MEETING DATE:
SEPTEMBER 23, 2014
SUBJECT:
Title
RESOLUTION NOS. PFA 2014-71, 2014-7980 & SMPFA 2014-009 - aUTHORIZATION TO ISSUE REFUNDING BONDS FOR COMMUNITY FACILITIES DISTRICT NO. 91-01 (TWIN OAKS VALLEY RANCH) AND CERTAIN IMPROVEMENT AREAS WITHIN COMMUNITY FACILITIES DISTRICT NO. 99-01 (SAN ELIJO HILLS)
Body
Recommendation
Recommendation
Staff recommends the City Council adopt the attached resolutions authorizing the issuance of bonds by the San Marcos Public Financing Authority (the "Authority") and related Special Tax Refunding Bonds by the City of San Marcos Community Facilities District No. 91-01 (Twin Oaks Valley Ranch) (the "CFD 91-01) and the City of San Marcos Community Facilities District No. 99-01 (San Elijo Hills) (the "CFD 99-01).
Body
Board or Commission Action
Not applicable
Relevant Council Strategic Theme
Good Governance
Relevant Department Goal
Not applicable
Introduction
In 2004, the San Marcos Public Facilities Authority (the "Public Facilities Authority") issued its $33,805,000 Special Tax Revenue Refunding Bonds, 2004 Series A and its $3,690,000 Special Tax Revenue Refunding Bonds, 2004 Series B to refinance certain prior local obligations issued by CFD 91-01 and Improvement Areas A1, A2, B1, B2, C1, D1, G3, H1A, H1B, M, N1, N2, R1 and R2 of CFD 99-01.
In 2006, the Public Facilities Authority issued its $13,660,000 Special Tax Revenue Bonds, 2006 Series A the proceeds of which were ultimately used to finance the acquisition and construction of certain public facilities and infrastructure improvements necessary to support the planned development within Improvement Areas F2/V2, J, T and V1A of CFD 99-01. In December 2012, San Elijo Hill Estates, LLC and San Elijo Hills Development Company, LLC provided sufficient funds to redeem all $2,760,000 of the outstanding T Special Tax Bonds.
Since then, all of the parcels within CFD 91-01 and Improvement Areas A1, A2, B1, B2, C1, D1, F2/V2, G3, H1A, H1B, J, M, N1, N2, R1, R2 and V1A of CFD 99-01 (the "Improvement Areas") have been fully developed and sold to individual homeowners (except for 4 units in Improvement Area F2/V2 that are for sale). The construction and sale of these units has created a diversity of property ownership as well as increased property values. The combination of the diversified ownership, increased property values and low municipal bond interest rates has created an opportunity to refund (refinance) the bonds that were issued in 2004 and 2006. Said refunding would impact the Twin Oaks Valley Golf Course as well as approximately 214 residential units owned by individual homeowners in CFD 91-01 as well as approximately 1,527 residential units owned by individual homeowners in the Improvement Areas of CFD 99-01. The refunding of the 2004 and 2006 bonds will result in lower annual special tax levies for CFD 91-01 and each of the Improvement Areas.
The proposed refunding will be the City's first bond issue this year, and the fourth bond issue within the past five years, in which refunding bonds are issued with the intention of generating savings and tax relief for property owners within the boundaries of the City's community facilities districts affected by the issuance of refunding bonds. City staff is continuously looking for opportunities to ease taxpayer burden by refunding bonds, and is careful in the way initial bond issues are structured to ensure that tax relief from such refundings can be generated as quickly as possible.
Discussion
It is anticipated that the proposed refunding bonds will be issued with interest rates substantially lower than the interest rates on the existing 2004 and 2006 bonds. The reduction in borrowing costs will, in turn, result in a reduction of special taxes to be levied in CFD 91-01 and the Improvement Areas of CFD 99-01. Projections reflecting August 8, 2014, market conditions estimate net present value savings of over $3 million, or approximately 8.6% of the par amount of bonds to be refunded, without extending the term of the bonds from their original maturity dates. The City Council should note that due to daily changes in interest rates, the actual level of savings cannot be determined until the proposed refunding bonds have been priced and sold. The pricing date is tentatively set for October 2, 2014.
