HomeMy WebLinkAbout05.c. Receive plan to refinance existing 2009 bonds Page 1 of 6
Item 5.c.
Central Contra Costa Sanitary District
May 21, 2018
TO: FINANCE COMMITTEE
FROM: PHILIP R. LEIBER, DIRECTOR OF FINANCEAND ADMINISTRATI ON
REVIEWED BY: THEA VASSALLO, FINANCE MANAGER
ANN SASAKI, DEPUTY GENERAL MANAGER
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: RECEIVE PLAN TO REFINANCE EXISTING 2009 BONDS
As has been mentioned to the Board at various times over the course of the past year, Central San has
considered the possibility of refinancing existing debt to save on interest costs. While it appeared initially
that the 2017 Federal tax legislation closed off this possibility, alternative structures have been confirmed
(by the US Treasury representatives, financial advisor PFM and tax counsel Jones Hall) as still providing
for a viable refinancing opportunity.
Various parties (including potential underwriters Wells Fargo, Barclays, Stifel, and other financial advisors)
have brought refinancing proposals to the attention of Central San in recent months, and their analyses
have shown the possibility of Net Present Value savings of between $1-2 million in interest costs, net of
issuance costs. Tentative Net Present Value savings on the order of $1 million have been confirmed by
analyses prepared by PFM using relatively conservative assumptions as to interest rates at the time of
issuance. The actual amount of the savings will vary depending on interest rates at the time the refinancing
is executed. The chart below shows the debt service principal payments (bottom bar) and net interest
payments (top bar, net of the Build America Bonds subsidy)for existing debt. The chart demonstrates that
net interest payments decline over time as the amount of overall debt outstanding decreases.
May 21, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 102 of 129
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2009 Bonds
54,000,000
5s,500,000
53,000,000
52,500,000
52,000,000
$1,500,000
51,000,000
5500,000
50
■Prinroal ■Amort¢ation&Interest
The 2009 bonds consist of two series - Series 2009A taxable Build America Bonds, and Series 2009B
tax-exempt bonds. Methods exist to refinance the bonds, even after the 2017 Federal tax legislation that
eliminated the ability for issues to undertake tax-exempt advance refundings (issuing new tax-exempt
bonds to retire existing tax exempt bonds more than 90 days prior to their call date, and for that period of
time having two tax exempt bonds outstanding concurrently). For the Series 2009A bonds, an advance
refunding is possible if Central San foregoes the interest subsidy until the bonds are callable in September
2019. Accordingly, this type of refinancing is not in conflict with the 2017 Federal tax legislation, and bond
counsel is willing to provide the necessary favorable tax opinion on the transaction. Central San also has a
smaller portion of Series 2009B tax-exempt bonds outstanding which could be advance refunded using
taxable bonds. Analysis is still underway on whether these bonds should be refunded this year, or
potentially this refunding could be deferred until the fall of 2019 to take place with the new money
issuance. The opportunity for Net Present Value savings as a percentage of outstanding bonds is
significantly less (2-3%)for the Series 2009B bonds as compared to the Series 2009A bonds (7-8%).
Central San staff has worked with financial advisor PFM on the preliminary steps towards the bond
refunding transaction, including developing a proposed financing schedule (attached) and taking initial
steps to assemble a financing team. With respect to assembling a financing team, Central San's Debt
Management Policy specifies:
A. Selection of Financing Team Members
The General Manager or designee will make recommendations for all financing team members, with
the Board providing final approval. Financing team members may include a financial advisor, bond
counsel, disclosure counsel (which may be the same firm as bond counsel), and an underwriter.
Selection of those financing team members shall be in accordance with Professional Service and
Consultant provisions of Central San's procurement policies, and consistent with Chapter 2.36
"Purchasing and Materials Policy" of the District Code. In the event of a competitive bond sale,
Central San's debt will be offered to the underwriter providing the most cost advantageous proposal
to Central San.
