Title
A RESOLUTION AUTHORIZING SEDGWICK COUNTY, KANSAS TO ENTER INTO A BASE LEASE WITH THE SEDGWICK COUNTY PUBLIC BUILDING COMMISSION, WHEREBY THE COUNTY WILL LEASE CERTAIN PROPERTY TO THE PUBLIC BUILDING COMMISSION AND ENTER INTO A LEASE WHEREBY THE COUNTY WILL LEASE FROM THE PUBLIC BUILDING COMMISSION CERTAIN PUBLIC FACILITIES AND BUILDINGS FOR USE BY SEDGWICK COUNTY, KANSAS; APPROVING THE FORM OF SAID BASE LEASE AND LEASE; AND AUTHORIZING THE EXECUTION THEREOF AND CERTAIN RELATED DOCUMENTS.
Presented by: Chris Chronis, CFO.
RECOMMENDED ACTION: Adopt the resolution.
Body
Pursuant to Resolution No. 117-2011, adopted June 1, 2011, the Board deemed it advisable to: (a) design, construct and equip a radio communications network; (b) design, construct, reconstruct, equip and furnish emergency medical service facilities; and (c) design, construct, reconstruct, equip and furnish fire stations for Fire District No. 1 (collectively, the "Projects") more fully described as follows:
|
Description |
Estimated Costs |
|
|
|
|
Radio Communications System |
|
|
Tower site equipment & software $20,500,000 Microwave network 3,500,000 Dispatch center equipment & software 2,000,000 Interoperable communications equipment 1,000,000 Subtotal |
$27,000,000 |
|
|
|
|
Emergency Medical Service Facilities |
|
|
Post 5 (Remodel Caddy Lane) $472,586 Post 9 (Replace East 143rd 1,072,885 Post 10 (Phase 1: Replace Via Christi) 316,482 Post 10 (Phase 2: Replace Via Christi) 500,000 Subtotal |
$2,361,953 |
|
|
|
|
Fire Stations |
|
|
Station 34 (Remodel Haysville) $1,103,078 Station 35 (Relocate Goddard) 2,086,887 Station 36 (Relocate Derby) 2,240,519 Subtotal |
$5,430,484 |
|
Total |
$34,792,437 |
Resolution No. 117-2011 also requested the Sedgwick County Public Building Commission (the PBC) to sell up to $31,590,000 of PBC revenue bonds to pay a portion of the costs of the Projects.
The PBC, pursuant to its Resolution No. 2011-1 adopted June 6, 2011, declared an intent to design, construct, equip and finance the Projects and to issue revenue bonds in one or more series in an aggregate principal amount not to exceed $31,950,000, and provided for publication as required by KSA §12-1757 et. seq., as amended by Charter Resolution Nos. 45 and 48 of the County. During the protest period that followed publication, no sufficient protest was filed against the Projects or such revenue bonds in accordance with the provisions of the statutes.
In the weeks following the Board and PBC actions, the County executed a vendor contract for the radio communications system at a price much less than had been expected, and obtained unanticipated cash balances which were allocated to fund the fire stations. These events enabled the County to revise the project budgets and funding plans as follows:
|
Description |
Estimated Costs |
Amount Financed* |
|
|
|
|
|
Radio Communications System |
|
|
|
Tower site equipment, software & $10,417,000 $10,417,000 microwave network Dispatch center equipment & software 2,000,000 0 Interoperable communications equipment 1,000,000 0 Subtotal |
$13,417,000 $10,417,000 |
|
|
|
|
|
|
Emergency Medical Service Facilities |
|
|
|
Post 5 (Remodel Caddy Lane) $ 472,586 $ 472,586 Post 9 (Replace East 143rd 1,072,885 1,072,885 Post 10 (Phase 1: Replace Via Christi) 316,482 0 Post 10 (Phase 2: Replace Via Christi) 500,000 500,000 Subtotal |
$ 2,361,953 |
$ 2,045,471 |
|
|
|
|
|
Fire Stations |
|
|
|
Station 34 (Remodel Haysville) $ 1,103,078 $ 0 Station 35 (Relocate Goddard) 2,086,887 0 Station 36 (Relocate Derby) 2,240,519 0 Subtotal |
$ 5,430,484 |
$ 0 |
|
Total |
$21,209,437 |
$12,462,471 |
* plus associated costs of issuance and any required reserves.
