16
City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor Anthony Farnum, Council Member Kevin Mumpower, Council Member Kevin Wingard, Council Member CITY COUNCIL 300 Lee Street, Bristol, Virginia 24201 Upstairs conference room January 28, 2020 5:00 PM Call to Order Pledge A. Discussion Item(s) A.1 Discussion of strategic plan of finance. B. Adjournment 1

City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

  • Upload
    others

  • View
    8

  • Download
    0

Embed Size (px)

Citation preview

Page 1: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

City CouncilNeal Osborne, Mayor

Bill Hartley, Vice MayorAnthony Farnum, Council Member

Kevin Mumpower, Council MemberKevin Wingard, Council Member

CITY COUNCIL300 Lee Street, Bristol, Virginia 24201

Upstairs conference roomJanuary 28, 2020

5:00 PM Call to Order Pledge A. Discussion Item(s) A.1 Discussion of strategic plan of finance. B. Adjournment

1

Page 2: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

CITY COUNCIL

AGENDA ITEM SUMMARY Meeting Date: January 28, 2020 Department: City Manager Staff Contact: Nicole Storm,

AGENDA ITEM WORDING:Discussion of strategic plan of finance.

ITEM BACKGROUND:David Rose of Davenport, the city's financial advisor, will discuss the strategic plan of finance.

PREVIOUS RELEVANT ACTION:

STAFF RECOMMENDATION: DOCUMENTATION: Bristol (City of) VA Ref Summ 1.27.2020.pdf IDA.Falls debt 1.28.20.pdf

2

Page 3: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

Member NYSE|FINRA|SIPC

January 28, 2020

Strategic Debt Retirement and Refinancing Opportunities

Prepared for the City of Bristol, Virginia

3

Page 4: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

January 28, 2020 1

Background/Overview

In FY 2019, the City of Bristol (the “City”) once again realized a structurally balanced budget.

The City’s Unassigned Fund Balance level has exceeded the targeted 18% level as established byCity Council.

In the Fall of 2019, Moody’s Investors Service upgraded the City’s credit rating two notches to ‘A3’,which is considered “Strong Investment Grade”.

Interest rates continue to trend lower and, as such, refinancing opportunities for debt servicesavings continue to exist.

City of Bristol, Virginia4

Page 5: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

January 28, 2020 2

Background/Overview (cont.)

In the Spring of 2019, the City successfully refinanced $3.1 Million of its Series 2006B and 2007BBonds and saved $340,000.

Because the City has operated with structural balance, there is approximately at total of $3 Millionin funds that may be strategically used by the City. These Funds consist of:

– $2 Million of Unassigned Fund Balance over targeted levels; and

– $1 Million of Budgeted Debt Service Reserves.

These funds present an opportunity for the City to strategically pay-off certain higher interest rateoutstanding debt and achieve additional interest savings.

City of Bristol, Virginia5

Page 6: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

January 28, 2020 3

Recommended Plan of Finance

Davenport & Company LLC, as Financial Advisor to the City, recommends the following Three PartPlan of Finance:

– First: Refinancing approximately $5.6 Million of higher interest rate Series 2010 Bonds(similar to last year’s spring refinancing) for interest rate/cash flow savings.

• Estimated savings is in the $400,000+ range, which translates to 6.5% of presentvalue savings – well over the 3% industry standard benchmark.

– Second: Use $3 Million currently available cash to strategically pay-off certain higher interestrate debt.

– Third: Use approximately $1 Million per year of Budgeted Debt Service Reserve Funds, ifand when available (at the end of FY 2020 and FY 2021), to further pay down certaindebt.

City of Bristol, Virginia

Note: Second and Third recommendations collectively provide approximately $5 Million of benefit to the City’s debt portfolio.

6

Page 7: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

January 28, 2020 4

Preliminary Results of the Plan of Finance

In the current FY 2020 year, the City’s debtservice is roughly $6 Million.

By FY 2024, the City’s debt service will increaseto $7.7 Million, approximately $1.7 Million overtoday’s levels.

The Plan of Finance, if successfully achieved,will allow the City to free up nearly $5.4 Millionover the next several years, which can be usedfor any number of purposes including:

– “Shaving” the debt service peak in FY 2024and beyond; and/or

– Assisting in funding any unexpected shortfallsrelated to other City needs in the next severalfiscal years.

City of Bristol, Virginia

$-

$1

$2

$3

$4

$5

$6

$7

$8

$9

202

0

202

1

202

2

202

3

202

4

202

5

202

6

202

7

202

8

202

9

203

0

Mill

ions

Adjusted Debt Service Existing Debt Service

7

Page 8: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

January 28, 2020 5

Preliminary Results of the Plan of Finance (cont.)

