1. -111171 -CITY OF PLACENTIA
rai AN PLACENTIA PUBLIC FINANCING AUTHORITY
PLACENTIA
Rich Heritage, Bright Future
Considering the Issuance of
Lease Revenue Bonds
Presentation to City Council and Board of Directors
July 25, 2023
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financial sci.vice,
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1601 N. Sepulveda Blvd., #382
Manhattan Beach, CA 90266
TEL: 424-297-1073 l URL: www.KosmontFinancial.com
INTRODUCTION
■ The City of Placentia (City) has been working towards procuring a new Public Safety Facility for several years now
■ At the last City Council meeting on July 11, the City Council chose the financing structure that it wishes to employ:
• Approximately $21.62 million projects costs
■ Approximately $11.13 million "down payment" from various City resources, including reserves
■ The balance of the cost of the Project will be financed with Lease Revenue Bonds (LRBs) ■ Before the City Council and the Board of Directors of the Placentia Public Financing Authority (Authority) tonight is the package of resolutions and legal documents that will authorize the issuance of LRBs
FINANCING TEAM
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PLACENTIA
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ADMINISTRATION
CITY OF PLACENTIA
• Damien R. Arrula, GtyAdministrator
• Luis Estevez, Deputy GtyAdministrator
• Jennifer Lampman, Director of Finance
MUNICIPAL ADVISOR NI Larry J. Kosmont, President
KOSMONT FINANCIAL SERVICES • Dan Massiello, Sr. Managing Director kosmon
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_��'' NIXON BOND & DISCLOSURE COUNSEL
//,7' PEABODY NIXON PEABODY
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UNDERWRITER
SAMUEL A. RAMIREZ & CO.
• Danny Kim, Esq., Partner
• Travis Gibbs, Esq., Partner
• David Song, Esq., Associate
• Raul Amezcua, Sr. Managing Director
• Michael Mejia, Managing Director
• Esthela Carreon, Vice President
BOND RATING
• The City's Credit Rating is now AA!
• Thanks to the efforts of the City's
administration, the City's Standard &
Poor's credit rating has been upgraded,
again!
• Four upgrades in four years Nov 2019 BBB BBB+ BB+
General AAA General Fund Lease Obligation Rating
Fund Lease Issuer AA+
Obligation Credit AA
Date Rating Rating_ AA -
Nov 2003 A- A A+
Dec 2006 BBB BBB+ A
A -
Dec 2007 BBB- BBB
BBB+
Jan 2010 BB+ BBB- BBB
Feb 2015 BB BB+
BBB
`' nuesimeo_-
! Grade
• Eight "Notches"
• Three "Categories"
Oct 2020 BBB+ A- BB
Jun 2022 A+ AA- BB
July2023 AA- AA 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024 • This issue of LRBs will be rated AA-, which is one notch lower than the City's Issuer Credit Rating per S&P Ratings Criteria for lease transactions (e.g., abatement, appropriation risks) • This excellent credit rating opens up more options for the City for structuring the LRBs kosmon
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IMPLICATIONS OF HIGHER CREDIT RATING
■ With the LRBs rated in the "AA" category, investors require Tess security features Less security features equate to less financing costs
■ No need for a Debt Service Reserve Fund
▪ Typically 1 -year's worth of debt service payments borrowed in addition to project funds and held by the trustee for life of the LRBs
■ Likely no need for bond insurance
■ Purchasing a bond insurance policy buys a bond rating of: AA ■ Bond insurance providers my require additional property for the lease during construction; without bond insurance, able to encumber less City properties ■ Purely optional and economic decision — premium bids now expected to be very low ■ If inexpensive bond insurance garners even lower interest rates (more than the cost of the premiums), Finance Team may recommend to purchase
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LEGAL STRUCTURE
■ The Placentia Public Financing Authority ("Authority") will sell Lease Revenue Bonds ("LRBs") to the public capital markets secured by rent payments to be made by the City to the Authority
■ Security = City's (General Fund) promise to make Lease Payments to Authority ■ City will enter agreements with the Authority to lease and lease -back certain City real property assets, creating a revenue stream enabling the issuance LRBs a Site Lease — City transfers control of property to Authority in consideration of Bond Proceeds ® Lease Agreement — City leases property back from Authority and pays rent in amount equal to debt service
■ Leased Property will be the new Public Safety Facility but will also temporarily consist of other City properties until construction is completed as described herein kosmon
LEGAL STRUCTURE ILLUSTRATED
Bond
Holders
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Bond Proceeds ($)
Debt Service ($)
Authority
Bond Proceeds ($)
Site Lease
Lease Agreement
Lease Payments ($)
Cit
CITY PROPERTY TO BE LEASED/LEASED BACK
■ The new Police Evidence Facility itself will be the
primary property to be leased
■ Total Project costs of $21,616,963 are more than
adequate to justify rental payments
• During construction, City may not make rent
payments (abatement), so other properties are also
being leased, temporarily, to avoid borrowing
"capitalized interest" during construction period
■ Entirety of Corporate Yard is primary property
■ Bond insurers may require additional leased properties during construction as collateral ■ Economics to be evaluated by Finance Team; included in authorization for maximum flexibility Property
Estimated Value
Public Safety Facility
Corporate Yard
Civic Center
$21,616,963
$13,100,000
$14,240,000
APPROVAL PROCESS
■ City to hold Public Hearing first
■ Approve Resolutions of the City Council and Authority Board which authorize and/or approve:
✓ The issuance of the Bonds, empowering Staff to take certain actions to complete transaction ■ "Not -to -exceed" values:
■ True Interest Cost: 5.50%
■ Issuance (Par) amount: $10 million
M Underwriters discount: $10.00 per $1,000 (1.0%) of Par ■ Preliminary Official Statement (disclosure document for investors to use in consideration of buying the Bonds) ■ Site Lease (City leasing properties to Authority)
• Lease Agreement (City leasing properties back from Authority) ■ Indenture of Trust (agreement between Authority/Trustee on behalf of investors; establishes terms of the Bonds) ■ Assignment Agreement (Authority assigns lease payments from City to Trustee) • Bond Purchase Agreement (agreement between Underwriters, Authority and City for purchase of the Bonds) ■ Continuing Disclosure Agreement (agreement by City to provide ongoing disclosure per SEC regulations) kuSTT10flt
ANTICIPATED SCHEDULE OF ACTIVITIES IF APPROVED
DATE
July 25 (tonight)
July 26
July 26 — August 1
August 2
Week of August 6
Week of August 21
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ACTIVITY
City and Authority Boards of Directors meet to consider authorizing Bonds Finalize and Print/Post Preliminary Official Statement
Market Bonds to investors
Price Bonds (set interest rates)
Finalize all transaction documents
Close Bonds
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financial 'cr\ icy:
THANK YOU - ANY QUESTIONS?
-1 CITY OF PLACENTIA
vilk PLACENTIA PUBLIC FINANCING AUTHORITY
.r..
PLACENTIA
Rich heritage, Bright Future
Considering the Issuance of
Lease Revenue Bonds
Presentation to City Council and Board of Directors
July 25, 2023
1601 N. Sepulveda Blvd., #382
Manhattan Beach, CA 90266
TEL: 424-297-1073 1 URL: www.KosmontFinancial.com
Kosrnont Transactions Services, Inc. dang business as Kosmant Financial Services (KFS) is an Independent Registered Municipal Advisa- with the SEC and the MSRB KFS dais not provide
accounting, tax a• legal advice. lnfamacian included in this presentation is provided fa- discussion purposes only Such in(a7natian reflects KFSs views as of the date hereof (unless otherwise noted) and is subject to change without notice.