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HomeMy WebLinkAbout09.a EDB 11.21.23 CCUA Financing Presentation pfm Clay County Utility Authority Peters Creek Funding Status, Market Update, Anticipated LAMPA Funding Needs & Debt Policy Overview November 21 , 2023 PFM Financial Advisors LLC 200 South Orange Ave 407.648.2208 Suite 760 pfm.com Orlando, FL 32801 • OVERVIEW OF DEBT & MARKET UPDATE • Series 2023 Bonds Açjenda • Outstanding Debt • Market Update • CURRENT FINANCING OPPORTUNITY • Special Financing Needs • Recommended Plan of Finance & Preliminary Financing Schedule • DEBT MANAGEMENT POLICY • Purpose & Goals • Structuring & Targets • QUESTIONS © PFM 2 Overview of Debt & Market Update $75,000,000 Utility System Revenue Bond, Series 2023 • Summary: • $75 million Utility System Revenue Bond, Series 2023 (the "2023 Bond") was issued via Bank Loan on June 28, 2023. Truist served as Lender for the transaction • $22.5 million has been drawn to date. $5 million at close (June 28, 2023), $10 million first draw (September 14, 2023) & $7.5 million second draw (October 27, 2023) • Purpose of Issue: The 2023 Bond was issued for the purpose of providing funds to (finance capital improvements (mainly Peters Creek); and (ii) pay the costs of issuance • Payment Dates: • Principal paid semi-annually on May 1 and November 1, commencing November 1, 2026, through final maturity on May 1, 2031, providing opportunity and flexibility to manage liquidity risk with a long-term take-out financing • Interest paid semi-annually on May 1 and November 1, commencing May 1, 2024, through final maturity on May 1, 2031 • Security: The 2023 Bond is payable solely from and secured solely by a pledge of the net revenues of Clay County Utility Authority's ("CCUA") Utility System and will be issued on parity with CCUAs Series 2012, 2015 and 2019 Notes under and pursuant to Master Resolution No. 93/94- 27, as amended and supplemented (collectively, the Master Resolution) • Optional Redemption: The 2023 Bond has a make whole call provision, but structured to be "taken-out" with long term bond once the project is complete © PFM 4 Outstanding Debt Outstanding Debt Service (Fiscal Year) 14 0 12 10 11111 8 6 42 �� �0 �6 � �0 �c 30 3^ � 3` 3� 3( 36 3A 3c �g �0 �N �� �0 �� �0 �� �� �0 �cb h0 h^ h9, h� �10 r, , �10 �10 �10 �1, q , r10 �10 �10 �10 r, �O �10 �10 �10 (10 `10 �O �O �10 �10 �10 (10 �O �O r10 (10 ■2015 2015 SRF 2018 SRF •2019 ■2023 Aggregate Summary as of Fiscal Year End 2023 Interest Rate Initial Par Remaining Par Final Maturity Series 2015- Utility System Revenue&Refunding 1.29% 42,200,000 33,000,000 11/1/2031 Series 2015 SRF 2.82% 1,700,000 600,000 5/16/2029 Series 2018 SRF 0.94% 12,800,000 10,500,000 2/15/2039 Series 2019- Utility System Revenue&Refunding 2.03% 48,500,000 38,200,000 5/1/2039 Series 2023- Utility System Revenue 3.56% 75,000,000 75,000,000 5/1/2054* *Current maturity of 5/1/2031;Assumed to be refinanced with long-term debt with a—30 year maturity © PFM 5 Municipal Interest Rate Movements BVAL AAA G.O. Yield Curve Changes BVAL AAA G.O. Curve 5.00% 11/10/2023 30 26 4.50% 20 17 4.00% i ♦ S 3.50% ‘ ♦ 10 . 0" 3.00% 2 0 1 — ,2.50%} -10 2.00% 1.50% -20 -21 JIJIJF 2 -22 1.00% -25 -30 -30 -30 -30 0.50% -35 -40 0.00% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 2 yr 5 yr 7 yr 10 yr 30 yr Maturity ■1 Wk Ago •1MoAgo • 1YrAgo Current — — 1 Wk Ago — — 1 Mo Ago 1 Yr Ago Source:Bloomberg © PFM PFM Pricing Group 6 Treasury Interest Rate Movements U.S. Treasury Yield Curve U.S. Treasury Yield Curve Changes 6.00% 11/10/2023 60 5.00% ar—.�`_ _ _ 50 43 48 49 • 38 4.00% 40 -0 . 