Agenda 12/13/2022 Item #16C16 (Potential refunding of the Collier County Water Sewer Districts Water and Sewer Refunding Revenue Bonds, Series 2016)12/13/2022
EXECUTIVE SUMMARY
Recommendation that the Board of County Commissioners, acting ex-officio as the Governing Board of the
Collier County Water-Sewer District adopt a Resolution authorizing the execution and delivery of a rate lock
agreement with JPMorgan Chase Bank, N. A., related to the potential refunding of the Collier County
Water-Sewer District’s Water and Sewer Refunding Revenue Bonds, Series 2016.
OBJECTIVE: To authorize the execution and delivery of a rate lock agreement with JPMorgan Chase Bank, N.A.
related to the potential refunding of the Collier County Water -Sewer District’s (CCWSD) Water and Sewer
Refunding Revenue Bonds, Series 2016.
CONSIDERATIONS: The Board’s adopted Debt Management Policy states that a refunding for economic
savings will be undertaken when a net present value savings of at least 5% of the refunded debt can be achieved. In
the last ten years, the CCWSD has restructured $183.5 million of its debt portfolio and saved $27.4 million in gross
interest paid. The elimination of the advance refunding option, effective January 1, 2018, with the adoption of the
Tax Cuts and Jobs Act of 2017 made refundings more challenging. With the likelihood of a continued rise in
interest rates, the finance team evaluated the portfolio for further savings opportunities.
On September 20, 2022, the County’s Finance Committee voted unanimously to proceed with a request for
proposals to lending institutions for the potential refunding of the CCWSD’s Series 2016 Refunding Revenue
Bonds. On September 26, 2022, the County’s financial advisor, Public Financial Management (PFM), distributed a
request for proposals to a broad pool of financial institutions . On October 20, 2022, six (6) total proposals were
received. At the times bids were received, none of the proposals generated the desired 5% net present value savings
and the banks were alerted that the County would continue to monitor the market and periodically request that the
interest rates be updated. Rates significantly decreased the week of Nov ember 7, 2022, and updated rates were
requested. As indicated in the attached PFM memorandum, the recommendation is to proceed with the JPMorgan
Chase Bank, N.A. proposal by executing the attached rate lock letter as the savings generated exceeds the Debt
Management Policy’s 5% net present value savings guideline and preserves the CCWSD’s ability to prepay the
note. The final savings and proposed Bond issuance will be brought back to the Board in January of 2023.
FISCAL IMPACT: There is no fiscal impact associated with the adoption of the Resolution. The interest rate will
be determined on the date of the execution of the rate lock agreement. Final net present value savings will be
included in the subsequent BCC item in January 2023. Sources of funding for debt service payments are CCWSD
impact fees and user fees.
GROWTH MANAGEMENT IMPACT: None.
LEGAL CONSIDERATIONS: This item has been reviewed by the County Attorney, is approved as to form and
legality and requires majority vote for approval. -JAK
RECOMMENDATION: That the Board of County Commissioners, acting ex-officio as the Governing Board of
the Collier County Water-Sewer District adopt a Resolution authorizing the execution and delivery of a rate lock
agreement with JP Morgan Chase Bank, N. A. related to the potential refunding of the CCWSD's Water and Sewer
Refunding Revenue Bonds, Series 2016.
Prepared by: Amia Curry, Director, Utilities Finance
ATTACHMENT(S)
1. Collier County WSD - Utility Refunding Revenue Bonds, Series 2023 - Recommendation Memorandum
(PDF)
2. Rate Lock Resolution - CAO stamped (PDF)
16.C.16
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12/13/2022
COLLIER COUNTY
Board of County Commissioners
Item Number: 16.C.16
Doc ID: 24059
Item Summary: Recommendation that the Board of County Commissioners, acting ex-officio as the Governing
Board of the Collier County Water-Sewer District, adopt a Resolution authorizing the execution and delivery of a
rate lock agreement with JPMorgan Chase Bank, N. A., related to the potential refunding of the Collier County
Water-Sewer District’s Water and Sewer Refunding Revenue Bonds, Series 2016.
