Report to City Council
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TO: Mayor and City Council
Mayor and City Council Acting in its Capacity as
Chairman and Members of the Board of Directors of
the Moreno Valley Public Financing Authority (MVPFA)
FROM: Launa Jimenez, Chief Financial Officer
AGENDA DATE: June 4, 2024
TITLE: AUTHORIZATION TO REFINANCE THE 2014 LEASE
REVENUE BONDS (RESO. NOS. 2024 -__ & PFA 2024 -
__)
TITLE SUMMARY: Authorization to Refinance the Moreno Valley Public Financing Authority Lease Revenue Bonds, Series 2014
Recommendation(s)
That the City Council and the Moreno Valley Public Financing Authority:
1. Adopt Resolution No. 2024-__, Resolution Of The City Council Of The City Of Moreno Valley Approving The Issuance By The Moreno Valley Public Financing Authority Of Not To Exceed $25,000,000 Aggregate Principal Amount Of Lease Revenue Refunding Bonds, Se ries 2024a To Refinance Certain Capital Improvements; Authorizing The Execution And Delivery Of And Indenture, A Ground Lease, A Lease Agreement, A Continuing Disclosure Certificate, A Bond Purchase Agreement And An Escrow Agreement; Approving The Form Of Official Statement; And Authorizing The Execution Of Documents And The Taking Of All Necessary Actions Relating To The Financing.
2. Adopt Resolution No. PFA 2024-__, Resolution Authorizing The Issuance And Sale Of Not To Exceed $25,000,000 Aggregate Pri ncipal Amount Of Lease Revenue Refunding Bonds, Series 2024a To Refinance Certain Capital Improvements; Authorizing Execution And Delivery Of An Indenture, A Ground Lease, A Lease Agreement, An Assignment Agreement, A Bond Purchase Agreement And An Escrow Agreement; Approving The Form Of Official Statement; And Authorizing The Execution Of Documents And The Taking Of All Necessary Actions Relating To The Financing.
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SUMMARY
As part of the City’s ongoing effort to implement budgetary savings and reduce costs, staff has identified and discussed the opportunity to take advantage of favorable levels in interest rates to refinance the outstanding 2014 Lease Revenue Bonds. This refinancing could save the City more than $1.7 million in total gross savin gs or over $150,000 annually.
DISCUSSION
The Moreno Valley Public Financing Authority (the “Authority”) issued its Lease Revenue Bonds, Series 2014 (the “Series 2014 Bonds” and the “Prior Bonds”) to finance and refinance public capital improvements.
Taxable interest rates continue to be near historically low levels. In order to take advantage of market conditions, the Authority intends to issue refunding bonds (the “2024 Bonds”) to refinance the Prior Bonds in order to achieve debt service savings. Based on current estimates, the 2024 Bonds are predicted to save approximately $1.7 million in total, or more than $150,000 annually. The net present value savings are estimated at
6.06% as a percentage of the refunded principal amount. Typically, issue rs of refunding bonds should consider refunding outstanding debt when net present value savings exceed a minimum threshold of 3%-5%. The 2024 Bonds would have a final maturity on November 1, 2035 and would not extend the term of the Prior Bonds.
Because interest rates will fluctuate up until the proposed day the bonds are sold, City staff recommends a not-to-exceed amount for the 2024 Bonds of $25,000,000 and a not- to-exceed interest rate of 4.00% per annum and a not to exceed underwriter’s discount of 1.00% of aggregate principal amount of the 2024 Bonds to accommodate any changes in investor structuring preferences and/or bond market conditions. It is anticipated that the 2024 Bonds will be structured with insurance and a debt service reserve fund sur ety policy.
The 2024 Bonds will be structured as a lease -leaseback financing between the City and the Authority. The primary benefit of this structure is that it enables the City to pledge fewer assets over time to effectuate future lease financings. Th e City will have the flexibility to substitute, remove, or add other assets over time. The bonds are secured by City Hall in the master lease. The Authority has used the same financing structure for its prior lease revenue bond financings. The proposed 202 4 Bonds are expected to price mid-July and close early August.
Attached to the report are the required Resolutions and legal documents necessary to complete the issuance of the 2024 Bonds, including the Preliminary Official Statement that will be used by the underwriter to market the 2024 Bonds to potential investors.
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ALTERNATIVES
1. Adopt Resolutions 2024 -__ and PFA 2024 -__ and authorize the issuance of the 2024 Bonds and authorize staff to make the necessary revisions to the budget to account for these issuance activities. This alternative is recommended since this action will result in savings to the City’s General Fund.
2. Do not adopt the resolution and provide staff with additional direction. This alternative is not recommended as it will result in the loss of the opportunity to refund existing lease at lower interest rates.
FISCAL IMPACT
All refinancing-related costs will be paid from the 202 4 Bond proceeds. The estimated average annual cash flow savings will be approximately $1 50,000. The total estimated cash flow savings will be over $1.7 million over the term of the financing.
NOTIFICATION
Public Notice
PREPARATION OF STAFF REPORT
Prepared By: Department Head Approval:
Kimberly Ganimian Launa Jimenez
Deputy Finance Director Chief Financial Officer/City Treasurer
Concurred By: Concurred By:
Brian Mohan Mike Lee
Assistant City Manager City Manager
CITY COUNCIL GOALS
CITY COUNCIL STRATEGIC PRIORITIES
1. Economic Development
2. Public Safety
3. Library
4. Infrastructure
5. Beautification, Community Engagement, and Quality of Life
6. Youth Programs
See the Discussion section above for details of how this action supports the City Council’s Strategic Priorities.
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Report Approval Details
Document Title: STAFFREPORT_2014_LRB REFUND_FINAL .docx Attachments: - Authority Resolution (Moreno Valley 2024 Lease Revenue Refunding Bonds), 4891-4707-1410_4.docx
- City Resolution (Moreno Valley 2024 Lease Revenue
Refunding Bonds), 4892-3010-5522_4.docx
- DRAFT_2014 Bonds Escrow Agreement (Moreno Valley
2024 Lease Revenue Refunding Bonds), 4861-4840-
6194_2.docx
- DRAFT_Assignment Agreement (Moreno Valley 2024
Lease Revenue Refunding Bonds), 4878-5869-9186_2.docx
- DRAFT_BPA - Moreno Valley PFA Lease Revenue
Refunding Bonds 2024A.docx
- DRAFT_Continuing Disclosure Certificate (Moreno Valley 2024 Lease Revenue Refunding Bonds), 4889-5577-
2082_2.docx
- DRAFT_Ground Lease (Moreno Valley 2024 Lease
Revenue Refunding Bonds), 4856-2523-2306_2.docx
- DRAFT_Indenture (Moreno Valley 2024 Lease Revenue
Refunding Bonds), 4887-9763-3458_4.docx
- DRAFT_Lease Agreement (Moreno Valley 2024 Lease
Revenue Refunding Bonds), 4876-8968-1842_3.docx
- DRAFT_Official Statement (Moreno Valley 2024 Lease
Revenue Refunding Bonds), 4872-9371-4101_4.docx
Final Approval Date: May 28, 2024
This report and all of its attachments were approved and signed as outlined below:
No Signature found
Kimberly Ganimian
Natalia Lopez
Launa Jimenez
Brian Mohan
Mike Lee
No Signature - Task assigned to Jane Halstead was completed by assistant Patty Rodriguez
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Jane Halstead