HomeMy WebLinkAbout0001_1_Lake Elsinore 2016 Lease Bonds - Authority Bond Approval - SRREPORT TO LAKE ELSINORE FACILITIES FINANCING AUTHORITY
To:Chair and Members of the Financing Authority
From:Grant Yates, Chair of the Financing Authority
Prepared by: Jason Simpson, Assistant Chair of the Financing Authority
Date:October 11, 2016
SUBJECT: Issuance of the Lake Elsinore Facilities Financing Authority Lease Revenue
Bonds, Series 2016A
Recommendations
adopt A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE
FACILITIES FINANCING AUTHORITY, LAKE ELSINORE, CALIFORNIA, AUTHORIZING THE
EXECUTION AND DELIVERY BY THE AUTHORITY OF A GROUND LEASE, LEASE
AGREEMENT, AN INDENTURE, AN ASSIGNMENT AGREEMENT AND A BOND PURCHASE
AGREEMENT IN CONNECTION WITH THE ISSUANCE OF THE LAKE ELSINORE FACILITIES
FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2016A, AUTHORIZING THE
ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO
EXCEED ELEVEN MILLION ($11,000,000), AUTHORIZING THE DISTRIBUTION OF AN
OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH
BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND
CERTIFICATES OF RELATED ACTION
Background
On April 12, 2016, City Council conceptually approved proceeding with the issuance of lease
revenue bonds to finance the development of the La Laguna Resort. The use of lease revenue
bonds to finance general infrastructure is commonly used by cities in California. Under this
financing structure, a joint powers authority is utilized for the sole purpose of issuing bonds for
the benefit of the issuer. Therefore, on September 13, 2016, City Council formed the Lake Elsinore
Facilities Financing Authority (the “Authority”), a joint powers agreement between the City and
Lake Elsinore Parking Authority (approved and formed on August 23, 2016) to issue the lease
revenue bonds. With formation of the Lake Elsinore Facilities Financing Authority complete, the
Authority is being asked to approve a Ground Lease, Lease Agreement, an Indenture, an
Assignment Agreement and a Bond Purchase Agreement in connection with issuing the Lake
Elsinore Facilities Financing Authority Lease Revenue Bonds, Series 2016A (the “2016 Lease
Revenue Bonds”).
Discussion
Under a “lease revenue bond” financing, the City would lease certain City-owned assets to a joint
powers authority for a nominal amount (one dollar) who would then lease these assets back to
the City for a fixed annual rental payment (rental payments). These rental payments would be
pledged by the joint powers authority toward repayment of annual bond payments (in a like
amount). The City’s rental payments would be payable from the City’s General Fund. Although
the City’s General Fund would be liable for the payments, the intended source of repayment would
be from income generated from the project (i.e. campsite/RV/cabin rental, concession and boat
storage fees & income).
The proposed lease revenue bonds are anticipated to be secured by a variety of assets which
include City Hall, Fire Station No. 10, and Rosetta Canyon Park. Should it prove to be
economically viable, the proposed lease revenue bonds will be supported with municipal bond
insurance and a debt service reserve fund insurance surety policy. The economics of the 2016
Lease Revenue Bonds are provided under the following section entitled, “Fiscal Impact.”
As a reminder, City staff continues to work with Urban Futures, Inc. (“UFI”) in evaluating the
financial feasibility of creating an Enhanced Infrastructure Financing District (“EIFD”) to fund
critical infrastructure projects aimed at improving sustainability of Lake Elsinore, enhancing public
access and utilization of the Lake, and supporting new public and private investment around the
Lake, including infrastructure upgrades and land development.
An EIFD is a prime and unique model of the legislative intent to create public benefit from
infrastructure projects focused on the health, sustainability, and utilization of the single greatest
regional asset in Lake Elsinore, the Lake itself. The Lake is not only a tourist destination and
recreational amenity for the region, it is also a vital and threatened component of the broader
watershed system. Water quality and overall sustainability of the Lake is therefore a major focus
of the EIFD. It’s staff belief the financing for the La Laguna as well as the development and
implementation of the EIFD focused on the lake itself are two critical components of managing
the City’s greatest assets and utilizing the asset for the benefit of the community and those that
wish to enjoy recreational activities in the City while also utilizing the City’s restaurants and
businesses. Simply stated, the development of La Laguna as a world class facility can be
economic engine for the local and regional economy while also providing an educational
opportunity for those interested in natural resource sustainability.
Fiscal Impact
Based on current market conditions, it is anticipated that approximately $9.6 million in par amount
of the 2016 Lease Revenue Bonds will be issued. Annual lease payments (amortized over a
period of 30 years), payable from the City’s General Fund, are expected to be approximately
$550,000. Total aggregate lease payments are estimated to be $16.7 million over the 30-year
period. The final payment date of the 2016 Lease Revenue Bonds will be April 1, 2047.
Summary of Financing Statistics*
Par Amount $9,565,000
True Interest Cost 3.15%
Average Annual Lease Payments $550,000
Approximate Aggregate Lease Payments $16,700,000
*Preliminary; Subject to Change; Market Conditions as of September 27, 2016
The exact par amount, interest rates and annual lease payments of the 2016 Lease Revenue
Bonds will not be determined until the bonds are priced and sold to investors.
Exhibits
A.Authority Resolution No. 2016-__
B.Ground Lease
C.Lease Agreement
D.Indenture
E.Assignment Agreement
F.Bond Purchase Agreement
G.Preliminary Official Statement