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10/03/2017 Finance Committee Meeting Packet Finance Committee Agenda October 3, 2017 County Manager's Front Conference Room 9:30 a.m. 1. Call to order 2. Approval of Agenda (meeting noticed on September 26, 2017) 3. Approval of Minutes from May 26, 2017 Meeting 4. Plan of Finance—Acquisition of Golden Gate Utility 5. Other Business 6. Public Comment 7. Adjourn—Next Meeting—TBD .oiJr�jf,! 1'�,r Collier CountyGovernment r,,r1� Communication & Customer Relations 3299 Tamiami Trail East, Suite 102 colliergov.net Naples, FL 34112-5746 twitter.com/CollierPIO facebook.com/CollierGov youtube.com/CollierGov September 26, 2017 FOR IMMEDIATE RELEASE NOTICE OF PUBLIC MEETING COLLIER COUNTY FINANCE COMMITTEE COLLIER COUNTY, FLORIDA TUESDAY, OCTOBER 3, 2017 9:30 A.M. Notice is hereby given that the Collier County Finance Committee will meet Tuesday, October 3, at 9:30 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 May 26, 2017, 10:00 A.M. Board members in attendance: Mark Isackson, Corporate Financial Operations CMO; Crystal Kinzel, Clerk of Courts Finance Director; Joe Bellone, Director of Operations Support-Public Utilities; Jeff Klatzkow, County Attorney;Susan Usher-Senior Budget Analyst,OMB. Other attendees: Derek Johnssen, Clerk of Courts Assistant Finance Director; Ed Finn, Senior Budget Analyst OMB; Allison Kearns, Financial & Operational Support Manager; Nick Casalanguida, Deputy County Manager;Jim Gibson. Present by phone: Nicklas Rocca from the PFM Group;Steve Miller from Nabors, Giblin & Nickerson. Not present: Gene Shue-Growth Management Operations Support Director 1. Call to Order: Mark Isackson called the meeting to order at 10:00 a.m. 2. Approval of Agenda: Meeting noticed May 18, 2017. Motion to approve agenda. Susan Usher seconded. Unanimously approved. 3. Approval of Minutes from January 31,2017 meeting: Make the following edits per Derek's request: #4(5th sentence)Change"PRM"to"PFM" and insert "to" between "add" and "the BCC". (6th sentence) Change "second by"to "seconded by." Motion to accept minutes with Derek's edit corrections. Joe Bellone seconded. Unanimously approved. 4. Funding and Financing the Proposed Amateur Sports Complex: Nick and Mark will brief the BCC on 6/13 regarding project aspects including construction,site design,funding&financing. Nick reports that the 60 acre site will cost$200,000 per acre. With Board concurrence on 6/13,the design phase takes about 6 months and the construction time is about 24 months. Closing on the land is expected on or before March 2018 at which point CP will be required. Long term debt will follow 18 month hence. Ongoing General Fund operational commitment will be around $2.4 million annually. Validation required prior to long term debt issuance which will require Board action approving the Fifth TDT penny and Bond Ordinance. Validation process could take between 3-5 months. If it is appealed, it goes to the Florida Supreme Court which could take another year. Mark will bring this item back in the future for discussion before the Finance Committee assuming the Board approved the TDT increase and Bond Ordinance. 5. Infrastructure Financing Plans: Short term borrowing. a. Big Corkscrew Regional Park: (24 months) need funding 3 yr window b. Vanderbilt Beach Road Extension: (late 2019/2020) c. General Transportation Network Improvement DRAFT 6. Florida Utility Debt Securitization Authority: Tom Giblin (FUDSA Committee) asked if the County would be interested in having a seat on the Authority Board. Mark and Jeff will discuss this issue prior to bringing this matter before the BCC. Mark Isackson made a motion to endorse and bring to the Board. Joe Bellone seconded. 7. Other Business: None. 8. Public Comment: None 8. Adjourn: Meeting adjourned at 11:10 a.m. Motioned by Mark Isackson and seconded by Joe Bellone. Unanimously approved. Next meeting TBD. FINAL COLLIER COUNTY FINANCE COMMITTEE MEETING MINUTES May 26, 2017, 10:00 A.M. Board members in attendance: Mark Isackson, Corporate Financial Operations CMO; Crystal Kinzel, Clerk of Courts Finance Director; Joe Bellone, Director of Operations Support-Public Utilities; Jeff Klatzkow, County Attorney; Susan Usher-Senior Budget Analyst, OMB. Other attendees: Derek Johnssen, Clerk of Courts Assistant Finance Director; Ed Finn, Senior Budget Analyst OMB; Allison Kearns, Financial & Operational Support Manager; Nick Casalanguida, Deputy County Manager;Jim Gibson. Present by phone: Nicklas Rocca from the PFM Group;Steve Miller from Nabors, Giblin & Nickerson. Not present: Gene Shue-Growth Management Operations Support Director 1. Call to Order: Mark Isackson called the meeting to order at 10:00 a.m. 2. Approval of Agenda: Meeting noticed May 18, 2017. Motion to approve agenda. Susan Usher seconded. Unanimously approved. 