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BCC Minutes 08/06/1986 S - .. .. , Naples, Florida, August 6, 1986 LET IT BE REMEMBERED, that the Board of County Commissioners in . and for the County of Collier, and also acting as the Board of Zoning Appeals and as the governing board(s) of such special districts as have been created according to law and having conducted business herein, met on this date at 9:30 A.M. in SPECIAL SESSION in Building "F" of the Courthouse Complex, East Naples, Florida, with the following members present: CHAIRMAN: John A. Pistor VICE-CHAIRMAN: Anne Goodnight Frederick J. Voss Max A. Hasse C. C. "Red" Holland ALSO PRESENT: James C. Giles, Clerk; Maureen Kenyon, Deputy Clerk; Donald B·. LU3k, County Manager; Neil Dorrill, Assistant County Manager; Ken Cuyler, County Attorney; and Tom Cr~ndall, Utilities Administrator. AGENDA Resolution regarding $76,600,000 Capital Improvement Program Revenue Bonds, Series 1986. RESOLUTION 86-134 AUTHORIZING THE ISSUANCE OF $76,600,000 CAPITAL %KPROVEMENT PROGRAM REVENUE BONDS, SERIES 1986 - ADOPTED Legal notice having been published in the Naples Dail~' News on August 5, 1986, as evidenc0.d by Affidavit of Publication filed with the Clerk, a special meeting was held to discuss the issuance of $76,600,000 Capital Improvement Program Revenue Bonds, Series 1986. Mr. Bill Johnson of Fischer, Johnson stated that the purpo~e of this meeting is for the Board's consideration of the selling of the BOOK 096 PAGE 01 Page 1 aOOK 096 PAGE 02 August 6, 1986 Collier County Multi-purpose Capital Improvement Program Revenue Bonds, Series 1986, He said that the total size of the issue is $76,600,000, noting that the project size is $55,267,000 which is up from the original conversations, He stated that the project size along with a reserve account of 'SlO,OOO,ooo would make the issue $65,000,000 but in order to do it correctly, there is further projec- tion needed, which is not a cost item to the County. He stated that an additional item is capitalized interest at $5.1 million, which is in the issue to protect the County so that at such time a project is completed and the fixed bonds are sold with no immediate revenue stream during the construçtion period to pay for the bonds, the capitalized interest will be there. He reported that this is a calcu- lation of how much interest this will take for all of the projects involved. He indicated that the debt service reserve fund is $11,490,000, which sits there throughout the life of the issue and is e~sentially a money maker for the County in that it will earn invest- ment income greater than the interest expense, providing all this is done prior to the window closing which is scheduled for September 1, 1986, or whenever the tax bill is passed. In answer to Commissioner Voss, Mr. Johnson stated that the reserve fund will stay there throughout the life of the issue and it is the one fund that allows the ·County to arbitrage for the life of the issue, which would be 25 or 30 years. He stated the construction fund has a three-year life as f~r as being able to arbitrage and earn interest over and above the interest expense. Page 2 .. .. .. , ", .. - .. ~ August 6, 1986 Mr. Johnson stated that another item in the issue is the insurance premium, ðdding that at such time as a project is actually built and fixed rate bonds ðre issued, it becomes advisable to have the bonds insured in order to receive a Triple "A If rating, which is why th~re is an insurance premium amount of $2.3 million built into the program. He stated that this insurance premium also sits ðnd draws interest during the three-year period. Commissioner Pistor questioned if the interest from the $11 million cðn be used to pay for the insurance premium, to which Mr. Johnson replied affirmatively, adding that the interest on the $11 million can be used to pay for any cost. He stated that the insurance is ðn·election on the part of the County, but at such time as a project is completed, in order to get the Triple "A" rating and the low~st fixed-interest rate, the County should insure the issue. Commissioner Pistor stated that in order ·to get the Triple "A" rating, the County has to have the insurance and Mr. Johnson agreed, but added that. there is the option of nót taking the ins~:ance because some of the better credits are able to issue bonds on their own credit and they may have an "A" or "A+" rating and the spread between that and an insured Triple "An bond is small enough so that when the insurance premium is taken into consideration, it is sometimes better to issue the bonds without the Triple "An rating. Commissioner Pistor questioned if there is a maximum with regards to the amount of money that can be held in the reserve, to which Mr. aODK ()f}f)PAGE ()~. Page 3 'OM 096 PAGt 04 August 6, 1986 Johnson stated that the $ll million is a bond reserve fund and