HomeMy WebLinkAbout(0081) M&C 21-0262City of Fort Worth, Texas
Mayor and Council Communication
DATE: 04/13/21 M&C FILE NUMBER: M&C 21-0262
LOG NAME: 13SERIES 2021 WATER SEWER REVENUE REFUNDING & IMPROVEMENT BOND
SUBJECT
(ALL) Adopt Attached Thirty -Seventh Supplemental Ordinance Authorizing Issuance of City of Fort Worth, Texas Water and Sewer System
Revenue Refunding and Improvement Bonds, Series 2021, in an Aggregate Principal Amount Not to Exceed $170,745,000.00, Establishing
Parameters with Respect to the Sale of the Bonds, Delegating to Designated City Officials Authority to Effect the Sale of Bonds, and Enacting
Other Provisions Relating to the Subject, Adopt Attached Amended and Restated Thirty -Second Supplemental Ordinance, which Mirrors the Prior
Thirty -Second Supplement but Extends the Term of Delegated Authority and Makes Minor Conforming Changes; and Adopt
Attached Appropriation Ordinances
RECOMMENDATION:
It is recommended that the City Council:
1. Adopt the attached thirty-seventh supplemental ordinance (i) authorizing the issuance of City of Fort Worth, Texas Water and Sewer System
Revenue Refunding and Improvement Bonds, Series 2021, in an aggregate principal amount not to exceed $170,745,000.00, (ii) approving
the sale of the bonds subject to meeting certain parameters being met, (iii) delegating to designated City officials authority to effect the sale;
(iv) approving execution of an agreement for the retirement of the refunded obligations, if any, and other instruments related to the issuance
of the bonds, (v) providing for the establishment of rates and collection of revenues sufficient to pay the principal and interest on said bonds;
and (vi) enacting other provisions related thereto;
2. Adopt the attached ordinance increasing estimated receipts and appropriations in the Water and Sewer Revenue Bonds Series 2021 Fund
by $128,000,000.00, subject to the sale of bonds and receipt of proceeds, for the purpose of funding capital improvements and paying the
costs of issuance, with such amount subject to reduction to conform to final figures reflected in bond closing documents and with any excess
cost of issuance funds remaining after closing being transferred to the water and sewer debt service fund;
3. Adopt the attached ordinance increasing estimated receipts and appropriations in the Water Prior Lien Debt Service Fund in the amount of
$44,000,000.00, subject to the sale of the bonds and receipt of proceeds, for the purpose of funding the required escrow to refund existing
debt, with such amount subject to reduction to conform to final figures reflected in bond closing documents;
4. Adopt the attached ordinance increasing estimated receipts and appropriations in the Water and Sewer Fund in the amount of $500,000.00,
subject to the sale of the bonds and receipt of proceeds, for the purpose of paying cost of issuance related to the refunding bonds, with such
amount subject to reduction to conform to final figures reflected in bond closing documents and with any excess cost of issuance funds
remaining after closing being transferred to the water and sewer debt service fund; and
5. Adopt the attached amended and restated thirty-second supplemental ordinance, which mirrors the prior thirty-second supplement in (i)
authorizing issuance and sale of City of Fort Worth, Texas Water and Sewer System Revenue Refunding Bonds in an aggregate principal
amount not to exceed $150,000,000.00 to allow outstanding commercial paper to be refunded/refinanced if needed, (ii) approving the sale
of the bonds subject to certain parameters being met, (iii) authorizing instruments related to the issuance of the bonds, (iv) providing for the
establishment of rates and collection of revenues sufficient to pay the principal and interest on said bonds, (v) waiving the provision in the
Financial Management Policy Statements that outlines the revenue debt of the City shall generally have an average life of approximately
seventeen -to -eighteen years, and (vi) extending the delegated authority to affect the sale of refunding bonds through May 31, 2022.
DISCUSSION:
The purpose of this Mayor and Council Communication (M&C) is to adopt ordinances associated with revenue -based debt financing of
infrastructure for the City's Water and Sewer System. The actions include authorizing bonds for system improvements and to refinance existing
Water and Sewer debt obligations to achieve a net savings (Thirty -Seventh Supplement), extending standby refunding authority to facilitate the
System's Commercial Paper (CP) program (Amended and Restated Thirty -Second Supplement), and adopting associated appropriation
ordinances.
Thirty -Seventh Supplement
The first four recommendations relate to the thirty-seventh supplemental ordinance, which authorizes issuance and sale of up to $170,745,000.00
in Water and Sewer system revenue refunding and improvement bonds, in one or more series, for the purpose of (i) extending and improving the
system, (ii) refinancing existing Water and Sewer debt obligations to achieve net savings, and (iii) paying the costs of issuance of the bonds, and
to the appropriation of the bond proceeds. The proposed debt transaction includes $126,800,000.00 in new money to fund capital projects in
alignment with the Water Department's Capital Improvement Program with the balance of the debt proceeds to be used to refund other debt to
achieve savings.
It is the City's practice to achieve positive debt service savings through refinancing when the opportunity presents itself. Staff and the City's Co -
Financial Advisors Hilltop Securities and Estrada Hinojosa, are recommending the callable Series 2011 Water and Sewer System Revenue
Bonds be refunded, with a par amount outstanding of $43,045,000.00. The actual savings amount will not be determined until the time bids are
received. However, in accordance with the City's Financial Management Policy Statements, the ordinance provides that the refunding debt shall
not be sold unless the sale will result in net present value savings of at least 3.50 percent of the par amount being refunded. Currently, the refunding
is projected to provide 12.10 percent net present value savings, or $5,241,776.00.