30 v 3.00% c 0 20 2.00% `n 10 6 � ■ 0 0 1.00% 1-10 -4 -6 — -20 -10 -11 0.00% — -17 2 yr 5yr 7yr 10 yr 30 yr -30 Maturity 2 yr 5yr 7yr 10 yr Current — — 1 Wk Ago 1 Mo Ago • — 1 Yr Ago ■1WkAgo •1 Mo Ago 1 Yr Ago Treasury Rate Movement for the Past 3 Months Date & Weekday Total 11/10 Tenor 8/14 8/21 8/28 9/1 9/11 9/18 9/25 10/2 10/6 10/16 10/23 10/3010/31 11/1 11/2 11/3 11/6 11/7 11/8 11/9 11/10 A Rate Mon Mon Mon Fri Mon Mon Mon Mon Fri Mon Mon M T W T F M T W T F 1 5.37 0 7 -8 4 4 1 -6 -1 0 -1 3 1 4 0 1 -1 1 5.38 2 4.96 1 1 -11 10 8 4 -4 1 -4 -2 4 10 -2 2 1 5.04 3 4.64 Ir 6 -1 -12 7 10 9 5 -1 0 2 -2 3 2 -16 10 -8 1 ' 4.80 5 4.36 10 -8 -9 11 6 16 10 3 -3 9 -1 2 - -2 -16 11 -7 -2 14 0 2 4.65 7 4.29 013 -10 -5 10 4 20 12 6 -5 13 1 1 -14 -7 -13 11 -8 -4 14 0 39 4.68 10 4.19 15 -14 -2 11 3 23 14 9 -7 0 15 2 0 -11 -10 -10 10 -9 -9 13 -1 42 4.61 20 4.46 18 -16 0 8 1 27 16 13 , -7 13 2 0 -8 -14 -6 7 -9 -9 15 -4 47 4.93 30 4.29 16 -16 0 8 3 27 14 14 -8 14 3 0 -8 -14 -5 7 -9 -11 13 -4 44 4.73 Source: treasury.gov © PFM PFM Pricing Group 7 Treasury & Municipal Interest Rate Movements AAA Municipal Curve U.S. Treasury Curve 5.00% - 6.00% - 10yr Historical Range 11/9/2022 10yr Historical Range 11/10/2023 -11/9/2022 -11/9/2023 5.00% - % r 4.00% - 4.00% - 3.00% - 3.00% - 2.00% - 2.00% - 1.00% - 1.00% - 0.00% 0.00% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 Source:Bloomberg,treasury.gov © PFM PFM Pricing Group 8 Federal Reserve Dot Plot Federal Reserve DOT Plot 6.25 • The Dot Plot is chart showing estimates of what 6 the federal funds rate, the short-term interest 5.75 rate controlled by the Fed, should be 5.5 • Members of the rate-setting Federal Open 5.25 — Market Committee each assign a dot for what 5 they view as the midpoint of the rate's 4.75 appropriate range at the end of each of the next 4.5 three years and over the longer run. Investors 4.25 focus on the median dot 4N,..._ 3.75 • As many as 19 monetary policy makers -- the 3.5 seven governors on the Fed Board in Washington and the presidents of the 12 3.25 regional banks -- can contribute a dot 3 2.75 • Of the 12 regional Fed presidents, only five are 2.5 voting members of the FOMC in any given year. 2.25 That raises questions over how well the dots 2 accurately reflect longer-term FOMC intentions 2023 2024 2025 2026 Longer Term • Dot Plot projections don't reflect a commitment FOMC Dots Median by the FOMC to act and aren't an official Fed Funds Futures - Latest Value consensus forecast OIS - Latest Value © PFM 9 Future Needs w am Special Financing Needs ,,,„ .W0 u- ro Zw a to • CCUA has current borrowing needs totaling $30 million / Y • N m m N Z to facilitate the interlocal agreement with Shadowlawn _ ,y. WoNo Community Development District �• . o W w; • The Project is to be financed in tranches to limit exposure yj� - • 1 0, 0 to CCUA for development risk while saving interest . 3 expense R i • Consists of the construction of the Road Work and the • nl Utility Work within the Cathedral Oaks West and • fl CR218 right of way and CCUA easements from St 8e Shadowlawn Elementary School to the First Coast . 144 Expressway interchange, being approximately 1.8 20 miles . • Phase 1 (approximately $9.2 million) is necessary for: • • 9 • • County Road 218 Extension Utility Construction & • . • , Construction Engineering Inspection Services • . . • • Capital reimbursement to CCUA for funds previously / . spent to accelerate Utility Work through the Lake 1 ' • . I' , Asbury Master Planning Area (LAMPA) L' . . • g£ ,i ,. F ; a 1 II 1 SS5 ?a © PFM 11 Recommended Plan of Finance & Timeline • PFM's recommended approach would be to issue a Bank Loan RFP for the Series 2024 Issuance • Given the recent increase in interest rates, it might also be worth considering other funding alternatives • PFM recommends requesting financing options for the entire $30 million (with a structure like