is at its maximum and is not a part of any fund to pay insurance premiums. Commissioner Voss questioned what happens to the money that is made on the $2.3 million insurance fund, to which Mr. Johnson stated thðt this is the County's money'and is used to reduce the overall cost of the program, but the County only has the right to earn more money than the cost for a three-year period, which is the same as the construction fund. Mr. Johnson stðted that the next item in the issue is the initial discount and issuance expense which is $766,000 and the last item ~s the conversion remarketing fees which is $1.6 million, for a totðl of $76,600,000. County Manðger LIJsk stated t'1at this money will be in a bank until it is drawn down a~d questioned why it needs to be insured? Mr. Johns~n stated that it is not insured, adding that the $2.3 million is when it goes from a variable rate to a fixed rate, He stated that when a project is completed, the variable rate goes into a fixed bond issue for a 25 or. 30 year life, and at that point, the County makes the decision whether to insure t~e bond issue or not, and if this $2.3 million is not used, it goes to retire the bonds. He noted that the interest that the money is earning would go toward deferring any cost associated with the program. Clerk Giles questioned whðt pðrt of the $76,000,000 can be invested beyond the three years, to which Mr. Johnson replied only the Page 4 .. - .. .. - - - ~ August 6, 1986 bond reserve. Mr. Johnson stated that at the end of the three-year period, if there is $10 million in the construction fund that was not spent, that money can be invested at an interest rate that is no greater than the interest expense on the bonds, adding that it will not be an expense factor but it cðn no longer be a moneymaker to the County. Mr. Johnson stated that with regards to the investment side of the issue, Smith Barney has worked out an investment agr~ement that provi- des that over a three-year period the income side would amount to $l million and the issuance expense involved is $766,000. He noted that the dollars over and above the initial issuance expense amounts to $235,000. He stðted that this money goes toward deferring any cost that would be incurred at such time as the County goes from the weekly rate to the fixed bond issue when a project is complete. He stated that the reserve account is also drawing interest and depending on the spread between the expense of the bond issues and the income derived, it earns between $2.5 million and $7 million du'~ing the life of the entire program, which will be sufficient to pay all additional costs. He stated that these figures are the minimum based on the fact that the program is used precisely as the draw-downs have been described by the various departments. He stated that if any money is left for a longer period of time to deaN interest, there is a guarantee that it will draw 1.45% over and above the interest expense which would be plus dol1ðrs. aDOK 096 PAGE 05 Page 5 'OO( 096 PAGE 06 August 6, 1986 Mr. Johnson stated that :f these projects are going to be done and financed, there are two avenues; one would be to do it on a project- by-project basis at such time as the County is ready to build the pro- j~ct and the other way would be this capital improvement program revenue bond issue. He stated that the major ðdvantage to this program versus the project-by-project basis is the reserve account which can be invested over the life of the issue and earn money for the County. He stated that if a project-by-project basis is done, the reserve account will be restricted to the investments and earnings will be restricted to the interest expense. In answer to Commissioner H~ssc, Mr. Johnson stated that the only way the reserve account could b~ drawn-down is if the revenue stream that is identified on a given project to pðy the debt service i~ not sufficient. He stat~d that it is highly unlikely that this Coun~y would want to or be allowed to float a bond issue for a project with a revenue stream that is going to be less than the principle and interest on the d~bt. He stated that if the reserve account were used for such a situation, the County would be in default. County Manager Lusk stated that the rates would have to be raised in a case like that and Me. Johnson stated thðt the bond issue would not be floated if there was not sufficient revenues. Mr. Johnson stated that if the County elects to insure the issue when it becomes a fixed-bond issue, the insurance company would not permit that bond to come into creation unless it can be proved that Page 6 .. - - , .. .. .. ~ August 6, 1986 the revenue stream is ample to pðy the principle and the interest. He . stated that the reserve account that is being funded will remain just as it is and be in a position to earn the County funds during the totðl life of the project. Commissioner