In 2005, the Brea Public Financing Authority issued its Local Agency Revenue Bonds (Community Facilities Districts Refinancing), 2005 Series A (“2005 Authority Bonds”), proceeds of which were used to purchase the following bonds:
- City of Brea Community Facilities District No. 1997-1 (Olinda Heights Public Improvements) 2005 Special Tax Refunding Bonds (“2005 City CFD Bonds”), which were issued to refund the City of Brea Community Facilities District No. 1997-1 (Olinda Heights Public Improvements) 1998 Special Tax Bonds. The 1998 City CFD Bonds were issued for the construction of a neighborhood park, an historic park, storm drain and traffic facilities, utility relocation, roadway construction and abandonment of the oil fields on public property in the Olinda Ranch development.
- Brea Olinda Unified School District Community Facilities District No. 95-1 (Olinda Heights) Special Tax Refunding Bonds, Series 2005A (“2005 School District CFD A Bonds”), which were issued to refund the Brea Olinda Unified School District Community Facilities District No. 95-1 (Olinda Heights) 1998 Special Tax Bonds. The 1998 School District CFD Bonds were issued to finance school facilities and improvements.
- Brea Olinda Unified School District Community Facilities District No. 95-1 (Olinda Heights) Special Tax Bonds, Series 2005B (“2005 School District CFD B Bonds”), which were issued for the construction of a proposed school and related facilities.
The 2005 Authority Bonds were issued in collaboration between the City of Brea ("City") and the Brea-Olinda Unified School District (“School District”) 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 substantially overlap in the 276-acre, fully-developed Olinda Ranch.
The 2005 Authority Bonds are outstanding in the amount of $9.4 million and are callable on any interest payment date without penalty. City Staff has determined in consultation with its Municipal Advisor, Fieldman, Rolapp & Associates, Inc, and its bond underwriter, Stifel, Nicolaus & Company, Incorporated, that current market conditions allow for the issuance of refunding bonds (“2019 Authority Bonds”) to generate savings in the form of lower annual debt payments through refinancing the prior bonds.
The City’s Local Debt Policy requires at least a 3% net present value savings threshold to be met to refund bonds. The 2019 Authority Bonds have a projected 9.04% net present value savings. Based on current market conditions, subject to change, the refunding of the 2005 Authority Bonds is projected to provide average annual savings of approximately $167,246 through 2028 and $88,624 from 2029 to 2035 an average annual savings per parcel of $262 through 2028 and $139 from 2029 to 2035.
The proposed refinancing assumes that the 2005 Authority Bonds will be called on September 1, 2019 and the proposed refunding bonds would retain the same final maturity as the 2005 Authority Bonds. The 2019 Authority Bonds will be secured solely by revenues from the 2019 City CFD Bonds and the 2019 School District CFD Bonds referred to below, which in turn are payable from special taxes levied against properties in CFD No. 1997-1 and CFD No. 95-1, respectively. The resulting per parcel savings mentioned above will be passed on to the taxpayers. The City of Brea has no obligation to use any of its resources for repayment of these bonds.
Proceeds of the 2019 Authority Bonds will be used to purchase the following bonds:
- City of Brea Community Facilities District No. 1997-1 (Olinda Heights Public Improvements) 2019 Special Tax Refunding Bonds (“2019 City CFD Bonds”)
- Brea Olinda Unified School District Community Facilities District No. 95-1 (Olinda Heights) 2019 Special Tax Refunding Bonds (“2019 School District CFD Bonds”)
The 2019 City CFD Bonds will refund the 2005 City CFD Bonds and the 2019 School District CFD Bonds will refund the 2005 School District CFD A Bonds and the 2005 School District CFD B Bonds.
On June 4, 2019, Board of Directors of the Brea Public Financing Authority adopted the Resolution A-2019-01 approving the initiation of proceedings to refinance the outstanding Local Agency Revenue Bonds 2005 Series A (2005 Authority Bonds) related to the City of Brea Community Facilities District No. 1997-1 (Olinda Heights Public Improvements) (CFD 1997-1) and the Brea Olinda Unified School District Community Facilities District No. 95-1 (Olinda Heights) (CFD 95-1) and to engage professional services. The School District approved the issuance of the 2019 School District CFD Bonds at a regularly scheduled School Board meeting on June 24, 2019.
The proposed bonds are structured in a manner that makes each respective agency responsible for their own administration of their special taxes, and result in shared savings by utilizing one financing team for the refinancing. Below is a table summarizing the detail for each series of 2005 bonds to be refunded and the anticipated savings:
If the refinancing is approved, it is anticipated that the 2019 Authority Bonds will be sold in late July with the bond closing expected to be completed in August and the reduced special taxes submitted to the County in early August for the upcoming Fiscal Year 2019-20 tax levy.
On October 9, 2017, the Governor approved Senate Bill 450 (SB 450), adding Section 5852.1 to the California Government Code. SB 450 requires prior to an issuance of bonds, that a public agency disclose in a public meeting good faith financing estimates provided by an underwriter, municipal advisor or private lender. These estimates include: a) the True Interest Cost of the bonds; b) the total finance charge of the bonds, equal to the sum of all fees and charges paid to third parties; c) the amount of estimated bond proceeds minus the total finance charge of the bonds; and any reserves funded from proceeds of the bonds and d) the total payment amount, which includes the projected sum total of all payments the CFD will make to pay debt service on the bonds plus any portion of the finance charge of the bonds that will not be paid with the proceeds of the bonds. The total payment amount should be calculated to the final maturity of the bonds.
The following table includes the SB 450 requirements for the 2019 Authority Bonds. These estimates are subject to change, based upon market conditions at the time of bond sale.
| Requirement |
Estimate |
| True Interest Cost |
2.41% |
| Total Finance Charge (Fees Paid to Third Parties) |
$410,365 |
| Estimated Bond Proceeds Minus Finance Charge |
$7,775,906 |
| Total Payment Amount to Maturity (9/1/2035) |
$9,456,708 |
|