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HomeMy WebLinkAbout16.a. Annual Meeting of the Central San Facilities Financing Authority (FFA) Page 1 of 9 Item 16. ENTRAL SAN CENTRAL CONTRA COSTA SANITARY DISTRICT January 3, 2019 TO: HONORABLE BOARD OF DIRECTORS FROM: PHIL LEI BER, DIRECTOR OF FINANCE AND ADMINISTRATION REVIEWED BY: ANN SASAKI, DEPUTY GENERAL MANAGER ROGER S. BAILEY GENERAL MANAGER SUBJECT: ADJOURN BOARD MEETING AND RECONVENE AS THE CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY(FFA)TO CONDUCT ITS ANNUAL MEETING NOTE: IN COMPLIANCE WITH ASSEMBLY BILL 23, BOARD MEMBERS WILL NOT RECEI VE A SEPARATE OR INCREASED STI PEND FOR ATTENDANCEAT THIS MEETING. Please see the attached agenda, draft minutes of last year's annual meeting held January 4, 2018, annual Acting Treasurer's Report, and background information related to the FFA. Strategic Plan Tie-In GOAL THREE:Be a Fiscally Sound and Effective Water Sector Utility Strategy 1 - Conduct long-range financial planning ATTACHMENTS: 1. FFA Agenda for 01-03-19 Meeting 2. FFA Draft Minutes 01-04-18 meeting 3. F FA Treasurer's Report dated 01-03-19 4. FFA Background and Summary of Past Activity January 3, 2019 Regular Board Meeting Agenda Packet- Page 252 of 260 Page 2 of 9 ATTACHMENT 1 CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY ANNUAL MEETING JANUARY 3, 2019 AGENDA 1. CALL TO ORDER 2. ROLL CALL 3. PUBLIC COMMENTS 4. APPOINTMENT OF OFFICERS a. Appointment of Officers pursuant to Article III, Section 2 of the Bylaws as follows: 1) Appoint Chair of the Authority (Chair of the Finance Committee of the District Board of Directors — Paul Causey); 2) Appoint Vice Chair of the Authority (Member of the Finance Committee of the District Board of Directors — Jim Nejedly); 3) Appoint Executive Director of the Authority (General Manager of the District); 4) Appoint Treasurer of the Authority (Director of Finance & Administration of the District); and 5) Appoint Secretary of the Authority (Secretary of the District). STAFF RECOMMENDATION (Motion Required): Appoint the Officers as recommended for aone-year term. 5. APPROVAL OF MINUTES a. Approve Minutes of January 4, 2018 meeting. STAFF RECOMMENDATION (Motion Required): Approve the minutes. 6. BUDGET AND FINANCE a. The Acting Treasurer of the Authority (Philip Leiber) will present Financial Status Report for 2018. 7. OTHER BUSINESS RELATING TO MATTERS ABOVE 8. ADJOURNMENT a. Adjourn annual meeting of the Authority and reconvene as the Board of Directors of the Central Contra Costa Sanitary District. January 3, 2019 Regular Board Meeting Agenda Packet- Page 253 of 260 Page 3of9 DRAFT ATTACHMENT 2 MINUTES OF THE ANNUAL MEETING OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY HELD ON JANUARY 04, 2018 1. CALL TO ORDER At 2:32 p.m., President Nejedly adjourned the Central San Board Meeting and, as Chair of the Central Contra Costa Sanitary District (District) Facilities Financing Authority (the 'Authority'), convened the annual meeting of the Authority. 2. ROLL CALL Chair Nejedly requested that the Secretary of the District call roll. PRESENT.- Members: Causey, McGill, Pilecki, Williams, Nejedly ABSENT.- Members: None In compliance with Assembly Bill 23, it was noted that Board Members will not be receiving a separate or increased stipend for this meeting. 3. PUBLIC COMMENTS No comments. 4. APPOINTMENT OF OFFICERS a. Chair Nejedly stated that, in accordance with the Bylaws of the Authority, it would be appropriate to elect officers for 2018 as follows: 1) Chair of the Authority shall be Central San Board President Jim Nejedly, Chair of the Finance Committee; 2) Vice Chair of the Authority shall be Board Member Tad Pilecki, the other member of the Finance Committee; 3) Executive Director of the Authority shall be the General Manager of the District; 4) Treasurer of the Authority shall be the Finance Manager of the District; and 5) Secretary of the Authority shall be the Secretary of the District. AUTHORITY ACTION: It was moved by Member Causey and seconded by Member Williams to approve the above slate of officers for 2018, to serve for a one-year term in accordance with Article III, January 3, 2019 Regular Board Meeting Agenda Packet- Page 254 of 260 Page 4 of 9 CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY Minutes of January 12, 2017 Board Meeting Section 2 of the Bylaws: Motion passed by unanimous vote of the Authority Members. [5-0] 5. APPROVAL OF MINUTES a. Approve Minutes of January 12, 2017 meeting. AUTHORITY ACTION: It was moved by Member Causey and seconded by Member McGill to approve the Authority minutes of the January 12, 2017 meeting. Motion passed by unanimous vote of the Authority Members. [5-0] 6. BUDGET AND FINANCE Ms. Thea Vassallo, Central San Finance Manager and Treasurer of the Authority, referred to the report contained in the agenda packet that included a historical background of the Authority and a summary of past activity. During 2017, no new debt was issued by the Authority. However, there was a change in the subsidy received from the Internal Revenue Services (IRS) on the 2009 Series A Bonds as part of the ongoing Federal Budget sequestration. The IRS announced that credit