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HomeMy WebLinkAboutWestlake Village Public Improvement District presentationJefferies LLC Member SIPC Presentation to the Town of Westlake Westlake Village Public Improvement District Financing For Public Projects October 28, 2013 Jefferies LLC / October 28, 2013 Table of Contents PID Program Overview 3 The City/Issuer PID Activities 11 PID Financial Overview 21 Jefferies LLC / October 28, 2013 PID Program Overview Jefferies LLC / October 28, 2013 The Purpose Provide Long Term Fixed Rate Land Secured Financing Interest rates from 5% to 7.5% based on credit Debt Secured by a Property Assessment Lien Can finance all types of public infrastructure Remains on the property regardless of subsequent ownership Provide long term (15 to 30 years) fixed rate, fixed payment financing Can provide financing at the start of construction 4 Jefferies LLC / October 28, 2013 What Can Be Financed? Basic public infrastructure The public infrastructure must eventually be owned by a public agency (City, County, Utility District, etc.) The public infrastructure can be on-site or off-site Design and engineering costs Up to 3 years of construction period interest funding is possible while the infrastructure is built 5 Jefferies LLC / October 28, 2013 When Can The Bonds Be Issued? Bonds can be issued “up front” to fund engineering and construction For phased or larger projects: ─Bonds can be issued in a phased program over time Once private development is well underway, added bonds may be issued to finalize public improvement costs reimbursements 6 Jefferies LLC / October 28, 2013 What is the Repayment Mechanism? Bond debt service payments are semiannual, but assessment payments are paid with annual property tax payments Standard property tax delinquency charges will apply Delinquency will cause foreclosure proceedings to commence within 90 days Delinquency is cured by bringing the special assessments current – the PID debt does NOT accelerate upon delinquency The City or County who is the bond issuer may collect the special assessments with separate billings that will coincide with the property tax payments or work to contract with the county tax collector to include the assessment in the normal ad valorem tax bills 7 Jefferies LLC / October 28, 2013 How Can the Public Infrastructure be Built? Standard procedures for public infrastructure construction Terms of reimbursement (estimated costs, progress payments vs. completed “systems” and timing process) should be pre-negotiated Infrastructure plus soft cost reimbursements are public record and must be reasonable and verifiable The contractor selection and cost reimbursement procedure should be open and transparent 8 Jefferies LLC / October 28, 2013 Texas Public Improvement District (PID) History 1987 – Original PID Law Adopted 1988 to late 1990s – Primarily used as funding for maintenance of Home Owners Association facilities and other neighborhood improvements Late 1990s to Present – Expanded use for “pay-as- you-go” capital cost of reimbursements for new infrastructure 2007 – First Major PID Bond financing for The Highlands at Trophy Club 9 Subsequent issues for:  City of Lubbock 2008 Vintage Township PID  City of Hackberry 2009 Hackberry Hidden Cove PID  City of Waxahachie 2011 Waxahachie PID No.1 Phase 1 Project  City of Austin 2011 Whisper Valley and Indian Hills (Jefferies Team)  City of Lago Vista 2012 Tessera Project (Jefferies Team) City of the Colony 2013 Nebraska Furniture Mart Project (Jefferies Team) City of Austin 2013 Estancia Project (Jefferies Sole Underwritten) Jefferies LLC / October 28, 2013 Texas Public Improvement District (PID) History 2009 – Interest Cap obstacle inadvertently added to the PID Law 2011 – Interest Rate Cap removed & law improved 10 City/Town Public Improvement Project Par Amount Issue Date Status Houston Lamar Terrace 800,000 Dec-92 Matured Round Rock Encino Plaza 2,690,000 Mar-97 Matured Waco District No. 2 2,255,000 Feb-03 Payments Current El Paso Thunder Canyon 400,000 Apr-07 Payments Current Trophy Club The Highlands at Trophy Club 27,500,000 Dec-07 Payments Current Lubbock Vintage Township 3,472,000 May-08 Payments Current Hackberry Hackberry Hidden Cove 17,280,000 Oct-09 Payments Current Waxahachie District No. 1 Phase 1 1,340,000 Jan-11 Payments Current Austin Whisper Valley 33,985,168 Nov-11 Payments Current Austin Indian Hills 5,192,350 Nov-11 Payments Current Lago Vista Tessera 24,690,000 Nov-12 Payments Current The Colony Texas Furniture Mart 201,400,000 Feb-13 Payments Current Austin Estancia 12,590,000 Jul-13 Payments Current Jefferies LLC / October 28, 2013 The City/Issuer PID Activities Jefferies LLC / October 28, 2013 City/Issuer Additional Work for a PID Added Work for the PID 2 to 4 City Council Presentations ─Informational presentation and non-binding go-ahead approval ─PID formation Approval ─PID Services Assessment Plan (SAP) Review ─Bond sale approval Senior Staff Review ─PID formation plan ─Bond sale specifics All staff, legal and consultant time to be funded by the PID/Property owner Public infrastructure review is no different than standard construction 12 Jefferies LLC / October 28, 2013 City PID Tasks PID Formation Approval Bond Fund Disbursement and Construction Oversight On-going Operation and Bond Disclosure PID Revenue Collections All of these tasks should be funded by the PID. The basic work for all tasks can be performed, on behalf of the City, by qualified consultants. 