FINANCE DEPARTMENTREFUNDING BUILD AMERICA BONDSLEASE REVENUE REFUNDING BONDS(ROSE BOWL RENOVATION PROJECT)SERIES 2024Vic ErganianDeputy Finance Director/City TreasurerFinance Committee and City Council Item 1 (Finance Audit Committee); Item 21 (City Council) FINANCE DEPARTMENTRecommendation•Find that the proposed action is not a project subject to California Environmental Quality Act (CEQA) and as such no environmental document pursuant to CEQA is required for the project •Adopt a resolution of the City Council of City of Pasadena and the Board of Directors of the Pasadena Public Financing Authority authorizing the issuance of lease revenue refunding bonds in an aggregate amount not to exceed $130 million and the execution and delivery of a third amendment o amended and restate d lease, a fourth amendment to amended and restated sublease, bond indenture, bond purchase agreement, preliminary official statement and final official statement in connection therewith, and authorizing the taking of certain actions relating thereto. 2 FINANCE DEPARTMENTBackground•In 2010, the City issued four series of lease revenue bonds in an aggregate amount of $155,873,265. The proceeds of the bonds were used to finance the renovation and improvements of the Rose Bowl Stadium.•The series 2010B were issued as Build America Bonds (BABs). >Do not have an option to call the bonds at par>Have the option to call the bonds at a Make Whole call price or using an Extraordinary Optional Redemption provision (EOR) only under certain circumstances.3 FINANCE DEPARTMENTBackground•BABs were issued as taxable fixed rate bonds whereby the U.S. Treasury rebates the City 35% of the interest portion due on the bonds semi-annually for the life of the bonds.•Beginning 2013, the US Government began a sequestration process that reduced the amount of the subsidies due to the City by a cumulative $2 million to date.4 FINANCE DEPARTMENTEstimated Impact of Sequestration
5 Estimated Impact of Sequestration (Reduced Subsidy Payments)Estimated Impact of ReductionPayments Net of RevisedSubsidyPayments Net of Original 35%SubsidyAnnual SubsidyFiscal Year$0 $1,346,448 $1,346,448 35.0%201104,946,1364,946,13635.0%2012(115,854)5,061,9894,946,13632.0%2013(211,733)5,157,8684,946,13632.5%2014(193,090)5,139,2254,946,13632.4%2015(187,763)5,133,8984,946,13632.6%2016(182,436)5,128,5724,946,13632.6%2017(179,773)5,125,9094,946,13632.7%2018(170,451)5,116,5874,946,13632.8%2019(161,130)5,107,2654,946,13632.9%2020(154,472)5,100,6074,946,13633.0%2021(151,808)5,097,9444,946,13633.0%2022(151,808)5,097,9444,946,13633.0%2023(151,808)5,097,9444,946,13633.0%2024($2,012,126)$67,658,336 $65,646,210 Totals •Since FY 2013, sequestration has resulted in lower BAB subsidy payments by an estimated $2.0M to date FINANCE DEPARTMENTExecutive Overview•TheCity is planning to issue the 2024 Bonds to refund the 2010B Build America Bonds (BABs), outstanding in the amount of $106,660,000, for the following purposes:1.Eliminate exposure to future BABs subsidy sequestration2.Incorporate future optionality for a refunding by issuing traditional tax-exempt bonds with a conventional par call 3.Restructure and create level annual debt service payments to provide future budgetary cash flow capacity for Rose Bowl capital improvements 4.Maintain community relations by not increasing the number of events at the Rose Bowl Stadium to meet ascending debt payments 6
FINANCE DEPARTMENT
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2019 2020 2021 2022 2023 2024
10-Year MMD10-Year UST10-Year AAA MMD and US Treasury Yields Since 2019 7Yields as of 10/23/2024:10-Year UST: 4.24%10-Year MMD: 3.07%Source: Bloomberg, as of October 23, 2024.
