8-29-2023 Item #6
RTC #23-767
Approving Installment
Sale Financing
Certificates of
CITY OF Participation (COPs)
for RWF Capital Costs
1852 August 29, 2023
THE MISSION CIT
Gary Welling
Director of Water and Sewer
Utilities
City of
Santa Clara
The Center of What's Possible
Background
San Jose-Santa Clara Regional Wastewater Facility (RWF) One of the Largest Advanced Wastewater
Treatment Plant in the Western USA
• City of San Jose 80.5% Co-Owner
• City is Santa Clara 19.5% Co-owner
• Flows Average 110mgd into the RWF,
Sources: SJ, SC and 5 Tributary Agencies;
Capacity 167 mgd
City has a Substantial Available Capacity
of 12 mgd, Current Flow 14 mgd
• City Receives 3mgd of Recycled Water for
361 Customers Irrigation, Industrial and
Commercial Uses
2 POST MEETING MATERIAL
1 City of
Santa Clara
The Center of What's Possible
Capital Projects
• RWF Undergoing Over $600 Million of Capital Improvements in the Next 5 Years
deced Foley Carted end Meter Eaglec
• $2.0 B Project
O Da
(over 20 years)
© varer
• The City's Share of the
RWF Capital
Lant and
Improvement
Costs is $98 Million
Over the Next 5 Years
3 City of
Santa Clara
The Center of What's Possible
Why Borrow?
• Cash Flow
• Large CIP Allocation - $98 Million in Next 5 Years.
• Rates
• Efforts to Keep Rates Reasonable for Santa Clara Customers • Generational Equity
• Future Rate Payers Sharing the Burden with Current
Customers
4 4
2 City of
Santa Clara
The Center of What's Possible
Financing Concepts
• Installment Sale Agreement: Between the City Public Facilities Financing Corporation and the City
• Creates Annual City Obligation to Make Installment Payments to the Corporation for the Portion of the RWF Being Financed • Corporation Assigns all Installment Payments to the Trustee for Payment to the Investors
• Certificates of Participation are Held by Investors and Represent Undivided Fractional Interests in the Stream of Installment Payments
5 City of
Santa Clara
The Center of What's Possible
Financing Concepts (cont.)
• Installment Payments are Secured Only by Net Revenues of the City's Sewer Utility
• Certificates of Participation Secured by an Installment Sale Agreement are a Legally Available Form of Long-Term
Obligations to Finance Capital Projects
3 City of
Santa Clara
The Center of What's Possible
Legal Structure of Wastewater Revenue COPs
PFFC assigns Rights and
City of Santa Clara
Responsibilities to Trustee
Public Facilities Trustee
→
Financing Corp (via Trust Agreement)
Under the ...and in return
Installment Sale makes installment Trustee uses
Agreement, City payments from
Installment Payments
"purchases" the Net Revenues of
the Sewer Utility to pay debt service on
project ... the issued COPs
City of Santa
Clara
Proceeds of the
COPs, used to Investors
(Issuer Sewer
complete the
Utility) project
City of
Santa Clara
2020 Installment Sale Agreement
• Short-Term Financing Entered into by the City 2020 to Provide for the City's Share of RWF costs
• Matures in June 2024
• $50 Million Maximum Amount; $20 Million has Been
Drawn
• Certificates of Participation Will Refinance this Debt over 25 Years
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4 City of
Santa Clara
the centero has Possible
Financing Strategy
Approximate Uses of Proceeds
Refinance 2020 Installment Sale Agreement: $20,400,000
Finance City's Share of Current RWF Projects: $15,000,000 Issuance Costs: $ 500,000
Total $35,900,000
• Total Anticipated Borrowing is within $38 Million Maximum Authorized by the Resolutions 9
9 City of
Santa Clara
The Center of What's Possible
Financing Timeline
• June 2020: City Executes 2020 Installment Sale Agreement to Provide Interim Project Financing
• March 2023: City Staff, Legal Counsel and Municipal
Advisor Begin Analysis of Options to Refinance 2020
Installment Sale Agreement and Finance New RWF Costs
• March 2023: Council Approves Resolution of Intention to Reimburse Project Cost Expenditures from Proceeds of
Future Financing
10 10
5 City of
Santa Clara
The Center of What's Possible
Financing Timeline (cont-)
• August 2023 - Council & Corporation Board Consider
Resolutions to Approve Installment Sale Financing and
Certificates of Participation
• September 2023 - Rating Agency Presentation. Offering of Certificates of Participation through Distribution of
Preliminary Official Statement.
