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Home My WebLink AboutIR 25-0038INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 25-0038 To the Mayor and Members of the City Council March 4, 2025 Page 1 of 2 "+qrF rn Yg7'3 SUBJECT: 2025 DEBT FINANCING PLAN OVERVIEW The purpose of this report is to provide an overview of the City's planned debt financing activities for 2025. As the City continues to invest in critical infrastructure and capital projects, a strategic and well -structured approach to debt issuance is essential to maintaining financial stability and long-term affordability. This report outlines the anticipated bond issuances, including their intended purposes, projected timelines, and key financial considerations. New Money • Series 2025 General Purpose Bonds General Purpose Bonds in the amount of $110,000,000 are planned to fund propositions under the 2022 Bond Program, including: streets and mobility infrastructure, parks and recreation, public library, public safety, and natural area and open space. • Series 2025 Tax Notes Tax Exempt Notes in the amount of $17,000,000 are planned to fund fire apparatus (13.8M) and design and project related work for the Consolidated 911 Call Center at the Zipper Building (3.2M). • Series 2025A Combination Tax and Revenue Certificates of Obligation Combination Tax and Revenue Certificates of Obligation in the amount of $13,600,000 planned to fund Will Rogers Memorial Center. The repayment source will come from net culture and tourism revenues. • Series 2025B Combination Tax and Revenue Certificates of Obligation (Taxable) Combination Tax and Revenue Certificates of Obligation in the amount of $6,505,000 planned to fund TWDB DWSRF(Texas Water Development Board — Drinking Water State Revolving Fund) Lead Replacement Program. The repayment source will come from Water and Sewer System revenue. • Series 2025 Water & Sewer System Revenue Bonds Water & Sewer System Revenue Bonds in the amount of $185,000,000 to fund planned Water and Sewer System capital improvements. • Water Infrastructure Finance and Innovation Act— EPA(INIFIA) Loan WIFIA Loan Program in the preliminary estimated amount of $252,575,400 to fund the planned Mary's Creek Reclamation Facility. • Series 2025 Special Tax Revenue Bonds Special Tax Revenue Bonds in the amount of $65,000,000 planned to fund Fort Worth Convention Center Phase II - Design. The repayment source will come from various pledged revenues of the ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS INFORMAL REPORT TO CITY COUNCIL MEMBERS No. 25-0038 To the Mayor and Members of the City Council March 4, 2025 Page 2 of 2 "+qrF rn Yg7'3 SUBJECT: 2025 DEBT FINANCING PLAN OVERVIEW culture and tourism system. The City plans to issue Special Tax Revenue Bonds in the amount of $541,000,000 to fund Fort Worth Convention Center Phase II — Construction in 2026. Refinancing Opportunities • Series 2017A Special Tax Revenue Bonds Refunding Current refunding of the City's Special Tax Revenue Bonds, Series 2017A to achieve estimated debt service savings of approximately 8.6% or $6,428,028. Commercial Paper Program Amendments • Water and Sewer Commercial Paper Program Water and Sewer Commercial Paper Program supports appropriations to initiate capital projects between annual revenue bond sales. Several upcoming large facility projects in the five-year CIP are necessitating this increase. Water and Sewer Commercial Paper program will be renewed and appropriation authority increased from $225,000,000 to $700,000,000. Next Steps Please refer to the accompanying