City of Bristol, Virginia

Second: Strategic Use of FY’19 Funds to Pay-down Debt

First: Refinance 2010 BondsSave $400,000+

Third: Strategic Use of FY’20/21 Funds to shave debt service

A B C D E F G H

FY

TotalEx isting

DebtService

Refunding:Savings from

2010's

Pay-down:2016A

Pay-off:2012A

Pay-off:2012B

ShaveDebt

Service

AdjustedDebt

Service

Net FundsAvailable

to the C ity

2020 5,869,708$ -$ -$ -$ -$ -$ 5,869,708$ -$ 2021 6,176,097 (57,640) (15,818) (370,450) (484,031) (500,000) 4,748,157 1,427,940 2022 6,661,990 (56,962) (312,802) (266,397) (238,350) (1,000,000) 4,787,479 1,874,511 2023 7,164,184 (57,929) (529,030) (253,906) (223,366) (500,000) 5,599,953 1,564,231 2024 7,642,654 (57,910) - - (184,828) - 7,399,916 242,739 2025 7,659,695 (57,684) - - (178,109) - 7,423,902 235,793 2026 7,673,584 (57,007) - - - - 7,616,578 57,007 2027 7,673,779 (57,527) - - - - 7,616,252 57,527 2028 7,661,070 - - - - - 7,661,070 - 2029 7,660,727 - - - - - 7,660,727 - 2030 7,650,374 - - - - - 7,650,374 - 2031 7,649,745 - - - - - 7,649,745 - 2032 7,644,231 - - - - - 7,644,231 - 2033 7,638,615 - - - - - 7,638,615 - 2034 7,637,859 - - - - - 7,637,859 - 2035 7,629,231 - - - - - 7,629,231 - 2036 7,628,943 - - - - - 7,628,943 - 2037 7,626,989 - - - - - 7,626,989 - 2038 7,612,912 - - - - - 7,612,912 - 2039 7,611,208 - - - - - 7,611,208 - 2040 7,606,757 - - - - - 7,606,757 - 2041 7,604,761 - - - - - 7,604,761 - 2042 7,599,589 - - - - - 7,599,589 - 2043 1,531,365 - - - - - 1,531,365 - Totals 172,516,066$ (402,659)$ (857,651)$ (890,753)$ (1,308,684)$ (2,000,000)$ 167,056,319$ 5,459,747$

8

Page 9: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

January 28, 2020 6

Next Steps/Timetable

January 28, 2020 • Davenport presents Plan of Finance to City Council.

• City Council provides direction to proceed with Plan of Finance, whichincludes refunding of selected Series 2010 Bonds.

Late January/Early February • Davenport finalizes RFP with City’s Bond Counsel.

February 15 • RFP for Refinancing Series 2010 Bonds distributed to Banks.

March 17 • Responses to RFP due to City and Davenport.

March 17-23 • Clarify any questions with respect to terms/conditions with Banks.

March 24 • Davenport to present results to City Council.

• City Council adopts Authorizing Resolution to pursue refinancing.

City of Bristol, Virginia9

Page 10: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

January 28, 2020 7

Next Steps/Timetable

Weeks of April 7 and 14 • Finalize numbers and closing documentation with Bond Counsel.

April 23 • Targeted closing date for Refunding of 2010 Bonds.

Late Summer/Early Fall 2020 • Davenport and City staff strategically deploy $1 Million of FY 2020 BudgetedDebt Service Reserve Funds, as available, to further reduce debt.

Late Summer/Early Fall 2021 • Davenport and City staff strategically deploy $1 Million of FY 2021 BudgetedDebt Service Reserve Funds, as available, to further reduce debt.

City of Bristol, Virginia

10

Page 11: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

Municipal Advisor Disclosure

The U.S. Securities and Exchange Commission (the “SEC”) has clarified that a broker, dealer or municipal securities dealer engaging in municipal advisory activities outside the scope of underwritinga particular issuance of municipal securities should be subject to municipal advisor registration. Davenport & Company LLC (“Davenport”) has registered as a municipal advisor with the SEC. As aregistered municipal advisor Davenport may provide advice to a municipal entity or obligated person. An obligated person is an entity other than a municipal entity, such as a not for profitcorporation, that has commenced an application or negotiation with an entity to issue municipal securities on its behalf and for which it will provide support. If and when an issuer engagesDavenport to provide financial advisory or consultant services with respect to the issuance of municipal securities, Davenport is obligated to evidence such a financial advisory relationship with awritten agreement.

When acting as a registered municipal advisor Davenport is a fiduciary required by federal law to act in the best interest of a municipal entity without regard to its own financial or other interests.Davenport is not a fiduciary when it acts as a registered investment advisor, when advising an obligated person, or when acting as an underwriter, though it is required to deal fairly with suchpersons.

This material was prepared by public finance, or other non-research personnel of Davenport. This material was not produced by a research analyst, although it may refer to a Davenport researchanalyst or research report. Unless otherwise indicated, these views (if any) are the author’s and may differ from those of the Davenport fixed income or research department or others in the firm.Davenport may perform or seek to perform financial advisory services for the issuers of the securities and instruments mentioned herein.

