FISCAL IMPACT: There is no fiscal impact associated with this agenda item.
ENVIRONMENTAL ISSUES: There are no environmental issues associated with this agenda item.
ATTACHMENTS:
1. Resolution
2. Exhibit A: Legal Description
3. Exhibit B: Site Plan
4. Exhibit C: Revocable Encroachment Permit Agreement
PREPARED BY: Paul Willis, Director of Public Works
RECOMMENDATION:
1. Open the public hearing and receive comments; and
2. Close the public hearing; and
3.Adopt the resolution approving a Revocable Encroachment Permit Application for 690 Fairway Circle.
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RESOLUTION NO. 23-
RESOLUTION OF THE CITY COUNCIL OF THE TOWN OF HILLSBOROUGH
APPROVING A REVOCABLE ENCROACHMENT PERMIT APPLICATION
FOR 690 FAIRWAY CIRCLE PURSUANT TO CEQA GUIDELINE 15303.
WHEREAS, the owner(s) of 690 Fairway Circle has submitted a revocable encroachment permit application to the Town; and
WHEREAS, the owner(s) proposes to install a two foot high freestanding concrete wall with three foot six inch tall iron railings and a stucco finish, a five foot six inch high iron pedestrian gate, a five foot six inch high automatic driveway gate, a four foot six inch tall stucco mailbox and four seven foot eight inch high stucco columns (“Outdoor Fixtures”) within the public right-of-way; and
WHEREAS, pursuant to Hillsborough Municipal Code Section 12.12.030, the City Council shall approve, conditionally approve, or deny the an application for a revocable encroachment permit based on public health, safety and welfare needs and taking into account in that regard, the number and location of any other outdoor fixtures located within the right-of-way in the vicinity of the proposed outdoor fixture, the likelihood of the town's need for access to the affected portion of the right-of-way, the effect that allowing the outdoor fixture within the right-of-way would have on parking and on traffic safety (traffic meaning motor vehicles, self-propelled vehicles and pedestrians), and any other factors that the council deems relevant to a determination of the public health, safety, and welfare needs.
WHEREAS, based on the required findings identified above, staff recommends that the City Council approve the revocable encroachment permit application for 690 Fairway Circle; and
WHEREAS, the City Council and the public have been presented in open and noticed public meetings, all of the details of the project.
NOW, THEREFORE, BE IT RESOLVED that the City Council of the Town of Hillsborough hereby approves the revocable encroachment permit application for 690 Fairway Circle to install outdoor fixtures in the public right-of-way as shown in Exhibit B upon the owners’ execution of the agreement attached hereto as Exhibit C:
1. The City Council finds the outdoor fixtures have no impact on the public health, safety and welfare need, taking the following into account in that regard as further detailed below:
a. Other outdoor fixtures in the vicinity of the proposed outdoor fixtures are similar in number and location and are more consistent with frontages found in the neighborhood and across Town.
b. The outdoor fixtures within the right-of-way would have no impact on parking and on traffic safety.
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ATTACHMENT 1
EXHIBIT "A"
Legal Description
CLTA Preliminary Report Form - Modified (11.17.06) Printed: 12.02.22 @ 02:41 PM by SCA0002402.doc / Updated: 07.10.19 3 CA-FT-FSMO-01500.080655-SPS-1-22-FSMO-6552200251 For APN/Parcel ID(s): 028-172-040
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE TOWN OF HILLSBOROUGH, COUNTY OF SAN MATEO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 11, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "HILLSBOROUGH MANOR HILLSBOROUGH, CALIFORNIA", FILED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SAN MATEO, STATE OF CALIFORNIA ON DECEMBER 7, 1945 IN BOOK 25 OF MAPS AT PAGE(S) 4.
JPN 028-017-172-04
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WHEN RECORDED MAIL TO:
City Engineer of the Town of Hillsborough
1600 Floribunda Ave.
Hillsborough, CA 94010
AGREEMENT REGARDING A REVOCABLE ENCROACHMENT PERMIT
THIS AGREEMENT is entered into between the TOWN OF HILLSBOROUGH (“Town”) and ______________________ the “Owner” of that certain real property commonly known as 690 Fairway Circle, Hillsborough, California, more particularly described on Exhibit A attached hereto.