attached handout, which details the planned transactions along with key activity dates. On March 11, staff will bring forward an ordinance directing publication of the notice of intent to issue Certificates of Obligation for improvements to Will Rogers Memorial Center. Additionally, staff will bring forward parameters' ordinances relating to the above transactions for Council consideration at the May 13, 2025 Council meeting. Conference calls and/or meetings with the City's Credit Rating Agencies are planned to occur during the week of April 28, 2025. The general obligation and water & sewer revenue bond sales are planned for the week of June 2, 2025 with final closing on July 2, 2025. The special tax revenue sales are planned for the week of June 9, 2025 with final closing on July 9, 2025. Please refer to the accompanying Appendix for additional details. If you have any questions, please contact Reginald Zeno, Chief Financial Officer, at 817-392-8500. Jesus "Jay" Chapa City Manager ISSUED BY THE CITY MANAGER FORT WORTH, TEXAS 2025 DEBT FINANCING PLAN OVERVIEW March 4, 2025 Financial Management Services FaR SANS NC�NG P VPpP'E 2p25 F�Np E�EASAN�E REFVNp�N�'oG10N DEBT GENEC TV PA Age�'da MpRKE� ItA UpDA� G p,Cv`�\ES DEBT FD FY2025 RMA.�\pN gEy�N c, \NFO GREO%T R R�oV: pG,��v�T\ES C A`ENp A 2 .. m FY 2025 Preliminary Debt Financings Q2 110, 000, 000 Q2 17, 000, 000 $127,000,000 General Purpose Improvement Bonds Tax Notes' Waterworks & Sewer System Q2 185,000,000 W & SS Revenue Bonds TBD 6,505,000 Comb Surplus Rev and Tax Cert. of Obligations Q3 252,575,400 WIFIA Loan $444,080,400 Culture & Touri Q2 65,000,000 Special Tax Revenue Bonds Q2 13,600,000 Comb Rev and Tax Cert. of Obligations $78,600,000 FORT WORTH 2022 Authorization Ad Valorem Tax Fire Apparatus/911 Call Center Ad Valorem Tax W&SS W & SS Revenue TWDB DWSRF Lead Replacement W & SS Revenue WIFIA (Mary's Creek) W & SS Revenue FWCC Phase 2 Design Special Tax Revenue Will Rogers Memorial Center C&T Revenues 1$17,000,000 Tax Notes: ➢ $13,801,000 fire apparatus ➢ $3,199,000 for design and project related work for the Consolidated 911 Call Center at the Zipper Building General Obligation 2022 Bond Program - Proposition Summary Purpose Streets & Mobility Infrastructure Parks & Recreation Public Library Public Safety Natural Area and Open Space Amount Authorized $369, 218, 300 123, 955, 500 12,505,200 FORT WORTH Amount Previously nount To Be Unissued Issued Issued* Balance $125,177, 000 $53, 717, 30C $190, 324, 000 90, 069, 500 10, 823, 500 20, 000, 000 1,681,700 39, 321, 000 19, 720, 000 19, 601, 000 - 15, 000, 000 - 15, 000, 000 - $560,000,000 $245,790,000 $110,000;000 $204,210,000 *Amount to be issued based on cash flow forecast and analysis in coordination with FWLab. 5 FY 2025 Commercial Paper Program Waterworks & Sewer System W V 19 popw Closing pose FORT WORTH Water and Sewer System Commercial Increase authority from Q1 700,000,000 Paper Notes, Callable CP Series $225,000,000 to $700,000,000 W & SS Revenue $700,000,000 • The Water and Sewer System Commercial Paper program provides necessary appropriation authority to support capital projects identified in the Water and Sewer Capital Improvement Plan. • Increasing the program size will allow the Water and Sewer System additional flexibility in issuing contracts to support projects such as: • Mary's Creek Water Treatment Plan • Eagle Mountain Water Treatment Plant • Granulated Carbon Facility • Big Fossil Part IV and along with other water and sewer CIPs. • The commercial paper authority, in conjunction with council -adopted