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Home My WebLink AboutF-2 Staff Report - Successor Agency Agenda Item-Bond Ref 2007A 2007BBond Refundings-2007A and 2008B TABS June 19, 2017 Page 1 SUCCESSOR AGENCY ITEM F-2 TO: HONORABLE CHAIRPERSON AND MEMBERS OF THE SUCCESSOR AGENCY BOARD FROM: TROY L. BUTZLAFF, ICMA-CM, CITY MANAGER VIA: TALIKA M. JOHNSON, DIRECTOR OF FINANCE DATE: JUNE 19, 2017 SUBJECT: AUTHORIZATION TO COMMENCE PROCEEDINGS TO REFUND 2007A AND 2007B TAX ALLOCATION BONDS SUMMARY: The former Redevelopment Agency of the City of Azusa (the “Prior Agency”) issued Taxable Tax Allocation Bonds in 2007 for the purpose of financing redevelopment activities. Total issuances were $15,780,000 of 2007A Bonds and $4,790,000 of 2007B Bonds. This action requests authorization for Staff and the Agency’s Financial Advisor, Urban Futures, Inc. (UFI), to commence preparation of documents for the issuance of refunding bonds to refund (repay) the outstanding 2007A and 2008B Tax Allocation Bonds issued by the former Redevelopment Agency to achieve debt service savings. RECOMMENDATION: Staff recommends that the Successor Agency Board take the following action: 1) Authorize Staff and the Agency’s Financial Advisor to commence preparation of documents necessary for the issuance of the Agency’s (proposed) Tax Allocation Refunding Bonds, Series 2017. DISCUSSION: The former Redevelopment Agency of the City of Azusa (the “Prior Agency”) issued Taxable Tax Allocation Bonds in 2007 for the purpose of financing redevelopment activities. Total issuances were $15,780,000 of 2007A Bonds and $4,790,000 of 2007B Bonds. The 2007A bonds were partially refunded with the issuance of the 2015 A&B Subordinate Tax Allocation Refunding Bonds. Currently, $3.95 million and $3.93 million of the 2007A and 2007B Bonds, respectively, are outstanding. The (remaining) 2007A Bonds have interest rates ranging from 5.77% to 5.95% with a final maturity of August 1, 2022, and the 2007B Bonds have interest rates ranging from 4.70% to 5.30% with a final maturity of August 1, 2036. APPROVED CITY COUNCIL 6/19/2017 Bond Refundings-2007A and 2008B TABS June 19, 2017 Page 2 The Successor Agency to the former Redevelopment Agency of the City of Azusa (the “Successor Agency” of “Agency”) has assumed responsibility for repayment of the 2007A and 2008B Bonds from the Prior Agency. Per AB 1484, the Successor Agency may refund existing bonds, with approval of the Oversight Board and the State Department of Finance, for the purpose of creating debt service savings. Based on current market interest rates, the proposed 2017 Bonds would generate an estimated total debt service savings of $1.2 million net of all costs of issuance; equal to approximately $80,000 per year through 2022, and an average of $56,000 per year from 2023 to 2036. The term of the 2017 Bonds will not exceed the existing term of the 2007A and 2007B Bonds. The sale of the proposed 2017 Bonds can be accomplished with either a public bond sale (the method used for the Agency’s refunding bonds issued in 2014 and 2015), or by a “private placement” sale to a single bank. The method of sale (public issuance vs. private placement) will be determined closer to the date of the actual bond sale. Presently, market rates slightly favor a private placement sale format, but that could change before the 2017 Bonds are actually priced. With that in mind, the bond documents will be drafted to allow for either method of sale. The source of repayment of the 2017 Bonds would be limited to tax revenues (in amounts equivalent to the former tax increment revenues) deposited by the County into the Successor Agency’s Redevelopment Property Tax Trust Fund, on a parity with outstanding tax allocation bonds issued by the Agency in 2014 and 2015. After the initial financing and legal documents for the 2017 Bonds have been prepared, they will be presented to the Agency for approval. After approval by the Agency (and subsequent approval from the Agency’s