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HomeMy WebLinkAbout10. Adopt resolution appointing Financing Team for 2009 Bond Refinancing and authorizing negotiated sale Page 1 of 27 Item 10. CENTRAL SAN CENTRAL SAN BOARD OF DIRECTORS POSITION PAPER MEETING DATE: JULY5, 2018 SUBJECT: CONSIDER ADOPTING RESOLUTION NO. 2018-013 APPOINTING THE FINANCING TEAM FOR REFINANCING OF EXISTING 2009 OUTSTANDING DEBT OBLIGATIONSANDAUTHORIZING THE NEGOTIATED SALE OF REFINANCING BONDS SUBMITTED BY: INITIATING DEPARTMENT: PHILIP R. LEIBER, DIRECTOR OF FINANCE ADMINISTRATION-FINANCE AND ADMINISTRATION REVIEWED BY: THEA VASSALLO, FINANCE MANAGER ANN SASAKI, DEPUTY GENERAL MANAGER Roger S. Bailey General Manager ISSUE Per Board Policy 029 - Debt Management and Continuing Disclosure Policy, Board approval is required for the selection of the Financing Team that will assist with the execution of the 2009 Bond Refinancing transaction. The financing team includes the appointment of a Financial Advisor, Bond Counsel/Disclosure Counsel and a Senior Managing Underwriter to issue the bonds through a negotiated bond sale. BACKGROUND At previous Finance Committee and Board meetings, staff have discussed the potential to achieve savings through refinancing Central San's 2009 outstanding debt. The attached memo addresses current market conditions, anticipated saving from refinancing, and recommendations on the structure for the refunding. July 5, 2018 Regular Board Meeting Agenda Packet- Page 87 of 195 Page 2 of 27 Key issues still outstanding and included in the attached memo include: • Whether to issue Certificates of Participation or Revenue Bonds (Staff reported at the Finance Committee meeting that Revenue Bonds are now viewed as the preferred financing structure). • Whether to proceed with refinancing only on the Series 2009A bonds, or in addition, the Series 2009B bonds. In addition to seeking the Board's input on bond structuring issues, staff is seeking the Board's approval on the appointment of the Financing Team to assist in issuance of the refunding bonds. The team is comprised of a Financial Advisor, Bond Counsel/Disclosure Counsel and Senior Managing Underwriter. • The Financial Advisor is PFM Financial Advisors LLC ("PFM"). Central San appointed PFM and Sperry Capital as financial advisors in December 2017, with PFM to serve as the Financial Advisor for this refinancing transaction. PFM's work on this matter will include financial analysis related to the potential refunding savings, assistance in selecting an underwriter, evaluation of bond structuring alternatives, bond document review, bond pricing, interfacing with the rating agencies, and assistance with State and Federal initial and continuing disclosure compliance. PFM's fee for this work, payable from bond proceeds, will be $47,500. • The law firm of Jones Hall served as both Bond Counsel and Disclosure Counsel to Central San in the 2009 bond issuance. Central San has been well served by their previous work, and staff believes it is prudent and cost effective to have this firm continue in those roles. Jones Hall drafted the documents related to the existing bonds, and they are well situated to draft new agreements on the refunding bonds. As to the disclosure counsel work, their familiarity with Central San, and the existing bond official statement will allow them to assist with constructing required disclosures for the new bonds in the most timely and cost effective manner. Jones Hall's fees for bond counsel are $60,000, and for disclosure counsel are $40,000. Both of these fees are payable from bond proceeds as a cost of issuance. • Staff recommends appointing Piper Jaffray as Senior Managing Underwriter. PFM conducted a Request for Proposal (RFP) in early June by notifying a total of nine underwriting firms of Central San's proposed bond refunding. The list of firms notified was comprised of three firms that approached Central San to indicate the District should consider refunding existing debt to save money, plus another six firms who are active issuers for water and wastewater bonds. These firms were asked to address several issues including the optimal bond structure and anticipated yields, marketing approach, and underwriting cost. Six firms presented written proposals: Barclays, Piper Jaffray, Prager& Co., Raymond James, Stifel, and Wells Fargo. Based on qualifications, proposed structure and cost as outlined in the informal RFP, staff and PFM narrowed the underwriter selection to two firms: Stifel and Piper Jaffray. Final interviews to select the proposed underwriter were conducted on June 20 and 21, 2018. The following factors set forth in the request for proposal were considered in the selection: A. Quality of proposal and responses to specific questions included in this RFP; B. Ability to structure and market the bonds in a manner that will result in the lowest possible cost of capital; C. Experience on similar financings in California; D. Relevant qualifications of key personnel assigned to this financing; E.Accessibility of key personnel to the District's staff during the engagement; F. Understanding of the District's financing objectives; G. Distribution capabilities; H. Reasonableness of fees. Both firms submitted excellent proposals and were highly qualified. Piper Jaffray distinguished July 5, 2018 Regular Board Meeting Agenda Packet- Page 88 of 195 Page 3 of 27 themselves with respect to items C, D, and F, including very strong wastewater experience, and view of current and longer term financing Central San needs. With respect to underwriter's cost, this is a specified dollar amount per bond that covers their fees (take- down fee) and a provision for other expenses including underwriter's counsel. The proposed fees are as follows: $3.19 per$1,000 bond. This equates to about$51,100 for Series 2009 A, and an additional 20% of that if the Series 2009B bonds are also financed. Such fees are payable from bond proceeds as a cost of issuance. The costs of the debt to Central San would include those fees, plus the yield on the bonds, which are typically quoted as a spread over a benchmark(called MMD, for Municipal Market Data) index of"AAA" tax exempt bonds. This spread is to be negotiated with the assistance of PFM near the time of issuance. This spread is to allow the underwriter to market the bonds to investors after the underwriter purchases the bonds from Central San. Setting this spread too high could result in the District paying a higher interest cost than necessary and setting it too low could result in the underwriter losing money on the bonds if they are unable to resell them to investors at a price equal or higher than they paid Central San. The anticipated savings related to the refinancing are net of the cost of issuing the new bonds, and the steps necessary to defease the existing debt. The direct costs to refinance the Series 2009A bonds apart from underwriter costs are anticipated to be approximately$176,000, consisting of: Financial Advisor Fee $47,500 Bond Counsel $60,000 Disclosure Counsel $40,000 S&P Rating $24,000 Other miscellaneous cost $4,500 Total costs without underwriter costs $176,000 Underwriter Costs (Series 2009A) $51,100 Total costs with underwriter costs $227,100 All of the bond issuance costs noted above would be payable from bond proceeds. The estimated savings for the refinancing are net of these costs. If the Series 2009B bonds are also refinanced, certain additional minor costs may also be incurred by Central San, as well as underwriter costs at$3.19 per bond (equating to about$10,000). An updated cost schedule will be provided at the July meeting if it appears likely the Series 2009B bonds will be refinanced. Schedule and Next Steps An initial financing schedule was prepared by PFM in May and provided to the Finance Committee on May 21, 2018. An updated version of the schedule is provided as Attachment 2, with some of the mid-course milestones dates updated. The targeted issuance date remains early to mid-September, but with targeted pricing in August. The next key milestone for Board and Finance Committee involvement will be approval of several key documents related to the Financing in July, as noted below: 1. Adoption of the Refinancing Resolution, authorizing the refinancing of existing debt to take advantage of interest cost savings. 