• October 2023 - Competitive Sale of COPs; Closing and
Receipt of Proceeds
11 11
City of
Santa Clara
The Center of What's Possible
CIP Allocations - RWF
FY FY FY 5-Year 10-Year
2023/24 2024/25 2025/26 2026/27 2027/28 Total Total
Santa
$12.4 $14.3 $10.0 $25.8 $35.5 $98.0 $121.1
Clara
San
$50.5 $58.1 $40.7 $104.8 $144.3 $398.4 $492.2
José
Tributary $15.1 $17.4
Agencies $11.7 $24.7 $41.7 $110.6 $138.5
12 12
6 City of
Santa Clara
The Center of What's Possible
RWF Headworks: $200M
13 City of
Santa Clara
The Center of What's Possible
RWF Cogeneration: $115M
MERIT Cogeneration Facility at the San
José-Santa Clara Regional
Wastewater Facility
14 City of
Santa Clara
The Center of What's Possible
RWF Filter Rehabilitation: $59.6 M
15 City of
Santa Clara
The Center of What's Possible
RWF Digested Sludge Dewatering
Facility: $167 M
16 8
City of
Santa Clara
he Centero whats Possiole
RWF Outfall Channel Improvements:
$10 M
17 City of
Santa Clara
The Center of What's Possible
Green Bonds
• Environmental Benefits and Alignment with Low Carbon Transition • Bonds Used to Finance Improvements to the Plant to Improve Treatment Processes, Increase Resource Recovery and Reduce Greenhouse Gas Emissions
• Financed Projects Reduce Impacts on San Francisco Bay Ecosystem • Align with the City's Sustainability Goals and Climate Action Plan • Climate Bonds Certification Pre-Issuance and Post-Issuance, External Reviewer: Kestrel Verifiers
IN
• Conformance with CBI Standards and Criteria
<ESTREI
VERIFIERS™ CERTIFIED 18
18 9
City of
Santa Clara
The Center of What's Possible
Fiscal Impact
• Annual Debt Service Estimated to be $3•3 Million (New Debt $2.3 Million + Trimble Road Sanitary Sewer $1 Million)
• Trimble Road Sanitary Sewer Debt Issuance in 2016 will be Paid in Full Beginning of 2031
• Debt Service Payments would be Made from Net Operating Revenues of the Sewer Utility and have been Contemplated in Long-range Financial Plan and Rate Structure.
• Amount/Timing of Future Borrowing Depends on RWF CIP
19 19
City of
Santa Clara
The Center of What's Possible
Sewer Utility Rates
• Sole Source of Repayment is Sewer Utility Revenues.
Not an Obligation of the General Fund.
• City Covenants to Maintain Sewer Rates Sufficient
to Generate 125% of Debt Service.
• Could Require Future Rate Increases if Operating
Costs Increase
20 20
10 City of
Santa Clara
The Center of What's Possible
Projected Fund Balance
(in millions)
FUND 094
FY2023/24 FY2024/25 FY2025/26 FY2026/27 FY2027/28 FY2028/29 (Sewer Forecast Forecast Forecast
Adopted Adopted Forecast
0&M)
Total Revenue $43.5 $47.4 $51.7 $55.2 $58.8 $60.2
Debt Service $3.3
$3.3 $3.3 $3.3 $3.3 $3.3
(proposed)
Total
$33.8 $52.1 $48.6 $64.6 $77.0 $45.8
Expenditures*
Ending Fund $12.2 ($8.9) $2.3
$29.2 $24.4 $24.6
Balance
* Including Transfers to CIP 21
21 City of
Santa Clara
The Center of What's Possible
Including Debt Issuance vs Rates Only
• Began Rate Modeling Debt Issuance in FY 2018-19
FISCAL YEAR 2021-22 2022-23 2023-24 2024-25 2025-26
Including
Debt 0% 5.2% 2.7% ~5% ~5%
Issuance
~10% ~10%
Rates Only 12.6% 14.7% 8.8%
22 22
11 City of
Santa Clara
The Center of What's Possible
Recommendation
• Adopt Presented Resolutions of the Board of Directors of the City of Santa Clara Public Facilities Financing Corporation and the City Council of the City of Santa Clara that:
- Approve an Installment Sale Financing and Authorize the Execution, Delivery and Sale of Wastewater Revenue Certificates of Participation and Related Agreements in a Maximum Principal Amount of $38 Million • Approve Installment Sale Agreement, Trust Agreement, Preliminary Official Statement and Related Documents for the Offering, Sale and Delivery of the Certificates
• Authorize various officers of the City and Financing Corporation to Execute all Related Documents and Agreements
23 23
City of
Santa Clara
The Center of What's Possible
Financing Team
• City Staff - Shilpa Mehta, Brendan McCarthy, Jensen Barna, Randy Piotrowski, Margaret McCahan, Tess Hoang, Daniel Ballin • Bond Legal Counsel -Jones Hall - Scott Ferguson, Brian Haroldson
• Financial Consultant - KNN -David Brodsly and Nedko Nedev • Rate Consultant - Black & Veatch -Ann Bui, Alberto Morales • Questions?
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City of
Santa Clara
The Center of What's Possible
CITY OF SANTA CALIFORNIA
1852
THE MISSION CIT
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