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Home My WebLink About08.c Recommendation Memo - CCUA Series 2024 Ff m February 16, 2024 Recommendation Memorandum To: Jeff Wesselman, Chief Financial Officer From: PFM Financial Advisors LLC Re: Utility System Revenue Bond, Series 2024— Recommendation Memorandum PFM Financial Advisors LLC ("PFM")was engaged by Clay County Utility Authority ("CCUA" or the"Authority")to serve as financial advisor for CCUA's proposed issuance of a privately placed Utility System Revenue Bond, Series 2024 (the "2024 Bond"). The purpose of the Series 2024 Bond is to provide funds to facilitate the interlocal agreement with Shadowlawn Community Development District and pay costs of issuance. The 2024 Bond is payable solely from and secured solely by a pledge of the net revenues of CCUA's Utility System and will be issued on parity with CCUA's Series 2012, 2015, 2019 and 2023 Notes under and pursuant to CCUA's Bond Resolution. The requested size of the 2024 Bond was a not-to- exceed par amount of either$9.2M or$30 million. Based on recent aggressive bids received from financial institutions for similar financings, PFM recommended CCUA pursue a privately placed direct bank loan (or line of credit), which in today's market was expected to be an efficient and cost-effective method of financing. All Authority debt currently outstanding is privately placed with a bank or issued as a State Revolving Fund loan. At CCUA's direction, following the board's direction to proceed, PFM distributed a request for proposals ("RFP")on December 5, 2023. The RFP was sent to a list of local, regional and national financial institutions to identify the institution that could provide CCUA with a fixed rate, non-bank qualified term loan at the lowest overall borrowing cost, pursuant to certain conditions as determined by CCUA. Prior to the submittal deadline (2:00 pm on January 18, 2024) CCUA received six (6) proposals from the following firms: Bank of America, JPMorgan Chase, PNC, Truist, Valley National &Webster Bank. A summary of each proposal is included as Exhibit A. Webster Bank proposed a traditional loan for either the $9.2M or$30M options, fully drawn at close, at a fixed interest rate of 4.15%. This also includes prepayment flexibility beginning on May 2, 2028, through May 1, 2029, at a prepayment price of 101%, and thereafter at par with no penalty. Comparatively, Bank of America proposed a variable interest rate of 3.97%, however, this would subject CCUA to interest rate risk. Truist proposed a fixed interest rate of 3.94%, however, this option included a put after 1 year. Based on PFM's review and discussions with CCUA's staff and Bond Counsel, it was determined that Webster Bank's $30M option provided the most cost-effective financing alternatives along with favorable conditions. The proposed interest rate, 4.15%, is locked through the anticipated closing date of February 27, 2024, which eliminates the risk of rising interest rates between the proposal submittal date and closing date. Based on the competitive bid offered by Webster Bank, included as Exhibit B, we recommend moving forward with the Webster Bank proposal and negotiating final deal terms with the bank. We look forward to discussing this recommendation at the CCUA Board meeting on February 20th Exhibit A Summary of Proposals pfm Clay County Utility Authority Utility System Revenue Note,Series 2024 RFP Summary Holly Kuhlman Scott Ricker Contact Information (239)598-8805 (407)236-5398 Holly.kuhlman@bofa.com scott.ricker@jpmorgan.com Option 1:$30mm w/initial Yes Yes Funding Amount Offered draw of$9.2mm Option 2:Not to exceed $9.2mm for phase 1 Initial Put Date - - Maturity May 1,2034 May 1,2034 Must be exercised on or before the termination date,with 15 Term-out Option days written notice of the request to convert,any amount