This material has been prepared for information purposes only and is not a solicitation of any offer to buy or sell any security/instrument or to participate in any trading strategy. Any such offerwould be made only after a prospective participant had completed its own independent investigation of the securities, instruments or transactions and received all information it required to make itsown investment decision, including, where applicable, a review of any offering circular or memorandum describing such security or instrument. That information would contain material informationnot contained herein and to which prospective participants are referred. This material is based on public information as of the specified date, and may be stale thereafter. We have no obligation totell you when information herein may change. We make no representation or warranty with respect to the completeness of this material. Davenport has no obligation to continue to publishinformation on the securities/instruments mentioned herein. Recipients are required to comply with any legal or contractual restrictions on their purchase, holding, sale, exercise of rights orperformance of obligations under any securities/instruments transaction.

The securities/instruments discussed in this material may not be suitable for all investors or issuers. Recipients should seek independent financial advice prior to making any investment decisionbased on this material. This material does not provide individually tailored investment advice or offer tax, regulatory, accounting or legal advice. Prior to entering into any proposed transaction,recipients should determine, in consultation with their own investment, legal, tax, regulatory and accounting advisors, the economic risks and merits, as well as the legal, tax, regulatory andaccounting characteristics and consequences, of the transaction. You should consider this material as only a single factor in making an investment decision.

The value of and income from investments and the cost of borrowing may vary because of changes in interest rates, foreign exchange rates, default rates, prepayment rates, securities/instrumentsprices, market indexes, operational or financial conditions or companies or other factors. There may be time limitations on the exercise of options or other rights in securities/instrumentstransactions. Past performance is not necessarily a guide to future performance and estimates of future performance are based on assumptions that may not be realized. Actual events may differfrom those assumed and changes to any assumptions may have a material impact on any projections or estimates. Other events not taken into account may occur and may significantly affect theprojections or estimates. Certain assumptions may have been made for modeling purposes or to simplify the presentation and/or calculation of any projections or estimates, and Davenport doesnot represent that any such assumptions will reflect actual future events. Accordingly, there can be no assurance that estimated returns or projections will be realized or that actual returns orperformance results will not materially differ from those estimated herein. This material may not be sold or redistributed without the prior written consent of Davenport.

Version 1.13.14 JU | RT | RK | DR

January 28, 2020 City of Bristol, Virginia 8

11

Page 12: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

kaufCAN.com

Industrial Development Authority

of the City of Bristol, Virginia

$6,355,000 Taxable City Appropriation Revenue Bonds

(The Falls at Bristol Project), Series 2014A

$27,500,000 Revenue Bonds (The Falls at Bristol

Project), Series 2014B

12

Page 13: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

kaufCAN.com

• The Series 2014 Bonds are debt obligations of the IDA, not of

the City. The City has not guaranteed EITHER series of the

Series 2014 Bonds; rather, it has dedicated certain sources of

funds to the IDA to provide for the payment of the Series 2014

Bonds.

• Neither the City nor the IDA has secured the Series 2014 Bonds

through a deed of trust, security interest in equipment or similar

credit enhancement.

• The City’s obligations with respect to the Series 2014 Bonds

consist of collecting and appropriating to the IDA various types

and sources of revenues (Sales Taxes and Additional Taxes)

with respect to the respective series of Series 2014 Bonds and

determining on an annual basis whether to appropriate any

general funds with respect to a deficit in debt service currently

due on the Series 2014A Bonds.13

Page 14: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

kaufCAN.com

Series 2014A Bonds – mature in 2033, currently

outstanding in the principal amount of $3,720,000.

• First call on Sales Tax Revenues (sales taxes in The Falls

development), which are deposited in trustee-held funds

dedicated to debt service on the Series 2014A Bonds.

• City has made a moral obligation commitment to appropriate

any deficit in debt service on the Series 2014A Bonds.

14

Page 15: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

kaufCAN.com

Series 2014B Bonds – mature in 2044, currently

outstanding in the principal amount of $27,480,000.

• First call on Additional Tax Revenues (real property, personal

property, taxes on sale of food and beverages, lodging taxes

and business and professional license taxes in The Falls

development), which are deposited in trustee-held funds

dedicated to debt service on the Series 2014B Bonds.

• City has NOT made any moral obligation commitment with

respect to the Series 2014B Bonds.

15

Page 16: City Council Neal Osborne, Mayor Bill Hartley, Vice Mayor ...€¦ · Recommended Plan of Finance Davenport & Company LLC, as Financial Advisor to the City, recommends the following

kaufCAN.com

Rights of Bondholders under Financing Documents

• Defaults under Financing Documents include, among others,

payment default, covenant default or appointment of receiver.

• Series 2014 Bonds are NOT subject to acceleration in the event

of default.

• As structured under the Financing Documents, the City is not

legally required to pay any other amounts on the Series 2014

Bonds as long as it is appropriating Additional Tax Revenues

and Sales Tax Revenues as required under the Financing

Documents.

16