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FC071321FINANCE COMMITTEE MEETING July 13, 2021 Elected Officials Participating Virtually Councilmember Vivian Olson Councilmember Diane Buckshnis CALL TO ORDER Staff Participating Virtually Dave Turley, Finance Director Phil Williams, Public Works Director Angie Feser, Parks, Rec., Cultural Arts & Human Services Director The Edmonds City Council virtual online Finance Committee meeting was called to order at 6:00 p.m. by Councilmember Buckshnis. 2. COMMITTEE BUSINESS 1. May 2021 Monthly Financial Report Mr. Turley presented the monthly budgetary financial report five months ended May 31, 2021 • What's happening in the Finance Department? o Completed the SAO Financial Audit on June 30 o In the interview process for both the Systems Support Technician and the Deputy Administrative Services Director positions o First five months have gone according to budget, nothing negative to report. Sales tax and REET continue to come in ahead of budget o All governments who apply to GFOA for the GFOA Award Certificate have the same June 30 deadline. The City of Edmonds is the only government in Snohomish County to have their audit completed in time to meet the June 30 deadline. All others had to file for an extension. • Noteworthy things in May report o REET is up $998,080 from this point in time last year o Sales tax is up 730,342 from this point in time last year o Telephone utility tax is down $90,700 from this point in time last year o Have not yet received the 1st quarter payment from Olympic View for their franchise payment; received this payment in May of 2020 o Liquor Excise Tax is up $25,216 from this point last year o Development Services revenues are down $26,062 from this point in time last year o Plan Checking fees are up $107,685 from this point in time last year o Parks & Recreation program fees are up $143,681 from this point in time last year o May 2020 Engineering Overhead was not recorded until June 2020 which is the main reason for the large difference between years. June 2020 Engineering Overhead totaled $183,166 Mr. Turley responded to a question about the bond reserve fund. Action: Consent Agenda 2. Discussion of City Financing Needs 07/13/21 Finance Committee Minutes, Page 2 Scott Bauer, Northwest Municipal Advisors, reviewed: • Potential 2021 LTGO Bond 1. Provide $4 to $7 million for Civic Park and other capital improvements 2. Refund for savings the Water and Sewer Improvement and Refunding Revenue Bonds, 2011 o $8.045M to be refinanced, representing the callable maturities from 2022 to 2031 o No change in share or final maturity (12/1/2031) 3. Advance refund and restructure a portion of the City's LTGO refunding bonds, 2021 (the "2012 bonds") o Portion attributable to the EPFD ■ All outstanding debt to be refunded - $2.585M o Avoid December 1, 2021 payment o Extend the final maturity to 2041 ■ Allows the PFD to receive the sales and use tax rebate until 2041 ■ Lowers annual debt service payments o Issued as taxable series due to federal tax law o Unrefunded portion of the 2012 bonds would remain outstanding • Graph of historical interest rates (Bond buyer 20-Bond General Obligation Index, 1990 to present and July 2018 to present) o Interest rates continue near historical low levels o The charges show an index of 20 long-term, well -rated general obligation bonds • Citv's Outstandina LTGO Bonds LTGO Bonds Par Outstanding Callable Par Final Maturity Coupon Rate Call Date LTGO Ref 2012 $3,895,000 $2,635,000 12/1/2031 1.75% 12/1/2022 LTGO Ref 2016 1,968,013 1,008,918 12/1/2026 1.67% 12/1/2023 LTGO 2019 3,375,000 2,230,000 12/1/2039 2.125-5.00% 6/1/2029 Total LTGO Bonds Debt $9,238,013 $5,873,918 Limited Tax General Obliaation Bonds - PFD Portion PFD Par Callable Final Coupon Call Date Outstanding Par Maturity Rate LTGO Ref 2012 (PFD $2,585,000 $1,755,000 12/1/2026 1.75-3.00% 12/1/2022 Portion of 2012 Bonds) • Outstandina Water and Sewer Revenue Bonds Water and Sewer Bonds Par Outstanding Callable Par Final Maturity Coupon Rate Call Date WS Improv and Ref Rev 2011 $ 8,705,000 $ 8,045,000 12/1/2031 3.00-4.00% 12/1/2021 WS Rev 2013 13,730,000 13,285,000 12/1/2038 4.00-5.00% 6/1/2023 WS Rev 2015 15,945,000 13,570,000 12/1/2040 2.00-4.00% 6/1/2025 WS Rev 2020 13,875,000 13,875,000 12/1/2045 2.00-2.25% 6/1/2030 Total Water & Sewer Bonds Debt $52,255,000 $48,775,000 • New Project Money Debt Service Comparison o Monthly debt service and totals for $4 and $ 7million in net proceeds amortized over 10 and 20 years • Considerations and additional items o Based on the potential projects/refinancings to include in the bond issue, it appears the bonds would be sold in two series ■ 2021A Tax Exempt: new money proceeds and refunding of the 2011 Water and Sewer Bonds ■ 2021 B Taxable: Advance refunding of the Edmonds PFD's portion of the City's 2012 LTGO bonds 07/13/21 Finance Committee Minutes, Page 3 The new money and refundings could be structured individually, but would roll up to their respective series Costs of issuance - Shared costs of issuance would be allocated based on size of each financing - Specific costs, such as refunding trustee or the PFD's financial and legal advisors (if any) would be allocated to the specific project or series o Timing ■ Bond issues take about 3 months to complete ■ Starting now would allow us to close a bond issue around October which would achieve both timing goals - After September 1 for a current refunding of the City's 2011 Water and Sewer bonds. - Before December 1 for the Edmonds PFD to defer their December 1, 2021 payment o Bank Qualification ■ Issuers who issue less than $10M tax-exempt bonds in a year are eligible to sell those as "bank -qualified" - Depending on the term, bank -qualified rates tend to be lower than non -bank qualified rates - The PFD portion of the 2021 Bonds, which are expected to be taxable, would not count toward this limit ■ At between $12 and $15M in tax-exempt proceeds, the 2021A bonds would be non - bank qualified ■ May be able to break up the issue into a $10 million bank -qualified series and the balance as a taxable series, if it produces a benefit over an entirely non -bank qualified bond - Would need to be done as a negotiated sale for added control ■ Recommendation: Bank qualification need not drive the City's decision on the size of the new money portion. If we are able to take advantage of bank -qualification, we will. Questions and discussion followed regarding 2012 bonds originally issued as tax exempt, advantages of refunding the 2012 bonds, bank qualification, other capital projects that could be funded by $4-7M in new money, $4M and $7M provided as examples, ARPA money that could be used for infrastructure, administration's recommendation regarding spending ARPA funds on green infrastructure projects including a Perrinville Creek project, timing of portions of the Perrinville Creek project, projects that qualify for ARPA funds, potential land acquisition in east Edmonds, citizens' interest in financing needs not wants, anticipated future political support for open space purchases but possibly not for building maintenance, cost of the first portion of the Perrinville project, 10-year versus 20-year bonds, amortizing a larger bond amount over a longer period, revenue source for debt service, and caution with using REET as a source for debt service due to its volatility. Suggestions: • Finance Committee create a list of projects that could be funded by additional $4-7M in bonds • Research whether ARPA funds would be eligible for the Yost stormwater mitigation project • Schedule a special Finance Committee meeting to discuss projects for an additional bond amount and to discuss bonds refunding with the PFD Finance Committee Recommendations: Sewer revenue bonds - recommend proceed Refunding PFD Bonds - recommend proceed Civic Field - recommend bond for the balance of the cost, need to decide on a dollar amount and number of years 07/13/21 Finance Committee Minutes, Page 4 Action: Schedule special meeting to discuss projects for an additional bond amount and to discuss bond refunding with the PFD 3. ADJOURN The meeting was adjourned at 6:59 p.m.