payments by issuers of certain tax credit bonds, including Build America Bonds, may be subject to a reduction of 6.9%. In 2017, Central San's rebate requested from the IRS was reduced by$28,759. As of December 31, 2017, the remaining principal balance on the 2009 debt service is $29,095,000. In response to a question from Member McGill, Director of Finance and Administration Phil Leiber stated that the new tax legislation is expected to potentially negatively impact Central San's bonds in a couple of ways. First, tax- exempt advance refundings will be prohibited, so the issue of refinancing existing bonds will likely need to wait until after their call date in 2019. Second, it is predicted that sequestration may increase substantially if the deficit increases, which could reduce the subsidy on the Build America Bonds from 2009. Staff will continue to monitor these issues. 7. OTHER BUSINESS RELATING TO MATTERS ABOVE None. 8. ADJOURNMENT There being no further business to come before the Authority, Chair Nejedly adjourned the annual meeting of the District Facilities Financing Authority at 2 January 3, 2019 Regular Board Meeting Agenda Packet- Page 255 of 260 Page 5of9 CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY Minutes of January 12, 2017 Board Meeting 2:35 p.m. and reconvened the meeting of the Central San District Board of Directors. Donna M. Anderson Provisional Secretary of the Authority 3 January 3, 2019 Regular Board Meeting Agenda Packet- Page 256 of 260 Page 6 of 9 ATTACHMENT 3 CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY January 4, 2019 Annual Meeting Report of Interim Treasurer of the Authority Philip Leiber The background on the Facilities Financing Authority (Authority) as well as a summary of past activity from its inception in 1994 through 2018 is attached in a separate attachment. During 2018, as part of the ongoing Federal budget sequestration, the Internal Revenue Service (IRS) announced credit payments by issuers of certain tax credit bonds, including Build America Bonds, would be subject to a reduction of 6.6% for the period of October 1, 2017 to September 30, 2018. Due to concerns about ongoing reductions of this nature, Central San explored the opportunity of refunding the Series 2009A Certificates of Participation, and on September 13, 2018 refunded the Series 2009A bonds financed with the proceeds of new tax-exempt bonds through exercise of the extraordinary call provisions of those obligations. Concurrently, Central San issued taxable obligations to establish an escrow account to advance refund the Series 2009B obligations (which were issued as tax-exempt obligations) which are callable on September 1, 2019. As of December 31, 2018, the remaining principal balance on the Series 2009 B debt is $6,980,000. The escrow account was funded with $7,146,625, which is sufficient to pay the principal amount and accrued interest on the principal amounts due and called on September 1, 2019. Accordingly, the obligations are considered defeased from the standpoint of Central San and the Authority. This was declared in a notice to obligation holders on September 13, 2018: NOTICE IS HEREBY GIVEN, by the Central Contra Costa Sanitary District (the "District"), with respect to the captioned certificates of participation (the "Certificates"), that it has discharged all of the Certificates as of September 13, 2018. During 2018, no new debt was issued by the Authority. Due to the retirement of the Authority's Treasurer in August 2018, this report has been written and issued by the Philip Leiber, Director of Finance &Administration of Central San. It is recommended that Mr. Leiber be appointed as Treasurer of the Authority, as the Central San's Finance Manager remains vacant at this time. January 3, 2019 Regular Board Meeting Agenda Packet- Page 257 of 260 Page 7of9 ATTACHMENT 4 CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY The Central Contra Costa Sanitary District Facilities Financing Authority ("Authority") is a non-profit corporation established on November 14, 1994 through Board action to facilitate the borrowing of funds using long-term Revenue Installment Certificates (Certificates of Participation). Background In conjunction with the 1994-95 Capital Improvements Financing Program, the Board approved borrowing $25 million by issuing 20-year revenue bonds. As a requirement of the Installment Sale Agreement for delivery of the bond certificates, it was necessary to form a non-profit corporation to sell the facilities improvements to the District. Thus, the Authority was formed, bylaws were adopted, a time and place for regular meetings was established, and a resolution was adopted approving issuance of the bonds. Regular meetings of the Authority Board are generally held following the first District Board meeting in January each year. Summary of Past Activity 1994 In December 1994, the Authority was utilized to facilitate issuance the 1994 Revenue Installment Certificates (Certificates of Participation) in the amount of $25 million for a term of 20 years. All payments for the capital projects supported by the proceeds were made from the District's Sewer Construction Fund. Once all the capital projects supported by the proceeds were substantially complete, payments were made from the Running Expense Fund. 1998 In October 1988, revenue bonds were issued to refund all outstanding debt because interest rates had declined significantly. After the refunding, on advice of Bond Counsel was sought as to whether the Authority should be dissolved. Counsel advised that it must continue to exist and meet on an annual basis until the earliest call date of the older Certificates of Participation, September 2004. At that time, the Authority Board could decide whether the Authority should continue to exist or dissolve. 