Title
RESOLUTION REQUESTING THE SEDGWICK COUNTY PUBLIC BUILDING COMMISSION TO PROCEED WITH THE ISSUANCE OF REFUNDING REVENUE BONDS, SERIES 2012-1 (JUVENILE JUSTICE COMPLEX); RATIFYING THE EXISTING BASE LEASE AND LEASE RELATING TO SUCH TRANSACTION; AND AUTHORIZING THE EXECUTION OF CERTAIN RELATED DOCUMENTS.
Presented by: Chris Chronis, Chief Financial Officer.
RECOMMENDED ACTION: Adopt the resolution.
Body
The Board of County Commissioners (the "Board") has created the Sedgwick County Public Building Commission, a municipal corporation of the State of Kansas (the "PBC") under the authority of K.S.A. 12-1757 et seq., as amended by Charter Resolution Nos. 45 and 48 of the County. The PBC has issued the following revenue bonds: (a) Sedgwick County Public Building Commission Revenue Bonds, Series 2003-1 (Juvenile Justice Complex), dated December 1, 2003, in the original principal amount of $21,400,000 (the "Series 2003-1 Bonds) to provide financing for the Countys Juvenile Justice Complex (the Complex), and (b) Sedgwick County Public Building Commission Revenue Bonds, Series 2007-1 (Juvenile Justice Complex), dated January 1, 2007, in the original principal amount of $15,445,000 (the "Series 2007-1 Bonds) to provide additional funding for the Complex. In conjunction with the issuance of the Series 2003-1 Bonds, the County, as Lessor and the PBC, as Lessee, entered into a Base Lease dated as of December 1, 2003, whereby the County leased certain land where the Complex is located to the PBC, and the PBC, as Issuer, and the County, as Tenant, entered into a Lease dated as of December 1, 2003 (the "Lease") wherein the County agreed to make rental payments to provide funds sufficient to meet the debt service requirements of the Series 2003-1 Bonds; in conjunction with the issuance of the Series 2007-1 Bonds, the PBC and the County entered into a Supplemental Base Lease and Supplemental Lease, both dated as of January 1, 2007 (the "Supplemental Leases"), wherein the County continues to make rental payments to provide funds sufficient to meet the debt service requirements of the Series 2003-1 Bonds and Series 2007-1 Bonds.
Due to the current interest rate environment, the PBC has the opportunity to issue its refunding revenue bonds in order to achieve an interest cost savings on the debt represented by all or a portion of the Series 2003-1 Bonds (the Refunding Bonds), which will directly benefit the County with respect to reduced rental payments made to the PBC pursuant to the Lease. Pursuant to Resolution No. 107-2012, the Board requested that the PBC proceed with the sale of the Refunding Bonds to refund the Series 2003-1 Bonds; provided that: (a) the present value savings associated with refunding the Series 2003-1 Bonds shall be not less than 3% of the outstanding principal of the Series 2003-1 Bonds to be refunded; (b) the debt service requirements on the Refunding Bonds are substantially equal in each year; and (c) that the final maturity of the Refunding Bonds is not longer than the final maturity of the Series 2003-1 Bonds to be refunded.
The PBC has received bids for the Refunding Bonds that meet the parameters established in Resolution No. 107-2012 and requests the approval of the Board to accept such bids, have the Board ratify its obligations under the Lease and Base Lease and authorize the Chairman to execute the various legal documents necessary to secure the PBC bonds.
Alternatives:
This resolution could be rejected. In that event, the PBC would not award the sale of the bonds and the County would continue making lease payments to the PBC based on the provisions of the 2003 bond sale.
Financial Considerations:
The PBC Refunding Bonds will be secured by the Lease. The County's obligations under the Lease are exempt from the cash-basis and budget laws and therefore, constitute a binding obligation of the County, meaning the PBC will be able to compel the levy of property taxes if necessary to make payments under the lease. Prior PBC bond issues for County facilities have received the same financial ratings as the County's general obligation bonds.
The average annual debt service currently required under the Lease is $1,562,000; subsequent to the refunding, the average annual debt service would be reduced by $81,000. The financial plan contemplates Lease payments to be made general revenues including property tax; a tax rate increase will not be required to do this. The source of funds used to repay this debt will be determined annually through the budget adoption process.
Legal Considerations:
The Board of County Commissioners under the authority of K.S.A. 12-1757 et seq., as amended by Charter Resolution Nos. 45 and 48 of the County (jointly the "Act"), has heretofore created the PBC. The PBC has full power and authority to issue revenue bonds in order to provide funds for the purpose of refunding the Refunded Bonds. The PBC Bonds shall be revenue bonds of the PBC payable solely and only from rentals received by the PBC under the Lease, pursuant to the Act. Pursuant to the Act, the County may enter into leases with the PBC for up to 50 years. Such leases are exceptions to the cash-basis and budget laws. Unlike revenue bonds issued to initially finance projects, the issuance of the Refunding Bonds are not subject to any notice and protest provisions.
Policy Considerations:
The PBC Bonds do not count against the County's statutory debt limitations. The Lease payments constitute a long term debt that is subject to the Countys adopted debt policy. It provides five ratios that constitute limits on the total County debt that may be outstanding at any point. The policy restricts the county from issuing additional debt if it will cause more than two of the ratios to exceed the stated maximum levels. The issuance of these Bonds and the execution of the Lease will not cause more than two of those ceilings to be exceeded. As is shown in the following table, all current and planned 2012 debt including this issue falls within the debt limits of four of the five ratios established by County policy.
|
Ratio |
Policy maximum |
Estimated actual 12/31/2012 |
|
Per capita direct debt |
$500 |
$322 |
|
Direct debt as % of full market value |
1.5% |
0.48% |
|
Per capita direct, overlapping & underlying debt$3,000$3,401Direct, overlapping & underlying debt as % of full market value6.0%5.09% Annual debt service as % of budgeted expenditures |
20% |
10.16% |
Outside Attendees:
Joe Norton, Gilmore & Bell, P.C., Bond Counsel
David MacGillivray, Springsted, Inc., Financial Advisor
Multimedia Presentation: No