Pursuant to Resolution No. 170-2011, adopted August 31, 2011, the Board requested that the PBC proceed with the sale of the PBC Bonds in an approximate principal amount of $12,650,000, approved the information relating to the County contained in the Preliminary Official Statement and authorized the Chairman and Chief Financial Officer to execute a certificate to that effect in order to permit the purchaser of the PBC Bonds to comply with the provisions of Rule 15c2-12 of the Securities and Exchange Commission.
Pursuant to Resolution No. 2011-2, also adopted August 31, 2011, the PBC authorized the competitive public sale of bonds, approved the Preliminary Official Statement and the Notice of Bond Sale, and authorized the President of the PBC, the CFO, the Financial Advisor, and Bond Counsel to take such actions as may be necessary to carry out the bond sale.
The County owns the land and existing facilities at which the projects will be located. In order for the PBC to complete the projects, it must gain control of the land and facilities by execution of a Base Lease with the County. The PBC then will finance and complete the requested projects, and give the County rights to use them by execution of a Lease agreement. The Lease agreement requires the County to make annual pay annual rent to the PBC for its use of the Projects, and the PBC uses the rental income to pay its principal and interest obligations for the bonds. After the bonds are fully redeemed the Base Lease and the Lease expire, and ownership of the Projects transfers to the County.
The staff has received bids for the bonds and requests the approval of the Board to accept such bids and execute the resolution and lease documents necessary to secure the PBC bonds.
Alternatives: The Projects could be funded by imposing a limited extraordinary property tax to provide cash for the expansion. The size of the mill levy required to do this would depend on the length of time allowed to collect the needed funds. At one end of the time spectrum, approximately 3 mills for one year would be needed; at the other end, approximately 0.2-mills for 20 years would be needed to fund the projects with cash from a special tax levy. The Projects could also be funded with general County reserves. Doing so, however, would require an unplanned reduction of the level of reserves, which potentially could lead to future increases of property taxes as well as to a downgrade of the Countys bond rating. As an additional alternative, the Projects could be funded with general obligation bonds issued by the County. Prior to the issuance of general obligation bonds, such Projects and general obligation bonds would need to be approved in a referendum by the electors of the County.
Finally, this resolution could be rejected and the projects could be cancelled. In this event, cash balances used to pay expenditures already incurred on any of the projects, which in the aggregate total $2.5-million, would not be reimbursed with bond proceeds and thus would be an unplanned reduction of general County reserves.
Financial Considerations:
Issuance of the PBC Bonds is contemplated in the Countys financial plan. The PBC 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 AAA credit ratings as the County's general obligation bonds. At the time of submittal of this agenda summary Standard & Poors, Moody's, and Fitch had not provided a rating of these bonds.
The difference between the estimated cost and the amount financed of the projects will be funded by E-911 telephone surcharges and planned draws on the County's reserves.
The preliminary estimate of annual debt service required under the Lease is $860,000. The financial plan contemplates Lease payments to be made from the Debt Service Fund and that the addition of this lease cost will not require an increase of the County property tax rate. If funded solely with property taxes, the lease cost will consume the equivalent of approximately 0.2 mills of the existing property tax rate. 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, 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 paying all or a portion of the costs of the Projects. The PBC Bonds are revenue bonds of the PBC payable solely and only from rentals received by the PBC under the Lease. Pursuant to the Act, the County may enter into leases with the PBC for up to 50 years. These leases are exceptions to the cash-basis and budget laws.
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 measure the impact of debt on the community. These ratios are benchmarks that serve to limit the amount of debt Sedgwick County will have outstanding at any point in time. The policy prohibits the issuance of new debt if it would cause more than two of these ratios to exceed the specified maximum levels. After including the new debt, four of the five ratios will be less than the specified maximum levels. As is shown in the following table, all current and planned 2011 debt including this issue will comply with the debt limits established by County policy.
Ratio Policy Estimated actual
maximum 12/31/2011
Per capita direct debt $500 $345
Direct debt as % of full market value 1.5% 0.51%
Per capita direct, overlapping &
underlying debt $3,000 $3,543
Direct, overlapping & underlying debt as
% of full market value 6.0% 5.28%
Annual debt service as % of budgeted 20.0% 10.84%
expenditures
Outside Attendees:Joe Norton, Gilmore & Bell PC, Bond Counsel
David MacGillivray, Springsted Inc, Financial Advisor
Multimedia Presentation:PowerPoint