YOUNTVILLE COMMONS DEVELOPMENT PROJECT
Preliminary Funding and Financing Discussion
TOWN COUNCIL MEETING | DECEMBER 2, 2025
Today’s Presentation Objectives
1 Provide an update on the Yountville Commons Development Project (the Project) and status of the construction procurement process to date Report on the Town’s Fiscal Year 2024-25 financial results Discuss preliminary funding approaches and financing scenarios for the Project Present an initial framework for evaluating debt affordability Fiscal Year 2024-25 Financial Results:
Cash on Hand
2 Based on June 30, 2025 audit results, the Town’s General Fund has about $3M in Unassigned Balance
o Town Council to decide to reallocate this amount to the Yountville Commons Project when we reach Funding Junction in February 2026 Based on available FY 25/26 resources, the Town could have between $4M and $5M of cash ready to use for the purpose of funding the first construction phase of the Yountville Commons Project
o Staff’s recommendation would be to utilize approximately $4.2M and will bring a more detailed report to the Town Council for review and discussion in February 2026
Preliminary Bank Financing Discussion
3 KNN and the Town have had initial discussions with Westamerica Bank regarding potential future financing options
LINE OF CREDIT – a line of credit was a suggested option for securing the rest of the necessary funding for the horizontal phase of the Yountville Commons Project. This is a short-term strategy that provides an opportunity to draw down capital for ongoing work as we prepare to issue bonds. Any borrowing from the line of credit would be paid back by bond proceeds. LONG STANDING RELATIONSHIP – the Town has been a customer of Westamerica for over 20 years. Westamerica also holds the Lease Revenue Bonds for the Town Hall Retrofit project which expire in June 2027. FINANCING VS. USING RESERVES – staff will bring additional information regarding funding options to the Town Council in February 2026 for in-depth review and discussion. This information will include current reserve minimums and levels.
Funding Public Infrastructure Projects
4 Funding plans for public infrastructure projects tend to utilize a mix of resources Available Cash or PAYGO
Grants: State and/or Federal
Borrowing Proceeds: Bonds, Notes, Loans
There are different borrowing options and financing types:
BORROWING OPTIONS
I. Interim Borrowing: When there is less certainty about larger scale borrowing needs, but some initial project investment is needed II. Long-Term Borrowing: When timing and amount of larger scale projects is known
FINANCING TYPES
I. Lease Revenue Bonds: The most common type of financing for general government projects – repaid with general fund resources II. Enterprise Revenue Bonds: Finances projects of an enterprise and repaid with enterprise revenues within a rate structure III. General Obligation Bonds: Requires voter approval
IV. Other Special Tax Bonds: Also requires voter approval 5 EXISTING YOUNTVILLE LEASE OBLIGATION DEBT | ANNUAL DEBT SERVICE REQUIREMENTS 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037 2038 2039 2040 $0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
2017 LRBs 2020 Lease Financing
The Town has Previously Issued Lease Debt
to Finance Capital Projects
Initial Project Funding Considerations
6 STAGE 1 PROJECT FUNDING APPROACH
I. Available Cash
II. Interim Borrowing Facility
Westamerica, the has provided an initial commitment to lend up to $3 million Other banks could also be approached to provide an “interim” borrowing solution
Details of the “interim” facility, borrowing structure, and costs are still to be determined/negotiated and will be presented to Council for approval in 2026 STAGE 2 & STAGE 3 PROJECT FUNDING APPROACH
I. Long-Term Borrowing
Project costs, scope, and resources would better defined Borrowing proceeds would “refinance” the interim facility and fund Stage 2 and/or Stage 3 Project costs
Could be executed in phases (i.e. multiple borrowings over the course of several years)
II. Lease Revenue Bond Issuance
Requires the lease of City asset(s)
Payable from General Fund resources
7 1
Costs of Issuance includes fees for bond and disclosure counsel, municipal advisor, credit rating, title insurance, financial printer, etc., and underwriters discount of $3/bond. 2 Assumes the issuance of lease revenues bonds rated AA- with a 30-year borrowing term. Market conditions as of early November 2025 plus some interest rate cushion.