Meeting Date: 12/13/2022
Prepared by:
Title: Manager - Operations Support - PUD – Public Utilities Operations Support
Name: AmiaMarie Curry
12/02/2022 2:53 PM
Submitted by:
Title: Manager - Operations Support - PUD – Public Utilities Operations Support
Name: AmiaMarie Curry
12/02/2022 2:53 PM
Approved By:
Review:
Public Utilities Department Drew Cody Level 1 Division Reviewer Completed 12/02/2022 5:14 PM
Public Utilities Department George Yilmaz Level 2 Division Administrator Review Completed 12/05/2022 10:09 AM
Office of Management and Budget Debra Windsor Level 3 OMB Gatekeeper Review Completed 12/05/2022 10:15 AM
County Attorney's Office Jeffrey A. Klatzkow Level 3 County Attorney's Office Review Completed 12/05/2022 10:24 AM
Office of Management and Budget Susan Usher Additional Reviewer Completed 12/05/2022 12:46 PM
County Manager's Office Amy Patterson Level 4 County Manager Review Completed 12/07/2022 11:47 AM
Board of County Commissioners Geoffrey Willig Meeting Pending 12/13/2022 9:00 AM
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2222 Ponce de Leon Boulevard
Third floor
Coral Gables, FL
33134
786-671-7480
www.pfm.com
November 16, 2022
Memorandum
To: Collier County, Florida
From: PFM Financial Advisors LLC
Re: Recommendation Memorandum – Utility Refunding Revenue Bonds, Series 2023
The purpose of this memorandum is to briefly summarize the proposals received from lending institutions
to provide Collier County, Florida (the “County”) with a fixed-rate loan in the form of Utility Refunding
Revenue Bonds, Series 2023 (the “Series 2023 Bonds”) and summarize the recommendation of PFM
Financial Advisors LLC (“PFM”) to move forward in order to refund the prior bonds designated in the series
resolutions.
On September 26, 2022, PFM, on behalf of the County, distributed a request for proposals to a broad pool
of lenders that are active in municipal lending. PFM’s recommendation to proceed with a private placement
loan in the form of bonds relies upon the facts that: (1) the credit is well understood by market participants
and would attract a wide response; (2) the maturity of the prior bonds are short and within the wheelhouse
of direct placements (inside of 15 years, in this case with a final maturity of 2036); (3) a private placement
can allow for certain advantageous structures that are more difficult to structure in the public market, such
as forward and “Cinderella” refunding structures. For these reasons, PFM recommended that this request
would attract interest from the bank lending community and yield the County with a favorable result. On
October 20, six (6) total proposals were received. A full summary of the proposing firms (in alphabetical
order), along with a brief summary of the key points from each proposal is included in the matrix attached
to this memorandum.
Based on the responses received for the 2023 Bonds, the lowest fixed interest rate proposal was received
from TD Bank, and the County also received an indicative rate from JP Morgan that was markedly below
that of the TD Bank bid, though would come with the risk of exposure to further interest rate movements. A
short summary of the provisions found in each response is provided as an appendix to this memorandum.
• TD Bank – 4.75% taxable fixed rate, which converts to 3.87% tax-exempt. TD Bank provided for
the option to hold the interest rate until expected closing date with no rate lock agreement required. The
2023 Bonds would be subject to a make-whole call, or the County can pay an extra 17 bps of interest rate
to be able to prepay at any time. Other terms and conditions were reviewed by the PFM and generally
deemed to be acceptable.
• JP Morgan – 4.652% taxable indicative rate, which converts to 3.80% tax-exempt. JP Morgan
provided for the option to hold their rate via rate lock, which would require Commission approval, so interest
rates would have to float for approximately a month or so. JP Morgan proposed for rates with a range of
call options, including a make-whole call, a call on July 1, 2027, or call on July 1, 2032.
At the time bids were received, neither the TD Bank nor the JP Morgan rate resulted in savings above the
5% savings threshold, and after consultation with the County, PFM alerted these two banks that the plan
would be to monitor the market and periodically update rates as requested. Subsequently, PFM observed
rates significantly decrease the week of November 7, and requested updated rates from both banks. TD
Bank provided updated fixed rates of 4.48% / 3.65% (taxable / TE), and JP Morgan responded with
indicative rates of 4.12% / 3.37% (taxable / TE). In both instances the rates provided were make-whole
rates, and the County could still elect to pay more for a better prepayment provision. Given the long final
maturity on the refunded bonds and the desire to maintain future flexibility, we would recommend the option
that provided future call flexibility.
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Packet Pg. 1692 Attachment: Collier County WSD - Utility Refunding Revenue Bonds, Series 2023 - Recommendation Memorandum (24059 : CCWSD Series
November 16, 2022
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PFM updated numbers with the current market interest rates and found the following results:
• TD make-whole rate gets the County to 5.81% NPV savings with assumed tax-exempt conversion.
If the County were to pay up 17 bps for prepayment anytime, the County would not meet the required
threshold of 5%.
• JP Morgan make-whole rate gets the County to 8.57% NPV savings with assumed tax-exempt
conversion, on an indicative basis. If the County were to pay up for the best optional redemption (2027),
NPV savings are at 5.94%.
PFM recommends moving forward with the JP Morgan note, whereby the County would have a rate lock
letter approved at its December commission meeting and approving financing documents in January. This
shortens the County’s interest rate exposure down to less than a month and gets the County a better
financing rate, as long as interest rates do not dramatically increase in that time. Because the County is
able to achieve over 5% savings with JP Morgan’s best prepayment option and given the 2036 final maturity
for the Series 2023 Bonds, PFM also recommends that the County select optional prepayment on July 1,
2027.