Anticipated costs for bond counsel, disclosure counsel, and an underwriter are each expected to be below
the $100,000 threshold for professional and consulting work requiring Board approval under Central San's
procurement policies. Staff recommends retaining the firm of Jones Hall as bond counsel, and disclosure
counsel as that firm performed such roles on the 2009 issuance and it is most efficient for the same firm to
perform these roles for this transaction where time is of the essence and that firm is already familiar with
Central San and the 2009 bond documents.
May 21, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 103 of 129
Page 3 of 6
PFM will conduct an informal Request For Proposals process during the May- June timeframe for the
selection of an underwriter for the refinancing transaction. The Board would be asked to formally affirm the
financing team members at the June 21 st Board meeting, and then at the July 19th Board meeting, the
bond documents developed by the team. At these meetings, staff would also present the analyses
required under the Debt Policy, and under state law related to bond financings. The proposed schedule
further anticipates receiving bond ratings in August, and then closing of the transaction in September.
Alternatives to refinancing the debt include allowing the bonds to stay in place through their scheduled
maturities through FY 2029-30, or waiting to refinance the bonds until the fall of 2019 when Central San
anticipates a new money bond issuance. However, rising interest rates could eliminate the savings
opportunity by then, and it is prudent to take steps to capture the savings now while they are
available. Further, as the chart above shows that interest payments decrease significantly as the amount of
the debt outstanding decreases over time, capturing the opportunity for the maximum interest savings
means acting sooner rather than later.
The Board will be informed of any policy and/or structuring issues that may arise as we move further into
the work connected with the refinancing, but this is anticipated to be a straightforward transaction intended
for the purpose of reducing interest costs.
Stratedc Plan Tie-In
GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility
Strategy 2- Manage Costs
ATTACHMENTS:
1. Proposed Financing Schedule
May 21, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 104 of 129
Page 4 of 6
Central Contra Costa Sanitary District
Wastewater Revenue Refunding Certificates of Participation, Series 2018
Financing Schedule as of May 15, 2018
Board meetings are on the first and third Thursday of the month
S M T W T F S T F S S M T W T F S
1 2 3 4 51 2 1 2 3 4 5 6 7
6 7 8 9 10 11 12 7 8 9 8 9 10 11 12 13 14
13 14 15 16 17 18 19 101,712 14 15 16 15 16 17 18 19 20 21
20 21 22 23 24 25 26 17 18 19 20 21 22 23 22 23 24 25 26 27 28
27 28 29 30 31 24 25 26 27 28.29 30 29 30 31
S M T W T F S T W T F S 716
T W T F S
1 2 3 4 12 3 4 5 6
5 6 7 8 9 10 11 4 5 6 7 8 9 10 11 12 13
12 13 14 15 16 17 18 971011 12 13 14 15 17 18 19 20
19 20 21 22 23 24 25 16 17 18 19 20 21 22 21 22 23 24 25 26 27
26 27 28 29 30 31 23 24 25 26 27 28 29 28 29 30 31
30
Holiday
Date Event Party
Week of May 7 ■ Circulate information request for Preliminary Official Statement DC
Week of May 14 ■ Finalize and Distribute underwriter RFP MA
Mon.,May 21 ■ Finance Committee meeting for recommendation to proceed CCCSD
Week of May 21 • Information provided by District for POS CCCSD