Owner desires to install a two foot high freestanding concrete wall with three foot six inch tall iron railings and a stucco finish, a five foot six inch high iron pedestrian gate, a five foot six inch high automatic driveway gate, a four foot six inch tall stucco mailbox and four seven foot eight inch high stucco columns (“Outdoor Fixtures”). The owner desires to install the wall, gates, and columns between twenty one and thirty three feet from the street, which is in a location more consistent with the front property lines of the neighboring properties, and to have more usable space in an enclosed and secured front yard. The Outdoor Fixtures are shown in Exhibits B1 and B2 (Site Plan).
Immediately upon proof of recordation of this document by the San Mateo County Recorder’s Office, the Town shall issue a revocable permit for the Outdoor Fixtures in the right-of-way. Owner for Owner’s self, successors, and assigns, hereby agrees that the Outdoor Fixtures and all construction related thereto shall be removed from the Town’s public right-of-way, at Owner’s expense, upon written demand of the Town. Such demand shall be based on the fact that removal is needed by the Town or by a utility company, or for some other similar reason. Removal shall be complete within fourteen (14) days after Owner’s receipt of the written demand.
If removal is needed by the Town or by a utility company for utility purposes or other temporary needs, upon cessation of such need, confirmed by the Town, Owner shall be entitled to restore the Outdoor Fixtures in the public right-of-way under the continued terms of this Agreement. However, if removal of the Outdoor Fixtures is needed by the Town for use of any part of the public right-of-way, -247-
2 the Owner shall not be permitted to restore the Outdoor Fixtures in the public right-of-way without additional approval from the Director of Public Works.
The restrictions contained in this Agreement may be removed only by a document executed and recorded by the Town and the Owner.
TOWN OF HILLSBOROUGH OWNER:
By: ___________________________ ______________________________ Paul Willis, P.E., QSD/QSP
Director of Public Works
Date ___________________________ Date___________________________ -248-
EXHIBIT "A"
Legal Description
CLTA Preliminary Report Form - Modified (11.17.06) Printed: 12.02.22 @ 02:41 PM by SCA0002402.doc / Updated: 07.10.19 3 CA-FT-FSMO-01500.080655-SPS-1-22-FSMO-6552200251 For APN/Parcel ID(s): 028-172-040
THE LAND REFERRED TO HEREIN BELOW IS SITUATED IN THE TOWN OF HILLSBOROUGH, COUNTY OF SAN MATEO, STATE OF CALIFORNIA AND IS DESCRIBED AS FOLLOWS:
LOT 11, AS SHOWN ON THAT CERTAIN MAP ENTITLED, "HILLSBOROUGH MANOR HILLSBOROUGH, CALIFORNIA", FILED IN THE OFFICE OF THE RECORDER OF THE COUNTY OF SAN MATEO, STATE OF CALIFORNIA ON DECEMBER 7, 1945 IN BOOK 25 OF MAPS AT PAGE(S) 4.
JPN 028-017-172-04
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2 c. There are no other factors that the City Council deems relevant to make a determination of the public health, safety, and welfare needs.
First, there is no evidence that the proposed fixtures to be installed as part of this application would create a public health, safety and welfare impact in the Town.
Instead, installation of the fixtures at the desired location will bring consistency to this area as the proposed location of the fixtures is consistent with the front property lines of neighboring properties.
Second, the Town does not anticipate a public health, safety, or welfare impact in approving the application primarily because the Town does not see any future need to access the area where the application will be approved. While Town utilities run through the affected area, the design has been modified to allow Town staff easy access to the utilities in the event that access is required. In fact, approval of the application will have no impact on any necessary access to Town utilities and infrastructure.
Finally, approval of the application is not anticipated to impact parking and traffic safety because Fairway Circle is not a main throughfare, so traffic is limited to residents of the neighborhood. Additionally, the design of the proposed right of way improvements still allows for two vehicular parking stalls.
Mayor of the Town of Hillsborough
Attest: City Clerk
This resolution was adopted by the City Council of the Town of Hillsborough at its regular meeting held on the 13th day of March 2023, by the following vote of the members thereof:
AYES: Councilmembers
NOES: Councilmembers
ABSENT: Councilmembers
ABSTAIN: Councilmembers
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
9 DISCUSSION
CITY COUNCIL MEETING
MARCH 13, 2023
AGENDA STAFF REPORT
ITEM SUBJECT: DISCUSSION ON REFINANCING OF TOWN OF HILLSBOROUGH’S
CERTIFICATES OF PARTICIPATION AND INTEREST RATE SWAPS PURSUANT TO CEQA GUIDELINE SECTION 15378
SUMMARY: This agenda item is to review and discuss refinancing of the Town’s Certificates of Participation and interest rate swaps.