FINANCE DEPARTMENTCalculation of the Redemption Premium 8Definitions are paraphrased. See the 2010 Official Statement for detail and full definitions. •Make Whole (MW) redemption price: sum of the present value of principal and interest payments to be redeemed, discounted at Treasury Rate + 35 basis points (+0.35%)•Extraordinary Optional Redemption (EOR) price: sum of the present value of principal and interest payments to be redeemed, discounted at Treasury Rate + 100 basis points (+1.00%)•Treasury Rate (i.e. discount rate): yield to maturity as of such redemption date of US Treasury securities with a constant maturity>Higher Treasury Rate will produce a lower redemption price•Term Bonds 2034 and 2043 of the 2010B BABs are subject to MW and EOR FINANCE DEPARTMENTEstimated Redemption Premiums for the 2010B BABs 9 MW Redemption Price CalculationTotal2043 Term2034 Term20-year10-yearApplicable Treasury Rate $106,660,000 $96,915,000$9,745,000Par Amount Called (A)123,190,481112,179,17411,011,307Redemption Price / Sum of PV (B)24,124,53322,353,9081,770,625Redemption Premium (B-A)$123.07 $118.17 MW Call Price (B/A)EOR Redemption Price CalculationTotal2043 Term2034 Term20-year10-yearApplicable Treasury Rate $106,660,000 $96,915,000$9,745,000Par Amount Called (A)130,784,533119,268,90811,515,625Redemption Price / Sum of PV (B)16,530,48115,264,1741,266,307Redemption Premium (B-A)$115.75 $112.99 EOR Call Price (B/A)Source of Treasury Rate: H15 website as of October 21, 2024.All numbers are preliminary and subject to change. •Estimated MW Redemption Premium:$24,124,533•Estimated EOR Redemption Premium:$16,530,481 FINANCE DEPARTMENTExisting Rose Bowl Debt Profile
10¹Nets out reserve fund earnings, which are estimated at $333,250 per year.²Assumes that the current subsidy payments of 33.005% (BABs) and 42.435% (RZEDBs) are received through maturity.
Existing Rose Bowl Debt Profile% IncreaseExisting Payments2018B Bonds2018A Bonds2016A Bonds2010 Bonds1,2Fiscal Year--$13,033,966 $1,064,531 $1,529,250 $5,371,000 $5,069,185 20253.1%13,436,9731,277,788 1,529,250 5,560,750 5,069,18520263.0%13,845,1481,492,463 1,529,250 3,659,250 7,164,18520272.9%14,250,4481,236,263 1,695,000 0 11,319,18520282.6%14,626,0600 3,036,875 0 11,589,18520291.2%14,806,9350 3,012,750 0 11,794,18520301.2%14,990,0600 2,985,875 0 12,004,18520313.3%15,480,1850 2,966,000 0 12,514,18520321.3%15,677,0600 2,942,875 0 12,734,18520331.7%15,940,5150 2,916,500 0 13,024,01520341.2%16,134,1840 2,886,875 0 13,247,30920351.3%16,342,4210 2,868,625 0 13,473,79620361.2%16,546,1350 2,841,500 0 13,704,63520371.2%16,748,7740 2,810,625 0 13,938,14920381.6%17,018,6620 2,776,000 0 14,242,66220391.3%17,240,5220 2,747,375 0 14,493,14720401.3%17,464,6970 2,719,375 0 14,745,32220411.3%17,694,0200 2,691,750 0 15,002,27020421.2%17,911,4630 2,649,625 0 15,261,8382043$299,188,229 $5,071,045$49,135,375$14,591,000$230,390,808 Totals FINANCE DEPARTMENTImpact of Refunding on Rose Bowl Debt Profile 11 Impact of Refunding on Rose Bowl Debt Profile% IncreaseProposedPaymentsProposed Restructuring¹2018BBonds2018ABonds2016A Bonds2010DRZEDBs2010A CABsFiscal Year$12,959,084 $2,307,465 $1,064,531 $1,529,250 $5,371,000 $304,491 $0 20252.6%13,297,2794,625,0001,277,7881,529,2505,560,750304,491020263.1%13,703,4544,623,0001,492,4631,529,2503,659,250304,4912,095,00020270.1%13,718,5044,232,7501,236,2631,695,0000304,4916,250,00020280.0%13,714,8663,853,50003,036,8750304,4916,520,00020290.0%13,717,7413,675,50003,012,7500304,4916,725,00020300.0%13,714,8663,489,50002,985,8750304,4916,935,00020310.0%13,716,7413,001,25002,966,0000304,4917,445,00020320.0%13,718,6164,516,25002,942,8750304,4915,955,00020330.0%13,716,49110,495,50002,916,5000304,491020340.0%13,718,36610,527,00002,886,8750304,491020350.0%13,716,11610,543,00002,868,6250304,491020360.0%13,714,24110,568,25002,841,5000304,491020370.0%13,716,36610,601,25002,810,6250304,491020380.0%13,715,99110,635,50002,776,0000304,491020390.0%13,716,61610,664,75002,747,3750304,491020400.0%13,718,86610,695,00002,719,3750304,491020410.0%13,716,24110,720,00002,691,7500304,491020420.0%13,719,1163,365,00002,649,62507,704,491020430.0%13,715,00013,715,0000000020440.0%13,715,00013,715,0000000020450.0%13,715,00013,715,0000000020460.0%13,715,00013,715,0000000020470.0%13,715,00013,715,000000002048-45.2%7,510,0007,510,000000002049$335,514,561 $209,224,465 $5,071,045 $49,135,375 $14,591,000 $13,185,329 $41,925,000 Totals Targets level annual payments of $13.7M from FYs 2027-2048Extension of term by six years from FY 2043 to FY 2049Level payments eliminate annual increases¹Includes the September 1, 2024 debt service payment (net of subsidy and reserve fund earnings) on the 2010B BABs in FY 2025.All numbers are preliminary and subject to change. Based on market conditions as of October 23, 2024.