NOTE:
If the Town were to pursue an interim borrowing through a bank line of credit, we would expect that the future issuance of bonds would also refinance outstanding amount under the line of credit; thus, proceeds available for the Project may be net of the cost of refinancing the line of credit
Initial Project Borrowing Scenarios
SCENARIO 1:
Bonds sized to produce level
annual debt service of
approximately $1,000,0000
Approach: Annual Measure S
revenues are approximated at
$700k; in addition, the 2020
lease financing matures in FY
2027 providing additional
budgetary capacity of $350,000
to absorb additional annual
debt service
SCENARIO 2:
Bonds sized to generate $30M
of project fund proceeds
SCENARIO 3:
Bonds sized to generate $50M
of project fund proceeds
2027
202820292030
2031
203220332034
2035
203620372038
2039
2040204120422043
2044
204520462047
2048
2049
2050
2051
2052
2053
2054
2055
2056
$0
$500,000
$1,000,000
$1,500,000
$2,000,000
$2,500,000
$3,000,000
$3,500,000
$4,000,000
Existing GF Debt Service
Scenario 1
Scenario 2
Scenario 3
8 Generally, there are two primary measures of debt affordability for general fund supported borrowing programs:
BUDGETARY CAPACITY – what a local government’s budget can reasonably allow without undue budgetary or fiscal stress
MARKET CAPACITY – what the bond market will reasonably allow without adverse consequence or penalty (i.e. downgrade in credit ratings or increased cost of borrowing)
Assessing Debt Affordability
EXISTING & PROPOSED LEASE OBLIGATION DEBT | ANNUAL DEBT SERVICE REQUIREMENTS Current GF supported debt service + Measure
S resources = ~ $1.6 Million
+$2 Million
+$800,000
Debt Affordability Model &
Rating Agency Criteria
9 KNN has created a Debt Affordability Model (DAM) for Yountville The DAM uses various inputs from the Town’s financial statements to calculate key ratios that are derived from Standard & Poor’s (S&P) analytical framework for determining a U.S. local government credit rating
Specifically, inputs to the DAM are used to calculate economic and financial measures within the S&P rating criteria for:
Economy
Financial Performance
Reserves and Liquidity
Debt and Liabilities
The DAM also models the impacts of potential new debt on the scoring of key debt ratios
Note that KNN’s scoring of rating agency metrics is for general planning purposes only and is not intended to be predictive of particular rating agency outcomes – we are not rating agency analysts
S&P Rating Criteria:
Debt and Liabilities are 20% of Rating
10 Source: Standard & Poor’s Methodology for Rating U.S. Governments, September 9, 2024. The below metrics are utilized to establish S&P’s initial credit assessment:
Economy
(20%)
(Scoring 1 – 6)
Financial
Performance
(20%)
(Scoring 1 – 4)
Reserve and
Liquidity
(20%)
(Scoring 1 – 5)
Management
(20%)
(Scoring 1 – 4)
Debt and Liabilities
(20%)
(Scoring 1 – 6)
Step 1:
Establish Initial
Assessment
(Local Government)
Gross County Product
(GCP) per capita % of
US GDP per capita
(50%)
Three-year average
operating result (%)
Available reserves
(%) of revenues
Budgeting practices
(35%)
Current cost for debt
service and liabilities
(50%)
Long-term planning
(35%)
Net direct debt
per capita
(25%) County Per Capita
Personal Income
(PCPI) % of U.S PCPI
(50%)
Policies
(30%)
Net pension liabilities
per capita
(25%)
After determining the initial assessment, S&P then applies certain qualitative adjustments to arrive at the Individual Credit Profile (ICP), which determines the Anchor score
Initial S&P Credit Assessment:
Estimated Scoring for Yountville
11 Economy (20% of Credit Assessment)
Metric Score Scale
County PCPI as % of US PCPI (50%) 1 1-6
County GDP as % of US GDP (50%) 1 1-6
Total Economy Score 1
Financial Performance (20% of Credit Assessment)
Metric Score Scale
3-year Average of Operating Result 4 1-4
Total Financial Performance Score 4
Reserves and Liquidity (20% of Credit Assessment)
Metric Score Scale
Available Reserves as a % of
Revenues 1 1-5
Total Reserves and Liquidity Score 1
Debt and Liabilities (20% of Credit Assessment)
Metric Score Scale
Current Costs for Debt Service and
Liabilities as a % of Revenues (50%) 2 1-6
Net Direct Debt per Capita (25%) 4 1-6
Net Pension Liability per Capita (25%) 3 1-6
Total Debt and Liabilities Score 2.75
Consistent with the Town’s
outstanding “AA” S&P credit
rating, an estimated credit
assessment based on the
Town’s FY 2024-25 results
would suggest the continuation
of its strong “AA” category rating
KNN’s estimated scoring of
various credit metrics excludes
scoring of certain qualitative
adjustments applied by the
rating agency to arrive at the
Individual Credit Profile (ICP),
which determines the Anchor
score
Further, KNN does not score the
“Management” category (20%)
Initial S&P Credit Assessment:
Under Each Borrowing Scenario
12 STATUS QUO SCENARIO 1 SCENARIO 2 SCENARIO 3
PROJECT FUND PROCEEDS: -- $15,909,884 $30,000,000 $50,000,000 CURRENT COSTS FOR DEBT SERVICE AND LIABILITIES AS A % OF REVENUES Debt Service:1 $637,644 $637,644 $637,644 $637,644
