HomeMy WebLinkAbout05.d. Discuss opportunity to join a Joint Powers Authority for Revenue Bond Issuance Page 1 of 2
Item 5.d.
CENTRAL SAN
August 23, 2022
TO: FINANCE COMMITTEE
FROM: PHI LIP LEI BER, DI RECTOR OF FI NANCE AND ADMI NI STRATI ON
REVIEWED BY: KEVIN MIZUNO, FINANCE MANAGER
ROGER S. BAILEY, GENERAL MANAGER
SUBJECT: DISCUSS OPPORTUNITYTO JOIN A JOINT POWERS AUTHORITY FOR
REVENUE BOND ISSUANCE
As discussed at previous Financial Workshops (most recently in March 2022), staff anticipate the need for
about$200 million of additional external financing for our Ten-Year Capital Improvement Program.
External financing may come in the form of State Revolving Fund (SRF) loans, or debt issued to the public
in the form of Certificates of Participation (COPs), or revenue bonds. Staff will be looking for the most
cost effective form of financing, which is likely to be SRF loans, but a public debt offering is still being
considered as one viable form of financing. Staff have been advised that revenue bonds may be a lower
cost form of financing than COPs, as the latter are a somewhat more complex form of financing subject to
potentially adverse investor sentiment, in the event of any negative situations that may arise with COPs by
other issuers. I n light of that, it is sensible to consider the issuance of revenue bonds. Revenue bonds
are a very standard form of municipal financing, especially for utilities. However, revenue bonds for special
districts in California can only be used for new money (versus refunding existing debt)through a public
vote, which is why COPs have often used as an alternative. Revenue bonds were used by Central San in
2018 to refund and retire previously issued COPs. However, revenue bonds issued through a Joint
Powers Authority (J PA) on behalf of a participant in the J PA do not require a public vote. Accordingly, that
arrangement achieves the same outcome as a COP structure, but through a "more standard" structure. It
is for this reason that one sees special districts at times participate in J PAs established for the purpose of
financing projects by members.
Given this, it is advisable for Central San to consider taking the steps towards opening up this form of
financing for future needs. There will be external financing needs for projects around 2024, and about two
years later, so now is a good time to begin this process.
Establishing a J PA to be used for financings of the nature described above requires at least one other
government entity join in the effort. Costs of forming a J PA are minimal, and include legal costs to specify
formation and governance documents, and then filing fees with the State. Ongoing costs are minimal, and
comparable to those involved in maintaining an entity like Central San's existing financing authority (Central
Contra Costa Sanitary District Facilities Financing Authority) used for COPs.
On August 15, 2022, staff learned that the Sacramento Area Sewer District (SASD) and Sacramento
Regional County Sanitation District (Regional San) are exploring the option of merging into one single
Sacramento Sanitation District with the expectation that it will improve operational efficiency, provide
savings and achieve certain policy objectives. However, as a consequence of this action, the Sacramento
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County Sanitation Districts Financing Authority, a joint powers authority (JPA) between SASD and
Regional San, would cease to exist as a JPA requires the participation of at least two public agencies.
Accordingly, in order to keep the JPA active and retain the financing benefits it offers, the SASD and
Regional San is looking for a new participant and has invited Central San to join. Staff believes this may
be a good opportunity for Central San as it:
1. Would have a J PA available to issue debt through (Central Contra Costa Sanitary District Facilities
Financing Authority is not a JPA, but a public benefit non-profit corporation).
2. Would already have a willing partner.
3. Would have Legal Counsel (Orrick) already engaged to provide necessary amendments to the
existing JPA agreement to accommodate ourjoining.
There are two key points about participating in a J PA like this for financings:
1. Only the J PA member using the J PA for the debt issuance is responsible for repayment of that
debt. Accordingly, other J PA members have no risk or obligation for repayment of debt they did not
use.
2. The costs of maintaining a J PA like this are minimal. Board members and officers are to be
selected from among the participating members. Ongoing incidental costs are to allocated as
specified in the governance documents. Costs related to particular financings would be attributed to
the entity using the proceeds.
Treatment of these matters as well as all other logistical and governance matters would be specified in the
JPA agreement among the participating members. Staff would intend to provide feedback on this draft
agreement based on Central San's needs, and input from the Finance Committee and Board of Directors.
The purpose of this memorandum is to inform the Finance Committee of staff's intention to pursue
discussions with SASD and Regional San with the goal bringing an agreement to the Central San board to
participate in this J PA and, thereby, open up this financing vehicle for future use by Central San.
Staff looks forward to discussing and obtaining input from the Finance Committee about this opportunity.
Strategic Plan Tie-In
Tie-In
GOAL FOUR: Governance and Fiscal Responsibility
Strategy 3- Maintain financial stability and sustainability
GOAL SIX:Infrastructure Reliability
Strategy 2- Execute long-term capital renewal and replacement program
August 23, 2022 Regular FINANCE Committee Meeting Agenda Packet- Page 144 of 146