2. Approval of draft Preliminary Official Statement for the refunding obligations. 3. Approval of other necessary documents to authorize and implement the refinancing. Staff and Financing Team members are available to answer any questions the Board may have. July 5, 2018 Regular Board Meeting Agenda Packet- Page 89 of 195 Page 4 of 27 ALTERNATIVES/CONSIDERATIONS Do not refinance the bonds. FINANCIAL IMPACTS The 2009 obligations, whether Series 2009A alone, or also with Series 2009B, will be refinanced only if cost effective and will result in savings to Central San. Preliminary indications are that savings on the order of$1 million to $1.4 million are possible for the Series 2009A bonds, and potentially another$100,000 or so for the Series 2009B bonds. This is anticipated to result in a potential reduction in the Sewer Service Charge of approximately 75 cents per year through 2029 (ranging from about$1 per year in the first five years and declining to about 20 cents in 2029 as the amount of bonds outstanding declines). COMMITTEE RECOMMENDATION The Finance Committee reviewed this matter at its meeting on June 26, 2018, and recommended that the Board adopt the staff recommendation as noted below. The Finance Committee also provided the following guidance to staff regarding the refinancing: • Maintain generally the same debt amortization profile as the existing debt. • Proceed with only one credit rating on the refunding debt. • Review the need for the debt service reserve fund on new debt with consideration of issues surrounding the priority and security of Ad Valorem Tax. • Consider approvals, if necessary, by the Central Contra Costa Sanitary District Facilities Financing Authority. RECOMMENDED BOARD ACTION Staff recommends that the Board: 1. Adopt Resolution No. 2018- appointing the Financing Team proposed for the refinancing of 2009 obligations consisting of PFM Financial Advisors LLC as Financial Advisor, Jones Hall as Disclosure and Bond Counsel, and Piper Jaffray as Senior Managing Underwriter; and 2. Authorize that the refunding securities be sold on a negotiated basis with the Senior Managing Underwriter. Strategic Plan Tie-In GOAL THREE: Be a Fiscally Sound and Effective Water Sector Utility Strategy 2- Manage costs ATTACHMENTS: 1. 06-22-18 Memo to General Manager (including Attachments 1 and 2) 2. Updated Transaction Calendar 3. Proposed Resolution July 5, 2018 Regular Board Meeting Agenda Packet- Page 90 of 195 Page 5 of 27 CENTRAL CONTRA COSTA SANITARY DISTRICT June 22, 2018 TO: ROGER S. BAILEY, GENERAL MANAGER VIA: ANN SASAKI, DEPUTY GENERAL MANAGER FROM: PHILIP R. LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION SUBJECT: EVALUATION OF REFINANCING OF EXISTING 2009 BONDS As an update to our May 21, 2018 presentation to the Finance Committee regarding our plans to refinance our existing 2009 Bonds, the following describes the current market conditions and anticipated saving from the refinancing and recommendations on the structure of the refunding and refunded debt. Central San's Debt Management and Continuing Disclosure Policy (BP 029) (Extract at Attachment 1) specifies that the Board should be provided with certain information about any proposed debt issuance, including savings, rate impact, and proposed structure. Market Conditions Over the past two years, long-term municipal interest rates have seen several sharp movements - from near all-time lows in the summer of 2016 following Britain's vote to exit the European Union ("Brexit") to dramatically higher rates following the 2016 Presidential election, more moderated drifts lower through much of 2017, and sharply higher rates again following the introduction and eventual passage of federal tax reform legislation in late December 2017. In the first half of 2018, Treasury and municipal market yields have continued trending upwards from historic lows, in line with Federal Reserve rate increases and an improving economy. The short end of the yield curve in particular has been rising (see blue line below), in part due to increasing inflation expectations. Based on the Federal funds futures trading, the market correctly priced in a 100% chance of a 25-basis point June rate increase, which directly affected the short end of the yield curve. At the same time, the long-term rates remain relatively stable amid uncertainties surrounding the country's changing trade policies and role in the global market, resulting in a materially flatter yield curve. For the municipal market, there is strong demand from investors, as evidenced by net positive flows into municipal bond mutual funds for nine of the last 12 months, totaling $25 billion. At the same time, issuance volume has been down, particularly in California, with year-to-date 2018 long- term national municipal issuance down roughly 20% from the same period in 2017, and long-term California issuance down by roughly 40%, in part due to the loss of tax- exempt advance refunding's as a result of the 2017 tax reform bill. These technical factors of demand exceeding supply provide for favorable interest rates for municipal issuers. As a result, while day-to-day volatility remains, rates remain relatively low from July 5, 2018 Regular Board Meeting Agenda Packet- Page 91 of 195 Page 6 of 27 Roger S. Bailey Evaluation of Refinancing of Existing 2009 Bonds June 22, 2018 Page 2 a historical perspective: municipal yields for longer maturities have been lower than current levels less than 25% of the time since 1993. The chart below illustrates the extent of interest rate volatility present over the past few years for a range of highly rated municipal bonds with 1, 5, and 10-year maturities. AAA-RATED GENERAL OBLIGATION TAX-EXEMPT RATES 5.00 4.00 3.00 2.00 1.00 0.00 0 ra M c"7 V v V � to in rn to c0 (D 0 cD ti ti I- 1�_ OD ! ! ! ! ! !_ !_ r_ T_ !_ T_ ! ! !_ !