FINANCE DEPARTMENTVisual Comparison of Existing and Proposed Aggregate Payments 12All numbers are preliminary and subject to change. Based on market conditions as of October 23, 2024.$0$4$8$12$16$202025202620272028202920302031203220332034203520362037203820392040204120422043204420452046204720482049 MillionsExisting PaymentsProposed Payments
FINANCE DEPARTMENTDetailed Comparison of Existing and Proposed Aggregate Payments 13 Difference in Aggregate PaymentsPV $ Change²Nominal $ChangeProposedPaymentsExistingPayments¹Fiscal Year($97,951)($74,882)$12,959,084 $13,033,966 2025(193,668)(139,694)13,297,27913,436,9732026(188,098)(141,694)13,703,45413,845,1482027(517,153)(531,944)13,718,50414,250,4482028(809,443)(911,194)13,714,86614,626,0602029(917,208)(1,089,194)13,717,74114,806,9352030(1,020,690)(1,275,194)13,714,86614,990,0602031(1,333,888)(1,763,444)13,716,74115,480,1852032(1,427,389)(1,958,444)13,718,61615,677,0602033(1,590,214)(2,224,024)13,716,49115,940,5152034(1,648,887)(2,415,818)13,718,36616,134,1842035(1,711,384)(2,626,305)13,716,11616,342,4212036(1,762,969)(2,831,894)13,714,24116,546,1352037(1,804,448)(3,032,408)13,716,36616,748,7742038(1,877,585)(3,302,672)13,715,99117,018,6632039(1,915,765)(3,523,906)13,716,61617,240,5222040(1,946,868)(3,745,831)13,718,86617,464,6972041(1,975,041)(3,977,779)13,716,24117,694,0202042(1,953,499)(4,192,347)13,719,11617,911,46320436,011,004 13,715,000 13,715,000020445,762,408 13,715,000 13,715,000020455,524,093 13,715,000 13,715,000020465,295,635 13,715,000 13,715,000020475,076,624 13,715,000 13,715,00020482,664,871 7,510,000 7,510,00002049$5,642,487 $36,326,332 $335,514,561 $299,188,229 TOTALS¹ Nets out current subsidy and reserve earnings (estimated at $333,250 per year).² $ change discounted by the bond (arb) yield of the Proposed Restructuring Bonds. PV $ Change is higher than Nominal $ Change in earlier years due to the timing of the payments. All numbers are preliminary and subject to change. Based on market conditions as of October 23, 2024. •Change relative to Existing Payments:>Nominal payments: +$36.3M>PV of payments: +$5.6M$0$4$8$12$16$202025202620272028202920302031203220332034203520362037203820392040204120422043204420452046204720482049Existing PaymentsProposed Payments FINANCE DEPARTMENTDetails of the Proposed Refunding Bonds 14 Amortization Schedule (Current Interest Bonds and CABs)AggregateCapital Appreciation BondsCurrent Interest BondsDebt ServiceInterestPrincipalInterestPrincipalDate$2,307,465$1,757,465$550,0006/1/20254,625,0003,285,0001,340,0006/1/20264,623,0003,218,0001,405,0006/1/20274,232,7503,147,7501,085,0006/1/20283,853,5003,093,500760,0006/1/20293,675,5003,055,500620,0006/1/20303,489,5003,024,500465,0006/1/20313,001,2503,001,2506/1/20324,516,2503,001,2501,515,0006/1/203310,495,5002,925,5007,570,0006/1/203410,527,0002,547,0007,980,0006/1/203510,543,0002,148,0008,395,0006/1/203610,568,2501,728,2508,840,0006/1/203710,601,2501,286,2509,315,0006/1/203810,635,500820,5009,815,0006/1/203910,664,750$1,902,875$1,837,125329,7506,595,0006/1/204010,695,0005,748,9904,946,0106/1/204110,720,0006,052,7264,667,2746/1/20423,365,0001,977,9131,387,0876/1/204313,715,0008,386,7235,328,2786/1/204413,715,0008,699,2875,015,7136/1/204513,715,0008,979,0734,735,9276/1/204613,715,0009,266,2654,448,7356/1/204713,715,0009,502,5754,212,4256/1/20487,510,0005,326,6932,183,3076/1/2049$209,224,465$65,843,121$38,761,879$38,369,465$66,250,000Totals Sources of Funds$105,011,879Par Amount9,015,693Premium11,646,347Reserve Fund$125,673,918Total SourcesUse of Funds$124,860,327Escrow Deposit551,062Costs of Issuance262,530Underwriter's Discount$125,673,918Total Uses4.34%True Interest CostNote: All costs associated with the refunding will be incorporated and paid by the bond proceeds of the 2024A Bonds. Funds are appropriated in RBOC’s Fiscal Year 2025 Operating budget to pay debt service on the bonds. There is no anticipated impact to other operational programs or capital projects as a result of this action.All numbers are preliminary and subject to change. Based on market conditions as of October 23, 2024.
