DEBT MANAGEMENT COMMISSION

Transcription

1 DEBT MANAGEMENT COMMISSION HARRY J. BOTSFORD EMILY CARTER CLIFFORD EKLUND JON KARR STEVE GUITAR ROBERT F. SCHMIDTLEIN PAUL STEVENS STATE OF NEVADA, ) COUNTY OF ELKO. ) ss. The Debt Management Commission met in a regular session on July 14, 2015, at 10:00 a.m., in Suite 102 of the Nannini Building, at 540 Court Street, Elko, Nevada. There were present: Debt Management Member Harry Botsford Debt Management Member Emily Carter Debt Management Member Cliff Eklund Debt Management Member Jon Karr Debt Management Member Steve Guitar Debt Management Member Robert Schmidtlein Debt Management Member Paul Stevens Others Present: Deputy County Clerk Marilyn Tipton Elko Adm. Services Director Dawn Stout Sherman & Howard LLC Kendra S. Follett Elko County School District Jeff Zander Zions Public Finance Andrew Artusa --- CALL TO ORDER: Chairman Stevens called the meeting to order at 10:00 a.m. 10:01:04 AM: I. COMMENTS BY THE GENERAL PUBLIC: No comments were submitted. 10:02:16 AM: III. APPROVAL OF MINUTES: Approval of preceding minutes dated February 10, MOTION: Board Member Karr moved to approve the meeting minutes for February 10, 2015 as presented. Board Member Eklund seconded PAGE 1

2 10:03:38 AM: PAGE 2 the motion. The motion passed unanimously. II. THE CITY OF ELKO, NEVADA, TO ISSUE GENERAL OBLIGATION (LIMITED TAX) RECREATIONAL FACILITIES BONDS (ADDITIONALLY SECURED BY PLEDGED REVENUES) IN THE MAXIMUM PRINCIPAL AMOUNT OF $8,000,000; AND APPROVING CERTAIN DETAILS IN CONNECTION THEREWITH. RESOLUTION NO. DMC : Discussion and consideration of approval of Resolution No. DCM , entitled: ISSUE GENERAL OBLIGATION (LIMITED TAX) RECREATIONAL FACILITIES BONDS (ADDITIONALLY SECURED BY PLEDGED REVENUES) IN THE MAXIMUM PRINCIPAL AMOUNT OF $8,000,000. Andrew Artusa, Zions Public Finance and Finance Advisor for the City of Elko, stated he had prepared the packet in front of them today pursuant to NRS. He reported the project contemplated to be financed was included into the City s Debt Management Policy and Capital Improvement Plan and filed with the Clerk of the Debt Management Commission. Andrew Artusa stated their statutory debt limit was based as a percentage of their assessed valuation. He stated the City never anticipates going to that level and they were significantly below that even with the proposal before them today. He said this proposal was going to be supported by room tax revenues so no tax rate by the citizens would be necessary to support this bond issue. He gave an overview of the coverage ratios that were necessary to support this debt service from page 7 of the proposal document. He explained the increase in the 2016 revenues was due to the Ordinance that the City passed to increase the room tax. Andrew Artusa stated even without the increase in the room tax the City of Elko could support the $8 million dollars of debt service. He stated this was based upon the rate of 5% and if the City was going to issue the debt today it would be about a 3.5% interest rate. Andrew Artusa stated in order to make a finding today the Board needs to show that the proposal has at least one times coverage. He commented they could see that the higher interest rate and the conservative projection for the revenues were over two times coverage. He stated the other thing to consider was the City refinancing within this proposal which includes $1.5 million existing debt. Andrew Artusa explained they were not extending the term of the existing debt but essentially getting a lower interest rate on it because the rates had gone down since they issued the bond in Chairman Stevens inquired what the interest rate was originally. Andrew Artusa replied the interest rates upon those bonds were at 5% coupon. Chairman Stevens inquired what the percent was anticipated now. Andrew Artusa replied 3.5% coupon so it would save them $20,000 per year for 10 years so about $200,000. Chairman Stevens inquired if they were looking at this proposed bond to be for the full 20 years.