_ ! —1 Year MMD 5 Year MMD 10 Yeai MMD Refinancing of Existing Debt and Structuring Issues Several potential underwriters have approached Central San over the past 18 months with proposals to refinance our current outstanding debt with potential projected interest savings in the order of $1-2 million on a present value basis. Interest rates have risen over this period and may continue to do so in the coming month as the economy continues to perform well. Central San's existing 2009 debt consists of two series of Certificates of Participation: Series 2009A (Build America Bonds), which were issued on a federally taxable basis, and Series 2009B, which were issued on a more traditional tax-exempt basis. The 2009A bonds have an outstanding principal amount of $19.635 million with a weighted average coupon of 6.06% (ranging from 5.20% to 6.55%). The high average coupon reflects issuance on a federally taxable basis. The bonds have a call date of September 1, 2019. Refunding the bonds more than 90 days in advance of that date requires the use of an advance refunding structure, where new bond proceeds are received and placed in an escrow account to defease the 2009A bonds until they can be called (September 1, 2019). As noted above, the 2009A bonds were issued in the form of taxable Build America Bonds, where the investor receives taxable interest. The C:\Users\kyoung\Desktop\Evaluation of Refinancing of Existing 2009 Bonds 06-2018.docx July 5, 2018 Regular Board Meeting Agenda Packet- Page 92 of 195 Page 7 of 27 Roger S. Bailey Evaluation of Refinancing of Existing 2009 Bonds June 22, 2018 Page 3 Federal Government pays a subsidy (initially 35% of interest costs, but now reduced by approximately 7% due to Federal Government budget sequestration funding limitations) to Central San as the issuer. There were concerns about whether the 2017 Tax Legislation would permit refinancing of this debt prior to the call date in 2019; however our bond counsel is now willing to provide a tax opinion that this is possible so long as the issuer no longer receives the subsidy payment while the bonds are still outstanding. The proposed refinancing of this debt would yield a True Interest Cost of approximately 2.35% (as of June 2018), resulting in a Net Present Value savings of approximately $1.35 million. The savings is net of all issuance costs including bond/disclosure counsel, underwriter fees, financial advisor fees, and rating agency fees. Assuming interest rates increase by about 25-basis points reduces the savings by about 24%, from $1.35 million to $1.03 million. The chart above on recent rate volatility indicates that interest rate movements of that magnitude are possible between now and the targeted mid-August issuance. Refunding Debt Service Savings Estimate for Series 2009A Bonds Rates as of Current Current April 2018 Market Market +25 bps Refunding Savings $1,114,483 $1,351,442 $1,033,220 True Interest Cost (TIC) 2.34% 2.35% 2.59% of New Debt All-In-TIC of new Debt 2.52% 2.53% 2.78% % Savings of Refunded 5.68% 6.88% 5.26% Bonds Provided by PFM. Current market rates are as of June 11, 2018. Central San received proposals from six potential underwriters on June 5, 2018. In their proposals, they were asked to provide their best estimate of refunding savings. As shown below, the net present value savings estimates for the Series 2009A bonds ranged from $1.03 to $2.02 million, depending on various structuring assumptions. C:\Users\kyoung\Desktop\Evaluation of Refinancing of Existing 2009 Bonds 06-2018.docx July 5, 2018 Regular Board Meeting Agenda Packet- Page 93 of 195 Page 8 of 27 Roger S. Bailey Evaluation of Refinancing of Existing 2009 Bonds June 22, 2018 Page 4 Firm Estimated Refunding Savings Piper $1.03 million (5.27%) to $1.34 million (6.81%) Jaffray: Raymond $1.146 million (5.83%) James: Stifel: $1.38 million 7.03% Wells Fargo: $1.2 million 6.24% Barclays: $1.4 million (7%) Prager &Co: $2.02 million (10.28%) This data illustrates that the savings estimates in recent months have been relatively steady, and there is a general consensus that savings of at least $1 million is possible. The 2009B bonds have an outstanding principal amount of$9.46 million (a principal payment of $2.48 million is due on September 1, 2018 and an additional $2.58 million principal payment is due on September 1, 2019, leaving $4.4 million outstanding after the September 1, 2019 call date) at coupon interest rates of 4.0% to 5.0%. These bonds are traditional tax-exempt debt. While Central San could use an alternative structure, such as the issuance of taxable refunding bonds, to comply with the prohibition on advance refunding of tax exempt debt per the 2017 Tax Legislation, it may not be cost effective to pursue this refunding at this time. Currently, the potential refunding savings are just below the 3% threshold specified for triggering a refunding in Central San's Debt and Continuing Disclosure Policy (BP 029). We will continue to review opportunities and structures for refunding this debt through July. If it is not pursued now, it would still be possible to refinance this debt along with the contemplated new money issuance in 2019 (where a current refinancing can take place within ninety days of the September 1, 2019 call date of the outstanding bonds, or anytime thereafter). That would enable the relatively small refunding ($4.4 million of callable par) to share transaction costs with a larger issuance, be issued on a tax- exempt basis, and also avoid the inefficiency associated with the negative arbitrage (estimated at $34,000) from issuing taxable bonds and placing the proceeds in an escrow account until September 1, 2019, when the 2009B bonds can be called. C:\Users\kyoung\Desktop\Evaluation of Refinancing of Existing 2009 Bonds 06-2018.docx July 5, 2018 Regular Board Meeting Agenda Packet- Page 94 of 195 Page 9 of 27 Roger S. Bailey Evaluation of Refinancing of Existing 2009 Bonds June 22, 2018 Page 5 Refunding Debt Service Savings Estimate for Series 2009B Bonds Current Market Refunding Savings $129,000 True Interest Cost (TIC) 3.14% of new Debt All-In-TIC of new Debt3.45% % Savings of Refunded 2.94% Bonds Provided by PFM. Assumes rates as of June 11, 2018. The proposals submitted by the six potential underwriters on June 5, 2018, showed net present value savings estimates for the Series 2009B bonds ranging from less than $0 to $345,000, depending on various structuring assumptions and whether non-callable maturities were targeted for refunding. Firm Estimated Refunding Savings and Recommendation Piper Jaffray $80,000 (1.82%). Recommend monitoring only, no refunding at this time. Raymond $122,000(1.76%), taxable refunding. Recommend James refunding now. Stifel $345,000 (4.94%), taxable refunding. Recommend refunding now. But could wait until 2019. Wells Fargo $74,000(1.68%), taxable refunding. Recommend refunding next year with new money issuance. Barclays $135,000(1.9%). Recommend monitoring only, no refunding at this time. Prager &Co Negative savings; Recommend refunding next year with new money issuance. As to the impact of the expected savings on sewer service charge rates, staff have calculated an indicative rate impact using the following assumptions: • Debt service is paid currently from Central San's "Net Revenues" (consisting of Ad Valorem Taxes as well as rates and charges), and a reduction in debt service would make available those revenues for other purposes (including reducing debt issuances or using such funds for the capital program). C:\Users\kyoung\Desktop\Evaluation of Refinancing of Existing 2009 Bonds 06-2018.docx July 5, 2018 Regular Board Meeting Agenda Packet- Page 95 of 195 Page 10 of 27 Roger S. Bailey Evaluation of Refinancing of Existing 2009 Bonds June 22, 2018 Page 6 • We assume $1.35 million of Net Present Value of refunding savings through 2029, allocated proportionate to interest paid over those years. • We assume bond issuance amounts are held constant, and that Net Revenues no longer needed for debt service are made available to fund capital, thereby reducing the amount of sewer service charge that is allocated to the Capital program. The result is a reduction of about $1 per REU per year for the first five years, declining to about 20 cents in 2029. Interest costs decline over time as the debt is amortized each year, so the savings from lower interest costs also