Property owners within the Improvement Areas and CFD 91-01 can expect special tax savings beginning in Fiscal Year 2015-16. The level of savings will vary within each of the Improvement Areas and CFD 91-01. Preliminary estimates show annual special taxes in most of the Improvement Areas will decrease between $200 to $300 with some Improvement Areas seeing savings above and below this range. Residential property owners in CFD 91-01 will see average annual savings around $230, while the golf course will see overall savings of approximately $5,200 a year.
Copies of the various documents relating to the bond financing were provided to the City Council in an electronic format and are on file with the City Clerk and are available for public inspection during normal business hours.
Before the City Council are three resolutions that allow for the proposed refunding. In the first resolution the Public Facilities Authority approves the form of the Escrow Agreements pertaining to the defeasance and redemption of its 2004 and 2006 Bonds, and consents to the first amendment of the Fiscal Agent Agreements for the prior Special Tax Bonds issued by CFD 91-01 and each of the Improvement Areas.
In the second resolution, the City, acting for itself and as the legislative body for CFD 91-01 and CFD 99-01, authorizes and provides for the issuance of a separate series of Special Tax Refunding Bonds for CFD 91-01 and each of the Improvement Areas, and approves the form of the Preliminary Official Statement and various other documents relating to the refinancing.
In the third resolution, the Authority authorizes the issuance of the Special Tax Revenue Refunding Bonds, Series 2014A by the San Marcos Public Financing Authority, and approves the forms of the Indenture of Trust, Bond Purchase Agreement and other documents relating to the refinancing, including the Preliminary Official Statement.
Conflicts of Interest
Staff has reviewed the locations of the properties in CFD 91-01 and the Improvement Areas and determined that Mayor Desmond owns property within 500 feet of CFD 91-01 and Councilmember Orlando owns property within Improvement Area N1 of CFD 99-01.
Fiscal Impact
Approval of the attached resolutions will have no fiscal impact to the City's General Fund. However, it is estimated that approval of the attached resolutions will generate approximately $3 million of savings for the taxpayers in CFD 91-01 and the Improvement Areas.
Attachment(s)
· Resolution PFA 2014-____ of the San Marcos Public Facilities Authority approving the form of an Escrow Deposit and Trust Agreement pertaining to the defeasance and redemption of its Special Tax Revenue Refunding Bonds, 2004 Series A, Special Tax Revenue Refunding Bonds, 2004 Series B, Special Tax Revenue Bonds, 2006 Series A and consenting to the First Amendment to Fiscal Agent Agreements related thereto
· Resolution 2014-____ of the City of San Marcos, acting for itself and as the Legislative Body of CFD No. 91-01 and CFD 99-01, authorizing and providing for the issuance of separate series of Special Tax Refunding Bonds for CFD No. 91-01 and certain Improvement Areas of CFD No. 99-01, approving the forms of Fiscal Agent Agreements, a Bond Purchase Agreement, an Escrow Deposit and Trust Agreement, a Preliminary Official Statement, and a Continuing Disclosure Agreement, and authorizing other actions in connection therewith
· Resolution SMPFA 2014-____ of the San Marcos Public Financing Authority authorizing the issuance of Special Tax Revenue Refunding Bonds, Series 2014A, approving the forms of an Indenture of Trust, Bond Purchase Agreement, Preliminary Official Statement and Continuing Disclosure Agreement, and authorizing other actions in connection therewith
· Map of CFD 91-01
· Map of CFD 99-01 Improvement Areas A1, A2, B1, B2, C1, D1, F2/V2, G3, H1A, H1B, J, M, N1, N2, R1, R2 and V1A.
· Term Sheet
· Preliminary Official Statement
· Continuing Disclosure Agreement (Appendix D of the Preliminary Official Statement)
Prepared by: Roque Chiriboga, Manager of Financial Analysis and Debt Administration
Submitted by: Laura Rocha, Finance Director
Approved by: Jack Griffin, City Manager