We believe the results of this proposal are generally consistent with what a similarly priced competitive
public offering would have yielded. It’s also important to consider that this method yielded six proposals,
which implies a competitive process was achieved. In closing, the key benefits of this type of structure, in
addition to the economic results, are the significant reduction in costs of issuance as well as administrative
time, and a flexible structure that allows the County to take advantage of prevailing market conditions.
We look forward to continuing to work towards a successful closing for the Series 2023 Bonds. Please do
not hesitate to contact us should you have any questions on the details of the included response matrix.
16.C.16.a
Packet Pg. 1693 Attachment: Collier County WSD - Utility Refunding Revenue Bonds, Series 2023 - Recommendation Memorandum (24059 : CCWSD Series
Collier County, FloridaUtility Refunding Revenue Bonds, Series 2022 RFP SummaryCapital One Public Funding, LLC JPMorgan Chase Bank, N. A. Key Government Finance, Inc.Notes Proposed ForRefunding of Series 2016Refunding of Series 2016Refunding of Series 2016Interest Rate Options2022 (Cinderella Structure), Fixed:6.40% Taxable, 4.85% TE2022 (Cinderella Structure), Indicative:4.652% Taxable, 3.80% TE, make-whole call4.982% Taxable, 4.07% TE, call on Jul 1, 20274.725% Taxable, 3.86% TE, call on Jul 1, 20322022 (Cinderella Structure), Fixed:6.189% Taxable, 4.889% TERate Set Calculationfinal interest rate on the Loan shall be determined by observing the then-yielding 10-year U.S. Treasury note (ticker USGG10YR on Bloomberg, the “Benchmark Rate”) andcomparing it to its yield of 4.17% (the “Base Date Rate”) on October 20, 2022 (the “Base Date”).Not Specified N/ARate Locked to Closing, or Date to be SetCOPF shall lock the rate when the Borrower provides a final debt service schedule and firm closing dateRates are subject to change daily until a written rate lock letter agreement is executedRate can be locked without penalty subject to confirmation with the bank - can be locked through Dec 25.Prepayment ProvisionsNoncallable until July 1, 2030; Prepayable thereafter, in whole on any interest payment date, without penaltyIf the Borrower selects the option to refund the Loanwith the Tax-Exempt Loan, COPF shall select the call option of either (i) Callable in whole at 102% on07/01/30, then at 101% on 07/01/31 , then at par on07/01/32 and thereafter or (ii) Callable in whole on07/01/31, and thereafter at par.Prepayment options are as specified in the interest rate optionsPrepayable in whole at anytime, without penalty (or in part upon request)Legal/Other Fees$0$12,000$0Other Conditions & NotesPrepared by PFM Financial Advisors LLC1 of 210/20/202216.C.16.aPacket Pg. 1694Attachment: Collier County WSD - Utility Refunding Revenue Bonds, Series 2023 - Recommendation
Notes Proposed ForInterest Rate OptionsRate Set CalculationRate Locked to Closing, or Date to be SetPrepayment ProvisionsLegal/Other FeesOther Conditions & NotesTD Bank, N.A.Truist BankWells Fargo Bank, N.A.Refunding of Series 2016Refunding of Series 2016Refunding of Series 20162022 (Cinderella Structure), Indicative:4.75% Taxable, 3.87% TE2022 (Cinderella Structure), Fixed:4.93% Taxable, 3.895% TE, make-whole call5.14% Taxable, 4.06% TE, call on Jul 1, 20305.42% Taxable, 4.281% TE, call on Jul 1, 20285.79% Taxable, 4.573% TE, call on April 1, 20266.15% Taxable, 4.858% TE, call anytime2022 (Cinderella Structure), Indicative:5.21% Taxable, 4.07% TE make-whole call6.20% Taxable, 4.85% TE, call anytime Federal Home Loan Bank Rate + spread N/A Not SpecifiedThis rate will be held until a settlement date no later than December 6, 2022 so long as the Bank receives notification that it will be recommended Bank within 3 business days, and the 10-year USD Swap Rate doesn't increase more than 5 basis points.Rates valid through December 9, 2022Actual rates to be determined on a date mutually agreeable between the County and the bankThe Borrower may prepay up to 25%, of the amount currently outstanding, annually without penaltyOtherwise, prepayable, in whole or in part, subject to Make Whole Call provision(Par call option also available for additional 17 bps)Prepayment options are as specified in the interest rate optionsPrepayment options are as specified in the interest rate options$25,000$25,000$30,000(i) Term sheet expires February 19, 2022(ii) Financing documents to include clawbacklanguage(iii) Non-DTC eligible CUSIP number(iv)Indemnification languagePrepared by PFM Financial Advisors LLC2 of 210/20/202216.C.16.aPacket Pg. 1695Attachment: Collier County WSD - Utility Refunding Revenue Bonds, Series 2023 - Recommendation
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Packet Pg. 1696 Attachment: Rate Lock Resolution - CAO stamped (24059 : CCWSD Series 2023 Utility Bonds Refunding Series 2016)
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