MEETING DATE: 2/5/2019
DEPARTMENT: COUNTY ADMINISTRATION OFFICE
DEPT HEAD/DIRECTOR: Ray Espinosa
AGENDA ITEM PREPARER: Dulce Alonso
SBC DEPT FILE NUMBER: 156
SUBJECT:
COUNTY ADMINISTRATION OFFICE - R. ESPINOSA
Adopt Resolution, which authorizes the issuance of lease Certificates of Participation in the maximum amount of $8,500,000 to contribute toward financing the new County Jail project, approves as to form the lease agreements and other financing documents, and delegates authority to certain County officials to execute and deliver them on behalf of the County.
FILE NUMBER: 156
RESOLUTION NO: 2019-16
AGENDA SECTION:
REGULAR AGENDA
BACKGROUND/SUMMARY:
The San Benito County Jail Project
The 2019 COPs are being issued to finance a portion of the construction costs of the new County jail facility. The project consists of a 25,000 square-foot expansion of the existing San Benito County Jail. The jail will provide housing for 72 beds, program space, medical area, intake/release functions and administrative offices. Construction began in September 2017 and is anticipated to be complete by May 2019.
The total cost of the project is approximately $24.5 million, of which the 2019 COPs will finance approximately $7.5 million. The County has received approximately $15.0 million under the State’s AB 900 program for the project, and the County will contribute an additional $1.5 million from reserves.
The 2019 COPs/Financing Plan
The County will be issuing Certificates of Participation (“2019 COPs”) supported by a lease/leaseback structure, which is a borrowing tool commonly utilized by California counties for capital financings. County staff has worked diligently with the financing team over the past several months to prepare the structure and documentation of the 2019 COPs for the Board’s consideration.
The 2019 COPs will be issued as fixed-rate lease obligations that will pay principal annually and interest semi-annually for a term of 30 years. The 2019 COPs are secured by a lease/leaseback structure between the County and the San Benito County Financing Corporation (SBCFC). The County will lease the Sheriff Administration / County Permit Center to the SBCFC pursuant to a Site Lease; the County will then sublease the property back from the SBCFC pursuant to a Lease Agreement; finally, the rental payments made by the County under the Lease Agreement are assigned by the SBCFC to the Trustee pursuant to an Assignment Agreement.
Reserve fund requirements will be satisfied either with a cash funded debt service reserve, surety bond, or there will be no debt service reserve fund depending on the rating category. The County will maintain standard casualty insurance to protect against fire, lightning, etc. The plan will be structured for level debt service over 30 years.
County staff, along with the financing team, presented the County’s credit and the 2019 COPs to Standard & Poor’s on Thursday, January 24th in San Francisco. It is anticipated that S&P will issue the credit rating by the time of this Board meeting.
Attached Documentation
By approving Resolution No. 2019-__, the Board will be approving the following documents as to form, and delegating to staff the authority to finalize each document following the sale and pricing of the 2019 COPs, subject to the maximum parameters for the sale of the 2019 COPs set forth in the resolution, including the maximum principal amount of $8,500,000, maximum interest rate, and others.
- Site Lease: the County will lease the Sheriff Administration / County Permit Center to the SBCFC under the Site Lease.
- Lease Agreement: the County will sublease the Sheriff Administration / County Permit Center back from the SBCFC under the Lease Agreement.
- Trust Agreement: The Trust Agreement is an agreement among the COP trustee (Wells Fargo Bank, N.A.), the SBCFC, and the County that effectuates the execution and delivery of the 2019 COPs. The Trust Agreement sets forth all of the terms and conditions of the 2019 COPs.
- Official Notice of Sale: The document officially solicits bids from underwriting banks to underwrite (purchase) the 2019 COPs on the closing date.
- Certificate Purchase Contract: The resolution authorizes staff to switch to a negotiated sale if market conditions are such on the pricing date that a negotiated sale would produce a more favorable interest rate. In that case, the Certificate Purchase Agreement will be used as the agreement between the County and the underwriter.
- Preliminary Official Statement (POS): The POS serves as the primary disclosure document that summarizes the key credit features of the County. Potential investors will base their investment decision upon the information disclosed in the OS.
Next Steps
With the Board’s approval, County staff will work with the financing team to finalize the method of sale and the POS this week. The financing team anticipates selling the 2019 COPs through a competitive sale during the week of February 11th and closing the transaction during the week of March 4, 2019.
BUDGETED:
SBC BUDGET LINE ITEM NUMBER:
CURRENT FY COST:
STAFF RECOMMENDATION:
Adopt Resolution 2019-__:
1. Approving the Financing Plan for the issuance of the 2019 COPs in a maximum principal amount of $8,500,000.
2. Approving the form of the following documents:
a. Site Lease;
b. Lease Agreement;
c. Trust Agreement;
d. Official Notice of Sale;
e. Certificate Purchase Contract; and
f. Official Statement.
3. Delegating authority to the Board of Supervisors Chairman, the County Administrative Officer, the Auditor-Controller or the Treasurer-Tax Collector-Public Administrator to execute and deliver the foregoing documents on behalf of the County.
ADDITIONAL PERSONNEL: