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HomeMy WebLinkAbout22. Hold Annual CCCSD Facilities Financing Authority Meeting Page 1 of 10 Item 22. CENTRALSAN jdf A- hom CENTRAL CONTRA COSTA SANITARY DISTRICT January 13, 2022 TO: HONORABLE BOARD OF DIRECTORS FROM: KEVIN MIZUNO, FINANCE MANAGER REVIEWED BY: PHILIP LEIBER, DIRECTOR OF FINANCE AND ADMINISTRATION 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 MEETI NG NOTE: BOARD MEMBERS WILL NOT RECEIVER SEPARATE OR INCREASED STIPEND FOR A TTENDA NCE A T THIS MEETING. Attached is a copy of the annual FFA meeting agenda (Attachment 1), the draft minutes of the last meeting held by the FFA on June 3, 2021 (Attachment 2), the annual Treasurer's Report (Attachment 3), and background information related to the FFA (Attachment 4). The Treasurer's Report provides a synopsis of activities of the FFA during calendar year 2021. Strategic Plan Tie-In GOAL THREE: Fiscal Responsibility Strategy 1—Maintain financial stability and sustainability, Strategy 2—Ensure integrity and transparency in financial management ATTACHMENTS: 1. FFA Agenda for January 13, 2022 2. FFA Draft minutes from June 3, 2021 meeting 3. F FA Treasurer's Report for Calendar Year 2021 4. FFA Background History January 13, 2022 Special Board Meeting Agenda Packet- Page 251 of 260 Page 2 of 10 Attachment 1 CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY JANUARY 13, 2022 MEETING AGENDA 1. CALL MEETING 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 — Michael McGill); 2) Appoint Vice Chair of the Authority (Member of the Finance Committee of the District Board of Directors — David Williams); 3) Appoint Executive Director of the Authority (General Manager of the District); 4) Appoint Treasurer of the Authority (Finance Manager of the District); and 5) Appoint Secretary of the Authority (Secretary of the District). Staff Recommendation (Motion Required): Appoint the Officers as recommended for a one-year term. 5. APPROVAL OF MINUTES a. Approve Minutes of June 3, 2021 meeting Staff Recommendation (Motion Required): Approve the minutes. 6. BUDGET AND FINANCE a. Receive Treasurer's Report for calendar year 2021 (Kevin Mizuno). Staff Recommendation: Receive the report. 7. OTHER BUSINESS RELATING TO MATTERS ABOVE 8. ADJOURNMENT a. Adjourn meeting of the Authority and reconvene as the Board of Directors of the Central Contra Costa Sanitary District. January 13, 2022 Special Board Meeting Agenda Packet- Page 252 of 260 Page 3 of 10 DRAFF Attachment 2 MINUTES OF THE MEETING OF THE CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY HELD ON JUNE 3, 2021 NOTICE In accordance with the Governor's Executive Order N-29-20, which suspended certain requirements of the Brown Act due to the ongoing COVID-19 pandemic, all Board Members participated in this meeting via teleconference. Members of the public were provided options to participate in the meeting as provided on the agenda. 1. CALL TO ORDER At 2:27 p.m., President Pilecki adjourned the Central San Board meeting and convened a meeting of the Central Contra Costa Sanitary District Facilities Financing Authority (the 'Authority'). 2. ROLL CALL Chair Pilecki requested that Katie Young, Secretary of the Authority, call roll. PRESENT: Members: Hockett, Lauritzen, McGill, Williams, Pilecki ABSENT. Members: None It was noted on the agenda that Board Members would not receive a separate or increased stipend for this meeting. 3. PUBLIC COMMENTS No comments. 4. APPROVAL OF MINUTES a. Approve Minutes of May 6, 2021 meeting. AUTHORITY ACTION: It was moved by Member Williams and seconded by Member Hockett to approve the Authority minutes of the May 6, 2021 meeting. Motion passed by unanimous roll call vote of the Authority Members. 5. FFA BUSINESS RELATED MATTER a. Consider adopting Resolution No. 2021-03 to authorize the execution, sale, and delivery of wastewater revenue Certificates of Participation (COPs) in the maximum principal amount of $65,000,000 to finance capital improvement projects of the Central Contra Costa Sanitary District January 13, 2022 Special Board Meeting Agenda Packet- Page 253 of 260 Page 4 of 10 CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY Minutes of June 3, 2021 Board Meeting AUTHORITY ACTION: It was moved by Member McGill and seconded by Member Williams to adopt Resolution No. 2021-03 as proposed. Motion passed by unanimous roll call vote of the Authority Members. 6. OTHER BUSINESS RELATING TO MATTERS ABOVE None. 7. ADJOURNMENT There being no further business to come before the Authority, Chair Pilecki adjourned the annual meeting of the Authority at 2:30 p.m. after which the meeting of the Central San District Board of Directors reconvened. Katie Young Secretary of the Authority 2 January 13, 2022 Special Board Meeting Agenda Packet- Page 254 of 260 Page 5 of 10 ATTACHMENT 3 CENTRAL CONTRA COSTA SANITARY DISTRICT FACILITIES FINANCING AUTHORITY January 13, 2022 Annual Meeting Report of Treasurer of the Authority Kevin Mizuno In June 2021 the Facilities Financing Authority (Authority) issued $50.57 million in Certificates of Participation (2021 COPs), generating $58.0 million in proceeds to finance a portion of the FY 2020-21 and FY 2021-22 capital improvement budget. This COPs issuance allowed sewer service charge revenues previously budgeted for capital purposes to be made available to finance the payoff of Central Contra Costa Sanitary District's (the District's) outstanding pension plan unfunded actuarially accrued liability (UAAL) totaling $70.76 million. The 2021 COPs mature on September 1, 2028 (FY 2028-29), seven years from the date of issuance, with its debt service schedule roughly mirroring that of the pension UAAL amortization schedule. The 2021 COPs were issued with a true interest cost of 0.38%, compared to the pension UAAL which is charged a 7.0% discount rate by the District's pension administrator, CCCERA. As of the calendar year ended December 31, 2021, the total principal amount on the 2021 COPs, the only outstanding debt issuance of the Authority, was $50.57 million, with the first debt service payment becoming due on March 1, 2022. Prior to this, the Authority was used in 2009 to issue COPs, which were retired with 2018 refunding bond proceeds. The full principal amount of the Authority's 2009 Series B COPs was legally called on September 1, 2019, paid from the escrow account established when the 2018 Series B Wastewater Revenue Refunding Bonds were issued in on September 13, 2018. The proceeds of the Revenue Bond offering issued directly by the District were the source of funds to retire the Authority's 2009 COPs. With regard to the District's aforementioned Revenue Bonds, as of December 31, 2021, the remaining unpaid principal balance on the 2018 Series A and Series B Wastewater Revenue Refunding Bonds was $12,640,000 and $1,120,000 respectively (total of $13,760,000). The 2018 Series A and Series B Wastewater Revenue Refunding Bonds are scheduled to mature on September 1, 2029 and September 1, 2023, respectively. While the District's most recent financial plan anticipated the large solids handling facilities improvement project being financed with a $173.1 million low-interest State Revolving Fund (SRF) loan through the CA Water Board, the change in direction of this project from extending the life of incinerators to accelerating the use of digestion is resulting in significant revisions to this project, impacting both the timeline and likely ons sources. While staff does plan to utilize as much of the originally approved SRF debt funding as possible for work within the original loan's project scope, alternative financing sources will be needed. Alternative financing January 13, 2022 Special Board Meeting Agenda Packet- Page 255 of 260 Page 6 of 10 ATTACHMENT 3 could be obtained from additional COPs issuances through the Authority, the issuance of voter-approved revenue bonds through the District, or the issuance of revenue bonds through an existing or new JPA, or a new SRF loan application. The latter would involve a competitive process and a lengthy timeline in applying for and being awarded SRF funding through the State. Staff will bring a discussion of alternatives to the Board at the planned March 2022 financial workshop. Additional background on the Authority as well as a summary of past activity from its inception in 1994 through 2021 is included in a separate attachment. January 13, 2022 Special Board Meeting Agenda Packet- Page 256 of 260 Page 7 of 10 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 Central Contra Costa Sanitary District (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 13, 2022 Special Board Meeting Agenda Packet- Page 257 of 260 Page 8 of 10 ATTACHMENT 4 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) 2013-14) dropping to $3.6 million for the next nine years (through FY 2022-23) and $2.4 million for the remaining six years (through FY 2028-29). 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 13, 2022 Special Board Meeting Agenda Packet- Page 258 of 260 Page 9 of 10 ATTACHMENT 4 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. 2019 The full principal amount of the Authority's 2009 Series B Certificates of Participation were legally called on September 1, 2019, paid from the escrow account established when the 2018 Series B Wastewater Revenue Refunding Bonds were issued in the prior year. 2020 The Authority did not have any outstanding debt and there was no reportable activity. Revenue Bonds that were used to refund the 2009 Certificates of Participation remain outstanding, with annual principal payments through final maturity in 2030. 2021 Not anticipating the issuance of new debt given the availability of alternative and perceived more desirable financing mechanisms available to the District, the Authority's Board approved the dissolution of the non-profit corporation at its annual meeting in January 2021. Shortly thereafter, however, given historically low interest rates District staff sought advice from its financial advisors, PFM, on potentially issuing low-interest debt financing to pay off the remaining unfunded actuarially accrued liability (UAAL) of the District' pension plan, incurring interest at a 7.0% discount rate. Given significant uncertainty as to how long this phenomenon would last, it was concluded that a faster debt issuance of certificates through the existing Authority was preferable to slower alternatives, which could have the adverse impact of being pushed out into a higher interest rate environment. 3 January 13, 2022 Special Board Meeting Agenda Packet- Page 259 of 260 Page 10 of 10 ATTACHMENT 4 In June 2021 the Authority issued $50.57 million in Certificates of Participation (2021 COPs), generating $58.0 million in proceeds to finance a portion of the FY 2020-21 and FY 2021-22 capital improvement budget. This COPs issuance allowed sewer service charge revenues previously budgeted for capital purposes to be made available to finance the payoff of the District's outstanding pension plan unfunded actuarially accrued liability (UAAL) totaling $70.76 million. The 2021 COPs mature on September 1, 2028 (FY 2028-29), seven years from the date of issuance, with its debt service schedule roughly mirroring that of the pension UAAL amortization schedule. The 2021 COPs were issued with a true interest cost of 0.38%, compared to the pension UAAL which is charged a 7.0% discount rate by the District's pension administrator, CCCERA. As of the calendar year ended December 31, 2021, the total principal amount on the 2021 COPs, the only outstanding debt issuance of the Authority, was $50.57 million, with the first debt service payment becoming due on March 1, 2022. Next Regular Meeting of the Authority The next regular meeting of the Authority is expected to be held in January 2023, unless a debt issuance through the Authority is required sooner. 4 January 13, 2022 Special Board Meeting Agenda Packet- Page 260 of 260