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Home My WebLink About12 - Civic Center FinancingCITY OF NEWPORT BEACH CITY COUNCIL STAFF REPORT Agenda Item No. 12 September 13, 2005 TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Homer L. Bludau City Manager, 949 - 644 -3000, hbludau city.newport- beach.ca.us Dennis Danner Administrative Services Director/Treasurer, 949 - 644 -3123, ddanner @city.newport- beach.ca.us SUBJECT: Status Report from Civic Center Financing Team ISSUE: If the City Council decided to move forward with the building of a new Civic Center, how would that project be financed? RECOMMENDATION: Listen to presentation and provide direction to staff regarding financing options and preparation for the sale of Certificates of Participation (COP's). DISCUSSION: Background: In 2001 the City Council authorized a space needs analysis be done on the current City Hall in order to ascertain the space needed to provide the public and staff with adequate space to conduct business and perform needed work tasks. That report was finalized and accepted by the City Council in 2002. In May 2005, the City Council authorized Griffin & Associates to move forward with preliminary concepts and working drawings to allow for a firm cost estimate for a civic complex consisting of a replacement fire station, a 350 vehicle parking garage and a City Hall. In August 2005, the City Council directed Griffin & Associates to include all the options specifically reviewed in preparing for the cost estimate. There are three key components involving a decision as to whether to proceed with the civic center project: the physical layout and costs, how the project would be financed and how relocation would be accomplished. In the past two Council meetings, the Status Report from Civic Center Financing Team September 13, 2005 Page 2 Council discussed the physical layout and cost implications for the planning for the complex that has taken place thus far. At this meeting, staff and the Financing Team are making a presentation regarding how the Finance Team was assembled, funding options considered and the funding option (Certificates of Participation - COP) the Team feels is most suitable for this proposed project. This presentation is intended to provide background as to how the Finance Team is proceeding in preparing to issue COP's should the Council decide to commit to this project. At the end of this agenda item discussion, staff would like to know that the City Council concurs that COP's are the preferred financing instrument and that staff and the Finance Team are to proceed with their preparations for financing the project. Environmental Review: N/A Submitted by: Homer L. Bluo'au City Manager 4�L L Dennis Danner Administrative Services Director/ Treasurer �la-�-i3-o5 0 CITY OF NEWPORT BEACH CITY HALL, FIRE STATION & PARKING STRUCTURE FINANCING OVERVIEW CITY COUNCIL PRESENTATION SEPTEMBER 13, 2005 Fi 1,1mam Rolapp CTONf & STRAOLING YOCCA =Tt& Alssoclatcs YO U N C n e ac. CARLSON & RAUTH ➢ Finance construction for City Hall, Fire Facility and Parking Structure if Council decides to proceed. (Current project cost — $46.4 million) • Undertake a prudently structured financing • Maintain high credit quality standings with municipal rating agencies and bond insurers • Work with reputable and experienced finance team to ensure proper disclosure and achieve lowest cost of funds Page I 1. Cash ✓ Consideration of Whether to Fund Long -Term Asset w /Cash ✓ Opportunity Cost - Lost Investment Revenue ✓ Need of Cash for Other Capital Projects 2. General Obligation Bonds 2 /3rds Vote ✓ Tax Increase 3. Lease /Certificates of Participation (COPs) ✓ No Tax Increase Use Existing Funds for Annual Lease Payment • Interest Component of Payment Likely Tax- Exempt ✓ "Pay as You Use" Do Not Pay Annual Payment (or Portion) IF Unable to Occupy/Utilize Site ✓ Favorable Market - Historically Low Interest Rates (30 -YrAAA Insured -4,5) Page 3 Financial Advisor Fieldman, Rolapp & Associates Over the last 3 years, FR corTleted 187 transactions totaling $5.1B+ (including 27 COP /Lease Revenue transactions funding over $900M). Bond Counsel Stradling Yoeca Carlson & Rauth Ranked 2r° in each of the last three years based on Dollar Volume and V based on number of transactions, Over the last 5 years, SYCR colleted 176 COP /Lease Revenue Transactions as Bond Counsel totaling over $5, IB and 29 COP/Lease Revenue Transactions as underwno,,Wdisclasure counsel totaling S698M. Underwriter Stone & Youngberg nrunber oong -term CA bond Raked Is in n Sasues under i tten over the last s -veam: 718 issues totaling $13B- (mclud[ng 107 COP /Lease Revennle transactions totaling over S1.61B) • Each firm has prior working experience with the City of Newport Beach. • Each firm has submitted a Not to Exceed Fee Proposal. rase z 1. Cash ✓ Consideration of Whether to Fund Long -Term Asset w /Cash ✓ Opportunity Cost - Lost Investment Revenue ✓ Need of Cash for Other Capital Projects 2. General Obligation Bonds 2 /3rds Vote ✓ Tax Increase 3. Lease /Certificates of Participation (COPs) ✓ No Tax Increase Use Existing Funds for Annual Lease Payment • Interest Component of Payment Likely Tax- Exempt ✓ "Pay as You Use" Do Not Pay Annual Payment (or Portion) IF Unable to Occupy/Utilize Site ✓ Favorable Market - Historically Low Interest Rates (30 -YrAAA Insured -4,5) Page 3 Recommended Approach: ➢Sell COPs • City promises to budget & appropriate lease payment annually from existing revenue sources • Like a bond issue, interest component of annual lease payment is tax- exempt • Strong credit quality + tax exemption = low interest rates 6• Not A Pledge of Taxes or General Obligation of City •S Supreme Court Rulings: "— a Debt" ❖ Successful Method of Financing Used Since 1979 Page 0 3 56.0 $6.0 C $6.0 $3.0 A $2.0 $1.0 $0.0 199 x=c.x^ .. uixm�e+w.�m neamnc�au� �mWµswrs�.xws. Page 5 3 Recent C a I forma Issuers (Iisi via $ amount) 2004 San Diego County Water Authority $425.0 Water supply, storage& distribution 2004 Poway Unified School District 1000 K -12 school facility 2004 Imperial legation District 677 Water supply, storage& distribution 2004 Los Angeles Municipal Intend, Corp_ 661 Equipment 2004 Ames Unified School District 61 K -12 school facility 2004 Ontario 52.3 Water supply. storage & distribution 2005 Moreno Valley 48.2 Public toddles. 2002 Pomona 47.0 Multiple capital Improvements 2002 Reports of the University of CA 455 Multiple educational uses 2004 San Francisco City& County 394 Public building 2004 Pasadena 30.0 Multiple capital Improvements 2005 Oceanside 202 Public facilities Local Orange County Issuers (listed Via date) 2005 Orange County Water District $76:6 Water supply, storage& distribution 2004 Placentia 6.94 Ci tat im p...malts 2004 Fullerton 0.7 Water supply, storage & distribution 2004 Lake Forest 9.5 Street construction & repairs 2003 Fountain Valley 133. Capital improvements 2003 Rancho Sant. Margarita 128 Public building 2003 Santa Ana 17.0 Public building 2001 Orange County Fire Authority 26.1 Fire training facility 2001 Mission Viejo 17.5 Public building 2001 Laguna Hills 19.0 Civic center renovation 1994 Newport Beach 75 Public building 1992 Newport Mesa USO 53 School improvements Lessee O CUD, oftyewport Beach � Lessor Newport beach Public Facilities Corp. Certificate Proceeds Lease Payments P(Ige 6 EXAMPLE LEASE TERMS ge,00o,000 aarear Lease Term $7,000,000 •20 -Year Lease Term $6,000.000 • 10-Year Lease Term E E $5,000,000 a 36,000.000 , - .u: $0,000,000 _ 6 $2,000,000 81.000,800 $- 2008 2000 20t0 2013 2014 2016 2018 2020 2022 2024 2026 2028 2830 2032 2034 Assume: 546.4 Mllllon Protect Proceeds Level Annual Payment from 2008 Term Treat Average Cne prinel tl P y 2 971, 3 756 6 50.]85.000 