3 Andrew Artusa explained they would bond $6.5 million dollars, the new money portion for the proposed recreation center, for 20 years and the $1.5 for refunding of the existing debt for 10 years. He stated on page 7 at the year 2025 the debt service would be $711,000 and then it goes down to $522,000 because the refunding expires in 2025 and the debt service goes down. He stated they were not extending the refunding beyond the existing term. Chairman Stevens inquired if these should be two bond issues. Andrew Artusa clarified they were structuring the bond to save the City from more issuance costs and doing one bond with one portion that would amortize over 20 years and the other portion would amortize over 10 years. He stated that was the reason the debt service schedule showed the escalation until Board Member Eklund requested that he explain 3.5% coupon. Andrew Artusa explained that was the actual rate that they would pay and on a bond it was call the coupon. Chairman Stevens assumed from past experience with the City and other entities that it was standard practice to reissue the bonds to get lower interest rates. He inquired wasn t the interest rate originally for what they were coming in for now. He stated they knew what the entity was and inquired if they were paying at a higher rate. Andrew Artusa explained he does not provide the financing and his job was to get the lowest financing in the market at the time. He commented with a municipal bond they only have one opportunity to refinance the bonds under federal tax law on a tax exempt basis. He said most entities after 10 years take advantage of the lower interest rate. Chairman Stevens inquired if he searched the market to see who would give them the best price. Andrew Artusa explained they do a competitive offering, set a sell date and canvass the entire market for bids. He stated whoever provides the lowest interest rate upon the bond was the one that wins the bid. Chairman Stevens inquired if they went to the State because they offered better rates and was usually at a lower rate than anyone else. Andrew Artusa agreed the State has a better credit rating and often was able to access the capital markets on the lower interest rate basis but they only offer those programs for water and sewer projects, not for capital projects. Andrew Artusa explained the City of Elko had a very high bond rating and has been to the market before. He stated the City was in the A category which was one notch lower than the State at the AA category. Chairman Stevens commented on several millions they would save money. Andrew Artusa replied they could not get State funding because this was a building project. Chairman Stevens noted they were doing the golf course within this bond PAGE 3

4 which was a water/sewer project. Andrew Artusa stated it had to qualify under the State parameters so it was usually addressing clean water or a drinking water project. He commented the golf course was a small portion of the project so the issuance cost of breaking it out for the State would mean more costs. Board Member Schmidtlein stated with regards to the golf course irrigation and the reuse water being utilized now; the sewer fund financed a portion of the irrigation project. He noted if they did not distribute the water upon the golf course then they would have to develop a pond. Chairman Stevens stated the project for the sports project was at $13.5 million dollars. Board Member Schmidtlein replied that was based upon all three phases. He believed phase one was $8 million dollars, with phase two bringing it to $11 million dollars and phase three would be $13 million dollars. He stated with the proposal today $5.5 million dollars would be allocated toward the sports complex. He noted they would need in-kind donations and donations in general before the Pennington Group would came forward and contribute to the sports complex. He believed they would contribute approximately $3 million dollars towards the complex. Chairman Stevens requested clarification that of the $13.5 million dollar sports complex they were putting up $5.5 million dollars and inquired if they were looking at bonding for the other phases. Board Member Schmidtlein replied no, they would not exceed the $8 million dollars they were asking for. He explained of the $8 million dollars they were asking for $1.2 million dollars for the golf course irrigation project, and $1.2 million would pay off the Interpretive Trail Center. Andrew Artusa stated this proposal would not impact the property tax rate and overall he believed they satisfied all the requirements of the Debt Management Commission with regards to their considerations. Board Member Karr inquired if the $5.5 million would complete phase one of the sports complex. Board Member Schmidtlein replied that was correct and he believed phase one was three fields and a parking lot which was 50% of the entire project. Board Member Karr inquired who the group was that was contributing $3 million dollars to the complex. Board Member Schmidtlein replied the Pennington Foundation Group that had been established in Nevada for approximately 50 years. He stated this group participated in helping communities expand into the sports/recreational field. He stated this year they donated $3.5 million dollars to the Winnemucca Boys and Girls Club. Board Member Schmidtlein stated he met with these individuals over one year ago and the City Mayor had met with them several times. He stated this group would be coming back to Elko in January to present what they were willing to PAGE 4

5 contribute toward the sports complex. Board Member Schmidtlein stated the group had indicated to them that they were proposing $3.5 million to $5 million dollars but they haven t committed to any actual figure. He explained their trust fund generates interest and whatever amount of interest was generated would be contributed to the communities within Nevada. He stated the Pennington Foundation Group contributed to athletics activities in the communities within Nevada. He understood Newmont and Barrick had not committed to a dollar amount but believed they would each contribute $1 million dollars each. Board Member Karr inquired if they were keeping both softball fields. Board Member Schmidtlein replied yes, they would utilize all the fields presently but in the future the other fields up above would be where the recreation center would be built. Board Member Eklund inquired if they would come back in two years for further bonding or come back next year for additional funding. Board Member Schmidtlein replied no, they were trying to secure this for next year s construction. He stated they wanted the golf course irrigation system started in the spring of next year and then completed that fall because they cannot complete the project prior to the golf season. He stated they were trying to secure funding at this time because the Pennington group would not commit until their stakeholders were in place. Board Member Eklund inquired if they needed $13 million dollars in bonding for the total sports complex. Board Member Schmidtlein clarified they were proposing $8 million dollars. Chairman Stevens understood they were looking for $5 million dollars in donations. Board Member Schmidtlein stated of the $8 million dollars the City was committing $5.5 to the sports complex, $1.2 million for the golf course irrigation but that was a $3 million dollar project. He stated within the current fiscal year they have set aside $700,000 and the sewer fund has $1.5 committed to come into play for the $3 million for the golf course irrigation. Board Member Eklund noted they predict a 51% growth in 2016, and assumed that was based upon the 2% increase on room tax. Board Member Schmidtlein stated that was correct because the current tax allocated to this fund was 4% and with the 2% increase which makes it 6% for the 51% growth. Andrew Artusa clarified the City could support the payment without the 2% but they have the 2% to give them significant coverage. He noted in 2015 it was $1 million dollars and the debt service payment was approximately $700,000. Chairman Stevens inquired what the 4.96% represents on this current fiscal year. Andrew Artusa replied it was the estimated 2015 fiscal number amount of PAGE 5