decline. Bond Structure An analysis as to the optimal structure of the refunding bonds is still underway. Certain issues are generally settled, while other aspects are subject to additional discussion with the underwriter. Settled Structuring Issues: • The repayment term for the refunding debt is proposed to be generally the same as for the refunded debt--amortization payments through a final maturity date of September 1, 2029 (or through September 1, 2023 for the Series B refunding bonds). • Fixed rate vs. floating rate or synthetic fixed rate bonds: At times, an issuer may benefit from issuing an instrument that provides for something other than fixed interest rates, with the potential tradeoff between simplicity/risk and in many cases, lower interest costs. The anticipated refunding transaction will utilize standard fixed rate bonds. • No use of credit enhancement: Lower rated entities can benefit from obtaining third party credit enhancement typically in the form of bond insurance. With Central San's strong AAA and Aa1 ratings, this is unnecessary and not cost effective. Structuring Issues Still Under Consideration: • Certificates of Participation or Revenue Bonds. In 1994, the Central Contra Costa Sanitary District Facilities Financing Authority was created to assist with the financing of new debt. The 2009 financing, in the form of Certificates of Participation and a governing Installment Sale Agreement, was conducted in this manner. Continued use of this structure is possible, but an alternative is the issuance of revenue bonds. Refunding revenue bonds could be issued directly by Central San, or through a joint powers authority (new money bonds C:\Users\kyoung\Desktop\Evaluation of Refinancing of Existing 2009 Bonds 06-2018.docx July 5, 2018 Regular Board Meeting Agenda Packet- Page 96 of 195 Page 11 of 27 Roger S. Bailey Evaluation of Refinancing of Existing 2009 Bonds June 22, 2018 Page 7 can only be issued through a joint powers authority). Additional discussions with the underwriter on the benefits of this structure will take place in the coming days, however preliminary indications are that this structure may offer advantages for future sales. • Coupon rates on the bonds (and whether bonds would be issued at par, a premium, or a discount). It is likely that the bonds will be sold at a premium to offer investors a desired coupon in the range of 5%. • Whether to proceed with refinancing only on the Series 2009A bonds, or in addition, the Series 2009B bonds. Given the Series 2009B bonds would need to be issued on a federally taxable basis, the savings from such issuance would be reduced. However, it likely makes sense to proceed with the refunding of 2009B bonds based on current savings estimates. • Call provisions of the new debt. Given that the bonds have a final maturity in 2029, a standard 10-year call provision will not be of value. Forgoing a call feature altogether may result in the most attractive yield for Central San. • Whether a debt service reserve structure will continue to be used as is the case on the 2009 bonds. Initial conversations with underwriters indicate a debt service reserve is not needed for a highly rated entity like Central San. • Whether to change the amortization schedule of the debt to relieve rate pressure in the next few years. Staff will discuss this option with the Finance Committee. • Whether to have the bonds rated by two rating agencies (as has been past practice) or just one, potentially saving about $24,000. Competitive versus Negotiated Sale There are three methods in which bonds can be issued - a competitive sale, negotiated sale, or a private placement. This issue is relevant now as it affects whether an underwriter or lender(s) are appointed early in the process (for a negotiated sale or private placement, respectively) or whether the bonds are structured and made available to all underwriters on a particular date (a competitive sale). The District has used both competitive and negotiated transactions in the past, as illustrated below: Central San Issuance Type 1998 bonds Negotiated sale 2002 bonds Competitive sale 2009 bonds Negotiated sale Overall, in recent years, most municipal debt has been sold through negotiated sales, but this mix changes over time. A June 2018 outlook of announced municipal debt sales per the Bond Buyer shows approximately 56% negotiated sales versus 44% competitive sales ($7.40 billion of negotiated deals versus $5.87 billion of competitive sales). Most, but not all, refinancing transactions are done by negotiated sale. PFM is C:\Users\kyoung\Desktop\Evaluation of Refinancing of Existing 2009 Bonds 06-2018.docx July 5, 2018 Regular Board Meeting Agenda Packet- Page 97 of 195 Page 12 of 27 Roger S. Bailey Evaluation of Refinancing of Existing 2009 Bonds June 22, 2018 Page 8 recommending a negotiated sale for the refinancing of the 2009 Bonds, which staff concurs with. The difference between these types of sales are outlined below. • A competitive sale sets a day and time to take bids on securities from interested underwriters. The advantage of a competitive sale is the knowledge that the District received the lowest possible price as of the day and time the securities are sold. The disadvantage is that a significant event could raise interest rates on that date and once that sale date is set it cannot be easily changed. The likelihood of such an event is increased in an unstable market. • A negotiated sale engages an underwriter and pricing advisor and the securities are sold to the underwriter. A negotiated sale allows for pre-marketing to get the best possible interest rate and provides more flexibility in responding to significant market events proximate to the pricing date. An independent pricing consultant or financial advisor works for the District on the negotiations with the underwriter to ensure the District receives a fair interest rate based on market intelligence and comparison to comparable issues trading in the primary and secondary bond market. • In private placements, the issuer selects one or a small number of investors that buy the bonds and collect the interest payments and principal directly. Direct loans, in which state or local governments enter a financing agreement with a bank or other financial entity, are also a form of private financing. PFM cites the following factors in recommending a negotiated sale: current volatility in the market, the ability to pre-market the sale, the fact that this is a refunding transaction, and the chance that there could be a Series 2009B refunding that would involve taxable debt. Because the economics of bond refunding is subject to market conditions, the ability to time the sale through a negotiated transaction is useful. Having PFM serve as an independent pricing consultant ensures that Central San pays a fair interest rate on the bonds, as well as that the compensation paid to the underwriter (i.e., the underwriter's discount) is appropriate. A Government Finance Officers Association guide (see summary table as Attachment 2) on choosing between a competitive and negotiated sale lists several factors that favor one type versus the other. This table, with check marks referencing staff's assessment of Central San's current situation, illustrates that the assessment is not clear cut. However, weighing the factors noted above more heavily leads us to the recommendation for a negotiated sale. Attachments: 1. Debt Policy Extract— Refinancing Requirements 2. GFOA Competitive versus Negotiated