Voss questioned, because the arbitrage ends in three yeðrs and there is money in the pool from the bonds and only $30 million has been drawn down and put into specific revenue bonds, how can the earnings be used at that time? Mr. Tom Giblin, Bond Counsel, stated that the deal would collapse, adding that at the end of the three years if there is any money left over, the bonds will have ~o be redeemed at that time. Mr. Johnson stated that if there are funds at the end of the three year period that are not used in the construction area, then the County has to collapse that portion of the program. He stated that the amount of money that is left would be collapsed and the pro-ráta -f share of the reserve would be ~ollapsed, but there would also be that much less cos~ because it was not converted into any fixed-bond issue for that portion. Commissioner Voss questioned if Mr. Crandall could spend $76 million in three y~ars, and Mr, Johnson stated that only $55 mil).ion has to be spent, Utilities Administrator Crandall stated that at the end of that three-year period, there will be a project committed for construction for the remaining bonds. He stated that based on the projects that Page 7 aOOK ()!Jt)PAGt ()~ aDD~ 096 PA(;£ 08 August 6, 1986 have been reviewed for Utiliti~s and MSTU's and the desire to complete, the money will be spent. Mr. Giblin stated that the only thing that collapses at the end of the three years are monies which are allocated to projects which have not been undertðken at that point in time. He stated thðt if the pro- ject has been commenced prior to that three-year period, then the funds can be used that are allocated to it. He stated that the County would have to feel comfortable that there is a real project, that it would have to be sized and start drawing down monies and i; that can be done, then at the end of the third year period there is no need to worry. He noted that the bonds would have to be issued. In ðnswer to Commissioner Pistor, Mr. Giblin stated that the money can be drawn down in increments and the rest will remain in the account to draw interest, but at the third year, the County wants all the money out. He stated that if revenue bonds are not issued prior to the third ye~~ anniversary, any money that is l~ft would have to be used to redeem bonds. Commissioner Voss stated that if all the money is not used, it can still be invested as long as it does not earn more than the interest on the bonds. Mr. Giblin stated th~t as long ðS it is drawn-down, it does not make any difference how long it takes to complete the project, but there will be a yield restriction. He stated that if all the proceeds hav~ been drawn down, the Sll million cðn still eðrn money for the 25 years, adding that this Sll million is not yield-restricted. Page 8 .. .. - , .. .. .. August 6, 1986 Commissioner Voss stated that if there is ð $lO million project and only $1 million has been spent ðt the end of the three-year period, but ðll $10 million in bonds have been sold, then the $9 million that is left, b~t hðs not been sþent, could be invested to make money as long as it does not exceed the interest on the 59 mill~on bonds. Mr, Giblin agreed with Commissioner Voss on this example. Mr. Johnson stated that the lðst portion of this issue would be the interest r~te itself, adding that he checked with the various ðepartments and made determinations as to the timetable for the use of this money, and the progrðm was designed in such a wðy that the money becomes available ðt certain timcs, which ranges from April 1, 1907, through July 3, 19B9 ðnd the interest rate ranges from 5\ to 6\ during that period of time. He stated that these rates are in line with the market and the marketing cost that are i~volved are in line with the market, adding that he is satisfied to recommend to the County that the interest rates and the expenses involved are where they should be. Commissioner Pistor questioned where the agreement is concerning the specifications on the amount of the spread, to which Mr. Peter Zenn, Vice President of Smith Barney, stated that he has obtained investment agreements from numerous banks and has decided thðt Chemical Bank has the highest rate of investment for the County. He stated that t~e telecopy of the investment agreement WðS received by his office this morning, adding that the transaction cannot be closed aOOK 096 PAGE 09 Page 9 aOOK 096 PAGE 10 August 6, 1986 unless the investment agreement is in place with Chemicðl Bank, as well ð3 the interest rðtes. He stðted that a copy of this will be supplied at the closing, which will be August 14, 1986, if the County decides to move forward with the project. Commissioner Pistor questioned if Mr. Giblin is assuring the County that nothing will happen until this agreement is in place, to which Mr. Giblin stated that this investment agreement is essential and