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  Time Set   # 34.       
  
Meeting Date: 05/10/2022  
Brief Title:    2022 Landfill Improvement Projects Financing
From: Tom Haynes, Interim Chief Financial Officer, Department of Financial Services
Staff Contact: Sou Xiong, Accounting Manager-Treasury & Revenues, Department of Financial Services, x8212

Subject
Receive presentation, hold a public hearing, and adopt a resolution approving documents and actions, including authorizing the execution and delivery of an Installment Sale Agreement, Assignment Agreement and certain other documents, to complete the debt financing with the Yolo County Public Agencies Financing Authority for Solid Waste System improvement projects. (No general fund impact) (Haynes/Xiong)
 
Recommended Action
  1. Receive presentation on the Solid Waste System debt financing;
     
  2. Hold a public hearing on the Solid Waste System debt financing; and
     
  3. Adopt the attached resolution, which (i) makes a finding that the Solid Waste System debt financing will result in significant public benefits including improvements to the Solid Waste System and savings in effective interest rate, and (ii) approves and authorizes the execution and delivery of the Installment Sale Agreement, Assignment Agreement, and related financing documents in substantially the form submitted.  (Attachments A through C).  
Strategic Plan Goal(s)
Sustainable Environment
Reason for Recommended Action/Background
On October 26, 2021, the County approved the Capital Improvement Plan for the period of 2022-2026.  The plan contained several projects related to the Solid Waste System that required financing in order to complete, including Landfill Module 6H and Landfill Surface Impoundment Improvement. Landfill Module 6H includes the design and construction of a new Waste Management Unit (WMU), which must be in operation by 2023 to allow for adequate space for waste filling. The Landfill Surface Impoundment Improvement includes the design and reconstruction of an existing liquid waste pond (WMU 6 leachate pond), which is needed to increase the height on the levee for flood protection and to allow better access for customers.

With this recommended action the Board of Supervisors requests the Yolo County Public Agencies Financing Authority to assist the County by entering into an installment sale financing to fund these improvements to the Solid Waste System in an amount not to exceed $10.12 million, including approximately $5.5 million for the construction of Landfill Module 6H and $4.5 million for the Landfill Surface Impoundment Improvement.  The cost of issuance, which will be paid out of the financing proceeds, is estimated at $125,025. The financing will be conducted through the Installment Sale Agreement between the County and the Authority, which will assign all of the County’s installment payments to First Foundation Public Finance in return for the $10.12 million financing amount.  These payments will be made on a parity to the 2019 Solid Waste Revenue Bonds. 

As a part of this financing, the County will pledge revenues of the Solid Waste System to make semiannual installment payments to First Foundation Public Finance.  The Installment Sales Agreement contains similar provisions to the 2019 Solid Waste Revenue Bonds to secure the revenue pledge:
  • Rate Covenant – Net revenues during the fiscal year equal to 1.50x Debt Service
  • Insurance – Maintain insurance amounts and deductibles based on industry standards
  • Issuance of Parity Debt – Allowed based on 1.50x coverage based on maximum annual debt service on outstanding and proposed debt.
The resolution approves the financing plan, Installment Sale Agreement, Assignment Agreement, and all related documents. The financing will have a final maturity of no later than December 1, 2041 (20 years) and shall bear interest at a fixed rate of 2.77 percent per annum.  The rate is locked and is not expected to change barring any delay in the closing schedule.  With current market conditions projecting rapidly increasing interest rates, the rate obtained is favorable.  The projected annual debt service is approximately $660,000.

In order for the Authority to proceed with the issuance of the debt, the County needs to conduct a public hearing and make a finding that the financing will have significant public benefits.  The benefits of the financing include the improvement of the County solid waste projects listed above and savings in effective interest rate by use of tax-exempt financing.  In the original creation of the Authority in 1994, the directors of the Authority were the County Auditor, County Treasurer, and City of Davis Finance Director.  The County Board of Supervisors approved the Assistant County Administrator in-lieu of the County Auditor in a June 2017 action.  Upon approval by the Board of Supervisors, the Board of Directors of the Authority will meet to approve the Authority resolution effecting the debt issuance.

The County Department of Financial Services has reviewed the issuance of the debt in accordance with the County Policy on Borrowing, Debt, and Obligation and determined that the issuance of this debt will not cause the County to exceed the safe range of any of the County adopted debt ratios or have a significant negative impact to the County’s financial sustainability.
Collaborations (including Board advisory groups and external partner agencies)
The Department of Financial Services collaborated as a member of the County's Capital Improvement Committee (CIC) closely with the County Administrator's Office and the Department of Community Services, Division of Integrated Waste Management.

The projects were originally listed in the 2022-2026 Capital Improvement Plan which was adopted on October 26, 2021 and required financing in order to complete the projects of the Solid Waste System.  DFS selected members of the financing team which includes KNN Public Finance as the Municipal Finance Advisor, Jones Hall as Bond Counsel, and Brandis Tallman of Oppenheimer & Co Inc as the Placement Agent.   

The County Debt Committee, comprised of two members of the Board of Supervisors, the County Administrator, the Chief Financial Officer and the Director of Community Services (Department Head relevant to the project), reviewed and approved the recommendation for method of finance on January 20, 2022.  An update was provided to the County Debt Committee regarding the selection of the financing institution, the interest rate, and term of financing on May 6, 2022.
Competitive Bid Process/Vendor Performance
The role of the Placement Agent, Brandis Tallman of Oppenheimer & Co Inc., is to solicit a request for proposal (RFP) to financial institutions for the debt financing.  Their charge is to obtain the maximum number of bids to achieve the lowest possible interest rates.  The RFP process resulted in eight bids and the County selected the most advantageous bid based on factors such as interest rate, rate lock provision, lender costs, and prepayment terms.

Fiscal Impact
Fiscal impact (see budgetary detail below)
Fiscal Impact (Expenditure)
Total cost of recommended action:    $   125,025
Amount budgeted for expenditure:    $   0
Additional expenditure authority needed:    $   125,025
On-going commitment (annual cost):    $   660,000
Source of Funds for this Expenditure
$125,025
Explanation (Expenditure and/or Revenue)
Further explanation as needed:
The Cost of Issuance will cover an estimated $125,025 in costs of paying the Municipal Financial Advisor, Bond Counsel, Placement Agent, and Bank Counsel fees.  The costs are included in the borrowing and will be paid from the proceeds received in May 2022.  A budget resolution will be completed by the Division of Integrated Waste Management after completion of the bond closing.

The Sanitation Enterprise Fund is the source of repayment for the debt.  The financing is a 20-year term and will have annual debt service of approximately $660,000.  The first-year debt service will occur in fiscal year 2022/2023.  The estimated amounts above may be slightly different after completion of the debt issuance at the end of May 2022. 
Attachments
Att. A. Resolution
Att. B. Installment Sale Agreement
Att. C. Assignment Agreement
Att. D. Presentation

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Form Review
Inbox Reviewed By Date
Financial Services Tom Haynes 05/03/2022 04:04 PM
County Counsel Kimberly Hood 05/04/2022 11:43 AM
Joanne Van Hoosear Joanne Van Hoosear 05/05/2022 08:55 AM
Form Started By: Sou Xiong Started On: 03/29/2022 08:32 AM
Final Approval Date: 05/06/2022

    

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