abc s of municipal financing l.
Download
Skip this Video
Loading SlideShow in 5 Seconds..
ABC’s of Municipal Financing PowerPoint Presentation
Download Presentation
ABC’s of Municipal Financing

Loading in 2 Seconds...

play fullscreen
1 / 26

ABC’s of Municipal Financing - PowerPoint PPT Presentation


  • 194 Views
  • Uploaded on

ABC’s of Municipal Financing. Presented By:. GFOAZ. May 11, 2007. Types of Debt . Bonds General Obligation (GO) Revenue Annually Appropriated Debt Service Certificates of Participation (COPs) Lease Purchases/Municipal Property Corporation (MPC) Special Taxing Districts

loader
I am the owner, or an agent authorized to act on behalf of the owner, of the copyrighted work described.
capcha
Download Presentation

PowerPoint Slideshow about 'ABC’s of Municipal Financing' - nantai


An Image/Link below is provided (as is) to download presentation

Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author.While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server.


- - - - - - - - - - - - - - - - - - - - - - - - - - E N D - - - - - - - - - - - - - - - - - - - - - - - - - -
Presentation Transcript
abc s of municipal financing

ABC’s of Municipal Financing

Presented By:

GFOAZ

May 11, 2007

types of debt
Types of Debt
  • Bonds
    • General Obligation (GO)
    • Revenue
  • Annually Appropriated Debt Service
    • Certificates of Participation (COPs)
    • Lease Purchases/Municipal Property Corporation (MPC)
  • Special Taxing Districts
    • Community Facilities Districts
    • Municipal Improvement Districts
  • State Programs
    • Greater Arizona Development Authority (GADA)
    • Highway Expansion and Extension Loan Program (HELP)
    • Water Infrastructure Finance Authority (WIFA)

Page 1

general obligation go bonds
General Obligation (GO) Bonds
  • Authorization: Election
  • Security: Full faith and credit of the City with a promise to levy secondary property taxes as necessary to repay debt.
  • Repayment Source: Debt service may be repaid with property taxes, or other revenues sources of the City.
  • Debt Capacity: Net Secondary Assessed Valuation
    • 20% Limit ~ Projects involving lighting, open space, parks, public safety, recreational facilities, transportation, water, and wastewater.
    • 6% Limit ~ Other general purpose improvements.

Page 2

revenue bonds
Revenue Bonds
  • Authorization: Election
  • Security: Pledge of specific revenues including:
    • Highway User Revenue Funds
    • Utility Revenues (Water, Sewer, other Enterprise Funds)
  • Repayment Source: Usually matches security pledge.
  • Debt Capacity: Coverage-driven ~ pledged revenues must exceed debt service by a certain factor. Varies by type of pledge.

Page 3

certificates of participation cops
Certificates of Participation (COPs)
  • Authorization: Council Resolution
  • Security: Annual appropriation to pay debt service from City’s General Fund.
  • Repayment Source: General Fund or other available funds of the City (other than property taxes).
  • Debt Capacity: Limited by general creditworthiness of the City and existing debt.

Page 4

lease purchases municipal property corporation mpc
Lease Purchases/Municipal Property Corporation (MPC)
  • Authorization: Council Resolution and MPC Resolution
  • Security: MPC issues debt. City annually appropriates lease payments to the MPC with a pledge of specific revenues:
    • Excise Taxes
    • State shared revenues
    • Utility Revenues
  • Repayment Source: Usually matches security pledge.
  • Debt Capacity: Coverage-driven ~ pledged revenues must exceed debt service by a certain factor. Varies by type of pledge.

Page 5

community facilities districts cfds
Community Facilities Districts (CFDs)
  • Authorization:
    • District Formation:
      • Property Owners petition to form CFD.
      • CFD voters authorize CFD formation.
      • Council forms CFD.
    • GO Bonds ~ CFD voters must authorize.
    • Special Assessment Bonds ~ CFD forms assessment area.
  • Security & Repayment Source:
    • GO Bonds ~ CFD Secondary Property Taxes.
    • Special Assessment Bonds ~ Assessments on CFD property owners.
  • Debt Capacity: Based on credit-worthiness of project.
    • GO Bonds ~ 60% * [Market Value of Property + Public Infrastructure]
    • Special Assessment Bonds ~ Value to Lien Ratio; example 3:1

Page 6

municipal improvement districts mids
Municipal Improvement Districts (MIDs)
  • Authorization:
    • District Formation
      • Council adopts Resolution of Intent to form MID.
      • Property Owners may protest MID formation.
      • Council adopts Resolution Ordering Work.
    • MID issues Special Assessment Bonds
  • Security & Repayment Source:
    • Assessments on property owners within MID.
    • Contingent Liability of City’s General Fund if no other purchaser at foreclosure sale.
  • Debt Capacity: Limited by general creditworthiness of the City and project details.

