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Time Set # 27.
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| Board of Supervisors |
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| Subject |
| Hold a public hearing, receive presentation, and adopt resolution authorizing the issuance of the Yolo County Public Agencies Financing Authority 2019 Solid Waste Revenue Bonds; the sale of bonds and distribution of the official statement; and provide general authorization to County officers to execute and deliver documents to complete the issuance and delivery of the 2019 Revenue Bonds. (No general fund impact) (Rinde) |
| Recommended Action |
- Receive presentation on the issuance of Solid Waste revenue bonds;
- Hold a public hearing on the issuance of bonds by the Yolo County Public Agencies Financing Authority (Financing Authority) to finance improvements of the Solid Waste system;
- Make a finding that such issuance of bonds by the Financing Authority on a tax exempt basis will result in significant public benefits including improvements to the Solid Waste system and savings in effective interest rate; and
- Adopt a resolution authorizing the issuance on the bonds by the Financing Authority; the County Resolution; the Preliminary Official Statement; the Installment Sale Agreement; the Bond Purchase agreement; the Indenture of Trust, and certain other legal documents to complete the issuance of bonds (Attachments A through E);
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| Strategic Plan Goal(s) |
Operational Excellence
Sustainable Environment |
| Reason for Recommended Action/Background |
In March 2019, the County approved the Capital Improvement Plan for the period of 2019-2023. This plan contained several projects related to the Landfill system that required financing in order to complete the projects. As the projects and the revenue source for debt repayment will be limited to the revenues of the solid waste system, a separate financing was conducted separate from the other capital projects included in the plan.
In this transaction, the Board of Supervisors requests the Yolo County Public Agencies Financing Authority to issue Solid Waste Revenue Bonds in an amount not to exceed $15.5 million to assist the County solid waste system in financing public capital improvements including the (1) Landfill Module 6F (approx. $8,000,000), (2) Landfill Surface Impoundment and Flood Levee Improvement (approx. $2,000,000), (3) In-Vessel Digester (approx. $1,000,000), (4) Mitigation Land Purchases (approx. $1,000,000), and (5) Groundwater Control below Old Landfill Cells (approx. $2,000,000).
For this purpose, the County will pledge revenues of the Landfill to make installment payments to the Authority, which the Authority will use to pay debt service on the bonds. As part of the revenue pledge, the landfill will agree to some significant legal provisions to secure the revenue pledge.
- Rate Covenant - Net revenues during the fiscal year equal to 1.50x Debt Service
- Reserve Fund - Maintain a reserve fund to satisfy a three prong financial test
- Rate Stabilization Fund - County can fund or withdraw from a rate stabilization fund in order to assist in satisfying the rate covenant above. The rate stabilization fund will be funded with approximately $1.0 million at closing.
- Insurance - County will maintain insurance amounts, deductibles based on industry standards.
- Issuance of Parity Debt - Allowed based on 1.50x coverage of prospective periods on all outstanding bonds.
The resolution gives authority for the bonds to be sold and shall mature no later than December 1, 2039 (twenty years), and shall bear interest at a fixed rate with a true interest cost not in excess of four and one half percent (4.50%). From a historical perspective, interest rates are favorable and recent projections of debt service show an average interest rate on the bond of 3.9% which results in annual debt service of approximately $1,035,000.
In order for the Authority to proceed with the issuance of the bonds, the County needs to conduct a public hearing and make a finding that the issuance of bonds by the Financing Authority on a tax exempt basis will have significant public benefits. The benefits of the tax exempt bond issuance include the improvement of the County solid waste projects listed above and savings in effective interest rate due to the use of tax-exempt financing. In the original creation of the Authority in 1994, the directors of the Authority were the County Auditor, County Treasurer, and City of Davis Finance Director. The County Board of Supervisors approved the Assistant County Administrator in-lieu of the County Auditor in a June, 2017 action. Upon approval by the Board of Supervisors, the Board of Directors of the Authority will meet to approve the Authority resolution effecting the bond sale.
The County Department of Financial Services has reviewed the issuance of the debt in accordance with the County Policy on Borrowing, Debt, and Obligations and determined that the issuance of debt will not cause the County to exceed the safe range of any of the County adopted debt ratios or have a significant negative impact on the County's financial sustainability. |
| Collaborations (including Board advisory groups and external partner agencies) |
The Department of Financial Services collaborated as a member of the County's Capital Improvement Committee (CIC) closely with the County Administrator's Office and the Department of Community Services, Division of Integrated Waste.
The projects were originally listed in the 2019-2023 Capital Improvement Plan adopted March, 2019 as requiring financing in order to complete the projects of the Solid Waste System. In January, 2019, DFS started, through competitive solicitation, selecting members of the financing team which includes KNN Public Finance as the Municipal Finance Advisor, Jones Hall as the Bond and Disclosure Counsel, and Raymond James as the Underwriter.
The County Debt Committee, comprised of two members of Board of Supervisors , the County Administrator, the Chief Financial Officer and the Director of Community Services (Department Head relevant to the project), reviewed and approved the planned financing transaction in its meeting on April 9, 2019. A subsequent update was provided via email regarding the method of finance on August 22, 2019. |
| Competitive Bid Process |
| The role of the underwriter, Raymond James, who was selected competitively, is to solicit orders from investors for the bonds. Their charge is to generate the maximum number of orders from investors for each bond maturity to achieve the lowest possible interest rates during the sale of the bonds. The bond sale results will be made available after completion of the sale. |
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| Fiscal Impact |
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| Source of Funds for this Expenditure |
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Explanation (Expenditure and/or Revenue) |
| Further explanation as needed: |
The Cost of Issuance will cover an estimated $314,000 in costs of paying the Municipal Financial Advisor, Bond and Disclosure Counsel, and Underwriter fees. The Costs are included in the borrowing and will be paid from the bond proceeds received in November, 2019. A budget resolution will be completed by the Division of Integrated Waste Management after completion of the bond closing and exact amounts are known.
The Sanitation Enterprise Fund is the source of repayment for the debt. The annual debt service is expected to be approximately $1,035,000. The first years debt service, as only one payment is due, is in the 2019/2020 fiscal year in June, 2020 and thus is expected to be approximately $301,000. The estimated amounts above may be slightly different after completion of the bond issuance in November, 2019. |
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