones Hall, A Professional Law Corporation Municipal Advisor – Fieldman, Rolapp & Associates
Underwriter – Stifel, Nicolaus & Company
The Resolution also authorizes the City Manager and/or the Director of Administrative Services to select and execute an agreement with a state or national bank to act as trustee for the Refunding Bonds.
The next steps will be to prepare required legal and financing documents and secure an underlying credit rating from Standard & Poor’s. The final step will be for the City Council/Authority to consider resolutions authorizing the issuance of the Refunding Bonds and approving related documents, including the Preliminary Official Statement (bond offering document). Based on the current schedule, staff anticipates returning to the City Council/Authority for authorization to issue the Refunding Bonds at a June City Council meeting.
FISCAL IMPACT
The issuance of the Refunding Bonds will result in an average annual reduction in debt service payments of approximately $153,873. These are estimated savings based on market conditions as of March 3, 2022 and are subject to change. Costs will be paid from the proceeds of the Refunding Bonds.
ALTERNATIVE(S)
Provide alternative direction to staff.
ATTACHMENT(S)
City Council Resolution No. 2022-21
Refunding Analysis
City of Hesperia STAFF REPORT City of Hesperia STAFF REPORT City of Hesperia
STAFF REPORT
City of Hesperia
STAFF REPORT
Staff Report to the Mayor and City Council authorizing staff to refinance the Outstanding 2012 Lease Revenue Bonds (Water Rights Acquisition) March 15, 2022