outstanding of less than$1,000,000 on the draw termination date will be immediately due and payable Term-out Tax-Exempt Interest Rate As of January 18th,2024:3.97% - If the undrawn amount is 50%or greater for the line of credit, Commitment Fee(Undrawn Fee) the issuer will pay the actual daily unused amount equal to 23 - bps per annum payable monthly in arrears. Indicative Rates per annum as of 1/18/2024 Tax-Exempt Interest Rate(Drawn Fee) Determined using the calculation two days prior to closing Option 1:MWC:4.25% ° Option 2:05/01/2027 Redemption:4.82/° Option 3:05/01/2030 Redemption:4.40% Rate Set Calculation Rate per annum equal to:(80%x Daily SOFR)+.54%(per Subject to change daily until locked draw) Rate Locked to Closing,or Date to be Set Determined 2 days prior to closing,and the proposed terms are Rates subject to change daily until a written rate lock letter only valid if the loan closes on or before March 15,2024. agreement is executed. -18 Months Draw Flexibility -$100,000 integral and$100,000 multiples thereof 18 Months -Four draws per month Project Fund Options - - The County may prepay in full or in part at any time,with three A standard make whole call option and redemption dates of business days written notice(Variable Rate Option) May 1,2027 and May 1,2030 are all proposed with differing Prepayment Provisions fixed rates without premium or penalty;any other prepayment Make Whole(Fixed Rate Term Out Option) prior to the redemption date would subject the County to breakaae costs Fixed legal fee:$25,000 Legal/Other Fees Administrative fee:$2,500 Subject to pay all legal fees of the Bank,estimated fees are Both fees subject to increase if the transaction is not closed $8,500 within 60 days from the mandate being received by the Bank Default Rate Base rate plus 6.00% Currently applied interest rate+4.00% Term Sheet Expiration The pricing formula is only valid if the loan closes on or before March 15,2024. The Master resolution and any subsequent amendments are Rate covenant at 105%of annual DS or 110%include W&S Other Conditions&Notes subject to review and acceptance by the Bank.Within 270 days connection fees;ABT at 105%MADS,non-compliance would after the close of each FY,the County must provide their be considered default complete audited financial statements Prepared by PFM Financial Advisors LLC 1 of 3 1/22/2024 pfm Clay County Utility Authority Utility System Revenue Note,Series 2024 RFP Summary 111 J.Michael 011iff Lisa Hayes Contact Information (813)221-6184 (904)632-2599 michael.olliff@pnc.com lisa.c.hayes@truist.com Option 1:$30mm w/initial Yes Yes draw of$9.2mm Funding Amount Offered Option 2:Not to exceed $9.2mm for phase 1 Yes Yes Initial Put Date - 5/1/2027 or 5/1/2029 or 5/1/2031 Maturity May 1,2034 May 1,2034 Term-out Option - - Term-out Tax-Exempt Interest Rate - - Commitment Fee(Undrawn Fee) - 1-Year Put:3.994% Tax-Exempt Interest Rate(Drawn Fee) Options 1&2:4.98%(Indicative) 3-Year Put:4.220% 5-Year Put:4.300% Full Term:4.420% Rate Set Calculation N/A N/A Rate Locked to Closing,or Date to be Set Determined three business days prior to the Closing Date Rates available through February 29,2024 The Loan will be funded in a single drawdown on the date of At closing of the loan,the loan shall be fully disbursed and closing.Loan proceeds shall be deposited to an eligible escrow Draw Flexibility deposited into a depository account held in the name of the project account(the"Escrow Account"),to be held at Twist Borrower at the Bank.The Borrower will then draw funds from Corporate Trust Services.It is anticipated that the Loan shall be the depository account as needed repaid from proceeds of a long-term bond to be arranged following project funding and construction. Guaranteed Rate to May 2026:3.55%(Collateralized funds, Project Fund Options released at any time without penalty) Managed