City of South Lake Tahoe, California Refinancing of South Tahoe Parking Garage Bonds

Transcription

1 City of South Lake Tahoe, California Refinancing of Bonds City Council Meeting May 7, 2013

2 Overview Background Challenging start up garage project in community with abundant free parking nearby City general fund borrowing not desired at the time and redevelopment revenues were already fully leveraged Park Avenue DDA commemorated certain City and developer commitments South Tahoe Parking Revenue Bonds $9 million of non-rated bonds issued in August 2002 Funds used for construction of Heavenly Village Parking Garage Secured by net parking garage revenues and subordinate special tax revenues from CFD No (Park Avenue Project) Capitalized interest funded for approximately 16 ½ months Maintenance and operations account pre-funded 5 months of costs Debt service reserve at maximum annual debt service (~$800,000) Parking Garage Performance Revenues fell far short of projections Operations have limped along for a decade but shortfall is expected this year Market conditions and call date on 2002 Bonds provides restructuring opportunity 1

3 Mello-Roos Community Facilities District CFD No (Park Avenue Project) Established in 2001 with maximum authorization of $30 million Special tax levied on gondola, timeshares, commercial and retail space Allocated by zones and type of land use Non-contingent, revenue neutrality and contingent tax tiers Special tax sunsets 10 years after all bonds are paid off Original 2001 Special Tax Bonds Funded public infrastructure in Heavenly Village Additional special tax capacity remained after 2001 Bonds were issued and was pledged on a subordinate basis to subsequent Parking Bonds 2007 Special Tax Refunding Bonds Refinanced 2001 Special Tax Bonds Structured debt service to increase cash flow savings in 2007 through 2012 Additional special tax capacity was used to support Parking Bonds through 2012 and it was expected that parking revenues would improve sufficiently by 2013 to cover debt service Final maturity of

4 Parking Garage Operating Performance Net Parking Revenues have fallen far below original projections FY12 results were about one-third of forecast baseline FY13 Budget assumes drop in revenues Original funding cushion from capitalized interest now nearly depleted ($ in 000) Heavenly Village Garage Historical and Projected Net Operating Revenues $1,400 $1,200 $1,000 $800 $600 Original Projections Actual Projected $400 $200 $0 -$200 -$ Sources: South Tahoe Continuing Disclosure December 2012 and original 2002 Official Statement 3

5 Revenue Shortfall 2002 Parking Garage Bonds Debt Service Average annual debt service of approximately $800,000 through 2027 Revenues are projected to be insufficient by approximately $200,000 each year to cover debt service through 2027 Thousands $1,400 $1, Garage Bonds: Debt Service and Revenues $1,000 $800 $600 $400 $200 $0 Options Year 2002 Garage Bonds Existing Debt Service Available Revenues Restructuring of the debt to create cash flow relief Default on the bonds, make payments from the reserve fund until depleted Subsidize shortfall from the general fund 4

6 Current Municipal Bond Market Conditions Favorable market conditions, current call date enable refinancing option Tax-exempt revenue bond index hits all-time low of 4.06% on December 6, 2012 Rates remain near historic lows, 4.28% as of April 22, % 7.0% 6.5% Bond Buyer Revenue Bond Index (RBI) Jan. 1, Apr. 22, 2013 Max 6.480% Current 4.280% Min 4.060% 5.0% 4.5% 4.0% 3.5% 6.0% 5.5% 5.0% Average: 5.02% 4.5% 4.0% 3.5% 3.0% Source: The Bond Buyer. Tax-Exempt Bonds maturing in 30 years with average rating of A1/A+. As of 04/22/

7 Refinancing Opportunity 2002 Garage Bonds $7,270,000 currently outstanding at 7% interest rate Currently callable at 102%, 101% on December 1, 2013 and par on December 1, 2014 Refunding would cure Parking Authority Technical Default and cure the impending payment default projected for this year Refunding could be structured to enable recapitalization of operating and repair reserves 6

8 Refinancing Scenarios Level Debt Service to Original Term Revenues don t cover annual payments Not a marketable security Extended Final Maturity Significantly lower annual debt payments; improved coverage Remaining unused special tax capacity in later years could be used to accelerate repayment Back-Loaded Principal Leverages additional revenues in later years Enhanced debt service coverage but less efficient structure Interest rates should be somewhat lower ($000) $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 ($000) $1,400 $1,200 $1,000 $800 $600 $400 $200 $0 ($000) $1,400 $1,200 $1,000 $800 $600 $400 $ Parking Revenue Refunding Bonds Scenario: Original Maturity Parking Revenue Bonds Est. Net Revenues Parking Revenue Refunding Bonds Scenario: Extended Maturity Parking Revenue Bonds Est. Net Revenues ~1.10x coverage through Parking Revenue Refunding Bonds Scenario: Back-loaded Principal Parking Revenue Bonds Est. Net Revenues ~1.23x coverage ~0.83x coverage ~2.10x coverage $

9 Next Steps Draft financing documents Standard legal documents Preliminary Official Statement Amendment to Parking Facility Agreement Oversight Board and Department of Finance (DOF) Approval Required RDA formed the CFD and executed the original Parking Facility Agreement which transferred excess special tax revenues to the Parking Authority No tax increment revenues involved Amend Agreement to make it applicable to 2013 bonds and to allow Authority to utilize a greater amount of special tax revenues through 2027 and extend the number of years which it can receive the revenues to repay garage bonds debt service Since the former RDA formed the CFD and was a party to the agreement, the signature of the Successor Agency is required for amendment Approvals Single Council meeting needed to approve 2013 bonds Successor Agency meeting needed to approve amendment to agreement Oversight Board approval required DOF may exercises its right to a 60 day review period 8

10 Financing Schedule (Preliminary, subject to change) Date Tuesday, June 18 Week of June 24 th Event City Council Meeting to approve Documents, Financing and Amendment of Parking Facility Agreement Oversight Board Meeting to approve Amendment to Parking Facility Agreement Week of August 26 th Send documents and materials to DOF for approval Initiate 60 Day Review period End of 60 Day Review Period - Receive Approval from DOF Publish Preliminary Official Statement Week of September 2 nd Bond Pricing Week of September 16 th Bond Closing Refunding Completed 9