In 2005, the Brea Public Financing Authority (the "Authority") issued $15,405,000 of its Local Agency Revenue Bonds (the "2005 Authority Bonds") in collaboration between the City of Brea (the "City") and the Brea-Olinda Unified School District (the “BOUSD”) related to the City of Brea’s Community Facilities District No. 1997-1 (Olinda Heights Public Improvements) ("CFD 1997-1) and the Brea Olinda Unified School District's Community Facilities District No. 95-1 (Olinda Heights) ("CFD 95-1"), respectively, the boundaries of which overlap. The bonds are outstanding in the amount of $9,355,000 and are callable on any interest payment date without penalty.
Staff is recommending refunding the 2005 Authority Bonds by issuing 2019 Local Agency Revenue Refunding Bonds Series 2019 (the “2019 Authority Bonds”) due to favorable interest rates. The City's Local Debt Policy requires at least a 3.0% net present value savings on refunding of bonds. The proposed refunding bonds have a combined projected net present value savings of 9.04%.
The 2019 Authority Bonds will be secured by a pledge of special taxes levied against properties in CFD No. 1997-1 and CFD No. 95-1. It is projected that the refinancing of the outstanding bonds will produce a combined average annual reduction in bond payments of $167,246 in years 2020 to 2028 and $88,624 in years 2029 to 2035 based on current market conditions, subject to change. The projected average annual reduction in bond payments will be used to lower the special taxes of the property owners in CFD No. 1997-1 and CFD No. 95-1 by an estimated $254 per parcel in years 2020 to 2028 and $139 in years 2029 to 2035.
The adoption of the Resolution authorizes staff to undertake the necessary actions for the proposed refunding of the 2005 Authority Bonds; approves professional services related to the refunding; and directs City officials to execute related documents as needed. The City's bond issuance team for the Authority related bonds has been in place for many years and staff recommends these firms to continue providing those services for this refunding issue. The Resolution authorizes the following firms to participate in the transaction and the Executive Director (Brea City Manager) to execute agreements as necessary: Municipal Advisor - Fieldman, Rolapp & Associates; Bond Counsel - Quint & Thimmig, LLP; Disclosure Counsel - Richards, Waterson Gershon; Special Tax Consultant - Willdan Financial Services; Underwriter - Stifel, Nicolaus & Company; Trustee - Escrow Bank; and Dissmenation Agent - Bank of New York Mellon Trust, N.A.
Assuming the Authority Board of Directors authorizes staff to proceed with the refunding, the next steps will be to prepare the required legal and financing documents and secure an underlying credit rating from Standard & Poor’s. The final step will be for the BOUSD Board of Directors and the Brea City Council to authorize the issuance of their respective underlying CFD refunding bonds in conjunction with the Authority adopting a resolution approving the Preliminary Official Statement (bond offering document) and other related documents for the issuance of the 2019 Refunding Bonds. Based on the current schedule, staff anticipates the BOUSD action to be scheduled for July 8, 2019 and the City Council action would be scheduled for July 16, 2019.
Below is a table summarizing the detail for each series of Bonds to be refunded and the anticipated savings:
| Refunding Statistics |
City CFD |
School District
CFDs A&B |
Total |
| Amount of Refunded Bonds |
$3,590,000 |
$5,765,000 |
$9,355,000 |
| Amount of Refunding Bonds |
$2,620,000 |
$4,295,000 |
$6,915,000 |
| True Interest Cost |
1.90% |
2.61% |
2.41% |
| Final Maturity |
9/1/2028 |
9/1/2035 |
9/1/2035 |
| Reserve Fund |
Surety |
Surety |
Surety |
| Cash Flow Savings |
|
|
|
| Avg. Annual Savings (2020-2028) |
$78,902 |
$88,344 |
$167,246 |
| Avg. Annual Savings (2029-2035) |
$0 |
$88,624 |
$88,624 |
| Avg. Annual Savings per Parcel (2020-2028) |
$120 |
$138 |
$254 |
| Avg. Annual Savings per Parcel (2029-2035) |
$0 |
$139 |
$139 |
| Total Savings |
$710,118 |
$1,415,469 |
$2,125,586 |
| Present Value Savings |
|
|
|
| Net PV Savings |
$261,413 |
$584,641 |
$846,054 |
| % Savings of Refunded Bonds |
7.28% |
10.14% |
9.04% |
|