HomeMy WebLinkAboutWestlake Village Public Improvement District presentationJefferies LLC
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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
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PID Program Overview
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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
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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
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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
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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
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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
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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
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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
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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
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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
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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.
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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.
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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
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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
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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
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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
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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.”
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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
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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.
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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
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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
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Jefferies LLC / October 28, 2013
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