Rate:4.10%(Funds not collateralized,released at any time without penalty) CCUA will pay to the Lender prepayment compensation in Upon at least fifteen(15)business days'prior written notice to connection with any prepayment of the Loan based on the Prepayment Provisions the Bank,the Borrower has the right to prepay all of the Lender's standard break-funding terms for fixed rate loans. outstanding principal and interest There shall be no prepayment penalty for repayment on a Put Date. Legal/Other Fees Option 1:$12,500 Lender's Counsel:$20,000 Option 2:$8,500 The Default Rate equals the greatest of(i)the PNC Prime Rate Default Rate plus 3.0%;(ii)the Overnight Bank Funding Rate plus 3.5%;and Lesser of 18%per annum and the maximum lawful rate (iii)9.0%. Term Sheet Expiration 1/31/2024 2/29/2024 Annual audited financial statements for the Borrower within 210 Annual Financial Statements within 270 days of fiscal year end, Other Conditions&Notes days of fiscal year end,such other financial information as annual budget within 30 days of adoption,rate Covenant of requested by the Bank. 1.05x as outlined in the Master Resolution,additional debt allowed subject to terms of Master Resolution Prepared by PFM Financial Advisors LLC 2 of 3 1/22/2024 pfm Clay County Utility Authority Utility System Revenue Note,Series 2024 RFP Summary er Tim Hamilton Mark Cargo Contact Information (859)619-6677 (704)287-4493 thamilton@valley.com mcargo@websterbank.com Option 1:$30mm w/initial Yes Yes draw of$9.2mm Funding Amount Offered Option 2:Not to exceed $9.2mm for phase 1 Yes Yes Initial Put Date - - Maturity May 1,2034 May 1,2034 Term-out Option - - Term-out Tax-Exempt Interest Rate - - Commitment Fee(Undrawn Fee) - - Tax-Exempt Interest Rate(Drawn Fee) Option 1:7.90°�/0(Indicative) Options 1&2:4.15% Option 2:8.09/u(Indicative) Rate Set Calculation Option 1:1-Month SOFR plus 2.56 N/A Option 2:1-Month SOFR plus 2.75 Rate Locked to Closing,or Date to be Set - The Interest Rates quoted are valid through February 29,2024. Draw Flexibility 18 Months - Project Fund Options Loan proceeds may be funded into an escrow account,with disbursements made as needed Prepayable in whole on any payment date with at least thirty (30)days prior written notice at following redemption price: Prepayment Provisions Pre-payable in whole or in part at anytime Closing-5/1/28:No Call 5/2/28-5/1/29:101% After 5/2/29:100% Legal/Other Fees Not to exceed$20,000 Not to exceed$7,500 Default Rate Applicable fixed rate pricing at the time of default plus 300 basis points Term Sheet Expiration 1/30/2024 1/24/2024 CCUA agrees to maintain a depository relationship with VNB in For due diligence,Lender will require Borrower's three(3)most recent audited financial statements,its most recently adopted Other Conditions&Notes an amount of no less than$5 Million(Five-Million Dollars) budget,and any other information that Lender may reasonably during the term of the Series 2024 Bank Loan. require Prepared by PFM Financial Advisors LLC 3 of 1/22/2024 Exhibit B Webster Bank Proposal Mark A.Cargo Managing Director Webster Bank 0Webster Bank' Concord, NC28027 704-287-4493 Email:mcargo@websterbank.corn Website: www.websterbank.com January 18, 2024 Clay County Utility Authority, FL 3176 Old Jennings Road Middleburg, FL 32068 Project:A Tax-Exempt Revenue Bond, Series 2024 Webster Bank is pleased to present this financing proposal (the "Term Sheet") to Clay County Utility Authority, FL in connection with the above-referenced project. Working with Webster Bank has several major advantages, including: • Experience and Expertise: Each member of the Webster Bank Public Finance team has significant experience regarding the financing of essential governmental equipment and projects and can help you document your financing in a manner that complies with applicable local laws. • Financial Capability: The