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Regular-General Government # 27.
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| Board of Supervisors |
Financial Services |
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| Subject |
| Receive presentation from Government Financial Strategies on Health and Human Services Agency Facility Financing and adopt resolution authorizing execution and delivery of Site Lease and Lease-Purchase agreement, and authorizing certain additional actions for 500A Jefferson Boulevard in West Sacramento. (No general fund impact) (Rinde) |
| Recommended Action |
- Receive presentation from Government Financial Strategies (financial advisor) on Health and Human Services Agency (HHSA) Facility Financing; and
- Adopt a resolution approving the forms of and authorizing the execution and delivery of a Site Lease and a Lease-Purchase agreement, and authorizing certain additional actions for 500A Jefferson Boulevard in West Sacramento.
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| Strategic Plan Goal(s) |
| Operational Excellence |
| Reason for Recommended Action/Background |
As part of the County's capital improvement plan, staff from the General Services Department, in collaboration with the County Administrator's Office and Department of Financial Services, has analyzed certain long-term leases of the County to determine where it may be advantageous to purchase facilities that historically have been rented. In the fall of 2018, General Services arrived at a tentative negotiated price for the purchase of the 500A Jefferson facility in West Sacramento. This facility predominantly houses Health & Human Services operations in West Sacramento; however, it also has some space for the Board of Supervisors and Probation. In 2015, State and Federal rules related to facility reimbursement changed from a use allowance to depreciation, making purchasing facilities that house state/federal programs more favorable.
In January 2019, the Department of Financial Services presented to the County Debt Committee a plan of finance to acquire the 500A Jefferson facility, along with a preliminary analysis of the cost/benefit. The Debt Committee supported the proposal and the plan to complete the plan of finance prior to June 30, 2019. In late January 2019, the County Board of Supervisors approved the purchase of the 500A Jefferson facility for a price not to exceed $4,735,639 (based on the remaining lease payments). Financial Services and General Services performed a reconciliation of remaining lease payments, and determined that only $4,160,515 was remaining and payable. The City of West Sacramento agreed to the revised price and approved the revision at their City Council meeting on April 17, 2019. The closing date of the building acquisition was May 22, 2019, and the County currently holds title to the building. Internal borrowing is being used based on the County Treasurer's authority to allow temporary internal borrowing during the fiscal year as long as funds do not end the year in a negative cash position.
In the financing transaction, the County will lease to the Yolo County Financing Corporation the property located at 120 West Main Street in Woodland in exchange for a one-time upfront lease payment equal to the borrowing amount (not-to-exceed $4.25 million). The Corporation will obtain these funds from the lender (Zions Bancorporation). The County will lease-back the facility from the Corporation and make lease payments equal to the payments required to repay the borrowing. The Corporation will assign its rights to these payments to Zions Bancorporation.
The financing is scheduled to close on or about June 27, 2019. It is currently expected that the payments will be annual, beginning June 1, 2020, and ending June 1, 2034. A competitive process was used to select the lender and the interest rate is 2.81%. After accounting for issuance costs and the borrowing amount, the annual payment is approximately $348,519, which represents significant savings over the current lease agreement.
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 with the County Administrator's Office, General Services Department, Health and Human Services Department, County Counsel, Government Financial Strategies Inc. (as financial advisor), Parker & Covert (as bond counsel), and Hilltop Securities (as placement agent) in coming to the recommended action.
The County Debt Committee reviewed the plan of finance at the January 8, 2019 Board meeting. The County Debt Committee was also informed in May, 2019 of the plan to use Private Placement as the optimal method of finance to complete the transaction. |
| Competitive Bid Process |
All stages of the debt transaction involved competitive bidding as required by the County Procurement policy:
- A Request for Proposals was conducted closing on April 1, 2019 and of three bidding firms, Government Financial Strategies was determined to be the best qualified Financial Advisor for the transaction.
- Government Financial Strategies assisted with a solicitation for Bond Counsel services to complete the financing. Of three bidding firms, Parker & Covert was selected as Bond Counsel.
- Government Financial Strategies assisted with a solicitation for Placement Agent services to complete the financing. Of three bidding firms, Hilltop Securities was selected as Placement Agent.
- Hilltop Securities assisted the County in soliciting 32 lenders and investors for the financing in order to obtain the most advantageous terms for the County. Of the 32 lenders and investors solicited, 14 submitted proposals (some submitted multiple, alternate proposals, resulting in 18 proposal in all), and the County selected the most advantageous proposal based on considering a variety of factors such as the interest rate, rate lock provision, lender costs, and prepayment terms.
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