the issue cannot close until the investment agreement is signed. Mr. Johnson stðted that he cannot secure an investment agreement for the County until he has the approval of the Board of County Commissioners. Mr. Crandall questioned what would happen if the County decided not to draw anything from this pool, to which Mr. Johnson stated that the program would collapse ðnd there would be no expense involved because there would be sufficient eðrnings from the investments to have covered all the initial lssuðnce expense and there would not be any fixed bond issues, therefore, the issue would collapse. Mr. Giblin stated that if for whatever reason, the money was not drawn-down, che deal would cOllapse and any surplus money would be the County's, Commissioner Voss moved, seconded by Commissioner Goodnight, that the Board ot County Commissioners go forward with the project. Commissioner Hasse questioned how much more it would cost the County if these projects were done by separate bond issues rather than Page 10 .. .. .. , .. - .. August 6, 1986 putting them altogether under this one issue, to which Mr. Giblin stated thðt there would be no investment earnings at all. He stated thðt the r.pst factor would be ~hatever the County would have lost with the investment earnings on this transaction. Commissioner Pistor indicated that would amount to between $2.5 million and $7 million. Mr. Giblin stated that the County is in a no-lose posture with this type of issue ðnd there is no economic liability prior to draw- down because the bonds are secured solely by the money sitting in the investment account. He stated that subsequent to draw-down, the only liability is to payoff the bonds that have been issued by using the proceeds from delineated revenue sources and in this case it wIll be assessments and/or utility revenues. Commissioner Pistor questioned if each project will have to be validated, to which Mr, Giblin stated that he would recommend that eðch one of the assessment projects bp. validated, but as far as the utility projects are concerned, he is not sure that they need to be validated, but this'will be discussed later on. He stated that the insurance company may require validðtion before anything is drawn- down, but this can be discussed with the insurance companies, but the money is built into the issue for this, . In answer to Commissioner Hasse, Clerk Gilgs stated that he feels that this issue is the way to go and there will be millions of dollars in savings by doing it now before September l, 1986. He ~tated that the savings are too big to ignore. Page 11 aDo,; 096 PAGl 11 ~.._.._"-..,-,--- 'ODK 096 PAC.\. 12 August 6, 1986 Commisøioner Hasse questioned if this will affect the County's future borrowing power, to which Clerk Giles stated that it will affect the borrowing power once the money is drawn-down on the Utility projectø, but the borrowing power is going to have to be justified before it can be drawn down to begin with. He stated that it does not affect the County's overall rating as the Water-Sewer District is looked at for the ability to pay back, Commissioner Holland questioned if Collier County has a rating, to which Mr. Giblin stated that he does not believe that there is a general obligation rating for the County, adding that all debt is insured and, therefore, it is all Triple "A". Mr. Giblin stated that before any monies are drawn-down, there will be ð determination as to whether there will ~e insurance, adding that if the County decides to insure, they should insure everything. Commissioner Holland stated that if there is $18 million fór MSTU's, it leðves $37 million for utility projects and questioned what impact this will have on the customer base, to which Mr. Crandall stated that this is difficult to answer as the customer base is going to grow as the projects are done. Commissioner Holland stated that if the rate bl.se does not justify the issuance, then the bonds cannot be issued, adè~ng that there has to be guaranteed revenue on each project in order to justify it. Mr. Giblin stated that the insurance company will not allo~ the County to draw-down unless the provisions are met that gives the Page 12 , - .. - - .. .. August 6, 1986 insurance compðny security, ðnd if the rates are not there, then there will be no drðw-down. Mr. Crandall questioned if the County is forced to go to a fixed- rate bond issue at a certðin point or can it be done when the ~arket is right, to which Mr. Giblin stated that there is an automatic requirement to fix the rate whenever the monies are drawn-down. Mr. Giblin stated that a determination can be made ~s to when the money is drawn down, noting that if the market looks bad some interim financing could be done with the bank and when the market looks good, then the money could be drawn down to payoff the bank and then made into a fixed issue. He stated thðt another