Oversight Board) the refunding documents will be sent to the State Department of Finance for review and approval. To ensure the 2017 Bonds are structured and price competitively and to maximize the savings to the Agency, Urban Futures, Inc. (UFI), the Agency’s Financial Advisor, will work with Agency Staff to obtain informal professional service bids for bond/disclosure counsel and underwriter services. UFI will solicit fee proposals from 3-5 vendors for both bond/disclosure counsel and underwriter firms with substantial post redevelopment (i.e., AB X1 26 and AB 1484) experience. FISCAL IMPACT: The proposed 2017 Bonds will generate an estimated total debt service savings of $1.2 million net of all costs of issuance; equal to approximately $80,000 per year through 2022, and an average of $57,000 per year from 2023 to 2036. Based on RDA Dissolution Law, the debt service savings will be shared with all affected taxing entities, including the City. The City’s General Fund share of the total debt service savings would be approximately $260,000. The source of repayment of the 2017 Bonds would be limited to tax revenues (in amounts equivalent to the former tax increment revenues) and deposited by the County into the Successor Agency’s Redevelopment Property Tax Trust Fund. Bond Refundings-2007A and 2008B TABS June 19, 2017 Page 3 The 2017 Bonds would not be a debt of the City, but a special limited obligation of the Successor Agency. Related costs of the Successor Agency will either be recovered through the 2017 Bond Proceeds if issued, or if not, through the ROPs process. Prepared by: Reviewed and Approved: Talika M. Johnson Louie F. Lacasella Director of Finance Management Analyst Reviewed and Approved: Troy L. Butzlaff, ICMA-CM City Manager Attachment: 1) Azusa 2017 Refunding TABs Estimated Savings Summary as of 6-8-2017 Successor Agency to the Azusa Redevelopment Agency 2017 Tax Allocation Refunding Bonds (Refunding of the 2007A and 2007B Tax Allocation Bonds) Refunding Analysis Refunding Statistics Public Sale¹ Private Placement² Refunding Par Amount $6,825,000 $7,110,000 True Interest Cost 3.41%3.60% Final Maturity 2036 2036 Net Present Value Savings ($) $571,990 $572,546 Net Present Value Savings (%) 7.96%7.96% Aggregate Annual Cash Flow (CF) Savings 2018-2022 $76,356 $84,331 Aggregate Annual CF Savings 2023-2036 $56,985 $56,191 Aggregate Savings $1,179,549 $1,208,323 Annual CF Savings 2018-2022 (City Share³) $16,642 $18,380 Annual CF Savings 2023-2036 (City Share³) $12,420 $12,247 Aggregate Savings (City Share³) $257,084 $263,355 Annual Savings from Proposed Refunding (CITY SHARE³) Year Public Sale¹ Private Placement² 2018 $16,025 $17,148 2019 16,210 18,526 2020 16,743 18,346 2021 17,407 18,879 2022 16,823 19,000 2023 12,903 12,100 2024 12,546 12,689 2025 12,184 12,113 2026 11,816 12,593 2027 12,533 11,908 2028 12,100 12,278 2029 12,732 12,569 2030 12,210 12,766 2031 12,771 11,798 2032 12,181 11,883 2033 12,672 11,875 2034 12,011 11,791 2035 12,431 12,703 2036 12,786 12,392 Totals $257,084 $263,355 Notes: ¹Public Sale Evaluated at Interest Rates as of June 8, 2017 using Tax-Exempt Spreads to the Generic "AAA" Municipal Yield Index ("MMD") of +45 bps in 2018 and Increasing to +95 bps in 2036. Assumed Insurance Premium of 90 bps and Surety Premium of 240 bps (on both Public and Private Analysis) are Based on Recent Tax Allocation Credits of Similar Ratings. Interest Rates Assumed in this Presentation are Based on Current Market Conditions and Credits Characteristics Similar to other "A-" TABs (Most Recent Rating on the Agency's 2015 Tax Allocation Bonds). Actual Results may Differ, and Stifel makes no Commitment to Underwrite at these Levels or Guarantees the Private Placement Rate. Analyses was Performed with no Changes to the Term or Structure of the Debt Service from the Outstanding Issue. ²Placement Rate Provided by Interested Placement Bank on June 8, 2017. ³Projected City Share of Property Tax Provided on County Auditor Controller's Website (21%)