C:\Users\kyoung\Desktop\Evaluation of Refinancing of Existing 2009 Bonds 06-2018.docx July 5, 2018 Regular Board Meeting Agenda Packet- Page 98 of 195 Attachment 1 Page 13 of 27 Central Contra Costa Number: BP 029 Sanitary District Related Admin. Procedure AP 029 Authority: Board of Directors Effective: September 7, 2017 =---_ Revised: Reviewed: Initiating Dept./Div.: Administration/Finance BOARD POLICY DEBT MANAGEMENT AND CONTINUING DISCLOSURE I. PURPOSE The Government Finance Officers Association (GFOA) recommends' as a best management practice that state and local governments adopt comprehensive written debt management policies to improve the quality of decisions, articulate policy goals, provide guidelines for the structure of debt issuance, and demonstrate a commitment to long-term capital financial planning. Additionally, California SB 1029 requires public agency issuers of debt to adopt comprehensive written debt management policies pursuant to the GFOA recommendation, and to provide reports on any issuance prior to and after the debt sale, and on an ongoing basis, to the California Debt and Investment Advisory Commission (CDIAC).2 The purpose of this Debt Management and Continuing Disclosure Policy (Debt Policy) is to organize and formalize debt issuance and management related policies and procedures for the Central Contra Costa Sanitary District. This Debt Policy is applicable to both the District and the Central Contra Costa Sanitary District Facilities Financing Authority, both hereinafter referred to as "the District". This Debt Policy is intended to comply with Government Code Section 8855(1). General Manager maintained procedures amplify and provide additional guidance to staff related to the Debt Policy. The debt policies and procedures of the District are subject to and limited by applicable provisions of State and Federal law. 11 1 In their publication "Best Practice Debt Management Policy' 2 https://leg info.legislature.ca.gov/faces/bi11NavClient.xhtml?bill_id=201520160SB1029 July 5, 2018 Regular Board Meeting Agenda Packet- Page 99 of 195 Page 14 of 27 Number: BP 029 DEBT MANAGEMENT AND CONTINUING DISCLOSURE Page 2of9 II. POLICY OBJECTIVES The primary objectives of the District's debt and financing related activities are the following: • Maintain cost-effective access to the capital markets through prudent fiscal management policies and practices; • Specify parameters related to the prudent use of debt in the context of The District's rates and financial planning; o Ensure debt proceeds are expenditures for permissible uses as defined in this policy, and in accordance with bond covenants and other applicable requirements; • Minimize debt service commitments through effective planning and cash management; • Ensure the District is compliant with all applicable federal and state securities laws; • Protect the District's creditworthiness and achieve the highest practical credit ratings; and • Maintain the District's sound financial position. III. SCOPE AND DELEGATION OF AUTHORITY This Debt Policy will govern the issuance and management of all debt funded through the capital markets, including the selection and management of related financial and advisory services and products, and the investment of bond proceeds. Overall policy direction of this Debt Policy will be provided by the District's Board of Directors (Board). Responsibility for implementation of the Debt Policy and day-to-day responsibility for structuring, implementing, and managing the District's debt and finance program will lie with the General Manager or their designee (Director of Finance and Administration). The Board's adoption of the District's Annual Budget and Capital Improvement Program (CIP), or review of the financial plan, does not constitute authorization for debt issuance for any capital projects. This Debt Policy requires that the Board specifically authorize each debt financing. While adherence to this Debt Policy is required in applicable circumstances, the Board recognizes that changes in the capital markets, District programs, and other unforeseen circumstances may from time to time produce situations that are not covered by the Debt Policy and will require modifications or exceptions to achieve policy goals. In these cases, management flexibility is appropriate, provided specific authorization from the Board is obtained. July 5, 2018 Regular Board Meeting Agenda Packet- Page 100 of 195 Page 15 of 27 Number: BP 029 DEBT MANAGEMENT AND CONTINUING DISCLOSURE Page 3 of 9 IV. ROLES AND RESPONSIBILITIES • General Manager and/or Deputy General Manager— Provides oversight of debt program and recommendations on debt to the Board. • Executive Director of the Central Contra Costa Sanitary District Facilities Financing Authority— Provides oversight of debt program and recommendations on debt to the Board. • Director of Finance and Administration — Has primary responsibility for debt issuance recommendations, financing transaction execution, oversight of bond proceeds expenditures, and ongoing debt management. • Board of Directors — Sets debt policy and authorizes individual transactions. V. ETHICS AND CONFLICTS OF INTEREST Staff and Board involved in the debt management program will not engage in any personal business activities that could conflict with proper and lawful execution of securing capital financing and are to comply with the District's Conflict of Interest Code. VI. INTEGRATION WITH OTHER FINANCIAL POLICIES AND DOCUMENTS The District is committed to long-term capital and financial planning, maintaining appropriate reserve levels and employing prudent practices in governance, management and budget administration. Policies related to these topics are adopted separately but affect this Debt Policy in the context of the overall long-term financial plan. The Board shall be presented with the results of the long-term financial plan in contemplation of any proposed rate adjustment where the capital budget, financial policies, proposed debt issuances and resulting debt service are presented as elements contributing to the calculation of overall projected customer rates. VII. STANDARDS FOR USE OF DEBT FINANCING In financial planning, the District will evaluate the use of various alternatives including current year funding of capital projects through rates, various forms of debt financing, use of reserves, and inter-fund borrowing. The District will utilize the most advantageous financing alternative balancing the goals of long-term cost minimization, risk exposure, and compliance with generally accepted ratemaking principles. The District's debt management program will consider debt issuance where public policy, equity (including intergenerational equity), general ratemaking principles, economic efficiency and compliance with long-term financial planning parameters favor financing over cash funding. July 5, 2018 Regular Board Meeting Agenda Packet- Page 101 of 195 Page 16 of 27 Number: BP 029 DEBT MANAGEMENT AND CONTINUING DISCLOSURE Page 4 of 9 A. Use and Timing of Debt The District shall integrate its debt issuances with the goals of its Capital Improvement Program by timing the issuance of debt to ensure that projects are available when needed in furtherance of the District's public purposes (as articulated in, inter alia, the District's mission, vision, and goals) and are consistent with the rate and financial planning parameters specified in the District's long-term financial plans. The Board shall be presented with a long-term financial plan in each instance Sewer Service Charge rates are to be adjusted. 