the recent $75 million financing), along with an option of funding the current $9.2 million need as an initial financing • Below is the estimated timeline for a Bank Loan,: Board directs Staff Distribute Bank Loan Board Approval of to Move Forward RFP Receive Proposals Loan Documents & Loan Closing November 2023 November 2023 January 2024 February 2024 © PFM 12 Debt Management Policy Debt Management Policy Purpose & Goals • Authority: Clay County Utility Board of Supervisors • Purpose: Establish guidelines for the issuance and management of CCUAs debt • Goals: CCUA shall seek to Achieve the following Objectives: 1. Establish and/or Maintain sufficiently high bond ratings to assure access to affordable credit and low borrowing costs. 2. Ensure intergenerational equity by amortizing debt within the expected useful life of a project or asset. 3. Coordinate CCUAs capital improvement plan with CCUAs Debt Management Policy to develop a coherent long- term financing plan for CCUAs capital funding needs. 4. Maintain flexibility for future financial needs of CCUA. 5. Mitigate portfolio risks and limit budget uncertainty through the use of traditional debt instruments, without incorporation of derivative products. 6. Measure and track financial ratios and adjust over time as needed with a periodic review of this Debt Policy (every 3-years). • The Draft Debt Management Policy is currently under review with the expectation to be brought for Board approval at a future board meeting © PFM 14 Debt Policy Targets & Structuring • CCUA will monitor and report debt ratios annually through the budget process at the time of each debt issuance with a goal to structure debt to meet the following targets: CLAY COUNTY UTILITY AUTHORITY • Policy Targets KEY PERFORMANCE INDICATORS PERIOD ENDING 08/31/2023 • Liquidity: Greater than 365 days cash on hand Ratio Calculation vs.Target Target Days of Cash on Hand Undesignated Cash 50,841,957 • Debt Burden: Debt as a % of Capital Assets less than 50% /Operating Expense per day / 109,925 Days of Cash on Hand = 463 a 365 In Years 1.27 • Debt Service as % of Net Revenue Coverage Ratio: 1.25x or higher Debt Ratio Total Liabilities 176,884,685 • Structuring Criteria /Total Assets / 542,886,844 Debt Ratio(%) = 33% 0 50% • Average Life: 20 years or less Debt-Service Coverage Ratio Revenue,Annualized 58,172,537 • Variable Rate: 25% or less -O&M Costs,Annualized - 39,573,116 /Total Debt Service / 9,925,701 Debt-Service Coverage Ratio 1.87 0 1.25 • Medium-Term Notes: 50% or less • Combined Variable Rate & Medium-Term Notes: 50% or less • CCUA shall not exceed the greater of these percentages on a standalone basis or$100 million combined for Variable Rate and Medium-Term Notes at the time of issuance © PFM 15 Questions Thank you ! pfm Disclosures ABOUT PFM PFM is the marketing name fora group of affiliated companies providing a range of services. All services are provided through separate agreements with each company. This material is for general information purposes only and is not intended to provide specific advice or a specific recommendation. Financial advisory services are provided by PFM Financial Advisors LLC a registered municipal advisor with the Securities and Exchange Commission (SEC) and the Municipal Securities Rulemaking Board(MSRB)underthe Dodd-Frank Act of 2010.Additional applicable regulatory information is available upon request. Consulting services are provided through PFM Group Consulting LLC. PFM's financial modelling platform for strategic forecasting is provided through PFM Solutions LLC. A web-based platform for municipal bond information is provided through Munite LLC. For more information regarding PFM's services or entities, please visit www.pfm.com. © PFM 18