Proposed Debt Service:3 0 $997,353 $1,867,078 $3,101,250 Pension and OPEB Contributions:4 981,088 981,088 981,088 981,088 Total Current Costs: $1,618,732 $2,616,085 $3,485,809 $4,719,982 Total Governmental Funds Revenues:4 $18,732,507 $18,732,507 $18,732,507 $18,732,507 Current Cost for Debt Service and
Liabilities as % of Revenues: 8.64% 13.97% 18.61% 25.20% S&P Initial Assessment Score: 2 2 3 5
NET DIRECT DEBT PER CAPITA
STATUS QUO SCENARIO 1 SCENARIO 2 SCENARIO 3
Net Direct Debt (Par):2 $5,785,000 $5,785,000 $5,785,000 $5,785,000 Proposed Direct Debt (Par): 0 $15,100,000 $28,270,000 $46,955,000 Population:4 2,638 2,638 2,638 2,638
Net Direct Debt Per Capita $ 2,193 $7,917 $12,909 $19,992 S&P Initial Assessment Score: 3 6 6 6
1 FY 2024-25 debt service includes 2017 LRBs and SBITA and excludes the 2020 Private Placement debt service. 2 Par amount only includes 2017 LRBs and excludes the 2020 Private Placement debt service. 3 Estimated average annual debt service of proposed scenarios are shown. 4 As reported in Town of Yountville Draft FY 2024-25 ACFR. Holding all else constant
and assuming FY 2024-
25 financial results, the
“affordability” of
additional debt can be
evaluated based on the
impact on S&P debt
metrics
The analysis assumes
the Town issues longterm bonds in FY 2027
with a first debt payment
occurring after the 2020
Private Placement has
matured
Concluding Comments
13 Ultimately, decisions about incurring additional debt should be made in the context of budgetary capacity rather than the potential impact on rating agency metrics, which are not intended to be prescriptive
Affordability metrics established by the market (rating criteria) are typically greater than what a local government can reasonably afford in the context of its budgetary constraints
Thus, the assessment of debt affordability generally begins with the perspective of the “issuer” constraints and then evaluates the “market capacity” afforded by the credit markets
When viewed through the lens of market capacity, we evaluate debt affordability by gauging the potential for a rating downgrade by analyzing the impact of additional debt on credit metrics – specifically, leverage / liability metrics * KNN advisors are not rating or credit analysts and this analysis is only an informational tool to assist the Town with its capital and debt planning. It does not constitute a formal credit rating nor a prediction or assurance of any future ratings. The analysis is for an indicative/initial assessment rating, before any qualitative or subjective adjustments are made for a final rating outcome.
STANDARD & POOR’S DEBT RATIOS & MARKET
CAPACITY CONSIDERATIONS
Overview of S&P Rating Criteria
15 Source: Standard & Poor’s Methodology for Rating U.S. Governments, September 9, 2024. Standard & Poor’s released new methodology for rating U.S.
Governments on September 9, 2024. This was S&P’s first major revision of their criteria since 2013.
S&P Rating Criteria & Debt Ratios
16 Source: Standard & Poor’s Methodology for Rating U.S. Governments, September 9, 2024. CURRENT CARRYING COST (50% OF DEBT & LIABILITIES SCORING) is measured by:
Annual debt service, pension, and other postemployment benefits (OPEB) expenditures divided by total governmental fund revenues (expressed as a % of total) KNN has calculated and “scored” this ratio for Yountville NET DIRECT DEBT PER CAPITA (25% OF DEBT & LIABILITIES SCORING) is determined by:
Gross direct debt (outstanding par amount) divided by population (expressed as a $ amount)
KNN has calculated and “scored” this ratio for Yountville NET PENSION LIABILITIES (25% OF DEBT & LIABILITIES SCORING) is calculated by:
Total pension liability as reported in a government’s financial statements under Governmental Accounting Standards Board (GASB) standards less the fund's plan fiduciary net position divided by population (expressed as a $ amount) KNN has calculated and “scored” this ratio for Yountville Limiting Conditions
17 KNN has relied on the accuracy of information received from the Town, published in the Town’s financial statements or otherwise available publicly and has not independently verified the accuracy or completeness of such information. We assume no liability for errors in such information. KNN personnel are not rating agency or credit analysts and this analysis does not constitute a formal credit report for the Town nor a prediction or assurance of any future ratings. Moreover, KNN’s estimated scoring of various credit metrics excludes scoring of certain qualitative adjustments applied by the rating agency to arrive at the Individual Credit Profile (ICP), which determines the Anchor score. Further, KNN does not score the “Management” category (20%). This analysis is prepared exclusively for use by the Town of Yountville and shall be used only for the purposes for which it was prepared - as an informational tool to assist the Town with its capital and debt planning. It is not intended to be used in conjunction with, or relied upon, for any specific financing transaction, nor may it be published, in whole or in part, in any offering or other documents related to a specific financing transaction.
The information and analyses presented in this presentation apply only as of the date hereof.