02,9]1,863 93]58,163 3n1259229 3135229 51,150,080 21,511,125 78,081,126 7,909,056 52,700,000 12,3]6,383 65,078,383 ],]34,]98 ❖ Expected Useful Life: 50+ Years enge a Sources 852 195,000 of $47.4M 91.4 Reserve Fund $3,226,540 Bond Insurance (AAA 50bp) 5468,784 •'. Other Costs of Issuance 5689,676 Approximate Average Annual Payment 2008 -2035) $3,223,473 'Underwriting, Bond Counsel, Financial Advisor, Disclosure Counsel, Credit Rating Agencica, Plvrcing, crc. k Total -79 522-107 (2211.003) 17,311,104 3,093,325 11,801975 'Refinanced In 1998 COP Issuance Summary: • Establish desired timing of proceeds, overall finance structure and schedule • Review legal documents and Preliminary Official Statement (POS) • Present credit packages to rating agencies / insurance companies • Receive /analyze credit rating and insurance commitments • Confirm understanding of construction schedule, cost estimates, contracts • City Council considers legal documents, POS and other documents • Print & mail POS • Sell COPs • Close / Forward proceeds to City Pa" 11 Approximate Original Balance Balance Annual Pdndpal Financ!an Instrument IPrOIeLp Issuance 9112004 Additions Deletions 6/3012005 Payment Pad N Date Gedificates of Participation (Library) 7,330,000 5,845,000 - (275,000) 5.570,000 561,680 1,760,000 Note Payable( Balboa Manna) 3,457,930 1,939,132 - (149,801) 1.789.331 237,062 1.668.599 Water Revenue BOnds(Groundwater Wells) 14,225,000 8,535,000 - (1,280.000) 7,255,000 1.647,743 6970,000 Capital Leases(R.111ajabek) 1,700.049 852.975 - (442,202) 420,773 459,776 1,279,276 CDBG Loan(Balboe Village Improvements) 2,400,000 2,340,000 - (64,000) 2,276,000 187,056 124,000 Total -79 522-107 (2211.003) 17,311,104 3,093,325 11,801975 'Refinanced In 1998 COP Issuance Summary: • Establish desired timing of proceeds, overall finance structure and schedule • Review legal documents and Preliminary Official Statement (POS) • Present credit packages to rating agencies / insurance companies • Receive /analyze credit rating and insurance commitments • Confirm understanding of construction schedule, cost estimates, contracts • City Council considers legal documents, POS and other documents • Print & mail POS • Sell COPs • Close / Forward proceeds to City Pa" 11 C;REEti'L/GHT PO Bo.v 3 36 2 Vcm 17o,'1 Bauch, C4 92659 (94 9) 72/ -1272 "RECEIVED AFTER AGENDA PRINTED :" � �- q -\2 �5 September 8, 2005 Mayor John Heffernan and members of the Newport Beach City Council: Newport Beach City Hall 3300 Newport Blvd. Newport Beach, CA 92663 Dear Mayor Heffernan and Members of the City Council: This is to announce Greenlight's endorsement of the "Initiative measure to add chapter 3.25 to the Newport Beach municipal code and require voter approval before the city is authorized to borrow to finance the construction of public improvements." We have endorsed it because we believe that it will restore the intent of the city charter that requires voter approval of city incurrence of indebtedness. As the city has found a way to evade the intent of the charter by using a different form of indebtedness that typically requires a higher interest rate and up front costs, this initiative is needed to close that loophole. The initiative also enables voters to decide whether city projects are the highest priority in serving the interests of the residents. The Steering Committee of the Greenlight residents' organization has unanimously voted to endorse this measure. Greenlight has been supported by an average of 61 % of the voters in past elections on measures that it has placed on the ballot for voter approval. As taxpayers and residents, we want the intent of the City Charter implemented so that we have to approve major indebtedness before it can become an obligation on city operations. Tha you, {f Philip L Arst Spokesperson CC: Greenlight Steering Committee Greenlight web site c in r- -v