File #: 2017-0840   
Type: Resolution Status: Agenda Ready
File created: 12/14/2017 In control: Finance, Budget and Audit Committee
On agenda: 2/14/2018 Final action:
Title: ADOPT a resolution, Attachment A, that: A. AUTHORIZES the issuance of bonds by competitive sale to refund the Proposition C Series 2008-A Bonds, consistent with the Debt Policy; B. APPROVES the forms of Notice of Intention to Sell Bonds, Notice Inviting Bids, Supplemental Trust Agreement, Continuing Disclosure Agreement, Escrow Agreement, and Preliminary Official Statement on file with the Board Secretary as set forth in the resolution all as subject to modification as set forth in the resolution; and C. AUTHORIZES taking all action necessary to achieve the foregoing, including, without limitation, the further development and execution of bond documentation associated with the issuance of the refunding bonds. (REQUIRES SEPARATE, SIMPLE MAJORITY BOARD VOTE)
Sponsors: Finance, Budget and Audit Committee
Indexes: Bids, Budgeting, Debt, Policy, Proposition A, Proposition C, Resolution
Attachments: 1. Attachment A - Authorizing Resolution, 2. Notice of Intention to Sell Bonds - LACMTA 2018 Proposition C, 3. Notice Inviting Bids (2018-A) - LACMTA 2018 Proposition C, 4. Twenty-Eighth Supplemental Trust Agreement - LACMTA 2018 Proposition C, 5. Continuing Disclosure Certificate - LACMTA 2018 Proposition C, 6. Escrow Agreement - LACMTA 2018 Proposition C, 7. POS - LACMTA 2018 Proposition C
Related files: 2018-0091
Date Action ByActionResultAction DetailsMeeting DetailsAudio
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Meeting_Body

FINANCE, BUDGET AND AUDIT COMMITTEE

FEBRUARY 14, 2018

 

Subject

SUBJECT:                     PROPOSITION C BONDS

 

Action

ACTION:                     AUTHORIZE COMPETITIVE SALE OF BONDS

 

Heading

RECOMMENDATION

 

Title

ADOPT a resolution, Attachment A, that:

 

A.                     AUTHORIZES the issuance of bonds by competitive sale to refund the Proposition C Series 2008-A Bonds, consistent with the Debt Policy;

 

B.                     APPROVES the forms of Notice of Intention to Sell Bonds, Notice Inviting Bids, Supplemental Trust Agreement, Continuing Disclosure Agreement, Escrow Agreement, and Preliminary Official Statement on file with the Board Secretary as set forth in the resolution all as subject to modification as set forth in the resolution; and

 

C.                     AUTHORIZES taking all action necessary to achieve the foregoing, including, without limitation, the further development and execution of bond documentation associated with the issuance of the refunding bonds.

 

(REQUIRES SEPARATE, SIMPLE MAJORITY BOARD VOTE)

 

Issue

ISSUE

 

Low interest rates offer an opportunity for Metro to lower its debt service costs by refunding on a current basis the outstanding Proposition C Sales Tax Revenue Refunding Bonds Second Senior Bonds, Series 2008-A (the “2008-A Bonds”). Approximately $69 million of the outstanding 2008-A Bonds can be refunded.  Under current market conditions, the issuance of the Proposition C Sales Tax Revenue Refunding Bonds (the “Refunding Bonds”) would achieve approximately $7.0 million in net present value savings over the four year life of the bonds.

 

Discussion

DISCUSSION

 

IRS tax code regulates tax-exempt debt issuance.  Tax-reform legislation enacted by Congress repeals tax-exempt advance refunding bonds effective January 1, 2018.  An advance refunding is a refunding that closes more than 90 days prior to the date when the outstanding bonds are called for redemption.

 

The 2008-A Bonds may be refunded on a current refunding basis in early April, 2018 as their call date is July 1, 2018. The Debt Policy establishes criteria to evaluate refunding opportunities.  The refunding of the 2008-A Bonds is currently estimated to provide net present value savings in excess of the minimum 3% of the refunded par amount set forth in the Debt Policy criteria for evaluating refunding opportunities.

 

The Refunding Bonds will be sold as fixed rate bonds.  The Refunding Bonds will be sold using a competitive process where prospective underwriters bid to purchase the Refunding Bonds on the date of sale.  The Refunding Bonds will be sold to the underwriter offering the lowest true interest cost.  The timing of the bond sale is contingent upon our ability to take advantage of favorable market conditions as they arise.  In the event that bids do not meet our criteria, all bids will be rejected and the sale will be rescheduled.

 

Financial_Impact

FINANCIAL IMPACT

 

The costs of issuance for the Refunding Bonds will be paid from proceeds of the financing and will be budget neutral.  Savings from the Refunding Bonds will be reflected in future budgets under principal account 51101 and the bond interest account 51121.

 

Alternatives_Considered

ALTERNATIVES CONSIDERED

 

The Board could defer the issuance of the Refunding Bonds to a later time or indefinitely.  This is not recommended because we cannot predict where interest rates will be in the following three to six months.  Federal Reserve Bank actions, political and other market and economic conditions may push interest rates higher and may result in a loss of refunding savings.

 

Next_Steps

NEXT STEPS

 

                     Develop bond issuance documentation

                     Obtain ratings

                     Distribute the Preliminary Official Statement and Notice Inviting Bids to prospective underwriters and potential investors and publish the Notice of Intention to Sell Bonds

                     Receive electronic bids from underwriters

                     Finalize bond documentation and deliver the Refunding Bonds

 

Attachments

ATTACHMENTS

 

Attachment A - Authorizing Resolution

 

Prepared_by

Prepared by:                      

Danny Ray Jasper, Jr., Debt Manager, (213) 922-4047

LuAnne Edwards Schurtz, Deputy Executive Officer, Finance, (213) 922-2554

Donna R. Mills, Treasurer, (213) 922-4047

 

Reviewed_By

Reviewed by:                      

Nalini Ahuja, Chief Financial Officer (213) 922-3088