2002 In May 2002, Revenue Installment Certificates were issued in the amount of $16,565,000 for a term of 20 years. 2009 In November and December 2009 the District sold a total of $54 million in both taxable and non-taxable bonds. The purpose of the sale was to refund the 1998 and 2002 outstanding bonds of $24 million due to very favorable interest rates and to issue new debt to help fund several large capital projects included in the Capital Budget. 1 January 3, 2019 Regular Board Meeting Agenda Packet- Page 258 of 260 Page 8of9 Tax exempt bonds were issued to refund the 1998 and 2002 bonds as well as to raise new money. The refunding of the District's $24 million of outstanding debt was to produce an approximate $1.2 million net present value savings. The interest rates on the tax- exempt bonds ranged from 0.4% to 3.79% with a 20-year term. Of the $30 million in new debt, the District issued $19 million in taxable Build America Bonds which had a direct 35% subsidy from the Federal Government with yields ranging from 3.45% to 3.78% net of the subsidy. The proceeds of these 20-year bonds have been used to fund capital projects. Debt Service payments will be $5.4 million each year for the first five years (through fiscal year (FY) 2014) dropping to $3.6 million for the next nine years (through FY 2023) and $2.4 million for the remaining six years (through FY 2029). 2013 In March 2013, as part of the Federal budget sequestration, the Internal Revenue Service (IRS) announced credit payments by issuers of certain tax credit bonds, including Build America Bonds, may be subject to a reduction of 8.7%. In 2013, the reduction in rebate received was $36,261. 2014 In March 2014, as part of the Federal budget sequestration, the Internal Revenue Service (IRS) announced credit payments by issuers of certain tax credit bonds, including Build America Bonds, may be subject to a reduction of 7.2%. In 2014, the reduction in rebate received was $30,009. The 2009 Revenue Bonds have a covenant in the Agreement to comply with requirements for rebate of excess investment earnings to the federal government to the extent applicable every 5 years. An arbitrage audit was performed by PFM Asset Management LLC during 2014 and no arbitrage liability was owed to the Internal Revenue Service. 2015 In March 2015, as part of the continued Federal budget sequestration, the Internal Revenue Service (IRS) announced credit payments by issuers of certain tax credit bonds, including Build America Bonds, may be subject to a reduction of 7.3%. In 2015, the reduction in rebate received was $30,426. 2016 During 2016, as part of the ongoing Federal budget sequestration, the Internal Revenue Service (IRS) announced credit payments by issuers of certain tax credit bonds, including Build America Bonds, may be subject to a reduction of 6.8%. In 2016, the reduction in rebate received was $28,342. 2 January 3, 2019 Regular Board Meeting Agenda Packet- Page 259 of 260 Page 9of9 2017 During 2017, as part of the ongoing Federal budget sequestration, the Internal Revenue Service (IRS) announced credit payments by issuers of certain tax credit bonds, including Build America Bonds, may be subject to a reduction of 6.9%. In 2017, the reduction in rebate received was $28,759. As of December 31, 2017, the remaining principal balance on the 2009 debt service was $29,095,000. 2018 During 2018, as part of the ongoing Federal budget sequestration, the Internal Revenue Service (IRS) announced credit payments by issuers of certain tax credit bonds, including Build America Bonds, would be subject to a reduction of 6.6% for the period of October 1, 2017 to September 30, 2018. Due to concerns about ongoing reductions of this nature, Central San explored the opportunity of refunding the Series 2009A Certificates of Participation, and on September 13, 2018 refunded the Series 2009A bonds financed with the proceeds of new tax-exempt bonds through exercise of the extraordinary call provisions of those obligations. Concurrently, Central San issued taxable obligations to establish an escrow account to advance refund the Series 2009B obligations (which were issued as tax- exempt obligations) a portion of which are due on September 1, 2019, and the remainder are callable on that date. As a result of these actions, as of December 31, 2018, the obligations were legally defeased as obligations of the Authority. Next Regular Meeting of the Authority The next regular meeting of the Authority will be held in January 2020. 3 January 3, 2019 Regular Board Meeting Agenda Packet- Page 260 of 260