Webster Bank Public Finance team is part of Webster Bank, a publicly traded commercial bank, which has the capability of funding tax-exempt financings on a nationwide basis. • Reliability: The Webster Bank Public Finance team prides itself on excellent customer service and the prompt closing of awarded transactions. • Simplified Financing Structure: Webster Bank is proposing to finance 100%of the Utility System Revenue Loan via a Tax-exempt Revenue Loan. We look forward to working with you and your team on this assignment, and please do not hesitate to contact us with any questions,or comments you may have. We are positive that you'll enjoy working with Webster Bank. Very truly yours, Mark A. Cargo Managing Director mcargo@websterbank.com www.websterbank.com 0 Webster Bank' Mark A.Cargo Managing Director Webster Bank Concord, NC 28027 704-287-4493 Email: mcargo@websterbank.com Website: www.websterbank.com TERM SHEET TYPE OF FINANCING: A Tax-Exempt Utility System Revenue Loan, Series 2024 (the "2024 Loan" or "Loan"), with repayments made from the Net Revenues of the Utility System as noted in the RFP, and in the Security section below,which will enable the Borrower to finance the Projects as expressed in the RFP. Lender will fund the Loan on a private-placement basis. ISSUER/BORROWER: Clay County Utility Authority, FL("CCUA") LENDER: Webster Bank N.A., or its designee or assignee TOTAL AMOUNT FUNDED: Approximately$30,000,000.00 PROJECT/PURPOSE: The 2024 Loan is being issued by CCUA for the purpose of providing funds to (i)finance capital improvements, (ii) reimburse CCUA for funds spent to date; and (iii) pay the costs of issuance. ESCROW: The proceeds related to the Loan may be funded into an escrow account (the "Escrow Fund"),with disbursements made as needed. The Escrow may be set up with Webster Bank and will be collateralized as required by the State of Florida. TERM: Approximately Ten (10)years,Two (2) months, Exhibits A& B. PAYMENT STRUCTURE: Borrower shall make principal and interest Loan payments as set forth in Exhibits A& B. INTEREST RATE: A.4.15% (Option 1) B. 4.15%(Option 2) 2 ' Page ANTICIPATED CLOSING DATE: On or before February 27, 2024 INTEREST RATE LOCK: The Interest Rates quoted above are valid through February 29, 2024. SECURITY: The 2024 Loan is payable solely from and secured solely by a pledge of the net revenues of CCUA's Utility System and will be issued on parity with CCUA's Series 2012, 2015, 2019 & 2023 Notes under and pursuant to Master Resolution No.93/94-27, as amended and supplemented (collectively, the "Master Resolution"). PREPAYMENT: Borrower shall have the right to pre-pay the Loan in whole on any payment date by paying the Redemption Price, provided that the Borrower gives Lender at least thirty (30) days prior written notice of its intent to do so. The Redemption Price, as a percentage of the then-outstanding Loan balance, shall be equal to: Exhibits A& B: Years: Percentage: Closing-5/1/28 No Call 5/2/28-5/1/29 101% After 5/2/29 100% FEES OF LENDER: Not to exceed$7,500.00 for Webster Bank. The costs of issuance incurred by Borrower, such as loan counsel fees, are payable by Borrower and may be capitalized into the Loan upon request. DOCUMENTATION: Borrower shall provide documentation for the Loan, subject to review& approval by Lender. Borrower shall provide an opinion of legal counsel attesting to the legal, valid, binding, and enforceable nature of the Loan. The Lender will use Gilmore & Bell as counsel to review the documents. 