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March 9, 2011 Greater Wenatchee Public Facilities District.

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Presentation on theme: "March 9, 2011 Greater Wenatchee Public Facilities District."— Presentation transcript:

1 March 9, 2011 Greater Wenatchee Public Facilities District

2 CURRENT SITUATION  The PFD has $41.77 million in Bond Anticipation Notes (BANs) due 12/1/2011  The City of Wenatchee is currently contributing $1.6 mm towards the interest expense on the BANs  Town Toyota Center’s operating revenues are sufficient to cover operating expenses but not debt service  Town Toyota Center does not currently have a capital reserve  Current sales tax revenue available for debt service totals approximately $600,000. This can be leveraged to repay approximately $6 mm of the BANs  There is no other source of repayment of principal on the BANs  2006 Interlocal Agreement commits City to loan PFD money for principal and interest on the Bonds if PFD revenues are not sufficient  2008 Note Ordinance commits City to pay interest on the Revenue BANs, and for the PFD to issue Bonds to repay the BANs  The City has limited non-voted debt capacity of $22 mm 2

3 CURRENT FINANCING STRUCTURE * The BANS can be called at any time ItemInterest Rates Maturity*Par Amount BANs Outstanding: 2008 Limited Sales Tax BANs5.000%12/1/2011 $ 5,135,000 2008 Revenue & Special Tax BANs (tax-exempt) 4.750% 5.250% 12/1/2011 10,000,000 21,160,000 2008 Revenue & Special Tax BANs (taxable) 6.375%12/1/2011 5,475,000 $ 41,770,000 3

4 THE PFD’S CREDIT SITUATION  Sales tax will support approximately $6 mm of Limited Sales Tax Obligation Bonds, sufficient to take out Limited Sales Tax Obligation BANs  Leaves approximately $36 mm to be issued as Revenue Obligations but there is currently no net PFD revenue to support debt service  Can $36 mm of PFD revenue bonds be sold with no net revenues and no credit support other than contingent loan agreement of the City (CLA)? 4

5 CURRENT MUNICIPAL BOND MARKET  Interest rates have risen over the last 4 months due to investor concerns regarding potential municipal defaults  Money has flowed out of the municipal market into the stock market due to its strength  2011 is anticipated to be a critical year for the renewal of numerous, expiring bank letters of credit  Bottom line result is: Interest rates have trended higher Investors are more discerning Limited flexibility for bond structures Large demand for Bank credit support - difficult to obtain 5

6 FINANCING OPTIONS Summary:  OPTION 1. PFD issues long term debt consisting of:  Sales Tax Bonds in an amount that is supported by sales tax without a CLA from the City  Revenue Bonds backed by a CLA from the City  The Bonds could either be fixed rate or variable rate, depending on availability of Letter of Credit support from a Bank  Given revenues are not sufficient to pay more than operating expenses currently, the near-term security would be the CLA. The rating agency, bank and potential bond holders will scrutinize the PFD’s and City’s plans to increase PFD revenues and the City’s ability to pay in the mean-time 6

7 FINANCING OPTIONS (cont’d)  OPTION 2. PFD issues long-term Limited Sales Tax Bonds and short-term refunding notes to refund the Revenue BANs with a CLA from the City to pay interest on the Notes  Although short-term notes have advantage of not locking in long-term rates, they are less secure from a rating agency and investor perspective given the only real security is the promise to issue long-term bonds to repay. The rating agency and note holders will need to see a concrete plan for increasing revenues sufficient to support long-term bonds to make this a viable option  OPTION 3. If there is no market for PFD revenue bonds or notes, the PFD and City will need to explore all alternatives, including an extension of the outstanding Revenue BANs. There are numerous note holders and an extension would be difficult. Depending on the interest rates, the City may want to explore options to reduce at least some of the City’s loans to the PFD by, for example, the City issuing bonds or notes 7

8 FINANCING OPTIONS CONSIDERATIONS  Sell Limited Sales Tax Obligation Bonds now  Sell long-term Revenue Bonds now  $36 mm of debt sold as revenue debt with City CLA  The credit is the CLA: What will the rating agency say?  Sell BANs  BAN rating downgrade  Will make take-out financing very difficult due to public disclosure  What is the take-out for note holders?  Higher interest rates  Find a Bank to provide Letter of Credit  Banks are extremely conservative in their credit assessment  Would the CLA be enough? 8

9 POTENTIAL REVENUES  Additional revenues available to the PFD: Sales tax levy  Approximately 0.2% is estimated to generate as much as $3.6 mm per year  Concerns:  Requires support of all municipalities of the PFD  Requires over 50% voter approval  Other regional solutions Note: If the City is required to fund any additional amount, above the current $1.6 mm, it will require a major reduction in City services in addition to City’s ability to participate in region-wide services 9

10 WHAT’S NEXT?  Pursue voter approval for sales tax  Update disclosure  Pursue discussions with banks and rating agency  Timing is critical: Target should be end of April for financing plan 10

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