HomeMy WebLinkAboutPR 12166:EDC REVENUE BONDSinteroffice
MEMORANDUM
To: Mayor, City Council, City Manager.
From: Mark T. Sokolow City Attorney ~ ~
Subject: P. R. No. 12166; Council Meeting of April 29, 2003
Date: April 25, 2003
Attached is P. R. No. 12166 approving EDC sales tax revenue
bonds.
MTS/ts
Attachment
cc: Ike Mills, EDC Executive Director
Jim Wimberly VIA FACSIMILE: (409) 724-7585
Frank McCreary
Rebecca Underhill, Director of Finance
P. R. No. 12166
04/24/03 ts
RESOLUTION NO.
A RESOLUTION APPROVING SALES TAX REVENUE
BONDS AS IT PERTAINS TO THE SECTION 4A
ECONOMIC DEVELOPMENT CORPORATION IN THE
AMOUNT OF $8,100,000
WHEREAS, the City of
Development Corporation (the
into an economic incentive agreement
City of Port Arthur, Williams & Rao,
Corporation and War Horse Development
WHEREAS, the Corporation wishes
Port Arthur Section 4A
~Corporation") expects
Economic
to enter
(the "Agreement") with the
L.P. and IASIS Healthcare
Corporation; and
to provide financing for
certain obligations of the Corporation under the Agreement.
NOW THEREFORE BE IT RESOLVED
CITY OF PORT ARTHUR, TEXAS:
Section 1. That the facts and
are true and correct.
BY THE City COUNCIL OF THE
opinions in the preamble
Section 2. That the appropriate officers and
representatives of the Corporation are hereby authorized to
proceed with the necessary arrangements for the sale of
approximately $8,100,000 in sales tax revenue bonds as
delineated in Exhibit "A", including preparation of a
Preliminary Official Statement and applications to rating
agencies and bond insurers.
z.pr12166
Section 3. That a copy of
Resolution be spread upon the Minutes of
READ, ADOPTED AND APPROVED on this
the caption of
the City Council.
day of
, A.D., 2003, at a Regular Meeting of the City
Council of the City of Port Arthur, Texas, by the following
vote: AYES: Mayor
Councilmembers
this
NOES:
MAYOR
ATTEST:
CITY SECRETARY
APPROVED AS TO FORM:
CITY ATTORNEY
APPROVED FOR ADMINISTRATION:
CITY MANAGER
APPROVED AS TO THE AVAILABILITY OF FUNDS.'
DIRECTOR OF FINANCE
z.pr12166
EXHIBIT "A"
ITY OF PORT ARTHUR, TEXAS
FINANCE DEPARTMENT
DATE:
TO:
CC:
FROM:
RE:
4/25/03
IKE Mr[ l.S, EXECUTIVE DIILECTOR PAEDC
STEVE FITZGIBBONS, CII-T MA~E~ ~
It is my understanding that the Hospital Project must have fund/ng in place within 60 days of
execution of the contract, with the contract date being April 30, 2003. If the EDC Board and the
City Council des/res to fi,md reis project through Sales Tax Revenue Bonds, we must begin work on
this quickly.
I have attached schedules that were prepared, at my request, by Joe Morrow, of First Southwest
Company, financial advisors to the City. These preliminary schedules were based upon the following
assumptions:
· Financing instrument is a $8.095 million EDC Sales Tax Revenue Bond
The project funds required are $7.34 million, plus a debt service reserve fund of
$645,000, net issuance costs and insurance of $110,000
· Net interest cost of 4.30% for 20 years
· Net annual debt service of $57Q,000
I understand that you are considering other financing options for this project. Agam, in order to
meet the funding time 1/ne in the contract, we will need to proceed quickly to prepare documents for
a sales tax bond.
Please let me know how we can assist in this project.