Page 7

greater arizona development authority gada
Greater Arizona Development Authority (GADA)
  • Eligible Projects: All public infrastructure and facilities.
  • Program Features:
    • Subsidy of costs of issuance
    • “Pooled” with other loans
    • Intercept of State shared revenues in the event of default
  • Authorization:
    • Population 50,000 or More ~ Election
    • Population 50,000 or Less ~ Depends on security pledged.
  • Security:
    • Bonds (GO & Revenue Bonds authorized via election)
    • Annually Appropriated Debt Service (COPs & MPCs authorized by Council)
    • Special Taxing District (CFDs & MIDs via district formation)
  • Debt Capacity: Depends on repayment source.

Page 8

highway expansion and extension loan program help
Highway Expansion and Extension Loan Program (HELP)
  • Eligible Projects: Highway projects on the Federal Aid System, National Highway System, State Highway System, or designated as a state route. Project must be on ADOT’s State Highway Construction Program, ADOT’s State Transportation Improvement Plan, or Regional Transportation Improvement Plan.
  • Program Features:
    • Acceleration of highway projects
    • Shorter term loans – generally 5 to 7 years
    • Interest cost may be shared with Program
    • Intercept of HURF monies in the event of default
  • Authorization: Depends on security pledged.
  • Security: Depends on security pledged
  • Repayment Source: Depends on security pledged.
  • Debt Capacity: Depends on repayment source.

Page 9

water infrastructure finance authority wifa
Water Infrastructure Finance Authority (WIFA)
  • Eligible Projects: Water and wastewater projects on WIFA Priority List.
  • Program Features:
    • Subsidization of interest cost
    • No closing costs charged by WIFA
  • Authorization:
    • Population 50,000 or More ~ Election
    • Population 50,000 or Less ~ Depends on security pledged.
  • Security:
    • Bonds (GO & Revenue Bonds authorized via election)
    • Annually Appropriated Debt Service (COPs & MPCs authorized by Council)
    • Special Taxing District (CFDs & MIDs via district formation)
  • Repayment Source: Depends on security pledged.
  • Debt Capacity: Depends on repayment source.

Page 10

public private partnerships ppp or p3 s
Public-Private Partnerships (PPP or P3’s)
  • What are Public-Private Partnerships?
    • Historically, any public infrastructure that included governmental and private financial involvement
    • More recently, often involve private developments with public participation to help economics/provide incentives (e.g. hotels, mixed use developments, etc.)
    • The newest wave … privatizations of publicly owned infrastructure (e.g. toll roads, parking garages, utilities, etc.)
  • Typical Elements of Development Driven Public-Private Partnerships
    • Debt issued by public entity for all or portions of related public infrastructure
      • Generally excise tax bonds, ID’s and CFD’s
    • Rebate of various transaction taxes such as sales, hotel or occupancy taxes
      • Usually a percentage of taxes generated
      • Usually for a set period, a maximum amount or both

Page 11

public private partnerships ppp or p3 s13
Public-Private Partnerships (PPP or P3’s)
  • Typical Elements of Development Driven Public-Private Partnerships
    • Often constructed on land owned by public entity
    • Often look to use property tax abatement
    • May involve lease of portion of development by government entity
      • Provides both cash flow and credit benefit
  • Examples of Recent Privatizations
    • Chicago Skyway – 99-year lease by City of Chicago for 9-mile stretch of bridge and toll road generating an up-front payment of $1.8 billion to municipality
    • Indiana East-West Toll Road – 75-year agreement with $3.85 billion in upfront payment to State of Indiana
    • Chicago Parking Facilities – 99-year lease of four underground parking garages in downtown Chicago

Page 12

debt versus pay as you go
Debt Versus Pay As You Go
  • A balancing act
    • No interest cost on pay as you go
    • But … also need to weigh:
      • Opportunity cost of use of current monies
      • Construction cost inflation
      • Value of accelerating projects and service delivery
      • Spreading the burden of long-term assets
  • Financial analysis/political philosophy is great
    • But in most case comes down to availability of current cash

Page 13

factors in selecting the right debt vehicle
Factors in Selecting the Right Debt Vehicle
  • Debt Capacity
    • What are the available capacities by debt type
    • Impact on credit
    • Leveraging balance
  • Cash Flow Considerations
    • Revenue sources available to pay debt service
    • Existing revenues versus new revenues
  • Voter Authorization
    • Willingness to seek authorization (or already in place)
    • Voter acceptance of project

Page 14

factors in selecting the right debt vehicle16
Factors in Selecting the Right Debt Vehicle
  • Timing Needs
    • How quickly is the money needed?
    • How quickly can debt issue be completed?
    • Are bridge monies available?
    • Year end/expenditure limitation issues
  • Project Type
    • Revenue generating/enterprise related?
    • City-wide benefit or local?
  • Borrowing Cost
    • Interest rate considerations
    • Costs of issuance

Page 15

sealed bid versus negotiated bid
Sealed Bid Versus Negotiated Bid
  • Two approaches to sales issuance from issuer standpoint
    • Sealed bid to purchase bonds
    • Negotiated bid to purchase bonds
  • Sealed Bid
    • Pick a date
    • Receive bids within set parameters
    • Best price among bids received
  • Negotiated Bid
    • Pick a firm or firms to underwrite purchase
    • Set initial market pricing
    • Actively determine a market level or market clearing price