3. Approval of Minutes from January 31, 2017 meeting: Make the following edits per Derek's request: #4(5th sentence) Change "PRM"to "PFM" and insert "to" between "add" and "the BCC". (6th sentence) Change "second by"to "seconded by." Motion to accept minutes with Derek's edit corrections. Joe Bellone seconded. Unanimously approved. 4. Funding and Financing the Proposed Amateur Sports Complex: Nick and Mark will brief the BCC on 6/13 regarding project aspects including construction, site design,funding&financing. Nick reports that the 60 acre site will cost$200,000 per acre. With Board concurrence on 6/13,the design phase takes about 6 months and the construction time is about 24 months. Closing on the land is expected on or before March 2018 at which point CP will be required. Long term debt will follow 18 months hence. Ongoing General Fund operational commitment will be around $2.4 million annually. Validation required prior to long term debt issuance which will require Board action approving the Fifth TDT penny and Bond Ordinance. Validation process could take between 3-5 months. If it is appealed, it goes to the Florida Supreme Court which could take another year. Mark will bring this item back in the future for discussion before the Finance Committee assuming the Board approved the TDT increase and Bond Ordinance. 5. Infrastructure Financing Plans: Short term borrowing. a. Big Corkscrew Regional Park: (24 months) need funding 3 yr window b. Vanderbilt Beach Road Extension: (late 2019/2020) c. General Transportation Network Improvement FINAL 6. Florida Utility Debt Securitization Authority: Tom Giblin (FUDSA Committee) asked if the County would be interested in having a seat on the Authority Board. Mark and Jeff will discuss this issue prior to bringing this matter before the BCC. Mark Isackson made a motion to endorse and bring to the Board. Joe Bellone seconded. 7. Other Business: None. 8. Public Comment: None 8. Adjourn: Meeting adjourned at 11:10 a.m. Motioned by Mark Isackson and seconded by Joe Bellone. Unanimously approved. Next meeting TBD. 255 Alhambra Circle 305 448-6992 Suite 404 305 448-7131 fax Coral Gables,FL www.pfm.com S 33134 pfm August 29,2017 Memorandum—Plan of Finance To: Collier County, Florida From: PFM Financial Advisors LLC Re: Acquisition of Golden Gate Utility PFM Financial Advisors, LLC ("PFM")in our role as financial advisor to Collier County and County's Utility (collectively the"County"), has been tasked with assisting the County to determine the alternative options with respect to the County's planned acquisition of the Golden Gate Utility Authority("GGUA"), and specifically the GGUA outstanding debt obligations. It is our understanding upon reviewing the available documentation and discussions with the County's bond counsel that the GGUA bonds and loans were issued with the appropriate disclosures and mechanism to be acquired in their entirety by the County. In the simplest terms, in order to effectuate the acquisition the County would issue a bond(covenant)to the GGUA assuming the payment responsibility for the outstanding debt, however the bonds and loans themselves would remain as-is (no change in investor holdings). The outstanding GGUA debt is as follows: • Series 2010 Bonds, outstanding principal amount of$6,315,000 • Series 2012 Bonds, outstanding principal amount of$16,040,000 • Series 2015 Bonds, outstanding principal amount of$12,605,000 • 2016 SunTrust Loan, outstanding principal amount of$2,265,100 • Two(2) SRF Loans, combined outstanding principal amount of$1,433,653.28 For purposes of this memorandum,this is considered the baseline scenario by which the County assumes the debt and no conditions change. However there are various nuanced considerations, even in the baseline scenario,that the County is currently working though, and which are addressed in this memorandum. PFM has performed an analysis for several acquisition alternatives using the following considerations as a guide for creating the various alternatives: • GGUA debt obligations include both senior and subordinated debt, which at the time of an acquisition would become on parity with the County's existing senior obligations. o GGUA 2010, 2012, and 2015 Bonds were issued on a senior basis. o GGUA 2016 SunTrust Note and two(2)SRF loans were issued on a subordinate basis. o According to the documents and acquisition procedures, it's our understanding that the subordinate debt would rise to a parity senior position with the County's existing debt upon acquisition. • GGUA debt portfolio has certain components that may be refinanced for interest rate savings under the current market conditions. o GGUA Series 2010 and Series 2012 Bonds can be refunded for Net Present Value savings. o GGUA Series 2015 Bonds, Series 2016 SunTrust Note, and SRF Loans have negative or insignificant Net Present Value savings. • GGUA outstanding bonds include various insurance policies, as well as cash available in a debt service reserve fund. o Series 2010 Bonds included a cash funded Debt Service Reserve Fund (—$631,500)that can be liquidated upon a refinancing and used to (a)fund any new reserve requirement in accordance with the County's Bond covenants and, (b) reduce the par amount of the refunding bonds. S August 29, 2017 Page 2 of 3 pfm Based on the factors listed above, PFM has prepared four analyses for the County's consideration. • The entire GGUA debt portfolio is simply assumed by Collier County(Alternative 1): o The existing cash reserve for the 2010 bonds would be applied to meet the County's reserve requirement. o The surety policies in place for the 2012 and 2015 Bonds would have to be replaced with cash, as the credit ratings of the policy provider(Assured Guaranty, A3/AA)do not meet the requirements of the County's Ordinance. • The County refinances the entire GGUA debt portfolio(Alternative 2): o The existing cash reserve for the 2010 bonds would be applied to meet the County's reserve requirement and reduce par size on the refunding bonds. o The surety policies in place for the 2012 and 2015 Bonds would have to be replaced with cash, as the credit ratings of the policy provider(Assured Guaranty,A3/AA)do not meet the requirements of the County's Ordinance. o The entire refinancing is accomplished at breakeven, without Net Present Value Savings or Cost compared to the existing GGUA debt. • The County refinances the portions of the GGUA debt portfolio that provide an economic benefit (NPV savings), assumes the bonds use existing cash to redeem the remaining subordinate debt Alternatives 3&4): o Only the 2010 and 2012 Bonds are refinanced for interest rate savings. The existing cash reserve for the 2010 bonds would be applied to meet the County's reserve requirement and reduce par size on the refunding bonds. o The surety policies in place for the 2015 Bonds would have to be replaced with cash, as the credit ratings of the policy provider(Assured Guaranty,A3/AA)do not meet the requirements of the County's Ordinance. o The refinancing is accomplished for Net Present Value Savings above the 5%County policy. o Remaining debt(2016 SunTrust Note and SRF Loans, totaling $3,898,753)are defeased with available cash. The results of the analysis are summarized in the table below. Collier Coun Ac•uisition of Golden Gate Utili S 'tem-Financin• Alternatives Market Conditions as of August 2017 Alternative 1 Alternative 2 Alternative 3 Alternative 4 Structure Assume Entire Refinance Entire Refinance/ Refinance/ GGUA Portfolio GGUA Portfolio Defease Select Defease Select GGU Debt GGU Debt Refunded Series None All GGU Debt Series 2010, Series 2010, _..a_.__._.____ Series 2012 Series 2012 Dated/Delivery Date October 1,2017 October 1,2017 October 1,2017 October 1,2017 Total GGU Par Amount(Refinanced and/or Assumed) 38,658,753 35,410,000 32,850,000 37,765,000 Total Aggregated Par Amount(GGU+County Senior Debt) 107,588,721 104,544,968105,758,721 106,694,968 True Interest Cost(%) - 2.99% 2.85% 2.15% Net Debt Service Reserve Deposita° 326,467 241,215 (25,248) 1,147,330 'Aggregate Average Annual Debt Service 7237,309 7,189,108 6,955237 9.278,405. AggregateMaximum Annual:Debt Service 10,478,178 10267'250 10,151,000 9,8i*,S0(t Net Revenues of the County)SD(2016 CAFR)I5j 40,982,058 40,982,058 40,982,058 40,982,058 Debt$ervlc'oitmrage 023%R egt)Ired). 