reimbursement resolutions facilitate the initial award of contracts that will ultimately be financed by long term bonds issued after the project has commenced. • There are no plans to issue commercial paper at this time. n. 13 FY2025 Refunding Opportunities FORT WORTH As a general rule, the net present value savings of a particular refunding should exceed 3.0% of the par amount of the refunded maturities. Refunding Par Maturities Refunded $26, 035, 000 2015A GO — 26-31 $51, 540, 000 2015A — 26-35 $70,400,000 2017A — 25-37, 39, 43 Net Present Value Savings ($) $546,849 $801,900 $6,428,028 Net Present Value 2.0% 1.6% 8.6% Savings (%) (Z) Avg Annual Savings $78,121 $721,123 $441,470 (FY25-31) (FY25-35) (FY25-43) Avg Refunded Coupon 4.5% 3.7% 5.1 % Refunding TICM 3.2% 3.1 % 4.0% (1) Rates as of January 29, 2025 (2) Due to the estimated savings, staff recommends the refunding for Special Tax Tax -Exempt bonds only (3) Special Tax Bonds Series 2017A originally issued for the construction of the Dickies Arena Project E General Obligation Debt Capacity General Obligation Debt Capacity Analysis Model is dynamic and continually updated by staff and FAs as conditions change Issuance plan maximizes project capacity based on estimated I&S Levy 7-Year Forecast Planned Estimated 2026 Bond Program: $800 million Net Taxable Assessed Value(') FORT WORTH $121.9 Billion Estimated Tax Note I 17.OMM to 25.9MM in 2025 through 2031, growing 3% Program thereafter Remaining 2022 Remaining 2022 bond program-2025 (110MM), 2026 Bond Program I (105MM) and 2027 (99.21MM) Interest Rate 6.00% interest rate for 2025, 2026, and 2027 issuances to Assumptions accommodate potential market volatility, rise in interest rates 4% Growth of I&S 3% Growth of I&S 3% Growth of I&S 3.5%(4) Growth of - - -(December24) I&S Levy (January I&S Rate Flat at $0.1475 167,787,434 Flat at $0.1475 Flat at $0.1475 Flat at $0.1475 Estimated Levy for Tax Year 2024(2) 170,581,392 170,581,392 170,581,392 Bonding Capacity through 2031 (3) 1.358 Billion 1.343 Billion 1.349 Billion 1.374 Billion 2022 Bond Program 314 Million 314 Million 314 Million 314 Million Estimated Tax Note Program 124 Million 124 Million 155 Million 155 Million Reserve Capacity 120 Million 120 Million 120 Million 120 Million Available Capacity for a 2026 Bond Program (3) 800 Million 785 Million 760 Million 785 Million (1) Estimated property tax revenue based on preliminary data from the CAD. Estimated 2024 Tax Year Net Taxable Assessed Value ("TAV") is sourced from FWLab. Future data is subject to change. Growth is based on Tax Year 2024 Levy and is 3.5% for tax years 2025 — 2029, 2% for 2030 — 2034; 1 % for 2035 — 2039 and flat thereafter. (2) Estimated 2024 Tax Year Levy is sourced from FWLab TAV using the pro forma I&S Rates. (3) Bonding Capacity is based on estimated property tax revenues available for debt service on a 20-year level principal debt financing and municipal market interest rate. Assumptions include estimates for delinquents, penalties, and interest, and that portions of certain obligations paid from self-supporting revenues will continue to be funded. Bonding capacity budget includes sizing consideration of future authorizations based on available revenues. (4) 3.5% represents most recent growth factor provided by FWLab 10 General Obligation Debt Capacity Analysis' FORTWORTH. $250 c $200 $150 $0 r Existing Debt Service Less Self -Supported Debt r Projected Amortization of Remaining 2022 Referendum Projected Debt Service Fund Revenues - 4% Growth (April Estimate) —Projected Debt Service Fund Revenues - 2% Growth (December) Projected Debt Service Fund Revenues - 0% Growth (December) 'Preliminary, subject to change �D O ��O `�D �O `�O `�O so s, Fiscal Year Tax Notes Program for Fire Apparatus ri Projected Amortization of Future Referendum (3% Growth Capacity) Projected Debt Service Fund Revenues - 3% Growth (December) —Projected Debt Service Fund Revenues - 1% Growth (December) 11 Tax Note Program FORT WORTH Fire Apparatus 17,000,000.00 17,000,000.00 17,000,000.00 17,510,000.00 18,035,000.00 18,575,000.00 19,130,000.00 Ambulance - 5,803,140.00 6,301,900.00 6,820,880.00 7,360,080.00 7,919,500.00 8 499 140.00 Purchase�1�' Fire Apparatus 13,800,382.00 14,360,047.00 14,934,449.00 15,681,172.00 16,308,419.00 16,797,671.57 17,301,601.72 Total Projects 13,800,382.00 20,163,187.00 21,236,349.00 22,502,052.00 23,668,499.00 24,717,171.57 25,800,741.72 Current Tax Notes Issuance 17,000,000.00 20,200,000.00 21,250,000.00 22,550,000.00 23,700,000.00 24,750,000.00 25,850,000.00 Projection(2) Net Additional (3,199,618.00)(3) 3,200,000.00 4,250,000.00 5,040,000.00 5,665,000.00 6,175,000.00 6,720,000.00 Tax Notes (1) Preliminary cost estimates representing base vehicle and replacement costs, currently under review by property management. Does not include any other equipment, upgrades or outfitting. (2) Actual projections through 2031, growing at 3% after 2031 (3) Net Additional Tax Notes in 2025 could be used for large vehicle replacements or other one-time capital projects. For 2026-2031, Net Additional Tax Notes reflects the difference in projected tax note issuances from prior projections to the most recent one. 12 GALVAN TFC STRATEGY GROUP • Market Update FORT WORTH Economic Highlights The consumer price index release in January showed headline inflation in the US rose 0.4% in December of 2024. Later in the month during its January meeting, the Federal Reserve kept rates the same as expected, maintaining the target fed funds rate at 4.25-4.50% The Committee is strongly committed to supporting maximum employment and returning inflation to its 2% objective. Bond Markets U.S. Treasury yields fell across the board in September. Since yields on the 10-year U.S. Treasury note hit their low in September, yields have risen over 100bps. Municipal Bond Market January's volume was at $35.243 billion in 486 issues, up from 10.8% in 2024. January's total also surpasses the 10-year average for the month of $26.675 billion. Potential volatility has brought issuers to market. 4 5% 4 0% 35% 30% 25% d 20% Y 15% —1 year Ago 10%—3Months Ago 0 5% —1 Month Ago —Current 0 0% 1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 Maturity 0 ��, fm p iiMM TFC 2 year 3 year 5 year 10 year 30 year JEL Current 1 /31 /2025 1 Month Ago 12/31 /2024 A 1 month 3 Months Ago 10/31 /2024 A 3 Months 1 Year 2.69% 2.80% -11 bps 2.67% +2 bps -2 bps 2.74% 2.81 % -7 bps 2.63% +11 bps +20 bps 2.80% 2.88% -8 bps 2.71 % +9 bps +43 bps 3.04% 3.11 % -7 bps 3.02% +2 bps +60 bps 3.90% 3.82% +8 bps 3.81 % +9 bps +34 bps 451/b —BVAL30yr —AG030yrSpread 40% 35% . 30% 100 90 30 70 25/0 60 } 20% 15% ..... ...... 