DATE:
September 17, 2024
TO:
Mayor and Council Members
FROM:
Rachel Molina, City Manager
BY:
Casey Brooksher, Assistant City Manager
SUBJECT:
Community Facilities District 2005-1 Bond Refunding - Professional Services Agreement with NBS Government Finance Group
RECOMMENDED ACTION
It is recommended that the City Council authorize the City Manager to enter into an agreement with NBS Government Finance Group (NBS) in an amount of $25,000, to provide professional services related to the Community Facilities District (CFD) 2005-1 (Belgate Development Restructuring) Special Tax, Series 2014 Bond Refunding. As this agreement is solely related to the refinancing of a debt issue, if approved, the agreement would be separate from other existing agreements with NBS totaling $200,000 for ongoing services related to CFD formation, assessment district administration, and annexation services, for CFD 2005-1, CFD 2021-1, CFD 2022-1, and CFD 2023-1.
BACKGROUND
On April 14, 2005, under the provisions of the Mello-Roos Act, the City issued $18,554,508 initial principal amount City of Hesperia Community Facilities District No. 2005-1 (Belgate Development Restructuring), County of San Bernardino, State of California Special Tax Bonds, 2005 Series A (the “2005 CFD Bonds”). The 2005 CFD Bonds were issued to cause a refinancing and exchange of the $10,000,000 original principal amount of Community Facilities District No. 91-3 of the City of Hesperia, Special Tax Bonds (the “1992 Bonds”), which were in payment default. The bonds related to CFD 2005-1 are paid solely from assessments received from the district, and the bonds are not an obligation of the City.
On December 18, 2014, as a result of favorable market conditions, the 2005 CFD Bonds were refinanced into the CFD 2005-1 (Belgate Development Restructuring) Special Tax Refunding Bonds, Series 2014 (the “2014 CFD Bonds”) and achieved a savings in interest costs for the district. NBS provided needed professional services related to the 2014 CFD Bond refinancing due to their familiarity with the CFD 2005-1 district.
ISSUES/ANALYSIS
Current market conditions have presented an opportunity to refinance the 2014 CFD Bonds, in order to further reduce interest costs for district property owners. Based upon a recent CFD refunding analysis, $12.8 million of the 2014 CFD Bonds are callable. Further, the 2014 CFD Bonds were sold as “non-rated” bonds. Under current market conditions, CFD financing, with a similar value to lien ratio and development status as CFD 2005-1, have achieved an S&P rating that has enabled a sale with more competitive interest rates. As such, based upon current market projections, a refinancing of the 2014 CFD Bonds would result in an estimated net present value savings of approximately $840,000. Further, because the 2014 CFD Bonds are payable solely from assessments received from property owners within the district, the projected savings would be passed on as reduced assessments in the future.
In order to proceed with the refinancing, an agreement is needed for NBS to provide required disclosure information related to CFD 2005-1 for inclusion in the bond documents. If approved, the cost of these services would be paid from the bond’s costs of issuance upon completion of the refinancing. If market conditions change, however, and render the refinancing no longer feasible, the cost of the services would be paid from CFD 2005-1 district funds.
CITY GOAL SUPPORTED BY THIS ITEM
Financial Health: Maintain a balanced budget and adequate reserves.
FISCAL IMPACT
An agreement with NBS in the amount of $25,000 is needed to provide the required disclosure services related to CFD 2005-1 in order to proceed with the proposed refinancing of the 2014 CFD Bonds. If approved, the cost of these services would be paid from the bond’s costs of issuance, upon completion of the refinancing. If market conditions change, however, and render the refinancing no longer feasible, the cost of the services would be paid from CFD 2005-1 district funds.
ALTERNATIVE(S)
Provide alternative direction to staff.
ATTACHMENT(S)
None
Page PAGE 2 of NUMPAGES 2
Staff Report to the Mayor and Council Members
Community Facilities District 2005-1 Bond Refunding - Professional Services Agreement with NBS Government Finance Group September 17, 2024
City of Hesperia
STAFF REPORT