3 ' Page ASSIGNMENT: Webster Bank (the "Purchaser/Lender") is purchasing the Loan as a vehicle for making a commercial loan for its own account with the present intent to hold the Loan to maturity or earlier prepayment, and without any present intent to distribute or sell any interest therein or portion, provided, however, the Purchaser/Lender reserves the right — without the consent of (but with notice to) the Borrower -to assign, transfer or convey the Bond or any interest therein or portion thereof, but no such assignment, transfer or conveyance shall be effective as against the Borrower, unless and until the Purchaser/Lender has delivered to the Borrower written notice thereof that discloses the name and address of the assignee and such assignment, transfer or conveyance shall be made only to(i)an affiliate of the registered owner of the Loan or (ii) banks, insurance companies or other financial institutions or their affiliates. Nothing in the Loan shall limit the right of the Purchaser/Lender or its assignees to sell or assign participation interests in the Loan to one or more entities listed in (i) or (ii). Webster Bank will sign an Investment Letter. IRS CIRCULAR 230 DISCLOSURE: Lender and its affiliates do not provide tax advice. Accordingly, any discussion of U.S.tax matters contained herein (including any attachments) is not written or intended to be used, and cannot be used, in connection with the promotion, marketing or recommendation by anyone unaffiliated with Lender of any of the matters addressed herein or for the purpose of avoiding U.S. tax-related penalties. ADVISORY DISCLOSURE: Webster Bank is not a registered municipal advisor as defined under the Dodd-Frank Wall Street Reform and Consumer Protection Act and its related rules and regulations. In providing this Term Sheet, Webster Bank is not providing any advice, advisory services, or recommendations with respect to the structure, timing, terms, or similar matters concerning an issuance of municipal securities. This Term Sheet is a commercial, arms-length proposal that does not create a fiduciary duty by Webster Bank to the Borrower. The Borrower may engage, separately and at its own cost, an advisor to review this Term Sheet and the proposed transaction on the Borrower's behalf. CREDIT APPROVAL: Although very favorably prescreened,the Loan is subject to final credit approval by Webster Bank and the negotiation of mutually acceptable documentation. For due diligence, Lender will require Borrower's three (3) most recent audited financial statements, its most recently adopted budget, and any other information that Lender may reasonably require. 4IPage PROPOSAL EXPIRATION: Unless accepted by the Borrower or extended in writing by Webster Bank at its sole discretion, this Term Sheet shall expire on January 24,2024. Once accepted,this Term Sheet shall expire if the Loan is not funded by February 29, 2024. Upon receipt of the signed Term Sheet, we will endeavor to provide you with a timely commitment, and we will use good faith efforts to negotiate and finance the Loan based on the terms herein. It is a pleasure to offer this financing proposal and we look forward to your favorable review. Very truly yours, Mark A. Cargo Managing Director mcargo@websterbank.com www.websterbank.com Agreed to and Accepted by: Clay County Utility Authority, FL (Name) (Title) (Date) 5 ' Page Exhibit A--Sample Amortization Schedule Funding Amount: $30,000,000.00 Interest Rate: 4.15% Down Payment: $0.00 Closing Date: 2/27/2024 Capitalized Interest: $0.00 Term(years): 10.18 Cost of Issuance: $0.00 Amount Financed: $30,000,000.00 Payment Payment Payment Interest Principal Outstanding Redemption Number Date Amount Component Component Balance Price Principal: 2/27/2024 $30,000,000.00 No Call 1 5/1/2024 $218,301.37 $218,301.37 $0.00 $30,000,000.00 No Call 2 11/1/2024 $622,500.00 $622,500.00 $0.00 $30,000,000.00 No Call 3 5/1/2025 $622,500.00 $622,500.00 $0.00 $30,000,000.00 NoCall 4 11/1/2025 $622,500.00 $622,500.00 $0.00 $30,000,000.00 No Call 5 5/1/2026 $3,342,500.00 $622,500.00 $2,720,000.00 $27,280,000.00 No Call 6 11/1/2026 $566,060.00 $566,060.00 $0.00 $27,280,000.00 No Call 7 5/1/2027 $3,421,060.00 $566,060.00 $2,855,000.00 $24,425,000.00 No Call 8 11/1/2027 $506,818.75 $506,818.75 $0.00 $24,425,000.00 No Call 9 5/1/2028 $3,506,818.75 $506,818.75 $3,000,000.00 $21,425,000.00 $21,639,250.00 10 11/1/2028 $444,568.75 $444,568.75 $0.00 $21,425,000.00 $21,639,250.00 11 5/1/2029 $3,594,568.75 $444,568.75 $3,150,000.00 $18,275,000.00 $18,275,000.00 12 11/1/2029 $379,206.25 $379,206.25 $0.00 $18,275,000.00 $18,275,000.00 13 5/1/2030 $3,684,206.25 $379,206.25 $3,305,000.00 $14,970,000.00 $14,970,000.00 14 11/1/2030 $310,627.50 $310,627.50 $0.00 $14,970,000.00 $14,970,000.00 15 5/1/2031 $3,785,627.50 $310,627.50 $3,475,000.00 $11,495,000.00 $11,495,000.00 16 11/1/2031 $238,521.25 $238,521.25 $0.00 $11,495,000.00 $11,495,000.00 17 5/1/2032 $3,883,521.25 $238,521.25 $3,645,000.00 $7,850,000.00 $7,850,000.00 18 11/1/2032 $162,887.50 $162,887.50 $0.00 $7,850,000.00 $7,850,000.00 19 5/1/2033 $3,992,887.50 $162,887.50 $3,830,000.00 $4,020,000.00 $4,020,000.00 20 11/1/2033 $83,415.00 $83,415.00 $0.00 $4,020,000.00 $4,020,000.00 21 5/1/2034 $4,103,415.00 $83,415.00 $4,020,000.00 Total: $38,092,511.37 $8,092,511.37 $30,000,000.00 6IPage Exhibit B--Sample Amortization Schedule Funding Amount: $9,200,000.00 Interest Rate: 4.15% Down Payment: $0.00 Closing Date: 2/27/2024 Capitalized Interest: $0.00 Term(years): 10.18 Costoflssuance: $0.00 Amount Financed: $9,200,000.00 Payment Payment Payment Interest Principal Outstanding Redemption Number Date Amount Component Component Balance Price Principal: 2/27/2024 $9,200,000.00 No Call 1 5/1/2024 $66,945.75 $66,945.75 $0.00 $9,200,000.00 No Call 2 11/1/2024 $190,900.00 $190,900.00 $0.00 $9,200,000.00 No Call 3 5/1/2025 $190,900.00 $190,900.00 $0.00 $9,200,000.00 No Call 4 11/1/2025 $190,900.00 $190,900.00 $0.00 $9,200,000.00 No Call 5 5/1/2026 $1,025,900.00 $190,900.00 $835,000.00 $8,365,000.00 No Call 6 11/1/2026 $173,573.75 $173,573.75 $0.00 $8,365,000.00 No Call 7 5/1/2027 $1,048,573.75 $173,573.75 $875,000.00 $7,490,000.00 No Call 8 11/1/2027 $155,417.50 $155,417.50 $0.00 $7,490,000.00 No Call 9 5/1/2028 $1,075,417.50 $155,417.50 $920,000.00 $6,570,000.00 $6,635,700.00 10 11/1/2028 $136,327.50 $136,327.50 $0.00 $6,570,000.00 $6,635,700.00 11 5/1/2029 $1,101,327.50 $136,327.50 $965,000.00 $5,605,000.00 $5,605,000.00 12 11/1/2029 $116,303.75 $116,303.75 $0.00 $5,605,000.00 $5,605,000.00 13 5/1/2030 $1,131,303.75 $116,303.75 $1,015,000.00 $4,590,000.00 $4,590,000.00 14 11/1/2030 $95,242.50 $95,242.50 $0.00 $4,590,000.00 $4,590,000.00 15 5/1/2031 $1,160,242.50 $95,242.50 $1,065,000.00 $3,525,000.00 $3,525,000.00 16 11/1/2031 $73,143.75 $73,143.75 $0.00 $3,525,000.00 $3,525,000.00 17 5/1/2032 $1,193,143.75 $73,143.75 $1,120,000.00 $2,405,000.00 $2,405,000.00 18 11/1/2032 $49,903.75 $49,903.75 $0.00 $2,405,000.00 $2,405,000.00 19 5/1/2033 $1,224,903.75 $49,903.75 $1,175,000.00 $1,230,000.00 $1,230,000.00 20 11/1/2033 $25,522.50 $25,522.50 $0.00 $1,230,000.00 $1,230,000.00 21 5/1/2034 $1,255,522.50 $25,522.50 51,230,000.00 Total: $11,681,415.75 $2,481,415.75 $9,200,000.00 7IPage ABOUT—Webster Bank The public finance group of Webster Bank provides tax-exempt and taxable financing solutions on a nationwide basis for state & local governments, non-profit corporations, and the federal government. Projects financed include virtually all types of essential capital items, including equipment, vehicles, energy efficiency & renewable energy equipment, and real property. Financing terms are tied to the useful life of the capital improvements and range from 3 to 20 years. Each member of the public finance team has 25 or more years of lending experience and is committed to the timely closing of awarded transactions. CONTACT INFORMATION For more information about this financing opportunity, please contact: Mark Cargo Managing Director Webster Bank Phone: (704) 287-4493 Email: mcargo@websterbank.com Wage