Mon., May 28 ■ Memorial Day All
Week of May 28 ■ Circulate first draft of bond documents BC
■ Receive underwriter RFP responses MA
Week of June 4 ■ Select underwriter CCCSD/MA
■ Circulate first draft of POS DC
Week of June 11 ■ Working group meeting to review documents and POS All
Fri.,June 15 ■ Deadline to submit materials to Board CCCSD
Week of June 18 ■ Circulate revised drafts of bond documents and POS BC/DC
Thu.,June 21 ■ Board meeting to appoint the financing team CCCSD
Week of June 25 • Working group call to review documents and POS All
Week of July 2 ■ Circulate first draft of credit presentation MA
Wed.,July 4 ■ Independence Day All
Financing Schedule 1
May 21, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 105 of 129
Page 5 of 6
Central Contra Costa Sanitary District
Wastewater Revenue Refunding Certificates of Participation, Series 2018
Financing Schedule as of May 15, 2018
Board meetings are on the first and third Thursday of the month
S M T W T F S T F S S M T W T F S
1 2 3 4 51 2 1 2 3 4 5 6 7
6 7 8 9 10 11 12 7 8 9 8 9 10 1 13 14
13 14 15 16 17 18 19 101,712 14 15 16 15 16 17 ]2t5226
20 21
20 21 22 23 24 25 26 17 18 19 20 21 22 23 22 23 24 27 28
27 28 29 30 31 24 25 26 27 28.29 30 29 30 31
S M T W T F S T W T F S 716
T W T F S
1 2 3 4 12 3 4 5 6
5 6 7 8 9 10 11 4 5 6 7 8 9 10 11 12 13
12 13 14 15 16 17 18 971011 12 13 14 15 17 18 19 20
19 20 21 22 23 24 25 16 17 18 19 20 21 22 21 22 23 24 25 26 27
26 27 28 29 30 31 23 24 25 26 27 28 29 28 29 30 31
30
Holiday
Thu.,July 5 ■ Deadline to submit bond documents to Board CCCSD/BC
Week of July 9 ■ Conference call to review credit presentation All
Week of July 16 ■ Circulate second draft of credit presentation MA/UW
Thu.,July 19 ■ Board meeting to approve bond documents and POS CCCSD/MA/BC
Week of July 23 ■ Finalize credit presentation MA/UW
Week of July 30 ■ Meetings with rating agencies CCCSD/MA/UW
Week of August 6 ' Select Printer CCCSD/MA
■ Due Diligence Call All
Week of August 13 ' Receive credit ratings All
■ Post POS P
Week of August 27 ■ Bond Pricing All
Mon.,September 3 ■ Labor Day All
Week of September 3 ■ Print final Official Statement P
Week of September 24 ■ Closing All
Financing Schedule 2
May 21, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 106 of 129
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Central Contra Costa Sanitary District
Wastewater Revenue Refunding Certificates of Participation, Series 2018
Financing Schedule as of May 15, 2018
Board meetings are on the first and third Thursday of the month
S M T W T F S T F S S M T W T F S
1 2 3 4 51 2 1 2 3 4 5 6 7
6 7 8 9 10 11 12 7 8 9 8 9 10 11 12 13 14
13 14 15 16 17 18 19 101,712 14 15 16 15 16 17 18 19 20 21
20 21 22 23 24 25 26 17 18 19 20 21 22 23 22 23 24 25 26 27 28
27 28 29 30 31 24 25 26 27 28.29 30 29 30 31
S M T W T F S T W T F S S M T W T F S
1 2 3 4 1 1 2 3 4 5 6
5 6 7 8 9 10 11 4 5 6 7 8 7 8 9 10 11 12 13
12 13 14 15 16 17 18 971011 12 13 14 15 14 15 16 17 18 19 20
19 20 21 22 23 24 25 16 17 18 19 20 21 22 21 22 23 24 25 26 27
26 27 28 29 30 31 23 24 25 26 27 28 29 28 29 30 31
30
Holiday
ParticipantParty Working Group
Issuer Central Contra Costa Sanitary District CCCSD
Municipal Advisor PFM Financial Advisors MA
Bond &Disclosure Counsel Jones Hall BC/DC
Underwriter TBD UW
Underwriter's Counsel TBD UC
Trustee TBD T
Verification Agent TBD V
Printer TBD P
Financing Schedule 3
May 21, 2018 Regular FINANCE Committee Meeting Agenda Packet- Page 107 of 129