1. The long-term financial plans will specify an expected debt issuance amount over a decade or more long-term planning horizon. a. The District shall target rate or tax revenue funding of, at a minimum, the value of the collection system replacement program (specifically, pipeline replacement) component of the CIP. b. Not more than 60% of the overall CIP shall be financed with debt. 2. All projects in the CIP are eligible to use debt financing, so long as the minimum rate or tax revenues are generated as described in A.1 of this section. This policy does not contemplate the use of debt financing to fund ongoing operating & maintenance expenditures; exceptions beyond a de-minimis amount would require approval of the Board. With respect to debt repayment and amortization, the debt repayment period should be structured so that the weighted average maturity of the debt does not exceed 100% of the expected average useful life of the project being financed. B. Credit Quality All District debt management activities for new debt issuances will be conducted in a manner conducive to receiving the highest credit ratings possible consistent with the District's debt management objectives. As debt service coverage is a key ratings consideration, the District shall target a debt service coverage level of at least 2.Ox or greater for financial planning and ratemaking purposes. C. Ongoing Debt Administration and Internal Controls The District will maintain all debt-related records according to the District's Retention Policy. The District will maintain internal controls to ensure compliance with the Debt Policy (including use of bond proceeds for purposes specified in the applicable Bond Official Statements and in compliance with this debt policy), all debt covenants and any applicable requirements of Federal and State law, including but not limited to the following: initial bond disclosure, continuing disclosure, tax-exemption, post-issuance compliance, investment of bond proceeds (including, for example, any continuing disclosure obligations under Securities and July 5, 2018 Regular Board Meeting Agenda Packet- Page 102 of 195 Page 17 of 27 Number: BP 029 DEBT MANAGEMENT AND CONTINUING DISCLOSURE Page 5 of 9 Exchange Commission (SEC) Rule 15c2-12, and tax covenants, and related federal tax compliance requirements such as arbitrage restrictions and rebate requirements), and annual transparency reporting to CDIAC. These internal controls are further specified in the related Debt Management and Continuing Disclosure (AP 029). D. Rebate Policy and System The District will develop a system of reporting interest earnings that relates to and complies with Internal Revenue Code requirements relating to rebate, yield limits and arbitrage. The District will accurately account for all interest earnings in debt-related funds to ensure that the District is compliant with all debt covenants and with state and federal laws. The District will invest funds in accordance with the investment parameters set forth in each respective bond indenture, and as permitted by the District's Statement of Investment Policy (BP 005). VIII. FINANCING CRITERIA When District staff determines the use of debt is appropriate, staff shall provide a report to the Board that: • describes the intended use of the financing proceeds (funding for new projects or to refund existing bonds); • recommends a specific debt type to include duration, type, interest rate characteristics, call features, credit enhancement or financial derivatives to be used in the transaction; • presents the impact of the bonds on the District's forecasted rates based on the anticipated maturity schedule. For refunding transactions, a comprehensive report on the debt to be redeemed, the replacement debt, and the anticipated benefits of the transaction shall be provided. IX. TERMS AND CONDITIONS OF DEBT The District will establish all terms and conditions relating to the issuance of debt, and will control, manage, and invest all debt proceeds. The District staff will specify to the Board proposed debt terms, coupon structure, debt service structure, redemption features, any use of capitalized interest, and lien structure. X. TYPES OF DEBT The following types of debt are allowable under this Debt Policy, subject to applicable law, and the District's statutory authority to issue debt: • General obligation bonds • Commercial paper July 5, 2018 Regular Board Meeting Agenda Packet- Page 103 of 195 Page 18 of 27 Number: BP 029 DEBT MANAGEMENT AND CONTINUING DISCLOSURE Page 6of9 • Bond or grant anticipation notes • Lease revenue bonds, certificates of participation and lease-purchase transactions • Other revenue bonds, including private placement obligations • Tax and revenue anticipation notes • Land-secured financings, such as special tax revenue bonds issued under the Mello-Roos Community Facilities Act of 1982, as amended, and limited obligation bonds issued under applicable assessment statutes • Refunding Obligations • State Revolving Fund Loans • Lines of Credit • Letters of Credit • The Board may from time to time find that other forms of debt would be beneficial to further its public purposes and may approve such debt without an amendment of this Debt Policy. XI. CREDIT ENHANCEMENTS The District may consider the use of credit enhancement on a case-by-case basis, evaluating the economic benefit versus cost for each case. Only when a clearly demonstrable savings or other measurable advantages can be shown will enhancement be considered and authorized. XII. REFINANCING OUTSTANDING DEBT The District will periodically evaluate outstanding bond issues for refunding opportunities and will bring to the attention of the Board those opportunities that are in the District's interest. Reports to the Board on potential refunding shall describe anticipated savings and the structure of refunding and refunded debt, and any refunding transaction executed will be followed with a report on actual savings. XIII. METHODS OF ISSUANCE District bonds may be sold on a competitive or negotiated basis (including private placement). A recommendation regarding the proposed use of either method shall be prepared by staff and provided to the Board prior to or concurrent with the proposed issuance. XIV. MARKET RELATIONSHIPS A. Rating Agencies and Investors The General Manager and designees (Deputy General Manager and Director of Finance and Administration) will be responsible for maintaining the District's July 5, 2018 Regular Board Meeting Agenda Packet- Page 104 of 195 Page 19 of 27 Number: BP 029 DEBT MANAGEMENT AND CONTINUING DISCLOSURE Page 7 of 9 relationships with rating agencies, which will typically include two or more of the nationally recognized statistical rating agencies. B. Board Communication The General Manager will make available to the Board any ratings report or other relevant feedback provided from rating agencies and/or investors regarding the District's financial strengths and weaknesses and recommendations for addressing any weaknesses. C. Continuing Disclosure The District will remain in compliance with SEC Rule 15c2-12 addressing continuing disclosure obligations. The District will also comply with state reporting requirements specified in SB 1029, which require initial and ongoing debt reporting requirements for California public agencies. D. Rebate Reporting The use and investment of bond proceeds shall be monitored to ensure compliance with