RU
City of Port Arthur, Texas
Economic Development Corporation
Sa/es Tax Revenue Bonds, Series 2002
DEBT SERVICE SCHEDULE
Date Principal Coupon Interest Total P+I FISCAL TOTAL
Preliminary
9/30/2018
2/15/2019
8/15/2019 455,000,00 4.450%
9/30/2019
2/15/2020
8/15/2020 475,000.00 4.550%
9/30/2020
2/15/2021
8/1512021 495,000.00 4.810%
9/30/2021
2/15/2022
8/15/2022 520,000.00 4.680%
9/30/2022
2/15/2023 -
8/15./2023 545,000.00 4.750%
9/30/2023
2/15/2024
8/15/2024 570.000.00 4.850%
9/30/2024
71,274.00 71,274.00
71,274.00 526,274.00
61,150.25 61,150.25
61,150.25 536,150.25
50,344.00 50,344.00
50,344.00 545,344.00
38,934.25 38,934,25
38,934.25 558,934.25
26,766.25 26,766.25
26,766.25 571,766.25
13.822.50 13.822.50
13 ~22.50 583.822.50
Tota 8.025 000.00 4.503.313.04 12,528 313.04
YIELD STATISTICS
596,470.50
597,548.00
597,300.50
595,688.00
597,868.50
598.532.50
597,645.00
Accrued Interest from 07/15./2003 to 08/15/2003 ................................................................. 28.992.04
Bond Year Dollars...
........................................................................................................... $101 303.75
Average Life ........
.............................................................................................................. 12.624 Years
Average Coupon ................................................................................................................ 4.4453567%
Net interest Cost (NIC) ........................................................................................................ 4.3828753%
True Interest Cost CrlC~ ...................................................................................................... 4.3351988%
Bond Yieid for Arbitrage Purposes ....................................................................................... 4.3330983%
Ail Inclusive Cost (AIC', ....................................................................................................... 4.5369189%
[RS FORM 8038
Net interest Cost .................................................................................................................. 4.2970251%
Weighted Average Maturity ............................................................................................... 12.408 Years
First Southwest Company File = SER2OO2. SF. S03- Hospital Market- SINGLE PURPOSE
Public Finance 4/21/2003 10:34 AM
Dated 07/15/2003
City of Port Arthur, Texas
Economic Development Corporation
Sales Tax Revenue Bonds, Series 2002
SOURCES & USES
Preliminar
Delk, ered 08/15/2003
SOURCES OF FUNDS
Par Amount of Bonds ......................................................................... $8,025,000.00
Reoffer[ng Premium ........................................................................... 127,496.05
Accrued interest from 07/15/2003 to 08/15/2003 ................................ 28,992.04
TOTAL SOURCES ............................................................................. $8,181,488.09
USES OF FUNDS
Total Underwriter's Discount (0.800%) .............................................. 64,200.00
Costs of Issuance .............................................................................. 8~,000.00
Gross Bond Insurance Premium ( 50.0 bp) ........................................ 62,641.57
Deposit to Debt Service Fund ............................................................ 28,992.04
Deposit to Debt Service Reserve Fund (DSRF) ................................. 598,726.50
Deposit to Project Construction Fund ................................................. 7,340,000.00
Rounding Amount .............................................................................. 1,927.98
TOTAL USES.; .................................................................................. $8,181,488.09
First Southwest ComDany File = SEP,2.002. SF-S03- Hospital Market- SINGLE PURPOSE
Public Finance
4/21/2003 10:34 AM
City of Port Arthur, Texas
Economic Development Corporation
Sa/es Tax Revenue Bonds, Series 2002
DEBT SERVICE SCHEDULE
Date Principal Coupon Interest TotalP+l FISCALTOTAL
8/15/2003
2/15/20O4
8/15/2004 220,000.00 4.120%
9/30/2004
2/15/2005
8/15/2005 255,000.00 4.120%
9/30/2005
2/15/2008
8/15/2005 270,000.00 4,120%
9/30/2OO8
2/15/2007
8/15/2007 280,000.00 4.120%
9/30/2007
2/15/2008
8/15/2008 290,000.00 4.120%
9/30/2008
2/15/2009
8/15/2009 305,000100 4,120%
9/30/2009
2/15/2010
8/15/2010 315,000.00 4.120%
9/30/2010
2/15/2011
8/15/2011 330,000.00 4.120%
9/30/2011
2/15/2012
8/15/2012 340,000.00 4.120%
9/30/2012
2/15/2013
8/15/2013 355,000,00 4,120%
9/30/2013
2/15/2014
8/15/2014 370,000.00 3,960%
9/30/2014
2/15/2015
8/15/2015 385,000.00 4.050%
9/30/2015
2/15/2016
8/15/2016 400,000.00 4.150%
9/30/2016
2/15/2017
8/15/2017 415,000.00 4.250%
9/30/2017
2/15/2018
8/15/2018 435,000.00 4.350%
Preliminary
202,944.29
173,952.25
169,420.25
169,420.25
164,157.25
164,167.25
158,605.25
158,605.25
152,837.25
152,837.25
146,863.25
146,863.25
140,580.25
140,580.25
134,091.25
134,091.25
127,293.25
127,293.25
120,289.25
120,289.25
I12,976.25
112,976.25
105,650.25
105,650.25
97,854.00
97,854.00
89,554.00
89,554.00
80,735.25
80,735.25
202,944.29
393,952.25
169,420.25
424,420.25
164,167.25
434,167.25
158,605.25
438,605.25
152,837.25
442,837.25
146,863.25
451,863.25
140,580.25
455,580.25
134,091.25
464,091.25
127,293.25
467,293.25
120,289.25
475,289.25
112,976.25
482,976.25
105,650.25
490,650.25
97,854.00
497,854.00
89,554.00
504,554.00
80,735.25
515,735.25
596,896.54
593,840.50
598,334.50
597,210.50
598,674.50
598,726.50
596,160.50
598,182.50
594,586.50
595,578.50
595,952.50
596,300.50
595,708.00
594,108.00
Pirst Southwest Company File = SER2002. SF-S03- Hospital Market- SINGLE PURPOSE
Public Finance 4/21/2003 '10:34 AM
City of Port Arthur, Texas
Economic Development Corporation
Sales Tax Revenue Bonds, Series 2002
NET DEBT SERVICE SCHEDULE
Date Principal Coupon Interest Total P+I DSR Net New D/S
Preliminar
9/30/2003
9/30/2004 220,000~00 4.120°/o 376,896.54 596,896.54 (25,943.40) 570,953~14
9/30/2005 255,000.00 4.120% 338,840.50 593,840.50 (25,943.40) 567,897.10
9/30/2008 2701060.00 4.120% 328,334.50 598,334.50 (25,943.48) 572,391.10
9/30/2007 280,000.00 4.120% 317,210.50 597,210.50 (25,943.40) 571,267.10
9/30/2008 290,000.00 4.120% 305,674.50 595,674.50 (25,943.40) 569,731.10
9/30/2009 305,000.00 4.120% 293,726.50 598,726.50 (25,943.40) 572,783.10
9/30/2010 315,000.00 4.120% 281,160.50 596,160.50 (25,943.40) 570~217.10
9/30/2011 330,000.00 4.120% 268,182.50 598,182.50 (25,943.40) 572,239.10
9/30/2012 340,000.00 4.120% 254,586.50 594,586.50 (25,943.40) 568,643.10
9/30/2013 355,000.00 4.120% 240,578.50 595,578.50 (25,943.40) 569,635.10
9/30/2014 370,000.00 3.960% 225,952.50 595,952.50 (25,943.40) 570,009.10
9/30/2015 385,000.0(~ 4.050% 211,300.50 595,300.50 (25,943.40) 570,357.10
9/30/2016 400,000.00 4.150% 195,708.00 595,708.00 (25,943.40) 5681764.60
9/30/2017 415,000.00 4.250% 179,108.00 594,108.00 (25,943.40) 568,164.60
9/30/2018 435,000.00 4.350% 161,470.50 596,470.50 (25,943.40) 570,527.10
9/30/2019 455,000.00 4.450% 142,548.00 597 548.00 (25,943.40 571.604.60
9/30/2020 475.000.00 4.550% 122.300.50 597 300.50 (25,943.40) 571.357.10
9/30/202' 495.000.00 4.610% 100.688.00 595 688.00 /25,943.40) 569,744.60
9/30/2022 520.000.00 4.680% 77858.50 597.868,50 (25,943.40) 571.925.10
9/30/2023 545.000.00 4.750% 53.532,50 598.532.50 (25,943.40) 572 589.10
9/30/2024 570.00000 4.850% 27.645.00 597.645.00 (624,669.90) (27.024.90)
Total 8.025.000.00 4.503 313.04 12,528,313.04 (1,143,537.90/ 11.384 775.14
First Southwest Company File = SER2OO2. SF.S03. Hospital Market- SINGLE PURPOSE
Public Finance
4/21/2003 10:34 AM
DATE:
TO:
FROM:
RE:
CITY OF PO.RT ARTHUR, TEXAS
FINANCE DEPARTMENT
4/23/2003 ~
REBECCA UNDERHILL, CPA,~gL'~DR OI?FINANCE
FUNDING FOR HOSPITAL PROJECT
Last Thursday, I spoke to Ike Mills, Executive Director PAEDC concerning dap financing of the
Hospital project, lie mentioned to me that he had an applination with the Texas Department of
Economic Development Leverage Fund scheduled for his April 22, 2003 Board meeting. Once
approved, the item would appear on the April 29 Council agenda. He provided me with some
infurmation on the fund and a name and phone number for contact. He suggested that I speak with
Ms. Reba Reed concerning this fimding opportunity and ask any questions that the Counc/1 might
have concerrfing this option. I spoke with Ms. Reed and she provided me with the following
information:
The interest rote is the prime rate, currently 4.25%, and is fl~ating. Th_is rate cannot be
locked in. It fluctuates with the pr/me interest rate, and can change multiple times
throughout any g~ven year.
· Maximum term is 15 years.
· There are no application fees or issuance costs with the leverage fund.
Funding is capped at $3 million per projec[ She did go on to say that a large project like this
could be divided into segments, i.e. land acquisition, engineering, construction, and receave
more than $3 million in funding.
I also asked for more details on how the endre project could be structured with the Leverage
Fund
We can submit multiple applications, but not all at the same me. Each entity
can only have one application in process ar a rime
She indicated that the P_AFDC had nor been approved as of yet The application had to be
approved by the Board and Council and then submitted to their office for review and to their
director for approval
She told me that approval could be received within 2-3 weeks of their receipt of the
application, and funding of the loan within a month.
PORT ARTHI~ TEXAS FINANCE DEPARTMENT: FUNDING FOR HOSPITAL
PROJECT
I also spoke with Joe Morrow, First Southwest Company, fmandal advisor to the City. He
provided me with the attached illustrations for a sales tax revenue bond for the eat[re proiect cost of
$7.34 million, plus issuance cost and the requited debt service reserve. He gave me the following
:::> 20 year term
Net interest cost over the life of the bond, 4.38%
:::> Average annual debt service payment $570,000
In light of what we know about both of these options, the following concez~s and questions
come to mind:
A floating interest rate is generally not favorable for a long term loan of this nature.
Curreafly, interest rates are at a 40 year low, and general thinking is that they have no where
to go, but up. Over the last 15 years the prime rate has fluctuated a total of 6.75%. The 15
years before that, the fluctuation was over 11%.
If the 4.25% rate was to increase only 1/2% per year for 4 years, and then remain
constant, at a low rate of 6.25% for the remainder of the term, the cost of the $3
million loan would increase by $363,000 (net present value of $260,000 at 4.5%
interest). Agahn, tbSs is only a part of the cost, the entire project is more than twice
this amount, and an interest rate of 6.25% in 2018 may be very unlikely.
2. Assuming that the entire $7.3 million could be obtained through this fund, and that
the rates escalated only V2% for four years, with a total increase of 2% over the
term, the cost of the $7.3 million loan would increase by $883,000 (npv $632.000).
Will we be able to structure the entire financing through the TDEC, or will we have to
combine debt vehicles? A sales tax bond subsequent to a TDEC loan will result in flightly
higher interest costs as the bond will be subordinate to the TDEC loan.
W/Il we fund any of this project from current EDC reserves?