Recent trends in rates indicate that there may be a unique opportunity to refund the Town’s certificates of participation “COPs” (Series 2000A, 2000B, 2003A, and 2006A) and unwind the fixed rate interest rate hedge “swaps” on the Series 2000B, 2003A, and 2006A at a lower cost than in previous years.
The reason that the net cost to unwind the synthetic fixed rate deals (2006, 2003 & 2000) and refund the COPs to a fixed rate is now less costly is a function of the significant richness in taxexempt to taxable rate ratios. Tax-exempt rates (muni bond rates) have declined compared to taxable rates (Treasury swap rates) creating a spread that translates to a "temporary" lower cost for unwinding the swaps, without the normally accompanying increase in bond borrowing rates.
To implement a bond transaction/swap unwind, an addendum to existing agreements with BB&K for bond attorney services and Acacia Financial Group for bond analysis services will be necessary.
The presentation will provide an overview of the opportunity and considerations for determining any next steps. This may include:
1. Direct staff to proceed with bond refunding and swap unwinding, which may include financing for additional proceeds for capital improvements;
2. Authorize City Manager to review and execute addendums to existing agreements with BB&K and Acacia Financial Group for bond transaction services; and
3. Bring the item to the Financial Advisory Committee for review and recommendation to the City Council.
FISCAL IMPACT: There is no fiscal impact associated with this discussion item.
ENVIRONMENTAL ISSUES: This item is exempt from environmental review pursuant to the California Environmental Quality Act (CEQA) Guidelines sections 15378(b)(2) and 15378(b)(5) as -253-
Agenda Staff Report - Hillsborough City Council
March 13, 2023
ongoing administrative or organizational activities that will not result in direct or indirect physical changes to the environment.
ATTACHMENTS:
1. Acacia Financial Group Memo dated February 28, 2023
2. PowerPoint presentation
PREPARED BY: Jan Cooke, Finance Director
RECOMMENDATION: Consider providing direction to staff as noted in the staff report. -254-
Via Electronic Mail
MEMORANDUM
To: Jan Cooke, C.P.A., Finance Director, Town of Hillsborough From: Peter Nissen, Managing Director
Josh Cooperman, Sr. Project Advisor
Date: February 28, 2023
Re: Town of Hillsborough, CA - Swap Modifications Options Valuations Pursuant to our discussions and as follow-up to the presentation to the Board, below please find a summary table of the costs to modify the various certificates of participation (COPs) and accompanying swap agreements. The first three columns (A, B and C) represent the estimated cost to convert the existing synthetic fixed rate structure (i.e. cash settle and terminate the swap and refund the variable rate debt) to a traditional fixed rate structure. The fourth column (D) represents the cost to convert the %LIBOR swap related to the 2006 COPs to a SIFMA based swap (no refunding of the underlying variable rate COPs).
(A) (B) (C) (D)
Est. Cost Est. Cost Est. Cost Est. Cost
to Convert to Convert to Convert to Convert
2006 COPs & 2003 COPs & 2000 COPs & 2006 COPs
%LIBOR Swap SIFMA Swap SIFMA Swap %LIBOR Swap
Valuation Date to Fixed Rate to Fixed Rate to Fixed Rate to SIFMA Swap 2/27/2023 Total PV $187k total $64k total $122k total ($348k total) Annual $20k/ yr $9k/ yr $20k/ yr ($59k-$2k/ yr)
Swap Unwind $363k $350k $130k n/a
Ref. TIC (%) 3.25% 3.16% 3.22% n/a
1/31/2023 Total PV $250k total ($75k total) ($64k total) ($289k total) Annual $25k/ yr ($5k/ yr) ($10k/ yr) ($48k-$2k/ yr)
Swap Unwind $560k $389k $165k n/a
Ref. TIC (%) 2.95% 2.74% 2.66% n/a
12/29/2022 Total PV $328k total $1k total $90k total $320k total Annual $34k/ yr ($2k/ yr) $14k/ yr $55k-$2k/ yr
Swap Unwind $472k $291k $121k n/a
Ref. TIC (%) 3.33% 3.17% 3.11% n/a
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ATTACHMENT 1
(A) (B) (C) (D)
Est. Cost Est. Cost Est. Cost Est. Cost
to Convert to Convert to Convert to Convert
2006 COPs & 2003 COPs & 2000 COPs & 2006 COPs
%LIBOR Swap SIFMA Swap SIFMA Swap %LIBOR Swap
Valuation Date to Fixed Rate to Fixed Rate to Fixed Rate to SIFMA Swap 11/30/2022 Total PV $443k total $149k total $148k total $270k total Annual $43k/ yr $18k/ yr $23k/ yr $45k-$2k/ yr
Swap Unwind $550k $405k $165k n/a
Ref. TIC (%) 3.42% 3.27% 3.22% n/a
10/31/2022 Total PV $601k total $279k total $185k total $338k total Annual $62k/ yr $32k/ yr $30k/ yr $55k-$2k/ yr
Swap Unwind $400k $245k $103k n/a
Ref. TIC (%) 4.13% 4.00% 3.84% n/a
9/30/2022 Total PV $629k total $325k total $195k total $302k total Annual $65k/ yr $40k/ yr $30k/ yr $46k-$2k/ yr
Swap Unwind $470k $345k $137k n/a
Ref. TIC (%) 4.02% 3.86% 3.70% n/a
8/31/2022 Total PV $572k total $267k total $170k total $280k total Annual $57k/ yr $31k/ yr $22k/ yr $42k-$2k/ yr
Swap Unwind $677k $562k $228k n/a
Ref. TIC (%) 3.42% 3.21% 2.93% n/a
7/29/2022 Total PV $625k total $313k total $170k total $266k total Annual $60k/ yr $34k/ yr $24k/ yr $42k-$2k/ yr
Swap Unwind $890k $780k $331k n/a
Ref. TIC (%) 3.08% 2.84% 2.49% n/a
6/30/2022 Total PV $678k total $343k total $177k total $298k total Annual $66k/ yr $38k/ yr $25k/ yr $46k-$2k/ yr
Swap Unwind $778k $637k $265k n/a
Ref. TIC (%) 3.44% 3.24% 2.91% n/a
5/31/2022 Total PV $655k total $276k total $154k total $386k total Annual $64k/ yr $31k/ yr $23k/ yr $60k-$2k/ yr
Swap Unwind $855k $665k $280k n/a
Ref. TIC (%) 3.24% 3.04% 2.74% n/a
4/29/2022 Total PV $727k total $359k total $197k total $364k total Annual $70k/ yr $40k/ yr $27k/ yr $60k-$2k/ yr
Swap Unwind $825k $640k $270k n/a
Ref. TIC (%) 3.46% 3.29% 3.03% n/a
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(A) (B) (C) (D)
Est. Cost Est. Cost Est. Cost Est. Cost
to Convert to Convert to Convert to Convert
2006 COPs & 2003 COPs & 2000 COPs & 2006 COPs
%LIBOR Swap SIFMA Swap SIFMA Swap %LIBOR Swap
Valuation Date to Fixed Rate to Fixed Rate to Fixed Rate to SIFMA Swap 3/31/2022 Total PV $756k total $359k total $187k total $299k total Annual $68k/ yr $39k/ yr $25k/ yr $48k-$2k/ yr
Swap Unwind $1,050k $845k $350k n/a
Ref. TIC (%) 3.05% 2.86% 2.59% n/a
2/28/2022 Total PV $689k total $339k total $182k total $302k total Annual $60k/ yr $35k/ yr $25k/ yr $48k-$2k/ yr
Swap Unwind $1,275k $1,143k $487k n/a
Ref. TIC (%) 2.49% 2.24% 1.92% n/a
1/31/2022 Total PV $694k total $387k total $201k total $260k total Annual $60k/ yr $40k/ yr $27k/ yr $41k-$2k/ yr
Swap Unwind $1,325k $1,239k $534k n/a
Ref. TIC (%) 2.43% 2.16% 1.83% n/a
12/31/2021 Total PV $592k total $301k total $148k total $244k total Annual $48k/ yr $31k/ yr $20k/ yr $38k-$2k/ yr
Swap Unwind $1,460k $1,385k $597k n/a
Ref. TIC (%) 2.02% 1.74% 1.34% n/a
11/30/2021 Total PV $634k total $347k total $137k total $219k total Annual $53k/ yr $34k/ yr $19k/ yr $33k-$2k/ yr
Swap Unwind $1,505k $1,458k $628k n/a
Ref. TIC (%) 2.03% 1.73% 1.21% n/a
10/29/2021 Total PV $622k total $348k total $161k total $220k total Annual $52k/ yr $34k/ yr $21k/ yr $33k-$2k/ yr
Swap Unwind $1,510k $1,470k $642k n/a
Ref. TIC (%) 2.02% 1.73% 1.29% n/a
9/30/2021 Total PV $614k total $364k total $166k total $206k total Annual $50k/ yr $35k/ yr $21k/ yr $31k-$2k/ yr
Swap Unwind $1,560k $1,550k $684k n/a
Ref. TIC (%) 1.94% 1.65% 1.18% n/a
8/31/2021 Total PV $600k total $353k total $158k total $192k total Annual $48k/ yr $33k/ yr $20k/ yr $29k-$2k/ yr
Swap Unwind $1,650k $1,655k $728k n/a
Ref. TIC (%) 1.79% 1.47% 1.02% n/a
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Please note that these are estimates and have not been evaluated with the counter-party to the swaps (JP Morgan) for pricing.
Please free to contact us regarding this report.
(A) (B) (C) (D)
Est. Cost Est. Cost Est. Cost Est. Cost
to Convert to Convert to Convert to Convert
2006 COPs & 2003 COPs & 2000 COPs & 2006 COPs
%LIBOR Swap SIFMA Swap SIFMA Swap %LIBOR Swap
Valuation Date to Fixed Rate to Fixed Rate to Fixed Rate to SIFMA Swap 7/30/2021 Total PV $570k total $333k total $152k total $189k total Annual $45k/ yr $31k/ yr $18k/ yr $27k-$2k/ yr
Swap Unwind $1,690k $1,705k $753k n/a
Ref. TIC (%) 1.69% 1.39% 0.93% n/a
6/30/2021 Total PV $528k total $289k total $136k total $190k total Annual $41k/ yr $28k/ yr $17k/ yr $27k-$2k/ yr
Swap Unwind $1,590k $1,599k $714k n/a
Ref. TIC (%) 1.81% 1.52% 1.08% n/a
5/18/2021 Total PV $514k total $299k total $158k total $166k total Annual $40k/ yr $29k/ yr $18k/ yr $24k-$2k/ yr
Swap Unwind $1,569k $1,598k $730k n/a
Ref. TIC (%) 1.82% 1.54% 1.10% n/a
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HILLSBOROUGH
California
City Council Meeting
Discussion Item – Bond Refunding/Swap Unwind
Opportunity
March 13, 2023
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ATTACHMENT 2
Agenda
Discussion Item –Provide direction to staff
1. Introduction
2. Review the opportunity details
3. Summary and discussion
2 -260-
Executive Summary – COP Financings Modification Opportunity • The Town has three variable rate COP issuances that are “swapped” to a fixed rate (aka “synthetic fixed rate”) under three swap agreements, where the Town pays a fixed rate and receives a variable rate, which variable rate is used to offset the variable rate payments the Town owes its bondholders • 2000 & 2003 COP’s “swap” variable rate is based upon receiving SIFMA (US markets tax-exempt index), and 2006 COP “swap” variable rate is based upon receiving a % of one-month LIBOR (UK bank index). • Synthetically fixed rate issuances are more complicated to administer and inherently bear various risks not borne by traditional fixed rate (discussed later).
• If the Town can ‘convert’ its synthetic fixed rate borrowings traditional fixed rate (e.g. publicly offered or privately placed bonds) structure with very nearly similar annual debt service, it can reduce its risk position and reduce the administrative burden on staff (in addition to any potential debt service savings).
• Unique current market conditions may permit this action. 3 -261-
How the Cost/Value to Convert from Synthetic Fixed Rate to Traditional Fixed Rate Changes • Normally, the cost (gross and net present value [NPV]) of converting from synthetic fixed rate traditional fixed rate is basically constant and immune to the movement in long term prevailing rates • If long term rates decline (normally the opportunity for issuers to refund their fixed rate debt for savings), the borrowing cost to refund the existing variable rate debt goes down (a good thing!), however the cost to terminate the swap agreement correspondently goes up1 (a bad thing).
• If long term rates increase, the cost to terminate the swap agreement goes down (a good thing!), however the borrowing cost to refund the existing variable rate debt goes up (a bad thing). • These two moving pieces normally move in tandem and offset each other keeping the “net” cost to convert basically static. • However, these involve two different markets (swap vs. bonds), and if these two markets dislocate (i.e., a separation develops between the two markets’ yield curves), then the net cost of converting will fluctuate. • If swap rates (Taxable [TX] represented by LIBOR swap rates and TE represented by SIFMA swap rates) rise relative to TE bond rates, then the cost of terminating the swaps goes down ‘faster’ than the cost borrowing TE fixed rate goes up. • This event has occurred over the past few months meaning the net cost of converting from synthetic fixed rate to traditional fixed rate has improved from the perspective of the Town. 1 Note: The ‘value’ or price of a fixed payer swap has an inverse relationship with interest rates just like a fixed rate bond meaning that if rates rise, the “price” of bonds and swaps falls and if rates decline, the “price” of bonds and swap increase. The reason that rising rates are “good thing” for the Town’s swaps price (or termination amount) is that the Town has “sold” the fixed rate (as opposed to normally “buying” a bond or fixed rate security)
4 -262-
Graph of the Effect of Swap Rates (TX) and Bond
Rate (TE) Dislocation (Why this works right now)
1 Note: 10-year tenor is used as a proxy for the terms of each of the three Town swaps which have final maturities respectively of 2029 (2000 swap), 2033 (2003 swap) and 2034 (2006 swap) • The graph (right upper) maps LIBOR swap
rates’ 10 year tenor1 (i.e. 10 year term)
against AAA rated TE Bonds of 10-year
maturity) for the past five years.
• When the difference (spread) between the
10yr LIBOR swap rate (upper orange line)
and the 10yr AA TE bond rate (lower white
line) gets wider, the cost of converting from
synthetic fixed rate to traditional fixed rate
moves in favor of the Town.
• Also shown in the spread graph at bottom – the lower the graph goes here, the less costly to convert from synthetic fixed rate
to traditional fixed rate:
5 -263-
• As also shown in the separate Swap
Valuation Memorandum (2/28/23), the
estimated cost/savings for the 2000
COPS, 2003 COPS and 2006 COPs is
shown a right1.
6 1 Note: These values presume that future costs of the LOC for existing VRDBs remain “as is” and that the relationship between the COPS resets and the variable rate received on the existing swaps remains neutral.
Risk of Proceeding (What are the risks)
• If the relationship between Swap Rates and TE Bond Rates reverts back to historically norms before the transaction is completed, the economic value could erode or evaporate, and the Town could elect not to proceed further.
• Many of the transaction costs (e.g., underwriter, etc.) are subject to bond closing, but some costs may be unavoidable once incurred or initiated (e.g. rating costs, publication costs, some legal costs) even if the transaction is discontinued.
Current Estimate of Value of Proceeding with Transaction (What is this worth) (A) (B) (C)
Est. Cost Est. Cost Est. Cost
to Convert to Convert to Convert
2006 COPs & 2003 COPs & 2000 COPs &
%LIBOR Swap SIFMA Swap SIFMA Swap
Valuation Date to Fixed Rate to Fixed Rate to Fixed Rate 2/27/2023 Total PV $187k total $64k total $122k total
Annual $20k/ yr $9k/ yr $20k/ yr
Swap Unwind $363k $350k $130k
Ref. TIC (%) 3.25% 3.16% 3.22%
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Actions Necessary to Convert from Syn. Fixed Rate to Trad. Fixed Rate (What is needed to do this) • Swap Termination or “Unwind”
• The swaps would need to be terminated. As this action is irrevocable, this would not happen until the day of, and only upon, the sale of the fixed rate refunding bonds.
• The Dodd-Frank Protocols (at least DF 1.0) will need to be executed between the Town and JP Morgan (swap counterparty). Once complete (prior to unwind), the DF protocol action is irrevocable even if the swaps are not subsequently terminated.
• Bond Transaction
• Need financing team including bond underwriter (RFP process) • Fixed rate financing could potentially be done either as a publicly offered bonds or through a privately placed (direct placement) lending.
• Need to prepare a disclosure and offering document (i.e. ‘Official Statement’ or ‘Private Placement Memorandum’) describing the purpose of the transaction and disclosing material information about the Town (Town disclosure counsel) • Need Town authorization (e.g. Bond Ordinance, authorization to effect other documents, procure bond credit ratings) • The Bond Transaction is the more time intensive activity (6-8 weeks). Preliminary actions leading up to the Swap Terminations (e.g. DF 1.0, market tie-outs with counterparty) would happen coterminous with initial work on the Bond Transaction. 7 -265-
New Money Issuance
• The Town could issue bonds for
water/sewer capital purposes (‘new
money bonds’) with the Swap
Termination/Refunding Bond
Transaction.
• There are efficiencies from
combining the two issuances
together
• Use the same Official
statement
• Same ratings activity
• Shared costs of issuance
• A Tax-Exempt issuance by the Town
to fund $5 million for sewer capital
purposes, if amortized over a 30- year term with “wrapped” amortization structure:
• Est. $238,000/yr. in the early years
• Est. $406,000/yr. in the later years 8
2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 2041 2042 2043 2044 2045 2046 2047 2048 2049 2050 2051 2052 2053 2023 $5mm Sewer Bonds $40 $238 $238 $238 $238 $238 $238 $238 $238 $238 $238 $238 $238 $408 $409 $405 $406 $406 $406 $405 $409 $407 $405 $407 $408 $408 $408 $407 $405 $408 $404 2023 Ref. of 2006A COPs $499 $753 $752 $750 $752 $753 $752 $750 $747 $753 $752 $750 $746 2023 Ref. of 2003A COPs $659 $916 $892 $864 $940 $912 $878 $949 $914 $880 $945 2023 Ref. of 2000B COPs $440 $681 $661 $636 $617 $697 $671 $646 $-
$500
$1,000
$1,500
$2,000
$2,500
$3,000
FYE 6/30
Est. Town of Hillsborough (CA) Debt Service Schedule - Post-Swaps Unwind (all amounts x$000)
2023 Ref. of 2000B COPs
2023 Ref. of 2003A COPs
2023 Ref. of 2006A COPs
2023 $5mm Sewer Bonds
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Summary and Discussion
Questions and Discussion
Provide direction on any next steps, including:
1) Direct staff to proceed with bond refunding and swap unwinding, which may include additional proceeds for capital improvements;
2) Authorize City Manager to review and execute addendums to BB&K and Acacia Financial Group agreements for bond transaction services; and 3) Bring item to the Financial Advisory Committee for review and recommendation to the City Council.
9 -267-
Appendices
-268-
Discussion of Synthetic Fixed Rate Structure Risks and Administrative Burdens • Risks inherent to synthetic fixed rate structures:
• Basis Risk – the risk that the variable rate received under the swap does not match the variable rate to be paid on the variable rate bonds (e.g. actual variable rate bond weekly resets (to investors), on average and over time, do not correlate closely to the swap index)
• Tax Risk – specific form of basis risk relating to Tax-Exempt (TE) variable rate bonds that are swapped via %LIBOR swaps (e.g. expected relationship between SIFMA and LIBOR dislocates)(2006 COP’s only) • Termination Risk – the risk that the swap may be terminated earlier than scheduled (e.g. swap agreement “call” events or events of default or termination attributable to either the Town or swap counter-party) resulting in the Town needing to restructure/novate the transactions.
• Counter-party Risk – the risk that the swap counter-party is downgraded or otherwise fails to perform resulting in the Town needing to restructure transactions (e.g., new counter-party, etc.). • Roll-over or Committed Funding Risk – the risk that the Town may not be able to procure replaced variable rate debt that performs like current VRDBs (e.g. higher LOC costs, lack of bank LOC availability, other variable rate products not attractive) • Administrative Burdens
• More frequent payments (monthly vs. semi-annual)
• Actual debt service payable is approximate until payment date • Accounting requirements (mark-to-market calculations and ‘effectiveness’ reporting) • Others – e.g. LIBOR sunsetting 11
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TOWN OF HILLSBOROUGH
San Mateo County
1600 Floribunda Avenue
Hillsborough, CA 94010
10 INFORMATIONAL
CITY COUNCIL MEETING
MARCH 13, 2023
AGENDA STAFF REPORT
ITEM SUBJECT: CITY MANAGER'S UPDATE
SUMMARY: The City Manager will provide an informational update related to Town projects, events and activities of interest to the community.
FISCAL IMPACT: There is no fiscal impact associated with this agenda item.
ENVIRONMENTAL ISSUES: This informational item is exempt from environmental review pursuant to the California Environmental Quality Act (CEQA) guidelines sections 15378(b)(2) and 15378(b)(5) as ongoing administrative or organizational activities that will not result in direct or indirect physical changes in the environment.
ATTACHMENTS: None
PREPARED BY: Ann Ritzma, City Manager
RECOMMENDATION: For information only; no action required. -271-