6 room tax collected. Chairman Stevens stated it went down 5% but questioned by increasing it, the amount would go up 51%. Andrew Artusa stated they had increased the 4% and now it would be at the 6% rate. Chairman Stevens asked what the 4.96% rate was compared to. Andrew Artusa replied to the 2014 room tax where they had $1.1 million dollars in revenues. Chairman Stevens believed that indicated there was less room tax. Andrew Artusa agreed in 2015 the room tax declined. Chairman Stevens questioned why the huge jump in their room tax and was it there to present this proposal. Andrew Artusa stated the City implemented a new Ordinance increasing the room tax from 4% to 6%. Chairman Stevens noted the room tax had been declining in the past. Dawn Stout, City of Elko Administrative Services Director, stated when they were looking at the proposal and projecting room taxes they based it upon 25 years of information, the changes in the room tax, and the new hotels in construction which would come on line quickly. Board Member Eklund inquired if they based it upon 100% occupancy. Dawn Stout replied they never have 100% occupancy and in the winter months they were doing good with a 30% occupancy. Board Member Eklund noted they were having a problem with 30% occupancy yet predict a 51% increase in revenue. He inquired what type of numbers they were basing the room occupancy average upon. Dawn Stout stated it does not come down to occupancy. She noted in the City of Elko once people go over 28 days they don t pay room tax. She commented they have a lot of people in the community that stay in some of the smaller hotels over a 28 day period. Dawn Stout explained when they estimated the revenues they had $3.3 million dollars in 2014 from room tax and conservatively estimated for Dawn Stout stated they took the $3.2 average and divided it to come up with the $1.6 million dollars for 2015 based upon the 6% room tax. Chairman Stevens asked when she looked at the City s requests was there a breakpoint where they could get a half percent off. Andrew Artusa replied no, but to access municipal markets they could go through different processes. He stated sometimes they could go to a bank if it was a small bond issue so they would not have to go out to the market and incur as much costs. Andrew Artusa stated it was their goal to maximize their interest rate and lower the amount of issuance costs incurred. He stated anything over $3 million dollars they go to investment banks for lower interest rates. He stated the interest rates were based upon the market rates at the time you sell. Andrew Artusa PAGE 6

7 explained the reason they use a 5% rate even though the rates were 3% currently was because they have a 90 day petition period and have to bring it before the City Council two more times. He did not believe the bond would be issued until sometime in November. Chairman Stevens requested clarification if they were predicting it at the 5% rate or at the proposed 3.5% rate. Andrew Artusa replied at the predicted 5% so there was a lot of cushion if the rates go up. MOTION: Board Member Karr moved to adopt Resolution No. DCM , entitled: ISSUE GENERAL OBLIGATION (LIMITED TAX) RECREATIONAL FACILITIES BONDS (ADDITIONALLY SECURED BY PLEDGED REVENUES) IN THE MAXIMUM PRINCIPAL AMOUNT OF $8,000,000. Commissioner Eklund seconded the motion. Board Member Karr stated he was voting for this based upon it following the criteria for the Debt Management Commission. He stated as a citizen of Elko he did not see the need for the expanded softball fields. Board Member Karr believed league play in bowling and softball was deteriorating so he did not see the gain in building these. The motion was passed unanimously. 10:31:01 AM IV. COMMISSIONERS AND STAFF COMMENTS: Chairman Stevens noted their next meeting was scheduled for August 18 th at 10:00 a.m. 10:31:22 AM V. COMMENTS BY THE GENERAL PUBLIC: No public comments were submitted. 10:31:32 AM VI. ADJOURNMENT: MOTION: Commissioner Emily moved to adjourn the meeting. Commissioner Eklund seconded the motion. The motion passed unanimously. There being no other business to come before the Board, the meeting was adjourned at 10:31 a.m. APPROVED ATTEST: MARILYN TIPTON, Deputy Clerk PAUL STEVENS, Chair PAGE 7