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03/23/2016 Finance Committee Meeting Packet Finance Committee Agenda March 23, 2016 County Manager's Front Conference Room 10:00 a.m. 1. Call to order 2. Approval of Agenda (meeting noticed on March 16, 2016) 3. Approval of Minutes from October 23, 2015 Meeting 4. General Discussion on Water&Sewer Refunding Revenue Bonds,Series 2016 5. FY 2017 Budget Policy covering Financing New and Replacement Capital Improvements 6. Other Business 7. Public Comment 8. Adjourn—Next Meeting—TBD • eis, r. Collier County Government ��J��R ,� Communication & Customer Relations 3299 Tamiami Trail East, Suite 102 colliergov.net Naples, FL 34112-5746 twitter.com/CollierPIO facebook.com/CollierGov youtube.com/CollierGov March 16, 2016 FOR IMMEDIATE RELEASE NOTICE OF PUBLIC MEETING COLLIER COUNTY FINANCE COMMITTEE COLLIER COUNTY, FLORIDA WEDNESDAY, MARCH 23,2016 10:00 A.M. Notice is hereby given that the Collier County Finance Committee will meet Wednesday,March 23, at 10:00 a.m. in the County Manager's Front Conference Room, second floor, Collier County Government Center, 3299 Tamiami Trail East,Naples, Fla. About the public meeting: Two or more members of the Board of County Commissioners may be present and may participate at the meeting. The subject matter of this meeting may be an item for discussion and action at a future Board of County Commissioners meeting. All interested parties are invited to attend, and to register to speak. All registered public speakers will be limited to three minutes unless permission for additional time is granted by the chairman. Collier County Ordinance No. 2004-05 requires that all lobbyists shall, before engaging in any lobbying activities (including, but not limited to, addressing the Board of County Commissioners, an advisory board or quasi-judicial board), register with the Clerk to the Board at the Board Minutes and Records Department. Anyone who requires an auxiliary aid or service for effective communication, or other reasonable accommodations in order to participate in this proceeding, should contact the Collier County Facilities Management Department located at 3335 Tamiami Trail East,Naples, Florida 34112, or(239) 252-8380 as soon as possible, but no later than 48 hours before the scheduled event. Such reasonable accommodations will be provided at no cost to the individual. For more information, call Mark Isackson at(239) 252-8973. ### DRAFT COLLIER COUNTY FINANCE COMMITTEE MEETING MINUTES October 23, 2015, 10:00 A.M. In attendance: Mark Isackson, Corporate Financial Operations CMO; Crystal Kinzel, Clerk of Courts Finance Director; Derek Johnssen, Clerk of Courts Assistant Finance Director; Joe Bellone, Director of Operations Support-Public Utilities; Laura Zautcke, Senior Budget Analyst, Public Utilities Operations; Jeff Klatzkow, County Attorney; Jim Gibson; Gene Shue-Growth Management Operations Support Director; Ed Finn, Senior Budget Analyst OMB. Present by phone: Nicklas Rocca from the PFM Group 1. Call to Order: Mark Isackson called the meeting to order at 10:00 a.m. 2. Approve Agenda: Meeting noticed October 16, 2015. Motion to approve agenda. Unanimously approved. 3. Approval of Minutes from the September 1, 2015 meeting: Motion to approve minutes. Unanimously approved. 4. General Discussion on Capital Project Planning through FY 2019 and related Capital Project Financing Strategies: Commissioner Henning has brought up future capital needs and the possibility for financing the improvements especially in transportation. Joe Bellone said that Stormwater capital projects and financing may come up at the November 3`d Board workshop. A general memo from PFM covering current market financing and options is attached as part of these minutes. Mark will cover new and replacement capital project financing as part of FY 2017 Budget Policy. Finance Committee members need to review the approach to capital requirements. There are the road projects, bridge program and stormwater projects to be done. Those are in addition to various general governmental capital projects. One thought from Mark is that the Gas Tax Bonds will expire in 2023-2025 and more than likely additional capital financing for transportation system projects will be necessary prior to expiration of the current gas tax pledged debt. Ideally we would simply re-issue gas tax debt and re-authorize the appropriate gas tax basket in 2023 and 2025 and issue new debt for transportation needs. However,timing likely call for additional debt prior to FY 2023. Based on an estimate of$150 million for capital projects between now and FY 2020,three options appear realistic. 1) Borrow the full$150 million in FY 2017 and spend down proceeds over a 2-3 year period. 2) Borrow half which is $75 million in FY 2017 locking in today's low interest rates and borrowing the rest in two years with subsequent long term debt. Future interest rates will most likely be higher. 3) Borrow as needed based upon project timing through the Commercial Paper program and then refinance the variable rate commercial paper through long term debt. This option allows you to borrow exactly what you need at the time you need it. Interest rates will vary over time. Important points: 1) Must identify the projects to be financed and the related execution timeline. 2) A blending of commercial paper and long term fixed rate financing is probably the best approach given current capital projects under consideration. Items to work on: Nick will generate figures for all three financing options. Gene will work on prioritizing needed transportation system projects that can be done in 2-3 years to get a more exact figure. 5. Other Business: Crystal asked if there was a Property Appraiser Taxable value estimate yet. Per Mark, not yet but 6.5% may be the planning number based upon current State estimates. DRAFT 6. Public Comment: None 8. Adjourn: Meeting adjourned at 10:40 a.m. Motioned by Mark Isackson and seconded by Crystal Kinzel. Unanimously approved. APPROVED FINAL COLLIER COUNTY FINANCE COMMITTEE MEETING MINUTES October 23, 2015, 10:00 A.M. In attendance: Mark Isackson, Corporate Financial Operations CMO; Crystal Kinzel, Clerk of Courts Finance Director; Derek Johnssen, Clerk of Courts Assistant Finance Director; Joe Bellone, Director of Operations Support-Public Utilities; Laura Zautcke, Senior Budget Analyst, Public Utilities Operations; Jeff Klatzkow, County Attorney; Jim Gibson; Gene Shue-Growth Management Operations Support Director; Ed Finn,Senior Budget Analyst OMB. Present by phone: Nicklas Rocca from the PFM Group 1. Call to Order: Mark Isackson called the meeting to order at 10:00 a.m. 2. Approve Agenda: Meeting noticed October 16, 2015. Motion to approve agenda. Unanimously approved. 3. Approval of Minutes from the September 1, 2015 meeting: Motion to approve minutes. Unanimously approved. 4. General Discussion on Capital Project Planning through FY 2019 and related Capital Project Financing Strategies: Commissioner Henning has brought up future capital needs and the possibility for financing the improvements especially in transportation. Joe Bellone said that Stormwater capital projects and financing may come up at the November 3`d Board workshop. A general memo from PFM covering current market financing and options is attached as part of these minutes. Mark will cover new and replacement capital project financing as part of FY 2017 Budget Policy. Finance Committee members need to review the approach to capital requirements. There are the road projects, bridge program and stormwater projects to be done. Those are in addition to various general governmental capital projects. One thought from Mark is that the Gas Tax Bonds will expire in 2023-2025 and more than likely additional capital financing for transportation system projects will be necessary prior to expiration of the current gas tax pledged debt. Ideally we would simply re-issue gas tax debt and re-authorize the appropriate gas tax basket in 2023 and 2025 and issue new debt for transportation needs. However, timing will dictate the need for additional debt prior to FY 2023. Based on an estimate of$150 million for capital projects between now and FY 2020,three options appear realistic. 1) Borrow the full$150 million in FY 2017 and spend down proceeds over a 2-3 year period. 2) Borrow half which is $75 million in FY 2017 locking in today's low interest rates and borrowing the rest in two years with subsequent long term debt. Future interest rates will most likely be higher. 3) Borrow as needed based upon project timing through the Commercial Paper program and then refinance the variable rate commercial paper through long term debt. This option allows you to borrow exactly what you need at the time you need it. Interest rates will vary over time. Important points: 1) Must identify the projects to be financed and the related execution timeline. 2) A blending of commercial paper and long term fixed rate financing is probably the best approach given current capital projects under consideration. Items to work on: Nick will generate figures for all three financing options. Gene will work on prioritizing needed transportation system projects that can be done in 2-3 years to get a more exact figure. 5. Other Business: Crystal asked if there was a Property Appraiser Taxable value estimate yet. Per Mark, not yet but 6.5% may be the planning number based upon current State estimates. APPROVED FINAL 6. Public Comment: None 8. Adjourn: Meeting adjourned at 10:40 a.m. Motioned by Mark Isackson and seconded by Crystal Kinzel. Unanimously approved. • 255 Alhambra Circle 305 448-6992 Suite 404 305 448-7131 fax P F Coral Gables,FL www.pfm.com 33134 The PFM Group Public Financial Management,Inc. PFM Asset Management LLC PFM Advisors February 18, 2016 Memorandum—Plan of Finance To: Collier County From: Public Financial Management Re: Water&Sewer Refunding Revenue Bonds, Series 2016(the"Series 2016 Bonds") Public Financial Management, Inc. ("PFM"), serving in our capacity as financial advisor to the County,has worked with County staff to develop a plan of finance for the refinancing of the County's Series 2006 Water & Sewer Refunding Revenue Bonds for net present value savings. The purpose of this memorandum is to describe the development of the plan of finance, and provide the findings that result in a recommendation to move forward with the proposed financing structure. Refunding Candidate PFM and County officials have continued to monitor refunding opportunities during the low interest rate environment seen in the latter half of 2015 and the beginning of 2016. In February of 2016, PFM provided the County with a refunding update for the Series 2006 Water & Sewer bonds indicating the potential refinancing savings. Based on that analysis, the County will be able to refinance all of the outstanding Series 2006 maturities (Term 2032 and Term 2036) for Net Present Value ("NPV") savings estimated at over $7.7 million, or over 12.50% on a percentage basis. As a matter of practice, the County has aggressively pursued refinancing bonds that result in NPV Savings greater than 5%. Refunding Structure Given that the underlying debt service for the refunded bonds is level, the refunding bonds would be issued as level savings, with approximate savings per year as illustrated in the below table. Years Savings per Year($) 2017-2028 $128,000 2029-2036 $1,360,000 Total Gross Savings $12,500,000 Principal will be paid on an annual basis beginning July 1, 2029, with interest paid semi-annually every January and July, commencing July 1, 2016. These principal and interest dates match the prior bonds. The Savings are also estimated to reduce the amount of money required in the Debt Service Reserve Fund, allowing for a release of approximately$680,000 that can be applied towards refunding of the 2006 bonds. Method of Sale In the municipal bond market, some issuers have strong preferences for either a negotiated or competitive sale approach, and oftentimes issuers achieve very successful results from either alternative. Ultimately, the decision in favor of either method may be influenced by a combination of broader policy and financial objectives, issuer-specific characteristics, and market conditions. There are a number of considerations in establishing a method of sale for any bond issue. Factors supporting one sale methodology versus another are summarized in the table below. The items listed in the table should be viewed as indicators of the most effective approach given a set of circumstances. Issuers may find charsttteristics for a specific set of circumstances that fall in both columns. The municipal market is very familiar with a large and recognized issuer such as Collier County. The primary security securing the Bonds, water & sewer revenues, is a common revenue stream that February 18,2016 Page 2 of 3 investors are comfortable with on a standalone basis. We would expect these bonds to maintain their existing ratings in the Aa2/AAA category from Moody's and Fitch, respectively. Over the latter half of 2015 and the beginning of 2016, the municipal markets have experienced volatility in light of the mixed rhetoric with respect to interest rate increases/decreases from the Federal Reserve, municipal bond supply volatility, and notable international headlines coming out of China and OPEC countries. Generally, uncertain capital markets dictate that the County should consider both methods of sale in order to provide the greatest flexibility. However in our view, a competitive sale is the appropriate method of sale for the following reasons: • Issuer/Frequency of issuance — Collier County is a relatively large county in Florida and is a well- known name in the municipal market. Because of its status as a broad-based government and its large investor base, the County can be fairly certain that it will receive adequate attention from municipal bond investors. The Water and Sewer bond security structure is one that will be widely understood by market participants. • Credit Quality — The finance team will soon approach credit enhancers and rating agencies to discuss the credit, documentation, and flow of funds. In light of the market events over the last several years, including the erosion of the municipal insurance market, underlying credit ratings dictate investor marketability. As a result, highly rated credits ('AA' category and above) have relatively easier access to capital markets. Based on the County's financial profile and existing underlying credit ratings, we expect the County to be able to maintain two ratings while having unfettered access to the capital markets. • Debt Structure — The debt structure of the bonds will likely be a conventional fixed-rate financing with uniform savings. This type of structure is the most typical for a refunding in the municipal market, and can be expected to receive broad market reception. At present time, the fact pattern surrounding the refunding of the Series 2006 Water & Sewer bonds are such that a competitive sale would be appropriate. This recommendation is based on the considerations described above. On the following page, we provide a supplemental table for the County's convenience that lists the considerations given to each method of sale. Please feel free to contact us should you have any questions or comments regarding the recommendations outlined in this memorandum. February 18, 2016 PFM Page 3 of 3 Attributes Competitive Sale Negotiated Sale Issuer Type of Broad-based, general- Special-purpose enterprise, Organization purpose government independent authority Frequency of Regular borrower in public New or infrequent issuer of debt Issuance market Market Awareness Active secondary market Little or no institutional base, but with wide investor base growing dealer interest Credit Quality (Specifically the County's Non-ad Valorem) Rating "AA" or better "A" category or lower Pledged Revenues General taxes Project supported revenues Security Structure Conventional resolution Unusual or weak covenants; and cash flow; rate subordinated debt covenant and coverage Trend Stable Declining or under stress Market Conditions Interest Rates Stable, predictable market Volatile or declining market Demand Strong investor demand, Oversold market, heavy supply; good liquidity, light forward coupon, structure or maturity • calendar requirements not favored in current market Debt Structure Tax Status Tax-exempt, no concerns Taxable Debt Instrument Traditional serial and term, Aggressive use of innovative bond full-coupon bonds structuring, derivative products, swaps, or variable-rate debt instruments Marketing Use of Underwriters Broad market participation Ability to select"best qualified" banker and direct business to local or regional firms Investors Process blind to ultimate Sale can be managed to achieve investors wide distribution or targeted allotments; can give priority to retail/local investors Pre-marketing Limited need for pre- Specific pre-sale activity to marketing educate investors Flexibility in Timing Less flexibility necessary Greater flexibility in timing Fine Tuning Limited options given to Unlimited ability to fine-tune Structure bidders Cost Gross Spread Reflected in winning (lowest Spreads are negotiated within a TIC) bid. Generally range of comparable transactions dependent on supply and and issuer standards. demand. Interest Rate Highest market price for Best match of product with specific commodity offered on day of investor demand sale Preparation Resolution/Structure Credit/Security features Professional banking support and fairly standard, allowing more direct marketing input in Issuer to determine balancing security for investor vs. preference for managing flexibility for issuer Disclosure Issuer relies on own Underwriters' counsel assists in program disclosure the preparation of official statement COLLIER COUNTY, FLORIDA FINANCING TIMETABLE WATER& SEWER REFUNDING REVENUE BONDS, SERIES 2016 (Refunding Outstanding 2006 Water & Sewer Bonds) February March April May ®®Lamm®® ®®®0®®SZI ®®®IM®®© ©®®®®®® -0©©11:111© 6 M11110©©0© LaLaLa-LaO© 0©©1:1© 6 0 MI 8 9 10 m®® 6 Q 8 9 10 ®® ©cu© 6 Q 8 9 8 9 10 m®®m 16 m 18 19 20 ®m® 16 m 18 19 10 m®®m® 16 in 16 m 18 19 20 La La®®m® 26 La 20 La®®La® 26 in 18 19 20 Lamm ®®La® 26 m 28 28 29 mignigumm La 28 29 30 