Page 16

sealed bid versus negotiated bid18
Sealed Bid Versus Negotiated Bid
  • Reasons to Consider a Negotiated Bid
    • Particularly large or small transaction
    • Unusual or “story” credit
    • Infrequent or new issuer
    • Weak credit
    • More volatile interest rate market or rising market conditions
    • Targeting or broadening investor base
    • Ability to select underwriting team
    • Complete flexibility in timing
  • Reasons to Consider a Sealed Bid
    • State law requirement
    • May get “steal” in falling rate environment
    • For large issuers, may occasionally use a technique to judge underwriters

Page 17

sealed bid versus negotiated bid19
Sealed Bid Versus Negotiated Bid
  • The Market
    • Far more negotiated bids than sealed bids
      • Nationally
      • And in Arizona
    • Trend has been moving more in the direction of negotiated bids

Page 18

case study bullhead city wastewater system
Case Study – Bullhead City Wastewater System
  • Problem
    • Need to fund construction of City-wide wastewater system to replace individual septic system tanks to address DEQ consent decree
  • Issues
    • Significant capital funding need
    • Limited funding sources
      • No property tax
      • No significant wastewater enterprise revenues
      • Growing, but limited, sales tax revenues
      • No significant cash available for capital projects

Page 19

case study bullhead city wastewater system21
Case Study – Bullhead City Wastewater System
  • Issues
    • Limited debt issuance opportunities
      • No interest in General Obligation Bonds
        • No property tax
        • Difficult voter authorization issues
      • No pledged revenues available for Wastewater Revenue Bonds
      • Limited excise tax bond capacity and competing needs for capacity
  • Financing Solution
    • Multi-phased/multi-pronged solution
    • Improvement District financings for main and collector system lines
      • 3 separate financings over multiple years for 3 areas of the City
      • Consistency among Districts in assessment methodology and amounts
      • Significant public outreach effort
      • Non-rated debt; difficult for public sale

Page 20

case study bullhead city wastewater system22
Case Study – Bullhead City Wastewater System
  • Financing Solution (con’t.)
    • WIFA as ID Bond purchaser
      • Significantly lowered interest cost due to subsidy
      • Knowledgeable “private placement” purchaser of ID debt
    • Contribution of City HURF funds
      • For street improvements associated with installing sewer lines
    • City Excise Tax Revenue Bonds for wastewater plant improvements
      • Broader City contribution toward backbone wastewater system serving whole community
      • Limited use permitted retaining bonding capacity for other City capital needs
    • CDBG Grant monies
      • For on-lot improvements (removal of septic tanks on privately owned property)

Page 21

case study pima county spring training stadium facility
Case Study – Pima County Spring Training Stadium Facility
  • Problem
    • Need to fund construction of Cactus League Spring Training Facility for Arizona Diamondbacks and Chicago White Sox
  • Issues
    • Significant capital funding need
    • Limited funding sources
      • No significant cash available for project
      • Anticipated negative cash flow from operations
      • No general sales tax

Page 22

case study pima county spring training stadium facility24
Case Study – Pima County Spring Training Stadium Facility
  • Issues
    • Limited debt issuance opportunities
      • No interest in General Obligation Bonds
        • No time for election/public vote
        • Difficult voter authorization issues
      • Limited alternative financing structures
      • Certificates of Participation, subject to annual appropriation, only viable approach
        • But poor project collateral
  • Financing Solution
    • Sale/lease-back of existing County facility
      • Need for essential project as collateral
      • County jail as selected facility

Page 23

case study pima county spring training stadium facility25
Case Study – Pima County Spring Training Stadium Facility
  • Financing Solution (con’t)
    • Public auction (sale) of County’s jail asset
      • Subject to lease-back under parameters established by County
      • Trustee submits bid on behalf of financing team
      • Title to property transfers back to County at end of financing term
    • Lease-back of facility by County securitized through issuance of Certificates of Participation
      • Subject to annual appropriation
      • Jail facility as collateral
    • Proceeds of Certificates of Participation paid by Trustee to County
      • Used by County to construct Cactus League facility

Page 24

contact information
Contact Information
  • For questions or follow-up on these materials or to address any of your financing needs, please contact any of our Arizona-based specialists listed below:
    • Kurt Freund, Western Region Manager (602) 381-5365
    • Shawn Dralle, Arizona Manager (602) 381-5362
    • John Snider, Managing Director (602) 381-5361
    • John Moore, Managing Director (520) 571-0626
    • William Wildman, Managing Director (602) 381-5364
    • Bruce Kelley, Managing Director (602) 381-5366
    • Jeffrey Wagner, Managing Director (602) 381-5369
    • Timothy Nelson, Director (602) 381-5342
    • Nicholas Dodd, Vice President (602) 381-5360
    • Jay Spector, Vice President (602) 381-5379
    • Phong Pham, Associate Vice President (602) 381-5370
    • Megan Wienand, Associate Vice President (602) 381-5367
    • Rene Moreno, Associate Vice President (602) 381-5376
    • Kathy Salcido, Associate Vice President (602) 381-5371
    • Michael Vásquez, Analyst (602) 381-5373

Page 25