AGENDA DATE: 3/2/2022
TITLE:
Title
Resolution Authorizing the Issuance of Refunding Bonds
BODY
SUBJECT/PROPOSAL/REQUEST: Request authorization to issue revenue refunding bonds via the Economic Development Authority of Albemarle County to refinance the existing 2013 Bond Issue
ITEM TYPE: Consent Action Item
STAFF CONTACT(S): Richardson, Kamptner, Birch, Sumner, Bowman, Greene
PRESENTER (S): Nelsie Birch, CFO and Davenport & Co., Financial Advisors
LEGAL REVIEW: Yes
REVIEWED BY: Jeffrey B. Richardson
BACKGROUND: In Fiscal Year 2013 (FY 13), the County issued a tax-exempt Revenue Bond through the Economic Development Authority of Albemarle County (EDA) to fund local government and school projects. The 2013 bond issue is currently callable on June 1, 2022. Under current federal legislation, a bond refunding can retain its tax-exempt status if closing on the refunding bonds occurs within 90 days of the call date. At this time, the County has the opportunity to lock in advantageous long-term interest rates to refinance the existing bonds at lower rates for debt service savings over the remaining term of the bond (next 11 years).
STRATEGIC PLAN: Mission - To enhance the well-being and quality of life for all community members through the provision of the highest level of public service consistent with the prudent use of public funds.
DISCUSSION: Staff recommends the Board approve the issuance of revenue refunding bonds to refinance the 2013 bonds at lower interest rates, in an amount not to exceed $21.5 million, including cost of issuance.
The refinancing includes all of the outstanding Public Facility Revenue Bonds (Albemarle County Project), Series 2013 (the “2013 Bonds”) that are subject to optional redemption. Preliminary budgetary savings estimates from the refinancing are expected to exceed $1.9 million spread over the remaining life of the issue, assuming interest rates as of January 28, 2022 (plus a 0.50% interest rate cushion).
On February 15, 2022, the County’s Financial Advisors, Davenport & Company, will present an overview of the proposed plan of lease revenue bond financing to the EDA, which is authorized under State law to assist the County in financing local government facilities and equipment, and will request the approval of an associated Resolution. If the EDA adopts the Resolution presented to them on February 15, 2022, it will serve as the conduit issuer.
If the Board adopts the Resolution (Attachment A), the EDA will issue debt through a Public Sale in a principal amount not to exceed $21.5 million to refinance outstanding bonds and cost of issuance, and would loan the proceeds to the County. The EDA Bonds will be secured under a master trust agreement and master financing agreement structure prepared by Hunton Andrews Kurth LLP, the County’s Bond Counsel. The security for the EDA Bonds will be the County’s promise, subject to appropriation, to make payments to the EDA to enable it to make debt service payments associated with this debt issuance.
A draft Preliminary Official Statement (POS), which is the Bond offering document to the capital market, is available for Board and public review in the Board Clerk’s Office.
Based on the County’s triple-AAA credit ratings, and without the security of offering additional leased collateral (unless recommended by the financial advisor), it is expected that the debt would be issued with credit ratings in the high ‘AA’ category, given the appropriation structure of the financing.
The resolution necessary for the Board’s approval, to advance this borrowing plan, is attached (Attachment A).
BUDGET IMPACT: Interest rates at the time of preparing this Executive Summary are at favorably low levels. The County is expected to realize budgeted debt service savings due to the refinancing of existing debt. The debt payments associated with this issuance are anticipated to be similar to or less than the amount budgeted for County debt service in FY 23. This financing adheres to the County’s financial policies regarding debt limits, debt capacity, debt affordability, and debt repayment standards.
RECOMMENDATION:
Recommendation
Staff recommends that the Board adopt the attached Resolution (Attachment A) authorizing the proposed plan of financing through the EDA.
ATTACHMENTS:
A - Refunding Resolution