arbitrage restrictions. E. Other Jurisdictions From time to time, the District may issue bonds to fund projects that provide a benefit to other public entities, (e.g. City of Concord). The District will conduct such analyses as deemed necessary to assure adequate cost recovery for such funding and to mitigate risks to the District (including consideration of the use of limited bonding capacity). The District may participate in a joint powers authority with one or more other eligible entities pursuant to Section 6500 of the California Government Code if deemed advantageous and appropriate and approved by the Board. XV. CONSULTANTS 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 underwriter. Selection of those financing team members shall be in accordance with Professional Service and Consultant provisions of the District'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, the District's debt will be offered to the underwriter providing the most cost advantageous proposal to the District. July 5, 2018 Regular Board Meeting Agenda Packet- Page 105 of 195 Page 20 of 27 Number: BP 029 DEBT MANAGEMENT AND CONTINUING DISCLOSURE Page 8 of 9 B. Financial Advisor The District may utilize a financial advisor to assist in its debt issuance and debt administration processes as is deemed prudent and necessary by management and in compliance with Municipal Securities Rulemaking Board (MSRB) regulations. C. Bond Counsel District debt will include a written opinion by legal counsel affirming that the District is authorized to issue the proposed debt and that the District has met all constitutional and statutory requirements necessary for issuance and a determination of the proposed debt's federal income tax status. The approving opinion and other documents relating to the issuance of debt will be prepared by counsel with extensive experience in public finance and tax issues. D. Disclosure Counsel The District may utilize a separate firm to serve as disclosure counsel as it deems necessary. If cost effective, bond counsel may also serve as disclosure counsel. E. Underwriter The District will have the right to select a senior manager for a proposed negotiated sale, as well as co-managers and selling group members, as appropriate. F. Conflict of Interest Disclosure by Financing Team Members All financing team members will be required to provide full and complete disclosure, relative to agreements with other financing team members and outside parties. The extent of disclosure may vary depending on the nature of the transaction. However, in general terms, no agreements will be permitted which could compromise the firm's ability to provide independent advice that is solely in the District's interests (to the extent the firm's role involves a duty to do so) or which could reasonably be perceived as a conflict of interest. XVI. INITIAL AND CONTINUING DISCLOSURE COMPLIANCE A. Disclosure Coordinator and Overall Requirements for Initial and Continuing Disclosure The Director of Finance and Administration (or as designated, the Finance Manager) for the District shall be the disclosure coordinator of the District (Disclosure Coordinator). The Disclosure Coordinator shall perform the following functions: July 5, 2018 Regular Board Meeting Agenda Packet- Page 106 of 195 Page 21 of 27 Number: BP 029 DEBT MANAGEMENT AND CONTINUING DISCLOSURE Page 9of9 • Ensure that any Official Statement meets appropriate standards and is approved by the Board as required. • Ensure that initial and continuing disclosure obligations undertaken by the District related to each debt issuance are met, including State of California requirements, and MSRB requirements that the District commits to undertake in the Continuing Disclosure Certificate or Agreement over the life of the bonds to investors. o Initial Disclosure requirements include preparation of the Bond Official statement and reports on the issuance to the CDIAC. o Ongoing disclosure requirements include annual reports with the MSRB Electronic Municipal Market Access (EMMA) system and the CDIAC. XVII. EXCEPTIONS In the event there are any deviations or exceptions from the Debt Policy when a certain bond issue is structured, those exceptions will be discussed in the staff reports when the bond proposal is agendized for Board consideration. XVIII. POLICY CONSIDERATION This policy shall be reviewed on a biennial basis. Any changes must be approved by the Board, as well as the individual(s) charged with maintaining internal controls. [Original retained by the Secretary of the District] July 5, 2018 Regular Board Meeting Agenda Packet- Page 107 of 195 Page 22 of 27 ATTACHMENT 2 Governmental Finance Officers Association (GFOA) COMPETITIVE v, NEGOTIATED SALES: Summary of Conditions Favoring Each Method of Sale CONDITIONS FAVORING A CONDITIONS FAVORING A COMPETITIVE SALE NEGOTIATED SALE DEBT STRUCTURE Pledged Revenues General Obligation or Strang Project Su PNded Revenues System Revenue Security Structure Conventional Resolution and Unusual or Weak Covenants; {for Revenue Bonds} Cash Flory; Rate Covenant and Suhordinaled Uebt Coverage Debi Instrument Traditional Serial and Term Use of Innovative Slructurins, Pull Coupon Bonds Derivalive ProductS,SwctuM to Attract Particular Investors CREDIT Qt)AUTY (e-g.RisCount Bonds),etc- Rating 440War better Below Single`A' Outlook Stable Weak tsar Unproving,or Under 4/ Stress ISSUER CRARACTERISTtCS Type of Organization Broad- ;6W General Purpose Special Purpose,Independent Borrower Authority Frequency of Issuance Regular Borrower in Public New or Infrequent Issuer Markel IVO Market Awamness Active Secondary Market with Little or No Institutional 1 Bread Investor ease Awareness of Issuer,Hisiarical 4/ Anti¢alhy Investor Comfort VWI-Known,Stable Issuer Issuer Experiencing Mgnirca M Financial,Legal or Other Problems MARKET CONDITIONS Interest Rates Stable;Predidable Mlarkat volatile or Declining Market 4/ Supply and Demand Strang Investor Demand,Good Oversold Market.Heavy Supply Liquidity,Light Forward Calendar POLICY CONSIDERATIONS Participation in Sale of Broad Markel Padicipatioa Desire to Direct Business tD Bands Desired for Sale of Bonds DBE or Local/R4onal Frnts r Stimulation of Investor Broad Market Panickpatian Desire to Direct Business to Interest 440Desired for Purchase of Boads LocalfRegional Investors Red checkmarks are the informal assessment of Central San Staff 13 July 5, 2018 Regular Board Meeting Agenda Packet- Page 108 of 195 Attachment 2 Page 23 of 27 Central Contra Costa Sanitary District Wastewater Revenue Refunding Certificates of Participation, Series 2018 Financing Schedule as of June 13, 2018 Board meetings are on the first and third Thursday of the month 77- - 17 S M T W T F S S M T W T F S S M T W T F S 1 2 3 5 6 7 1 2 3 4 1 8 9 10 11 12 13 14 5 6 7 8 9 10 11 2 4 5 6 7 8 15 16 17 18 19 20 21 12 13 14 15 16 17 18 9 10 11 12 13 t2829 18 19 20 21 22 23 22 23 24 25 26 27 28 19 20 21 22 23 24 25 16 17 18 19 20 24 25 26 27 28 29 30 29 30 31 26 27 28 29 30 31 23 24 25 26 27 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 drafts of bond documents and POS BC/DC Week of June 4 ■ Receive underwriter RFP responses MA Week of June 11 ■ Circulate underwriter RFP summary MA Fri.,June 22 ■ Deadline to submit memo to Finance Committee CCCSD Week of June 25 ■ Kick-off call to review documents and POS All Tue.,June 26 • Finance Committee meeting to consider financing team CCCSD/MA Week of July 2 ■ Circulate first draft of credit presentation MA ■ Circulate revised drafts