50 10% _ _ 40 0 5% — 30 0 0 % 20 tib ti� ti� tib tib tia ti� ti� ti� ti� ti� tib ti� ac ��o `Sai pey `S_A �c �� p�A yeQ CL- �o� peg lac 14 C Debt Activities Beyond FY2025 Water & Sewer System 2Q2026 267,600,000 W & SS Revenue Bonds 2Q2026 160,000,000 TWDB SWIFT Loan 2Q2026 150,000,000 TWDB DWSRF Loan 2Q2026 27,000,000 TWDB CWSRF Loan 2Q2027 287,600,000 W & SS Revenue Bonds 2Q2028 282,600,000 W & SS Revenue Bonds 2Q2029 180,000,000 W & SS Revenue Bonds 2Q2030 180,000,000 W & SS Revenue Bonds $1,534,800,000 W&SS and Mary's Creek Eagle Mountain WTP Granulated Carbon Facility Big Fossil Part IV W&SS and Mary's Creek W&SS and Mary's Creek W&SS W&SS Drainage (Stormwater) 2Q2026 39,720,000 Drainage Utility System Revenue Bonds Drainage $39,720,000 Culture & Tourism 2Q2026 541, 000, 000 2Q2028 53, 000, 000 TBD TBD $594,000,000 Special Tax Revenue Bonds Special Tax Revenue Bonds Certificates of Obligation Phase 2 Construction Omni Expansion (On Hold) Downtown Parking Garage FORT WORTH W & SS Revenue W & SS Revenue W & SS Revenue W & SS Revenue W & SS Revenue W & SS Revenue W & SS Revenue W & SS Revenue Drainage Rev. C&T Revenue C&T Revenue TIF Rev./C&T/Parking Research & Innovation LGC (Non General Obligation) 2Q2026 40,000,000 Certificates of Obligation A&M Public Parking Garage TIF/Parking Revenue 2Q2026 TBD Lease Appropriation Revenue Bonds Texas A&M Expansion Lease Revenue $TBD * Calendar Year Basis ** Preliminary Estimates 16 Credit Rating Information Rating Overview The City maintains a General Obligation (GO) of Aa3 rating from Moody's, equivalent AA ratings from S&P and Fitch, and AA+ rating from Kroll Credit strengths: • Strength of the local economy • Strong reserves • Very strong management practices • Healthy financial performance Credit challenges: • Very weak debt profile— predominantly due to the Pension/OPEB liabilities External factors: • Strong Value per capita (AA) • Very Strong Diversity of tax base (AAA) • Adequate Resident Income (A) • Very Strong Economic Growth (AAA) Please see Appendix for further rating commentary and peer comparison information. FORT WORTH Moody's S&P Fitch Kroll Category Aaa AAA AAA AAA Highest Possible Rating Aa 1 AA+ AA+ AA+ High Grade / High Quality Aa2 AA AA AA Aa3 AA- AA- AA - Al A+ A+ A+ Upper Medium Grade A2 A A A A3 A- A- A - Baal BBB+ BBB+ BBB+ Minimum Investment Grade Baa2 BBB BBB BBB Baa3 BBB- BBB- BBB- Bal , Ba2, Ba3 BB+, BB, BB- BB+, BB, BB- BB+, BB, BB- Non -Investment Grade / Speculative C C C C Highly Speculative D D D D Imminent or in Default 18 PFM's Estimated Moody's Scorecard for Fort Worth FORTWORTH. PFM estimates Fort Worth's post -issuance indicated score falls in the `Aa3' category Indicated Rating Aaa Weighted Score 0.0 - 1.50 Aal 1.51 —2.50 Aa2 2.51 — 3.50 Aa3 3.51 — 4.50 Al 4.51 — 5.50 u •7ct •• • ••Moody's Local Government Methodology Weight Weighted Weighted • •Category Factor 1: Economy 30% Economic Growth 1.8% Aaa 1.8% Aaa 10% 0.149 0.149 Full Value per Capita $108,227 Aa $108,227 Aa 10% 0.140 0.140 Median Household Income (adjusted for cost of 100.5% Aa 100.5% Aa 10% 0.200 0.200 iving) Factor 2: Financial Performance 30% Available Fund Balance Ratio 53.1 % Aaa 53.1 % Aaa 20% 0.067 0.067 Liquidity Ratio 88.7% Aaa 88.7% Aaa 10% 0.017 0.017 Factor 3: Institutional Framework 10% Institutional Framework Aa Aa Aa Aa 10% 0.300 0.300 Factor 4: Leverage 30% Long-term Liabilities Rati02 319.5% A 347.5% A 20% 0.919 0.993 Fixed Cost Ratio 17.6% A 19.5% A 10% 0.202 0.241 Indicated Rating 100% 3.36 Aa2 3.59 Aa3 'Pre -Issuance input based on Moody's GO 2024 report 2Debt outstanding from FY2023 ACFR 19 6J L Timeline FORT WORTH March 4, 2025 Debt Plan Informal Report to Council — Council Work Session March 11, 2025 Notice of Intent to Issue Approval — Council Meeting March 14, 2025 Publish Notice of Intent March 21, 2025 Publish Notice of Intent Week of April 28t" Credit Rating Agency Meetings May 6, 2025 M&C: Bond Authorization/Parameters Approval — Council Meeting Receive Credit Ratings June 3, 2025 Bond Pricing July 2, 2025 Bond Closing 21 N• f/) O N �J