HomeMy WebLinkAboutAgenda Packet - September 26, 2011 - CC Special City of Azusa Library
Financing Options
September 26, 2011
• Section One:
Table of Contents
Project Background
• Section Two: Financing Options
• Section Three: Financing Objectives
• Section Four: Keys To Successful Project Delivery
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Section One :
Project Background
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Project Background
Public Library:
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• Roughly 32,000 Sq. Ft a
• $18-22 Million ' J
Funding options include :
o General Fund
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o New Market Tax Credits •
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o Voter approved revenues
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Section Two :
Financing Options
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Financing Option- COP
O Easiest option to implement for the City
o City issues tax-exempt bonds, using an existing
unencumbered City asset (e . g . City Hall , etc. )
to facilitate the lease
O By using the General Fund Funds in a lease
with an essential City asset, the City can obtain
a high rating and the most likely chance at a
bond insurance policy
O COPs include significant liability to the General
Fund
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COPs - Flow of Funds
Tax-Exempt
COPs
Debt Service Proceeds
Proceeds
Facility Lease Entered
Into With Financing City of Azusa Pay for Public Facility
Authority Lease
payments
General Fund
revenues
Certificates of Participation (COPs) are issued using a facility lease
structure between the City and Joint Powers Authority (e.g. Financing
Authority)
COPs do not require voter-approval
✓ Lease exception applied
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. IiiG.O. Bonds
GOs - Flow of Funds
Debt Service Proceeds
City of Azusa Issues County of Los
G.O. Bonds Angeles
Property
payments _
Proceeds
Property Taxes
Pay for Public Facility Paid by Property
Owners
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Design, Build & Lease - Flow of Funds
Taxable COPs
Debt Service Proceeds
Proceeds
Facility Lease Entered
Into with Financing City of Azusa Pay for Public Facility
Authority
Lease
payments
New Market
General Fund Tax Credit
Revenues Equity
New Market Tax Credits (NMTC) are a federal subsidy program that
benefits projects in qualified census tracts
Tax credits are sold to corporations for an upfront payment that can be
used to fund the project (pays for about 25% of the project cost)
I Can only be paired with "taxable" debt during 7-year subsidy period
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Section Three :
Financing Objectives
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. i Financing Objectives
o General Fund revenues City of Azusa
must increase to cover COP, GO or P3
the following costs :
• Debt payments and (A) Operating Revenues
projected operations & o General Fund Budget
maintenance costs (B) Less (operating expenses)
o Assume 2% - 3% o Personnel
annual growth in o General/Administrative
operational costs
• Future debt payments
o COP's (A-B) (C) Net Income
o GO's (D) Debt / Lease Payments
o Lease/Tax Credits o New debt / Lease = Public
Facilities
(E) Income After Debt / Lease Payments
o Maintenance Costs
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Comparison of Financing Options
$22 Million Project
remnimffilmilli A+ A A A A
Assured Guaranty Assured Guaranty Assured Guaranty
Bond Insurance Aa3/AA+ Aa3/AA+ None Aa3/AA+ Assured Guarant Aa3/AA+
Issuance Date Janua 2013 Februa 2012 Februa 2012 Februa 2012 June 2012
Bond Amount(3) $22,677,334 $26,746,242 $26,142,839 $24,657,617 $21,400,000 c4)(5) >
%20 297 300
Project Cost $22,000,000 $22,000,000 $22,000,000 $22,000,000 $15,893,284(6)
Capitalized Interest None 18-Months 18-Months None 18-Months
Reserve Fund No Yes Yes Yes Yes
Annual Net Debt Payment(7)
Year 1 1,391,450 0 0 1,535,925 0
Year 2 1,398,850 565,675 573,982 1,538,625 647,910
Years 3 - 7 1,397,750 1,727,610 1,749,711 1,537,235 1,725,476
Year 8 &Thereafter 1 398 354 1 727 183 1 749 553 1 537 032 1 507 711
Total Debt Pa ments $41 941 200 .48 928 925 •.49 562 250 •.46 112 450 ••43 952 642
All-In Borrowin• Cost(8) 4.58% 5.03% 5.12% 5.01% 5.88%
(1) Assumes a 2/3 G.O. ballot election is held on November 2012.
(2)Assumes other City-owned asset(s) are pledged toward the COP lease.
(3) Equal to bond proceeds plus original issue premium and less original issue discount.
(4) Represents taxable bond amount in Years 1-7.
(5) Represents tax-exempt takeout financing executed in Year 8.
(6) Assumes that New Market Tax Credit contribution of$6,106,716 will reduce the total project cost ($22,000,000) to $15,893,284.
(7) Annual debt payment less capitalized interest and reserve fund earnings.
(8) Assumes arbitrage bond yield.
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Comparison of Financing Options
$18 Million Project
J �'I 4.32�y�,& P� � °"
Under in• Ratin• A+ A A A A
Assured Guaranty Assured Guaranty Assured Guaranty
Bond Insurance Aa3/AA+ Aa3/AA+ None Aa3/AA+ Assured Guarant Aa3/AA+
Issuance Date Janua 2013 Februa 2012 Februa 2012 Februa 2012 June 2012
Bond Amount(3) $18,601,855 $21,941,942 $21,446,762 $20,225,637 $17,565,000 (4) -->
..16 709 495(5)
Project Cost $18,000,000 $18,000,000 $18,000,000 $18,000,000 $13,002,295(6)
Capitalized Interest None 18-Months 18-Months None 18-Months
Reserve Fund No Yes Yes Yes Yes
Annual Net Debt Payment(7)
Year 1 1,149,475 0 0 1,258,522 0
Year 2 1,148,075 464,050 470,881 1,258,472 531,735
Years 3 - 7 1,146,000 1,416,985 1,435,177 1,262,242 1,416,535
Year 8 &Thereafter 1,146,557 1,417,049 1 435,102 1,260 483 1,216,127
Total Debt Pa ments $34,398,350 $40,141,100 $40,654,108 $37,819,310 $35,585,321
All-In Borrowin• Cost(8) 4.58% 5.03% 5.12% 5.01% 5.87%
(1)Assumes a 2/3 G.O. ballot election is held on November 2012.
(2)Assumes other City-owned asset(s) are pledged toward the COP lease.
(3) Equal to bond proceeds plus original issue premium and less original issue discount.
(4) Represents taxable bond amount in Years 1-7.
(5) Represents tax-exempt takeout financing executed in Year 8.
(6) Assumes that New Market Tax Credit contribution of$4,997,705 will reduce the total project cost ($18,000,000) to $13,002,295.
(7) Annual debt payment less capitalized interest and reserve fund earnings.
(8) Assumes arbitrage bond yield.
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Section Four:
Keys To Successful
Project Delivery
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•
Necessary Steps
o Determine most desirable financing option
GOs are most cost effective and insulate the general fund
from debt service liability
• COPs are the easiest to implement but come with a high level
of liability to the General Fund
P3 may present the best of both scenarios above by providing
the lowest cost of construction and lowest cost of financing
o Determine sufficient resources are available to make on-going
debt / lease payments and operational costs
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