Title
A RESOLUTION REQUESTING THE SEDGWICK COUNTY PUBLIC BUILDING COMMISSION (PBC) TO PROCEED WITH THE SALE OF REFUNDING REVENUE BONDS FOR THE PURPOSE OF REFUNDING THE PBC'S OUTSTANDING REVENUE BONDS, SERIES 2007-1 (JUVENILE JUSTICE COMPLEX) AND SERIES 2008-1 (TECHNICAL EDUCATION COMPLEX); DECLARING AN INTENT TO ENTER INTO SUPPLEMENTAL LEASES WITH THE PBC RELATING TO SAID REFUNDING REVENUE BONDS; AND MAKING CERTAIN FINDINGS REGARDING OFFERING DOCUMENTS RELATED THERETO.
Presented by: Chris Chronis, Chief Financial Officer.
RECOMMENDED ACTION: Adopt the resolution.
Body
The Board of County Commissioners (the "Board") of Sedgwick County, Kansas (the "County") has heretofore 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 (jointly the "Act").
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 County's Juvenile Justice Complex (the "Juvenile Justice 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 Juvenile Justice 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 (the "Juvenile Justice Base Lease"), whereby the County leased certain land where the Juvenile Justice 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 "Juvenile Justice 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 Juvenile Justice Leases"), wherein the County continues to make rental payments to the PBC to provide funds sufficient to meet the debt service requirements of the Series 2003-1 Bonds and Series 2007-1 Bonds.
At the request of the Board and in order to achieve interest cost savings, the PBC issued its Sedgwick County Public Building Commission Refunding Revenue Bonds, Series 2012-1 (Juvenile Justice Complex), dated August 15, 2012 to refund the Series 2003-1 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 2007-1 Bonds (the "Juvenile Justice Refunding Bonds"), which will directly benefit the County with respect to reduced rental payments made to the PBC pursuant to the Lease and Supplemental Leases.
The PBC has also issued its Sedgwick County Public Building Commission Revenue Bonds, Series 2008-1 (Technical Education Complex), dated December 15, 2008, in the original principal amount of $48,830,000 (the "Series 2008-1 Bonds") to provide financing for the County's Technical Education Complex (the "Technical Education Complex"). In conjunction with the issuance of the Series 2008-1 Bonds, the Wichita Airport Authority (the "Airport Authority"), as Lessor, and the PBC, as Lessee, entered into a Base Lease dated as of December 12, 2006 (the "Base Lease"), whereby the Airport Authority leased certain land where the Technical Education Complex is located to the PBC, and the PBC, as Issuer, and the County, as Tenant, entered into a Lease dated as of December 15, 2008 (the "Technical Education Lease") wherein the County agreed to make rental payments to provide funds sufficient to meet the debt service requirements of the Series 2008-1 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 2008-1 Bonds (the "Technical Education Refunding Bonds"), which will directly benefit the County with respect to reduced rental payments made to the PBC pursuant to the Technical Education Lease.
The Resolution provides that:
1. (a) issuance of the Refunding Bonds by the PBC; (b) continuing to lease certain real property to the PBC pursuant to the provisions of the Juvenile Justice Base Lease, as supplemented; and (c) continuing to lease the facilities from the PBC under the terms and provisions set forth in the Juvenile Justice Lease and Technical Education Lease, as supplemented, are necessary, convenient and in furtherance of the governmental purposes of the County;
2. the Board requests that the PBC proceed with the sale of the Refunding Bonds; provided that: (a) Juvenile Justice Refunding Bonds: (i) the present value savings associated with refunding the Series 2007-1 Bonds shall be not less than 3% of the outstanding principal of the Series 2007-1 Bonds to be refunded; (ii) the debt service requirements on the Juvenile Justice Refunding Bonds are substantially equal in each year; and (iii) that the final maturity of the Juvenile Justice Refunding Bonds is not longer than the final maturity of the Series 2007-1 Bonds to be refunded; and (b) Technical Education Refunding Bonds: (i) the present value savings associated with refunding the Series 2008-1 Bonds shall be not less than 3% of the outstanding principal of the Series 2008-1 Bonds to be refunded; (ii) the debt service requirements on the Technical Education Refunding Bonds are substantially equal in each year; and (iii) that the final maturity of the Technical Education Refunding Bonds is not longer than the final maturity of the Series 2008-1 Bonds to be refunded;
3. in the event such parameters are met, the Board declares its intent to enter into supplements to: (a) the Juvenile Justice Base Lease and Juvenile Justice Lease to provide sufficient rental payments to meet the debt service requirements on the Juvenile Justice Refunding Bonds, and the Outstanding Series 2003-1 and Series 2007-1 Bonds not refunded, if any; and (b) the Technical Education Lease to provide sufficient rental payments to meet the debt service requirements on the Technical Education Refunding Bonds, and the Outstanding Series 2008-1 Bonds not refunded, if any; and
4. authorizes the Chief Financial Officer to coordinate with the PBC the competitive sale of the Refunding Bonds and related activities and the Chairman to sign the necessary documents to accomplish the sale of the Refunding Bonds.
Alternatives:
This resolution could be rejected and the issuance of the Refunding Bonds could be cancelled.
Financial Considerations:
The PBC Refunding Bonds will be secured by the Leases. The County's obligations under the Leases 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 between 2017 and 2026 under the 2007 Lease is $763,832; subsequent to the refunding, the average annual debt service would be reduced by $29,674. The financial plan contemplates Lease payments to be made general revenues including a property tax levy in the Debt Service Fund. While a tax rate increase has not been required and is not expected to be necessary to fund the lease, if one were to be needed the effect of this refunding would be to lower any such requirement. The source of funds used to repay this debt will be determined annually through the budget adoption process.
The average annual debt service currently required between 2019 and 2028 under the 2008 Lease is $3,394,240; subsequent to the refunding, the average annual debt service would be reduced by $156,280. The financial plan contemplates Lease payments to be made general revenues including a property tax levy in the Debt Service Fund. While a tax rate increase has not been required and is not expected to be necessary to fund the lease, if one were to be needed the effect of this refunding would be to lower any such requirement. 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 (the "Board") 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 County's adopted debt policy. It provides five ratios that constitute limits on the total County debt that may be outstanding at any point. The issuance of these Bonds and the execution of the Lease will not cause those ceilings to be exceeded. As is shown in the following table, all current and planned 2014 debt including this issue falls within the debt limits established by County policy.
Ratio |
Policy maximum |
Estimated actual 12/31/2014 |
Per capita direct debt |
$600 |
$291 |
Direct debt as % of full market value |
1.50% |
0.47% |
Per capita direct, overlapping & underlying debt |
$3,000 |
$3,503 |
Direct, overlapping & underlying debt as % of full market value |
6.00% |
5.64% |
Annual debt service as % of budgeted expenditures |
20% |
10.14% |
Outside Attendees: Joe Norton, Gilmore & Bell PC, Bond Counsel
Multimedia Presentation: