Agenda Item   

AGENDA STAFF REPORT

 

                                                                                                                        ASR Control  13-001679

 

MEETING DATE:

01/28/14

legal entity taking action:

Board of Supervisors

board of supervisors district(s):

All Districts

SUBMITTING Agency/Department:

County Executive Office   (Approved)

Department contact person(s):

Suzanne Luster (714) 834-3362 

 

 

Louis McClure (714) 834-5999

 

 

Subject:  Approval in Concept of Tax Allocation Bond Refunding

 

      ceo Concur

County Counsel Review

Clerk of the Board

Concur

Approval Not Required

Discussion

 

 

3 Votes Board Majority

 

 

 

    Budgeted: N/A

Current Year Cost: N/A

Annual Cost: N/A

 

 

 

    Staffing Impact: No

# of Positions:

Sole Source: Yes

    Current Fiscal Year Revenue: N/A

  Funding Source: N/A

County Audit in last 3 years No

 

Year of Audit

    Prior Board Action: N/A

 

RECOMMENDED ACTION(S):

 

1.  Approve in concept the refunding of OCDA Tax Allocation Refunding Bonds, Neighborhood Development and Preservation Project, Series 2001 by the County.

 

2.   Approve the selection of KNN Public Finance as Financial Advisor, Stradling Yocca Carlson & Rauth as Bond and Disclosure Counsel, and E.J. De La Rosa & Co. as Underwriter.

 

 

 

 

SUMMARY:

 

The County Executive Office requests the Board of Supervisors (Board) approve in concept the refunding of the Orange County Development Agency (OCDA) Tax Allocation Refunding Bonds, Neighborhood Development and Preservation Project (NDAPP), Series 2001 and selection of the financing team.

 

 

 

BACKGROUND INFORMATION:

 

In July 2001, OCDA issued $26,160,000 Tax Allocation Refunding Bonds NDAPP, Series 2001.  The proceeds of the bonds were used to refund a portion of the outstanding 1992 Tax Allocation Bonds and pay the cost of issuing the bonds.  The NDAPP Refunding Bonds, 2001, payable through September 2022, are secured by a pledge of tax increment revenues allocated and paid to OCDA attributable to the NDAPP Project Area.  The principal amount outstanding is $15,285,000.  The bonds maturing on or after September 1, 2012, are subject to optional redemption on any date on or after September 1, 2011 at a redemption price of par, together with accrued interest thereon to the date of redemption, without premium.

 

Redevelopment Dissolution

 

On December 29, 2011, the California Supreme Court upheld the constitutionality of AB1x 26 (The “Dissolution Act”) eliminating the redevelopment agencies in the State of California effective February 1, 2012.  The Dissolution Act provides that upon dissolution of a redevelopment agency, either the County or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government.  On January 24, 2012, the County elected to become the Successor Agency to the Redevelopment Agency in accordance with the Dissolution Act.  An Oversight Board was appointed to oversee the dissolution process.

 

After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the State of California cannot enter into new projects, obligations or commitments.  Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution.  In future years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on all enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.

 

State law requires Successor Agencies to prepare a Recognized Obligation Payment Schedule (ROPS) that identifies the known financial obligations of the former redevelopment agency in six month increment periods.  Each six months, the OCDA Successor Agency submits a ROPS to the County Board of Supervisors for approval and authorization of use of Successor Agency funding.  The ROPS is then submitted to the Successor Agency Oversight Board for further consideration and approval, after which the ROPS is forwarded to the State Department of Finance and State Controller’s Office for final approval.  Debt service expenses have appeared on each ROPS and have been ratified as enforceable obligations without question by all approving bodies.

 

AB 1484, enacted subsequent to AB1x 26 on June 29, 2012 allows for former redevelopment debt to be refunded under certain conditions.  The conditions for refunding include:

 

· Refunded principal, interest, and other indebtedness may not exceed principal and interest to be refunded

· Existing indebtedness is not accelerated

· Must be fixed rate financing

 

Proposed TAB Refunding

 

At its December 19, 2013 meeting, the OCDA Successor Agency Oversight Board directed staff to proceed with refunding the Tax Allocation Refunding Bonds, NDAPP Series 2001.  CEO staff intends to evaluate various options for the refunding, including a public sale or private placement of the bonds. Preliminary analysis by KNN Public Finance and E.J. De La Rosa & Co. (De La Rosa) provided the following estimates as of January 2014:

 

Public Sale

 

· Cumulative savings of $777,000

· Average annual savings of $86,000

· Net Present Value Savings of $682,800 or 4.47%

 

Private Placement

 

· Cumulative savings of $668,000

· Average annual savings of $74,000

· Net Present Value Savings of $584,500 or 3.82%

 

Bond Counsel and Financial Advisor

 

In March 2013, Requests for Proposals (RFP) were issued for Bond Counsel (BC) and Financial Advisor (FA) services for the Santa Ana Heights (SAH) TAB refunding, which is scheduled to close January 9, 2014.  The RFPs were distributed to all BC and FA firms on the County’s current panel of qualified consultants approved by the Public Financing Advisory Committee (PFAC) and the Board.

 

Review teams were convened to evaluate the RFP responses and make recommendations to the PFAC and the Board.  The review teams considered overall quality of the proposal, total TAB experience in California, availability of firm principals assigned to the County from local offices, and proposed compensation.  The review teams recommended and the PFAC and the Board subsequently selected Stradling Yocca Carlson & Rauth (Stradling) as BC and KNN Public Finance (KNN) as FA to work with County staff to complete the SAH TAB refunding.  Both Stradling and KNN are familiar with County financings, have considerable experience with TAB financings and successfully completed the issuance of the SAH TAB refunding.  In addition, Stradling was the BC firm for the 2001 NDAPP Bonds.  Because KNN and Stradling were both selected through the RFP process and successfully completed the SAH refunding, CEO staff is recommending the selection of both Stradling and KNN for the proposed NDAPP refunding.  Due to efficiencies gained through recently closing the SAH refunding, KNN has agreed to reduce their fees from the $55,000 charged for the SAH refunding to $40,000 for a public sale or $20,000 for a private placement.  If sold through private placement, Stradling has agreed to reduce their fee from $75,000 to $48,000.

 

Underwriter

 

Public Finance staff recommends the selection of De La Rosa to provide underwriting services for the proposed NDAPP TAB refunding.  De La Rosa successfully sold the SAH TAB refunding in December 2013.  De La Rosa has consistently demonstrated its commitment to Orange County and knowledge of TAB debt providing frequent analysis of the viability of a NDAPP refunding and the estimated savings.  To further demonstrate its commitment to working with the County, De La Rosa has agreed to reduce its underwriting fee from $8.90 per bond (or $210,000) for the SAH refunding to $5.00 per bond (or $74,000) for a public sale or $2.50 per bond (or $37,000) for a private placement

 

Conclusion

 

Approval of the concept and financing team will allow CEO Public Finance staff to further analyze the option of refunding the NDAPP bonds and determine the best structure based on the market conditions and interest rate environment at the time.  

 

PFAC approved this item at its January 9, 2014 meeting.  If approved by the Board, County staff will return to PFAC and the Board requesting approval of a specific financing structure and financing documents later in the year.

 

 

 

FINANCIAL IMPACT:

 

N/A

 

 

 

STAFFING IMPACT:

 

N/A

 

 

 

REVIEWING AGENCIES:

 

County Counsel