FINANCE DEPARTMENTSavings Detail (Dissavings) of the 2010B BABs 15 Detailed (Savings) / DissavingsNominal $ChangeProposedPayments2010B BABsPayments¹Fiscal Year($74,882)$2,307,465 $2,382,347 2025(139,694)4,625,0004,764,6942026(141,694)4,623,0004,764,6942027(531,944)4,232,7504,764,6942028(911,194)3,853,5004,764,6942029(1,089,194)3,675,5004,764,6942030(1,275,194)3,489,5004,764,6942031(1,763,444)3,001,2504,764,6942032(1,958,444)4,516,2506,474,6942033(2,224,024)10,495,50012,719,5242034(2,415,818)10,527,00012,942,8182035(2,626,305)10,543,00013,169,3052036(2,831,894)10,568,25013,400,1442037(3,032,408)10,601,25013,633,6582038(3,302,672)10,635,50013,938,1712039(3,523,906)10,664,75014,188,6562040(3,745,831)10,695,00014,440,8312041(3,977,779)10,720,00014,697,7792042(4,192,347)3,365,0007,557,347204313,715,000 13,715,000204413,715,000 13,715,000204513,715,000 13,715,000204613,715,000 13,715,000204713,715,000 13,715,00020487,510,000 7,510,0002049$36,326,332 $209,224,465 $172,898,130 Totals$5,624,487PV²$17,287,772Net PV³16.2%Net PV as % of Outstanding Par¹ Nets out current subsidy and reserve fund earnings (estimated at $333,250 per year).² $ change discounted by the bond (arb) yield of the Proposed Restructuring Bonds.³ % net present value savings: savings (dissavings) / par amount refunded. Factors in both PV savings and the 2010 DSRF amount of $11.6M.All numbers are preliminary and subject to change. Based on market conditions as of October 23, 2024. •Proposed payments are +$36.3M higher (i.e. dissavings) •Present value (PV) dissavings²: $5.6M •Net PV dissavings³: $17.2M >$5.6M in higher payments + $11.6M 2010 DSRF amount>(16.2%) of par value refunded •Proposed payments are lower anywhere from $74,882 (FY 2025) to $4.2M (FY 2043) over the next 19 years•Term extension results in new payments of $13.7M from FY 2044 to FY 2049, $7.5M in FY 2049 FINANCE DEPARTMENTHypothetical Refunding
16Hypothetical Savings AnalysisCurrent +1.0%Current RatesCurrent -1.0%Rate Environment4.30%3.41%2.53%True Interest Cost²$7,157,790 $16,777,328$26,083,550 Total Cash Flow Savings447,362 1,048,583 1,630,222 Avg Annual Cash Flow Savings4,967,517 12,920,883 21,816,760Net PV Savings ($)4.2%10.9%18.4%Net PV Savings (%)¹ Preliminary and subject to change (based on market conditions as of October 23, 2024). Actual results may differ, and Stifel makes no commitment to underwrite at these levels. Analysis was performed with no changes to the term or the structure of the debt service from each option. The use of a ‘AA+' rating is consistent with the rating of the outstanding bonds. Refunding escrow has been funded with SLGS but in no way is Stifel recommending this or any other investment strategy. Costs of issuance and underwriter's discount assumptions are estimates for discussion purposes.² The True Interest Cost reflects the present value borrowing cost of a financing net of underwriter's discount. Hypothetical analysis assumes a refunding of the outstanding principal of the restructuring bonds amortizing from 2035-2048 (remaining ~14 years). •Hypothetical analysis¹ assumes the proposed restructuring bonds are refinanced in 10 years (2034) at par at current rates, -1.0%, and +1.0%>$97.6M of original principal estimated to be outstanding in 2034 (remaining amortization from 2035 to 2049, or ~15 years)•Current rates are based on market conditions as of October 23, 2024