13 Jefferies LLC / October 28, 2013 Public Improvement District Formation Approval The City Bond Counsel, Financial Advisor, Underwriter and Consultants will prepare all documents City Engineering Staff will need to review and approve the scope of public improvements to be constructed 3 to 5 City Council presentations and actions will be required The actual PID formation approvals are quite straightforward – agreement on the exact scope of the public infrastructure to be included in the PID usually takes the most discussion and time The Bond financing documents are typically quite straightforward as the financing is simply a fixed rate debt issuance secured by a special assessment lien. 14 Jefferies LLC / October 28, 2013 PID Bond Fund Disbursement and Construction Oversight The City Staff and customarily a third party Engineering Firm are responsible for reviewing the PID construction activity The property owner will submit monthly reimbursement requests to be approved by the City selected Engineering Firm and then City Staff With City approval, the Bond Trustee will disburse construction funds each month City oversight, to make certain funds are only paid for completed work, is important 15 Jefferies LLC / October 28, 2013 PID On-Going Operation and Bond Disclosure One annual meeting is required to approve the Special Assessment Levy The City should hire consultants to manage the quarterly and annual on-going disclosure to bond holders – the PID can fund these costs Once the project is substantially built out the disclosure activities will decrease markedly All activities should be funded from PID revenues and be undertaken by third party consultants 16 Jefferies LLC / October 28, 2013 PID Revenue Collections City Staff or consultants are responsible to see that the Special Assessment is billed – this can be done by the City consultants or jointly with the County property tax collections The City is responsible to hire consultants or direct staff to check and report annual delinquent Special Assessments Most critically, the City will covenant to foreclose promptly on delinquent assessments by any non-homeowner or party responsible for more than 5% of the Special Assessments Homeowner delinquencies will not need foreclosure attention unless the delinquency exceeds two years 17 Jefferies LLC / October 28, 2013 City PID Program Benefits Increased assurance of high quality infrastructure Infrastructure constructed at project start All formation and oversight costs fully reimbursed NO impact of the City’s debt capacity, credit rating or credit status 18 Jefferies LLC / October 28, 2013 PID Program Municipal Safeguards City Bond Counsel prepares all bond documents to assure secure flow of funds and no City liability City Financial Advisor to review all PID program finances, financing structure and bond pricing All Bond Documents will clearly present that there is no City liability, financial obligation or pledge of any funds The City’s credit rating and status is NOT pledged or at risk with the issuance of a PID financing “THE BONDS ARE SPECIAL OBLIGATIONS OF THE CITY PAYABLE SOLELY FROM PLEDGED REVENUES AND ANY OTHER FUNDS HELD UNDER THE INDENTURE, AS AND TO THE EXTENT PROVIDED IN THE INDENTURE. THE BONDS DO NOT GIVE RISE TO A CHARGE AGAINST THE GENERAL CREDIT OR TAXING POWERS OF THE CITY AND ARE NOT PAYABLE EXCEPT AS PROVIDED IN THE INDENTURE. THE OWNERS OF THE BONDS SHALL NEVER HAVE THE RIGHT TO DEMAND PAYMENT THEREOF OUT OF ANY FUNDS OF THE CITY OTHER THAN THE PLEDGED REVENUES AND ANY OTHER FUNDS HELD UNDER THE INDENTURE, AS AND TO THE EXTENT PROVIDED IN THE INDENTURE. THE CITY SHALL HAVE NO LEGAL OR MORAL OBLIGATION TO PAY THE BONDS OUT OF ANY FUNDS OF THE CITY OTHER THAN THE PLEDGED REVENUES.” 19 Jefferies LLC / October 28, 2013 Typical Sequence of Events for PID Formation 1.Detailed staff & consultant analysis of PID 2.Preparation of Service & Assessment Plan (“SAP”) 3.Prepare PID formation & optionally bond financing documents 4.Publish notice of PID formation hearing 1.50% Landowners 2.Payment of pre-formation costs PETITION INITIATED PID Legislative body commences proceedings 1.Staff “global” review to determine City/Issuer benefit 2.Preliminary legal/financial overview to approve steps proceed City approving PID formation Optional: Levy PID assessment and approve bond sale PUBLIC HEARING 1.Close Bond Issue 2.Record and Levy PID assessment 3.Commence Construction SUBSEQUENT ACTIONS 1.Initiate construction or acquisition 2.Commence activities to administer debt, levy and collect special taxes and comply with continuing disclosure requirement 20 Jefferies LLC / October 28, 2013 PID Financial Overview Jefferies LLC / October 28, 2013 The Land is the Credit The PID Debt is secured by a Special Assessment Lien on the PID Land Key credit factors include: ─Status of development entitlements There can be no impediments to construction Fully adopted development agreements are ideal Risks from environmental or legal challenges to development must be extremely remote (non-existent). The development entitlements should include analysis that confirms there are no toxic or endangered issues related to the property. This single factor (developability) is absolutely most critical. Many of the defaults of land secured bonds have resulted from flawed entitlements. 22 Jefferies LLC / October 28, 2013 The Land is the Credit The PID debt is secured by a Special Assessment Lien on the PID Land The land, not the owner, is the credit ─The owners can sell at any time – only the land is the security ─The PID appraisal should include a thorough analysis of truly comparable land sales ─It is in the best interest of the PID (and the respective City or County) to see that the PID area is parcelized to at least a neighborhood or village level when bonds are sold. ─Development entitlements must be in place 23 Jefferies LLC / October 28, 2013 Value to Lien Calculation at 3:1 300 Unfinished Single Family Homes Under Contract @ 60,000 per lot = 18,000,000 200 Unfinished Single Family Homes @ 40,000 per lot = 8,000,000 Subtotal Before Bonds are Issued = 26,000,000 Proposed Bond Sale for Public Infrastructure = 13,000,000 Post Bond Sale Value = 39,000,000 Property Value at Final Map 24 Jefferies LLC / October 28, 2013 Disclaimer Municipal Group Disclaimer This document is intended to be reviewed in conjunction with an oral presentation by representatives of Jefferies LLC (“Jefferies”) and is therefore incomplete on a stand-alone basis. 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