mom 26 ® 28 29 30 29 Ernimmoigsm DATE ACTION PARTICIPANTS February 18 Distribute Financing Timetable and Distribution List FA March 1 Distribute 1St Draft of Resolution BC/DC March 9 Distribute RFP for Ancillary Services FA March 11 Receive Ancillary Seances Bids FA March 14 Distribute 1st Draft of POS/NOS/SNOS and Escrow Deposit Agreement BC/DC March 21 Distribute 2nd Draft of Bond Documents DC/BC March 28 Conference Call — Draft Document Discussion ALL March 29 Circulate finalized Resolution BC March 29 Distribute Credit Packages to Rating Agencies FA April 1 Submit Documents for Agenda Package ALL Wk of April 4 Rating Calls (TBD) FA/COUNTY April 12 Board Approval of Documents COUNTY April 12 Receive Ratings FA/COUNTY April 14 Send POS/NOS to Printer; Post Electronically DC April 15 Advertise Notice of Sale in Bond Buyer DC April 26 Accept Bids (Pricing)/Award Bid ALL May 2 Print OS DC May 17 Pre-Closing - 11:00 am ALL May 18 Closing ALL LEGEND: COUNTY Collier County FA Financial Advisor: Public Financial Management, Inc. BC Bond Counsel: Nabors, Giblin & Nickerson DC Disclosure Counsel: Bryant Miller Olive UW Underwriter: TBA COLLIER COUNTY, FLORIDA DISTRIBUTION LIST WATER & SEWER REFUNDING REVENUE BONDS, SERIES 2016 (Refunding Outstanding 2006 Water& Sewer Bonds) Issuer- Collier County Collier County Government Complex 3301 East Tamiami Trail, Building F Naples,FL 34112 Mark Isackson 239-252-8717 239-403-2366 fax MarkIsacksonna,colliergov.net Corporate Financial Planning& Management Services, County Manager's Office Crystal Kinzel 239-252-6299 239-252-2096 fax Crystal.Kinzel(a,Collierclerk.com Finance Director Derek Johnssen 239-252-7863 239-252-2096 fax derek.johnssen(a,collierclerk.com Assistant Finance Director Susan Usher 239-252-8810 SusanUsher@,colliergov.net Sr Budget Analyst Jeffrey A. Klatzkow,Esq. 239- 252-8400 239-252-6300 fax Jeffreyklatzkow(a,colliergov.net County Attorney Collier County Public Utilities 3339 East Tamiami Trail, Suite 302 Naples,FL 34112 Joseph Bellone 239-252-2351 josephbellone@,colliergov.net Director, Operations Support Laura Zautcke 239-252-2539 LauraZautcke@colliergov.net Senior Analyst Financial Advisor Public Financial Management, Inc. 255 Alhambra Circle, Suite 404 Coral Gables, Florida 33134 Sergio Masvidal 786-671-7480 305-448-7131 fax masvidals(aipfm.com Pete Varona 786-671-7481 407-648-1323 fax varonapApfm.com 300 South Orange Avenue, Suite 1170 Orlando, FL 32801 Nicklas Rocca 407-406-5773 407-648-1323 fax roccanna,pfimcom COLLIER COUNTY, FLORIDA DISTRIBUTION LIST WATER & SEWER REFUNDING REVENUE BONDS, SERIES 2016 (Refunding Outstanding 2006 Water& Sewer Bonds) Bond Counsel Nabors, Giblin & Nickerson, P.A. 2502 Rocky Point Drive, Suite 1060 Tampa,Florida 33607 Steve Miller 813-281-2222 813-281-0129 fax smiller@ngn-tampa.com Bishoy Michael Habib, Esq. 813-281-2222 813-281-0129 fax bhabb@ngn-tampa.com Eileen Gianfrancesco,FRP 813-281-2222 813-281-0129 fax egianfrancescoAngn-tampa.com Paralegal Disclosure Counsel Bryant Miller Olive One Tampa City Center, Suite 2700 Tampa,Florida 33602 Duane Draper,Esq. 813-273-6677 813-223-2705 fax ddraper(abmolaw.com Debbie Lichty 813- 222-1724 813-223-2705 fax dlichty@bmolaw.com Alecia M. Ingram,Esq. 813-273-6677 813-223-2705 fax aingram@bmolaw.com Paying/Escrow Age nt TBA Verification Agent TBA Printer ImageMaster, Inc. 1182 Oak Valley Dr. Ann Arbor,MI 48108 Marianne Shiff 734-821-2525 734-821-2501 fax orders@imagemaster.com Underwriter TBA Underwriter's Counsel TBA • COLLIER COUNTY, FLORIDA DISTRIBUTION LIST WATER & SEWER REFUNDING REVENUE BONDS, SERIES 2016 (Refunding Outstanding 2006 Water& Sewer Bonds) Rating Agencies (Not to receive documents directly) Moody's Investor Services 7 World Trade Center 250 Greenwich Street New York,NY 10007 Gregory Lipitz 212-553-7782 212-298-6556 fax Gregory.Lipitz@moodys.com Fitch Ratings One State Street Plaza New York,NY 10004 Michael Rinaldi 212-908-0833 michael.rinaldi(2 fitchratings.com Larry Levitz 212-908-9174 larry.levitzAfitchratings.com COLLIER COUNTY, FLORIDA DISTRIBUTION LIST WATER & SEWER REFUNDING REVENUE BONDS, SERIES 2016 (Refunding Outstanding 2006 Water& Sewer Bonds) E-mail Distribution List MarkIsackson@colliergov.net Crystal.KinzeaCollierc Jerk.com de re k.j ohn s s e n@ c ollie r c le rk.c om SusanUs he r(c c olliergov.net JeffreyklatzkowAcolliergov.net josephbellone •,colliergov.net LauraZautcke(a colliergov.net masvidals@pfm.com roccan@pfm.com varonap@ pfm.c om srniller( ngn-tampa.com bhabib@ ngn-tampa.c om egianfrancesco@ngn-tampa.com ddraper(a,bmolaw.com dlichty@bmolaw.com aingramabmolaw.com