of documents and POS BC/DC Wed.,July 4 ■ Independence Day All Thu.,July 5 ■ Board meeting to approve appointment of financing team CCCSD/MA Week of July 9 ■ Conference call to review credit presentation,documents, POS All ■ Circulate second draft of credit presentation MA/UW Week of July 16 ■ Finalize credit presentation MA/LJW Fri.,July 20 ■ Deadline to submit documents and POS to Finance Committee CCCSD/BC Week of July 23 ■ Meetings with rating agencies CCCSD/MA/lJW Financing Schedule 1 July 5, 2018 Regular Board Meeting Agenda Packet- Page 109 of 195 Page 24 of 27 Central Contra Costa Sanitary District Wastewater Revenue Refunding Certificates of Participation, Series 2018 Financing Schedule as of June 13, 2018 Board meetings are on the first and third Thursday of the month 719 S M T W T F S S M T W T F S S M T W T F S 1 2 3 4 5 6 7 1 2 3 4 1 8 9 10 11 12 13 14 5 6 7 8 9 10 11 2 4 5 6 7 8 15 16 17 18 19 20 21 12 t2728 15 16 17 18 9 10 11 t2627 14 15 2712223 22 23 24 25 26 27 28 19 22 23 24 25 16 17 18 21 22 24 25 26 27 28 29 30 29 30 31 26 29 30 31 23 24 25 28 29 30 . Holiday Tue.,July 24 ■ Finance Committee meeting to review documents and POS CCCSD/MA/BC Week of July 30 ' Select Printer CCCSD/MA ■ Due Diligence Call All Thu.,August 2 ■ Board meeting to approve documents and POS CCCSD/MA/BC Week of August 6 ' Receive credit ratings All ■ Post POS P Week of August 13 ■ Bond Pricing All Week of August 20 ■ Print final Official Statement P Mon.,September 3 ■ Labor Day All Week of September 10 ■ Closing All GroupParty Working . 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 2 July 5, 2018 Regular Board Meeting Agenda Packet- Page 110 of 195 Page 25 of 27 ATTACHMENT 3 RESOLUTION NO. 2018- RESOLUTION OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT APPOINTING FINANCING TEAM TO REFINANCE OUTSTANDING OBLIGATIONS VIA NEGOTIATED SALE THEREOF, AND APPROVING RELATED DOCUMENTS AND ACTIONS WHEREAS, the Central Contra Costa Sanitary District (the "District") owns and operates facilities and property for the collection, treatment, disposal and reuse of wastewater within the service area of the District (the "Wastewater System"), and in order to provide funds to finance and refinance improvements to the Wastewater System, the District has previously entered into that certain Installment Sale Agreement, dated as of November 1, 2009, with the Central Contra Costa Sanitary District Facilities Financing Authority, a nonprofit public benefit corporation duly organized and existing under the laws of the State of California (the "Authority"), under which the District is obligated to pay installment payments, which, in turn, secure the repayment of the $19,635,000 original principal amount of 2009 Wastewater Revenue Certificates of Participation, Series A (Federally Taxable — Build America Bonds — Direct Payment) (the "2009A Certificates") and the $34,490,000 original principal amount of 2009 Wastewater Revenue Certificates of Participation, Series B (the "2009B Certificates," and together with the 2009A Certificates, the "2009 Certificates"); and WHEREAS, the Board of Directors of the District wishes at this time to appoint a financing team to assist the District with the refinancing of one or both series of the 2009 Certificates via the execution and delivery of 2018 Wastewater Revenue Refunding Certificates of Participation or Revenue Bonds, in one or more series (the "Certificates or Revenue Bonds"); and WHEREAS, additional structuring details regarding the proposed Certificates of Participation or Revenue Bonds, including the choice between those two forms of obligations will be determined by the District after consultation with its advisors; and WHEREAS, the Board of Directors wishes to authorize the execution, delivery and sale of the Certificates or Revenue Bonds via the negotiated sale thereof to Piper Jaffray, as underwriter (the "Underwriter"); and WHEREAS, the legal documents pursuant to which the Certificates or Revenue Bonds will be executed, delivered and sold, and the preliminary official statement pursuant to which the Underwriter will market the Certificates or Revenue Bonds to potential purchasers thereof, shall be brought back to the Board of Directors for approval at a later meeting. NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the Central Contra Costa Sanitary District as follows: Section 1. Engagement of Professional Services. The Board of Directors hereby approves the engagement of the law firm of Jones Hall, A Professional Law July 5, 2018 Regular Board Meeting Agenda Packet- Page 111 of 195 Page 26 of 27 Resolution No. 2018- Central Contra Costa Sanitary District Page 2 Corporation, to act as special counsel and disclosure counsel to the District in connection with the execution, delivery and sale of the Certificates or Revenue Bonds. The Board of Directors hereby further approves the engagement of the firm of PFM Financial Advisors LLC, to act as financial advisor to the District in connection with the execution, delivery and sale of the Certificates or Revenue Bonds. The Board of Directors hereby further approves the engagement of the Piper Jaffray, to serve as senior managing underwriter ("Underwriter") in connection with the sale of the Certificates or Revenue Bonds. The Director of Finance and Administration is hereby authorized and directed to execute an agreement with each of said firms on behalf of the District. Section 2. Negotiated Sale of Certificates or Revenue Bonds. The Board of Directors hereby authorizes and directs the negotiated sale of the Certificates or Revenue Bonds to the Underwriter in connection with the refunding of the 2009 Certificates. The General Manager and the Director of Finance and Administration (each, an "Authorized Officer"), are each authorized and directed to negotiate a Certificate or Revenue Bond Purchase Contract with the Underwriter pursuant to which the District shall sell the Certificates or Revenue Bonds to the Underwriter, such Certificate or Revenue Bond Purchase Agreement to be approved by the Board of Directors at a later meeting. Section 3. Official Actions. The General Manager, the Director of Finance and Administration and all other officers of the Board of Directors and the District are each authorized and directed in the name and on behalf of the District to execute and deliver such additional documents that they or any of them might deem necessary or appropriate in order to effectuate the purpose and intent of this Resolution. Whenever in this Resolution any officer of the District is authorized to execute and deliver any document or take any action, such execution, delivery or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or unavailable. Section 4. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. PASSED AND ADOPTED this 5t" day of July 2018, by the Board of Directors of the Central Contra Costa Sanitary District by the following vote: AYES: Members: NOES: Members: ABSENT: Members James A. Nejedly President of the Board of Directors Central Contra Costa Sanitary District County of Contra Costa, State of California COUNTERSIGNED: -2- July 5, 2018 Regular Board Meeting Agenda Packet- Page 112 of 195 Page 27 of 27 Resolution No. 2018- Central Contra Costa Sanitary District Page 2 Katie Young Secretary of the District Central Contra Costa Sanitary District County of Contra Costa, State of California Approved as to form: Kenton L. Alm, Esq. Counsel for the District -3- July 5, 2018 Regular Board Meeting Agenda Packet- Page 113 of 195