possibility is that the County, will be allowed to stay in a weekly mode after draw-down if opinion is obtained from the Bond Counsel that the bonds will not be adversely effected by staying in a weekly rðte. Mr. Henry Maxant questioned how many other communities have financed in this mðtter, to which Mr. Giblin stated that this is a new program ðnd there are five or six counties that are in the process of doing this. He stated that Lee County is doing a similar bond issue that is closing Thursday. He noted thðt Palm Beach County, Orange County, Hillsborough County, ðnd Broward County are all looking at this program and if there is enough time, he expects that more coun- ties will be doing this program, Mr. Don Brown questioned what type of debt instrument is being proposed, to which Mr: Johnson stated it is a put bond, ðdding that aODK 096 PAGl jg Pðge 13 'ODK 0Q6 P~Gt 14 August 6, 1986 the peper will be $ll million ðnd $6 million will be in a weekly mode, which meens thet it is renewed every week ðnd the balance is in a variety of puts which rðnge from April 1, 1987, to July 3, 1989. He stðted that the investment agr~ements match the puts. In answer to Commissioner Hasse, Mr. Giblin Etated that there is nothing out-of-pocket at all to the County. He stated thðt even when the money is drawn down, the only liability will be to pay back the bonds from the assessment or the utility revenues. Upon call for the question, the motion carrieð unanimously. Mr. Giblin stated that the bond resolution with the attached docu- ments needs to be adopted, adding that the bond resolution authorizes the issuance of the bonds. -He stated that Exhibit "A" to the bond resolution is the disclosure letter from the Underwriters to the County which i~ required by Florida Law. He noted thðt the second ettachment is the form of the Bond Purchase Agreement which will be' executed, assuming the bond resolution is adopted and the sale of the bonds are authorized. He stated that the third item is the form of the Indenture of Trust which will be entered into with Sun Bank which contains all the security provisions and leys out all the provisions under which the money can be drawn down. ComJ1issioner Voss questioned why Sun Bank is involved, to which Mr. Giblin stated that a trustee is needed and Sun Bank came in lowest. Mr. Zenn stated that Chemical Bank is the one the Co~~ty will be doing the investment agreements with and Sun Bank is the Florida Page 14 , .. .. .. ----...-..- .. .. .. ~ August 6, 1986 Trustee thðt will be watching the vðrious funds for the County, adding that he went out for bids and found that Sun Bðnk was the lowest. He stated that this agreement is also in his office and is being checked. Mr. Giblin stated that the fourth attachment is the Remarketing ~qreement betw~en the County and Smith Barney under which if anybody þ~ts bonds, they buy it bðck and sell it ,again. He stated that there ~¡.an annual remarketing fee. --;.'..: .. ~~~~. Mr~ Zenn stated thðt there is an ann~ðl remarketing fee that was in'~he original proposal, adding thðt it is explained in the Remðrketing Agreement, which is one-eighth of one percent per year which is a standard industry fee. Mr. Giblin stated that the next attachment is the Depository Agreement under which Sun Bank will help Smith Barney in remarketing the bonds. He stated thðt Exhibit "F" is the Official Statement that describes the trðnaaction and Exhibit "G" is the form of the invest- ment agreement which the County will be entering into with Chemical .... Bank which guarantees a certain rate of return above the bond yield. commissioner Voss moved, seconded by Commissioner Goodnight and carried unanimously, that Resolution 86-134 authorizing the issuance of $76,600,000 Collier County, Florida, Capital Improvement Program Revenue Bonds, series 1986, with attachments be adopted. See Pages J7 - /0 7 Mr. Peter Zenn of Smith Barney presented a check to Clerk Giles in the amount of $766,000 to hold as a good faith deposit. He stated aODIt 09SPAt;t is- Page 15 'OOK 096 mt 16 . . . August 6, 1986 . that the closing will be held on August 14, 1986, in New York and he will need to hðve the Clerk, the County Attorney, and the Chairman of the Boðrd present. commissioner Voss moved, seconded by Commissioner Goodnight and carried unanimously, that the Chairman of the Board of County commissioners, the County Attorney, and the Clerk of Courts or their designee be authorized to go to New York for the bond closing which is to be held on August 14, 1986. *** There being no further busineßs for the Good of the County, the meeting was adjourned at lO:45 A.M. by Order of the Chair. BOARD OF COUNTY COMMISSIONERS/ BOARD OF ZONING APPEALS/EX OFFICIO GOVERNING BOARD(S} OF SPECIAL DISTRICTS UNDER ITS CONTROL Ç(- £i:{ ~ £JC. the Board on ~",,2~ I"~ or as corrected Page l6 , .. - .. ~,..,-..,..,_.......,_...-.._._----