In 1991, the City adopted a master ordinance establishing a Water and Sewer System Revenue Financing Program for the Water Department.
Each time the Water Department issues debt, a supplemental ordinance must be adopted which contains details specific to the debt being issued
This issuance would be the thirty-seventh supplemental ordinance since the master ordinance was adopted. The ordinance provides delegated
authority to the City Manager and Chief Financial Officer, individually, to effect the sale of the bonds. Staff is recommending that these bonds be
sold through a competitive bid sale with the City Manager or the Chief Financial Officer being authorized to approve the terms of the sale so long
as it comes within the parameters set forth in the Council -adopted ordinance. Key parameters include: bonds must be rated in one of the four
highest generic rating categories (BBB or higher); the maximum maturity is February 15, 2051; and the maximum net effective interest rate is 3.25
percent.
Rating agency calls with Fitch and S&P will be conducted prior to the sale of the bonds with the bonds expected to be offered for sale
approximately two weeks after ratings are received. Subsequent to the pricing and awarding the sale of the bonds, the City will seek approval of
the debt transactions from the Texas Attorney General with an estimated closing date approximately one month after the award of sale.
The attached appropriation ordinances reflect the maximum appropriation amount for bond proceeds for each of the identified purposes. The
ordinances' structure accommodates variables associated with sale of debt under delegated authority such as the uncertain final interest rate to be
achieved and the possibility of a premium or discount being associated with the sale of the bonds. To the extent numbers at closing are less than
those reflected in each of the ordinances, the available appropriation amount will be reduced as needed to reflect final figures based on the
closing documents to ensure appropriations do not exceed actuals. Similarly, to the extent there are any remaining proceeds after paying cost of
issuance expense, those funds are to be moved to the Water Prior Lien Debt Service Fund.
Amended and Restated Thirtv-Second Supplement
This M&C also adopts an amended and restated thirty-second supplemental ordinance, which provides the officials identified and designated as
pricing officers with the authority to issue up to $150,000,000.00 in Water and Sewer revenue refunding bonds if needed to facilitate the system's
CP program. As approved by the City Council in December 2017, the CP program authorizes up to $150,000,000.00 in short-term commercial
paper for the Water and Sewer System to be outstanding at any time (M&C C-28496). Although it is not anticipated that commercial paper would
actually be issued very regularly, the program authority provides the Water Department with liquidity and contracting authority so that it can
efficiently design and commence capital projects that are ultimately planned to be financed out of longer term debt to be issued at a later date. As
the program is structured, an issue of commercial paper cannot have a maturity that is later than the 270th day after the date on which the paper is
initially issued. The thirty-second supplemental is an integral part of the CP program because it provides delegated authority that allows refunding
bonds to be issued, within certain parameters, in the unlikely event that commercial paper is actually issued and cannot otherwise be retired or
remarketed by the 270th day.
The thirty-second supplemental ordinance was initially adopted by M&C C-28496 and previously amended and restated (M&Cs G-19266, G-
19531, and M&C 20-0224). Among the parameters the ordinance sets for issuance of Water and Sewer revenue refunding bonds is that the
bonds bear a "net effective interest rate" (as defined in and calculated in accordance with the provisions of Chapter 1204, Texas Government
Code) that is no greater than 10.00 percent. In accordance with the practice of the Texas Attorney General, the prior versions of the thirty-second
supplemental ordinance provided delegated authority that would expire a year after the ordinance (original or restated) was adopted. Adoption of
the attached amended and restated version of the thirty-second supplemental ordinance extends the delegated authority of the pricing officers to
effect sale of all or any portion of up to $150,000,000.00 in revenue refunding bonds through May 31, 2022. Prior restated versions of the thirty-
second supplemental ordinance incorporated minor changes reflecting the impact of federal tax law changes on advance refunding and adding to
the list of events that require disclosure under federal securities regulations. Because ongoing authority to issue refunding bonds is needed for
proper operation of the CP program, a newly amended and restated thirty-second supplemental ordinance will be needed on an annual basis to
extend the period of delegated authority. Staff anticipates bringing forward an amended and restated thirty-second supplemental ordinance each
year as part of the City's annual debt issuance process.
A Form 1295 is not required because: This M&C does not request approval of a contract with a business entity
FISCAL INFORMATION / CERTIFICATION:
The Director of Finance certifies that upon approval of the above recommendations and adoption of the attached appropriation ordinances, the
sale of the 2021 Water and Sewer System Revenue and Refunding Bonds will occur as required under the parameters set forth therein and that
funds will be available in the Water Prior Lien Debt Service Fund and the W&S Rev Bonds Series 2021 Fund to record the appropriate and
necessary transactions. Pursuant to the recommended actions, appropriation authority up to $150,000,000.00 will be restored in the W&S
Commercial Paper Fund. Prior to any expenditures being incurred, the Water Department has the responsibility to validate the availability of
funds.
Submitted for City Manager's Office by. Jay Chapa 5804
Originating Business Unit Head: Reginald Zeno 8517
Additional Information Contact: Alex Laufer 2268
Expedited