HomeMy WebLinkAboutCity Council Committees - Public Facilities District Board - 02/18/2016 (2)
Unless otherwise noted, the Public Facilities District meets at 4 p.m. on the last Thursday of
each quarter at the ShoWare Center, 625 West James Street, Kent, WA 98032.
For additional information please contact Ronald F. Moore, MMC, City Clerk at 253-856-5728 or
via email at rmoore@kentwa.gov.
Any person requiring a disability accommodation should contact the City Clerk’s
Office at 253-856-5725 in advance. For TDD relay service call Washington
Telecommunications Relay Service at 1-800-833-6388.
Public Facilities District Board Agenda
Board Members: Chair Mike Miller – Lew Sellers – Randall Smith – Jeff Piecewicz - VACANT
Officers: Chair Mike Miller – Secretary Ronald F. Moore – Treasurer Aaron BeMiller
SPECIAL MEETING
February 18, 2016
4 p.m.
Kent City Hall, Centennial Building, Room 402
Item Description Action Speaker
1. Call to order Chair Miller
2. Roll Call Chair Miller
3. Discussion of Potential Bond Refunding Treasurer BeMiller
4. Adjournment Chair Miller
City of Kent, WA
2016 Potential Bond Refundings
Kent City Council Workshop
February 2, 2016
BOND REFUNDING OVERVIEW:
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What is bond refunding?
•“Refunding” is the process of retiring an outstanding bond
issue, at maturity or in advance of maturity, by using the
proceeds from issuing “new” debt.
•The “new” bond is issued at a lower rate of interest than the
“old or refunded” bond, ensuring a reduction of interest
expense for the issuer (City).
•The principal balance outstanding of the “old or refunded”
bond does not change, savings is achieved from lower interest
rates.
•Same principle as refinancing a home mortgage.
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Why’s and when’s to refund
•Why refund?
•Consolidating or restructuring debt
•Legal reasons
•Most common reason is savings
•When should we refund?
•When doing so would result in savings. Generally, 3% PV (present
value) saving on the refunded bond is a common target.
•Other considerations to factor in include:
•Negative arbitrage
•Cash flow needs
•Bond rate projections
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Example of refunding savings
-
100
200
300
400
500
$
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Outstanding Bonds - Interest Payments Refunding Bonds - Interest Payments
Original bonds
issued at an interest
rate of 5.00% with a
final maturity of
2030
If rates fall to 4.00% for bonds due in 2030, issuer
(City) refunds outstanding bonds by issuing
Refunding (new) Bonds to defease (pay off) the
“old” bonds. As a result, the issuer realizes savings
of $100,000 per year through 2030 compared to
prior debt service.
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Advanced refunding
•Advanced refundings occur at least three months before the
call date (the agreed upon date on which a bond can be
redeemed before final maturity).
•IRS Code stipulates that bonds can be advanced refunded only
once.
•Advance refundings typically include an impact in savings due
to negative arbitrage.
•Negative arbitrage exists when an advanced refunding has an
interest rate which is lower than what must be paid back to the
original bond holders.
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Advanced Refunding Flowchart
ISSUER
(City)
New
Proceeds
Sent to
Trustee
ESCROW
payment to
“old”
bondholders
New
Bondholders
2016
Bondholders
2008
Existing
Bondholders Payment for Called
Bonds
Receive Proceeds
Issue New Bonds
2016
New
Bondholders
Pays New
Debt
Service
ISSUER 2/
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2016 BOND REFUNDING
OPPORTUNITIES:
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2008 Series A: $22,700,000
•These bonds were issued and used to fund the following
projects:
•Technology Plan - $3,031,580
•East Hill Maintenance Facility - $1,527,490
•Lake Meridian Dock - $1,000,000*
•Events Center - $5,015,790 (sidewalk and street improvements)
•Municipal Court Renovation - $7,578,950
•Sidewalks - $1,515,790
•James Street Improvements - $1,652,370
•Other Street Improvement - $1,378,030
•* Represents unspent bond proceeds originally issued for the
East Hill Maintenance Facility and reassigned to this project as
part of the 2016 mid-biennium budget adjustment.
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2008 Series A: $22,700,000
•Call Date: December 1, 2018
•Amount which would be refunded: $16,945,000
•Net PV savings: $1,929,480
•Negative arbitrage: $424,240
•Net PV savings on refunded bonds: 11.15%
•Note: Amounts are as of January 2016. Negative arbitrage is
included in the net PV savings.
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2015 Refunding View
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Special Events Center Sales Tax
Bonds: $53,150,000
•These bonds were issued to fund the construction of the Kent
Special Events Center.
•Call Date: June 1, 2018
•Amount which would be refunded: $53,150,000
•Net PV saving: $5,913,620
•Negative arbitrage: $2,096,980
•Net PV savings on refunded bonds: 11.13%
•Note: Amounts are as of January 2016. Negative arbitrage is
included in the net PV savings. PFD debt is included in City
debt capacity.
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2015 Refunding View
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PFD Refunding Considerations
•City will issue bonds and loan the proceeds to the PFD to advance
refund the PFD’s Special Events Center Sales Tax Bonds, 2008.
•City’s bonds will be payable from sales taxes collected by the PFD
and remitted to the City for such purpose, and to the extent
necessary, funds of the City.
•City’s bonds will be secured by the full faith and credit of the City
(similar to other LTGO debt), and a pledge of the sales taxes
remitted by the PFD to the City.
•PFD Board will need to approve the refunding and changes/revisions
to our current agreements.
•Interlocal Agreement and Contingent Loan and Support Agreement
will need to be revised to provide:
•City is financing the refunding for the PFD at the PFD’s request.
•Flow of sales taxes to the City for purposes of paying debt service.
•Handling of large receivable on our books and securing our interest
in any possible repayment from PFD.
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SAVINGS STRUCTURE:
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Uniform Structure for
Refunded Bonds, Combined
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-
1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037
Prior Debt Service Gross Savings ($)Refunding Bonds Debt Service
Proposed Structure for
Refunded Bonds, Combined
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1,000,000
2,000,000
3,000,000
4,000,000
5,000,000
6,000,000
7,000,000
8,000,000
9,000,000
10,000,000
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037
Prior Debt Service Gross Savings ($)Refunding Bonds Debt Service
City of Kent Current GO Debt
Profile – Including PFD Debt
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$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
$12,000,000
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Fiscal Year Ending
Special Events Center Sales Tax Bonds, 2008 Special Events Center Revenue Bonds, 2008 (Taxable)
LTGO Bonds, Series 2008A LTGO - LTGO Refunding Bonds, Series 2009
LTGO - LTGO Refunding Bonds, Series 2012A LTGO - LTGO Refunding Bonds, 2014
LTGO Refunding Bonds, 2015AB
City of Kent Aggregate GO Debt
Service Structure
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$2
$4
$6
$8
$10
$12
2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 2031 2032 2033 2034 2035 2036 2037
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Existing LTGO Debt Service Proposed LTGO Refunding Bonds, 2016 Savings
The white bars in the chart above represent the debt savings realized as a result
of the aggregate refunding of the LTGO Bonds, 2008A and the Sales Tax Bonds,
2008, structured as the proposed structure. The City’s remaining outstanding
LTGO debt service is represented by the light and dark blue bars.
NEXT STEPS:
Operations Committee on 2/16/2016
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Questions? 2/
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