391% -09-0W: 4 4 4 Final Maturity July 1,2040 July 1,2040 July 1,2040 July 1,2029 (1)In alternatives w here Golden Gate Utility's subordinate debt is assumed,the debt w ill be elevated from a subordinate to a senior (2)Assures that cash is used to def ease portions of GGU debt In alternatives 3&4 (3)Golden Gate Utiilly's Series 2010 Bonds have a cash reserve of$831,500 that can be contributed to the County's reserve fund (4)Except in the case of Alternative 1,at reserve deposits w ill be funded by bond proceeds.h the case of Alternative 1,reserve deposit wit be funded by funds on hand (5)Net Revenues in calculation do not Include Impact fees of approximately$13.6M in FY 2016. S August 29, 2017 Page 3 of 3 pfrn In conclusion, refinancing all of the GGUA debt would include series that did not produce NPV savings, and assuming all of the GGUA debt would be at a higher cost than presently available as described in the alternatives. However assuming current market conditions, the County can expect to refinance certain bonds for net present value savings. As such,we believe either alternative three(3)or four(4)would result in the optimal execution for the County. These alternatives also assume that the County would utilize available cash from the GGUA acquisition to (1)fund-up any requirements to the Debt Service Reserve Fund requirement(ranging from$958,000 to $2.0M), and (2)cash defease the subordinate SunTrust and SRF loans(outstanding in the amount of$3.7M). Specifically, refinancing the Series 2010 and Series 2012 as described above in alternatives three and four is estimated to result in NPV savings of approximately$1.5M and $1.7M, respectively. Considered on an annual basis, alternative three(3)would provide approximately$65,000 to$165,000 in annual debt service savings through the original maturity date of 2040. Conversely alternative four(4)would result in approximately$180,000 of savings through 2022 and dis-savings of approximately$985,000 from 2023 through 2028. The remaining years, 2029 through 2040, would result in annual debt service savings of $347,000 to$1.48 million. This uneven savings schedule is a direct result of shortening the final maturity date of the refinanced GGUA debt from 2040 to 2029. Importantly, despite the years of"dis-savings" being created due to the shortened amortization in alternative four, it is the most cost-effective structure (lowest TIC and overall debt service, and highest NPV savings)while not increasing the Maximum Annual Debt Service and thereby preserving future County capacity. Of course, in order to proceed with this alternative the County would need to be comfortable that the annual debt service obligations in 2023- 2028 were manageable, and there was sufficient available cash from the acquisition to fund at least a portion of the Debt Service Reserve Fund requirement. From a credit agency perspective, we believe the rating agencies will largely defer to the County's Utility experts regarding the operational efficiencies and other factors gained from the acquisition of the system. The additional debt that would be added to the County's portfolio will also fit with that broader discussion, as the agencies would likely defer to the County's opinion as to the asset value compared to outstanding debt. Several of the alternatives described above include utilizing available cash to reduce the outstanding debt amount,which would be a credit positive. Factor in that the County has a cash-funded Debt Service Reserve Fund, a strong management team, and above-average projections for annual debt service coverage(note the coverage in the summary table is based on MADS, whereby annual coverage would likely be significantly higher),we do not anticipate that the GGUA acquisition would have an adverse impact on the Utility's credit ratings. We look forward to continuing to discuss the potential acquisition and assisting the County in determining the most appropriate approach on the debt portfolio. Please do not hesitate to contact us should you have any questions or comments.