PFM 2010 LTGO Bond Refunding-Staff Report

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KITTITAS COUNTY TREASURER’S OFFICE AGENDA STAFF REPORT AGENDA DATE: January 21, 2020 ACTION REQUESTED: Request to Approve the Issuance and Sale of a Limited Tax General Obligation Refunding Bond in the Principal Amount of $6,750,000 to Provide Funds to Refund Certain Outstanding Limited Tax General Obligation Bonds of the County; Providing the Form of Said Bond and Approving the Sale of Such Bond; Delegating Certain Authority to Approve the Final Terms of the Bond to the County Represent ative in Connection with the Sale; Appointing an Escrow Agent; and Authorizing the Execution of an Escrow Agreement Related to Such Refunding. BACKGROUND: The County issued bonds in the amount of $6,995,000 with Resolution 2010-099 on September 20, 2010. These bonds were originally issued to serve four purposes: repair and expand the Corrections Facility, remodel a building at the Event Center, acquire a building for court facilities, and advance refund the County’s Limited Tax General Obligation Bonds issued in 2001, which financed improvements to the County Fairgrounds. PFM is the County’s contracted financial advisor. They notified us on September 27, 2019 of the potential opportunity to do a bond refunding, and presented several options and analyses to the Treasurer’s Office. These options were: taxable advance refunding, tax-exempt forward refunding, and a tax-exempt current refunding. The Treasurer and Finance Officer decided that the tax-exempt forward refunding via a direct bank placement made the most sense logistically and saved the county the most money overall while taking on the least interest rate risk. PFM agreed with this decision. Upon direction by the Treasurer, PFM and KL Gates (the County’s bond counsel) submitted requests for offers of direct placement to several banks, as approved by the Finance Officer. There were five reasonable responses and offers; of those, US Bank was selected as the best choice in terms of total money saved by the County, as well as contractual stipulations and requirements. The most notable requirement by US Bank of the County is that the County must provide US Bank with audited financial statements within 330 days of the end of the County’s fiscal years, as well as a separate financing agreement with US Bank (it is structured as a loan via US Bank, but the outcome is the same as a bond; however, this requirement may affect the County’s financial reporting to some extent). This bond refunding will save the County a total of $468,133 net present value, or $47,172 annually on average. The bond is non-callable and is payable annually at a locked rate of 1.91%. Total out of pocket fees to US Bank, the CPA review firm, and the escrow agent will be about $5,000.00. These fees will be paid for from the Treasurer’s approved 2020 budget.