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Home My WebLink About14-150 Resolution for Special Tax Bond to refund Community Facilities Dist No. 2003-2(Canyon Hills)REPORT TO CITY COUNCIL TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: GRANT YATES CITY MANAGER DATE: MAY 27, 2014 SUBJECT: APPROVING AN IMPLEMENTING RESOLUTION REGARDING PROPOSED SPECIAL TAX BOND ISSUANCE TO REFUND THE OUTSTANDING BONDS RELATED TO IMPROVEMENT AREA A AND IMPROVEMENT AREA C OF THE CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003 -2 (CANYON HILLS), APPOINTING THE FINANCING TEAM, AND AUTHORIZING STAFF TO INITIATE THE PROCESS AND DRAFT ALL NECESSARY DOCUMENTS IN CONNECTION WITH THE PROPOSED BOND ISSUE Recommendation 1. Adopt the Authorizing Resolution directing staff and the proposed finance team to pursue the refinancing of the outstanding Special Tax Bonds for Community Facilities District No. 2003 -2 (Canyon Hills) for Improvement Areas A and C for savings. Background On February 12, 2004, the City of Lake Elsinore Communities Facilities District No. 2003 -2 (Canyon Hills) issued the $12,235,000 aggregate principal amount of Special Tax Bonds (Improvement Area A), 2004 Series A (the "2004 Bonds "). The 2004 Bonds were issued with a 5.91% average coupon and will be callable on September 1, 2014 at a price of 101 %. On November 18, 2010, the Lake Elsinore Public Financing Authority issued the $7,430,000 aggregate principal amount of Local Agency Revenue Bonds (Canyon Hills Improvement Area C), 2010 Series A (the "2010 Bonds "). The 2010 Bonds were issued with a 6.15% average coupon and will be callable on September 1, 2014 at a price of 102%. 1 Refunding Outstanding Bonds — CFD No. 2003 -2 Canyon Hills May 27, 2014 Page 2 Discussion The proposed 2014 Bonds would be approximately $19.7 million in par amount with a final maturity in 2040, which is the same as the final maturity for the 2010 Bonds. The final interest rate structure will be determined when the 2014 Bonds are priced and sold. The pricing date would be targeted for some time in June, assuming that interest rates are attractive. The bond closing is expected to occur the first week of July and the 2004 and 2010 Bonds will be redeemed on September 1, 2014. Based on current interest rates, present value savings over the life of the bonds is $2,150,000, or 11.43% of par value refunded, which is equal to approximately $165,000 annually through 2034 and $65,000 from 2034 through 2040. The drop -off in annual cash flow savings is due to the maturity of the 2004 Bonds in 2034. Savings from the refinancing will lower the special tax for each resident within the Canyon Hills subject to the CFD assessment. The table below highlights the total savings based upon current interest rates. Results Outstanding Amount $18,830,000 Average Coupon 6.03% REfundln" Sorids Par Amount $19,705,000 True Interest Cost 4.53% Net Present Value Savings $ $2,150,000 Net Present Value Savings % of Par Value Refunded 11.43% Average Annual Savings Through 2034 $165,000 Average Annual Savings From 2034 Through 2040 $65,000 Average Annual Per Parcel Savings Through 2034 $160 Average Annual Savings Per Parcel From 2034 Through 2040 $63 Directing staff to move forward does not authorize the issuance of bonds. The City's financing team of Urban Futures, Inc. as financial advisor, Fulbright & Jaworski LLP, as bond counsel, Harris Realty Appraisal, as special tax consultant, Stifel, Nicolaus & Company, Incorporated, as underwriter, Stradling Yocca Carlson & Rauth as disclosure counsel, and Nixon Peabody as underwriter's counsel, are proposed. The fees of all firms will be entirely contingent upon a completion of the financing. Such financing will be brought before Council for approval at its next meeting in June. Refunding Outstanding Bonds — CFD No. 2003 -2 Canyon Hills May 27, 2014 Page 3 Fiscal Impact There is no cost to the City of Lake Elsinore, however, the property owners are expected to save approximately $160 per parcel annually through 2034 and $63 per parcel through 2040, as illustrated in the table above. The net present value of savings is $2,152,927 or 11.43% on $18,830,000 on bonds outstanding. The bonds average coupon interest rate is estimated to be decreased from 6.03% to 4.53 %. Prepared by: Jason Simpson Director of Administrative Services Approved by: Grant Yates City Manager Attachments: Resolution RESOLUTION NO. 2014- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003 -2 (CANYON HILLS), AUTHORIZING THE REFUNDING OF CERTAIN OUTSTANDING BONDS RELATING TO IMPROVEMENT AREA A AND IMPROVEMENT AREA C, AND APPOINTING THE FINANCING TEAM IN CONNECTION THEREWITH WHEREAS, the City Council (the "Council') of the City of Lake Elsinore (the "City ") previously established the City of Lake Elsinore Community Facilities District No. 2003 -2 (Canyon Hills) (the "District ") pursuant to the Mello -Roos Community Facilities Act of 1982, as amended, commencing with Section 53311 of the Government Code of the State of California (the "Act') designated improvement areas within the District; and WHEREAS, the District previously issued its Special Tax Bonds (Improvement Area A), 2004 Series A (the 'Prior IA A Bonds ") and the Lake Elsinore Public Financing Authority previously issued its Local Agency Revenue Bonds (Canyon Hills IA C), 2010 Series A (the "Prior IA C Bonds," and together with the Prior IA A Bonds, the 'Prior Bonds "); and WHEREAS, an opportunity exists to refund the Prior Bonds for the purpose of achieving debt service savings, which savings will benefit the homeowners within such improvement areas by lowering the special taxes levied on their properties; and WHEREAS, the Council desires to authorize staff to proceed with the refunding of the Prior Bonds and appoint the financing team members to assist staff in consummating the transactions as described herein; NOW THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, ACTING AS THE LEGISLATIVE BODY OF CITY OF LAKE ELSINORE COMMUNITY FACILITIES DISTRICT NO. 2003 -2 (CANYON HILLS), DOES HEREBY RESOLVE, DETERMINE AND ORDER AS FOLLOWS: SECTION 1. The City Manager, the Director of Administrative Services, the City Clerk and all other officers of the City are hereby authorized and directed, for and in the name and on behalf of the City and the District, to do any and all things and take any and all other actions in connection with the issuance of refunding bonds for the purpose of refunding of the Prior Bonds. SECTION 2. The City Council hereby appoints Urban Futures, Inc., Orange, California, as financial advisor, Fulbright & Jaworski LLP, Los Angeles, California, as bond counsel, Harris Realty Appraisal, Newport Beach, California, as appraiser, and Stifel, Nicolaus & Company, Incorporated, Los Angeles, California, as underwriter, and acknowledges that Stradling Yocca Carlson & Rauth, a Professional Corporation, City Council Resolution No 2014 -. Page 2 Newport Beach, California, will serve as disclosure counsel, and acknowledges that Nixon Peabody will serve as underwriter's counsel. SECTION 3. This Resolution shall take effect from and after the date of its passage and adoption. PASSED, APPROVED AND ADOPTED on this 27th day of May, 2014. Natasha Johnson, Mayor City of Lake Elsinore ATTEST: Virginia J Bloom, City Clerk APPROVED AS TO FORM: Barbara Zeid Leibold, City Attorney STATE OF CALIFORNIA COUNTY OF RIVERSIDE CITY OF LAKE ELSINORE SS I, VIRGINIA J. BLOOM, City Clerk of the City of Lake Elsinore, California, hereby certify that Resolution No. 2014 - was adopted by the City Council of the City of Lake Elsinore at a regular meeting held on the 27th day of May, 2014 by the following vote: AYES: NOES: ABSENT: ABSTAIN: Virginia J. Bloom, CMC City Clerk