Introduction to General Obligation Bonds

Transcription

1 Introduction to General Obligation Bonds September 24, 2018 PFM Financial Advisors LLC Orlando Miami Largo PFM 1

2 Introduction to PFM PFM was founded in 1975 on the principle of providing sound independent and fiduciary financial advice to governmental and not-for-profit entities around the country PFM is 100% owned by the firm s Managing Directors and consists of seven affiliates PFM PFM Financial Advisors LLC Public Financial Management, Inc. PFM Asset Management LLC Financial Advisory Debt Management and Bond Pricing Optimization Capital Structure Consulting Risk Management Advisory Rating Agency/Credit Enhancement Advisory Public-Private Partnerships (P3s) Fixed Income Portfolio Management Treasury Management Consulting Multi-Asset Class Management Structured Investments PFM Group Consulting LLC PFM Swap Advisors LLC PFM Financial Services LLC Labor and Workforce Consulting Organizational Turnarounds Retirement and Post-Employment Consulting Health and Human Services Consulting Swap Advisory Services SwapViewer Payment Solutions PFM Solutions LLC Whitebirch Software PFM 2

3 PFM s National Experience PFM s national reputation and consistent growth are evident in our ranking as the nation s top financial advisor in terms of number of transactions and par amount PFM leadership in both number of transactions and par amount issued shows a commitment to small, medium and large issuers 2017 Full Year Overall Long Term Municipal New Issues Municipal Financial Advisory Ranking - Equal to Each Financial Advisor Source: SDC # issues $ in millions PFM 996 Public Resources Advisory Group 198 Hilltop Securities 775 Acacia Financial Group Inc ,913 KNN Public Finance 95 10,618 Piper Jaffray & Co 199 7,625 Kaufman Hall & Associates Inc 42 6,812 Ponder & Co 47 5,555 Lamont Financial Services Corp 43 4,639 Melio & Company LLC 24 4,057 35,776 52,385 63,473 PFM 3

4 PFM s Florida Experience PFM s Florida Clients PFM has been serving Florida clients for over 30 years and currently has 27 professionals covering the state from three office locations: Orlando, Miami and Tampa (Largo) Last year alone, PFM served as financial advisor on 52 transactions with a total par amount in excess of $5.7 billion in the State of Florida 2017 Florida Overall Long Term Municipal New Issues Municipal Financial Advisory Ranking - Full Credit to Each Financial Advisor Source: Ipreo # issues $ in millions PFM 52 Frasca & Associates 2 1,212 Hilltop Securities 6 1,180 Public Resources 6 1,040 Raymond James Ponder RBC Capital Mkts Larson Consulting Ford & Associates Dunlap & Associates ,733 PFM 4

5 PFM Serves the South Florida Market with Relevant Experience SOUTH FLORIDA EXPERIENCE Cities Boca Raton Boynton Beach Coral Gables Coral Springs Delray Beach Doral Golden Beach Hallandale Beach Hialeah Lake Worth Margate Miami Miami Gardens Palm Beach Palm Beach Gardens Plantation Pompano Beach Riviera Beach Sunrise Surfside West Palm Beach PFM has recent and relevant experience with similar cities in the region, as well as General Obligation Bonds PFM brings that experience and expertise to Cooper City Counties Broward Miami-Dade Monroe Palm Beach School Districts Broward Miami-Dade Palm Beach Indicates client with recent GO referendum PFM 5

6 What are General Obligation Bonds? General Obligation ( GO ) Bonds are a financing mechanism to fund improvements immediately Bonds are backed by the full faith and credit of the issuing municipality Repaid through the imposition of a dedicated debt service millage levy (Ad Valorem tax) The debt service millage is not included in a City s statutory millage cap Historically one of the most credit-worthy financing structures available Projects financed with GO Bonds typically have broad community benefits, such as parks, police/fire facilities, or bridge and street related projects A city-wide voter referendum is required prior to the issuance of GO Bonds PFM 6

7 Outline of Steps Required for Issuance of General Obligation Bonds 1. Develop Project List and Estimate Financial Impacts: City Commission, Administration, and Community stakeholders participate in developing the project list; Quantify preliminary millage estimates 2. Educational outreach program: Inform citizens of potential projects and receive feedback 3. Finalize project list: City Commission finalizes the project list based on initial steps 4. Authorizing Resolution: City Commission directs City administration to proceed, City Attorney and Bond Counsel draft resolution authorizing bond referendum 5. City Commission Meeting: Approves and adopts the resolution and specifies the ballot question(s). Includes scope of projects, ballot language, and referendum date 6. Required Notices Begin: City Clerk informs County of intent to have referendum (90 day min notice), City Clerk publishes weekly notices of bond referendum beginning five (5) weeks in advance, with a final notice one day prior to referendum date. GENERAL OBLIGATION BOND REFERENDUM DATE 7. Clerk performs canvas of referendum results 8. City Commission accepts results of the referendum at regularly scheduled Commission meeting 9. Bond Counsel prepares draft Bond Documents (Ordinance, Resolution) for bond validation (if required). 10. File Referendum Validation, City Clerk publishes certain notices, Validation hearing, 30-day appeal, Validation complete 11. Secure Financing: Seek credit ratings, finalize bond structure, notice bond sale, issue bonds, receive funds PFM 7

8 Credit Rating Process and Methodology Publicly offered bonds typically require one or more credit ratings from a nationally recognized rating service. Moody s, Standard & Poor s, and Fitch Ratings are three widely-recognized credit agencies A credit score is meant to measure risk to bondholders and an issuers ability to repay debt Investment-Grade Credit scores range from AAA to BBB Moody s and Standard & Poor s have published methodology for their scoring criteria, as illustrated below Moody s Methodology / Weighting S&P Methodology / Weighting Category Weight Institutional Framework 10% Economy 30% Management 20% Liquidity 10% Budgetary Performance 10% Budgetary Flexibility 10% Debt & Contingent Liabilities 10% Indicated Rating - PFM 8

9 General Obligation Bonds Sample Financing Scenarios The City s contemplating issuing $12 million of General Obligation Bonds that will be repaid over a 20 year period The table below estimates the impact to a $150,000 home value using different interest rate assumptions Generally, the estimated annual tax increase ranges from $42 to $51 for a home with a $150,000 taxable value Estimated 2019 Tax Impact ($150,000 Taxable Assessed Value) 2019 Borrowing Rate Annual Monthly 5.25% $ $ % $ $ % $ $ % $ $ 3.48 Notes: Assumes $12 million borrowing; 20-year borrowing term; 3% annual growth to City-wide Taxable Value. PFM 9