BACKGROUND
In November 2007, the Mayor and City Commission approved Ordinance 2007-3582 which amended the procedures that the City followed in connection with the approval of a bond issue and added the following Section to Chapter 2 of the Miami Beach City Code, entitled “Administration”; Article V entitled “Finance”; Sec. 2-278, entitled “Procedures governing the issuance of bonds.”
Sec. 2-278. Procedures governing the issuance of bonds.
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Prior to the adoption by the city commission of the final resolution approving the issuance of any bonds by the city, the following requirements shall be complied with:
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In order for the city commission and the public to be fully informed on all matters relating to the proposed issuance of bonds, the city manager shall prepare, or cause to be prepared, a fiscal analysis of the economic impact of the proposed bond issuance using the following criteria:
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The estimated cost of the project or projects on account of which such bonds are to be issued;
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The estimated annual revenues, if any, to be generated by such project or projects; and
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The estimated annual cost of maintaining, repairing and operating such project or projects.
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Upon completion of the fiscal analysis in subsection (a)(1), the proposed issuance of bonds shall be first considered and reviewed by the city's finance and citywide projects committee.
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The city commission shall hold two public hearings, each advertised not less than 15 days prior to the hearing, in order to obtain citizen input into the proposed bond issuance.
In November 2000, the City issued its first series of Stormwater Bonds in the amount of $52.17 million. In December 2011, the City issued an additional $52.13 million in Stormwater Bonds along with $26.6 million to refund the outstanding Stormwater Series 2000 Bonds. The Administration, in concert with the City’s Financial Advisor, has determined that the City now has the need and the capacity to issue additional Stormwater Revenue Bonds for new capital projects.
At the Special Finance and Citywide Projects Committee (FCWPC) meeting on May 20, 2014, the Administration presented the funding strategy for the Stormwater program recommending issuing three separate $100 million Stormwater bonds. The first issue would be in FY 2014/15 and the other issues would follow as funding was needed. On August 5, 2015, the City issued the first series of Stormwater Revenue Bonds which provided $100 million in proceeds for projects.
In 2016, the City Commission increased the rates to support the issuance of the second series of Stormwater bonds. To defer issuing debt and to expedite the spenddown of existing Stormwater bond proceeds and to comply with state law requirements that funds be available at the time a contract is awarded, the City obtained a Line of Credit (LOC) for $60 million to award scheduled Stormwater projects in anticipation of the new bond issue. On July 29, 2016, the City Commission authorized the execution of the LOC agreement between the City and Wells Fargo Bank, National Associations. To date, the City has committed approximately $60 million from this line for Stormwater projects.
At the Special FCWPC meeting on March 31, 2017, the Administration presented the Stormwater Capital Improvement Program for the second series of bonds to provide $100 million in proceeds.
Since that time, market conditions have made a refunding of the City’s Series 2011A&B Bonds economical. A refinancing of approximately $59 million of the Series 2011A&B Bonds currently provides approximately $3.5 million in net present value savings, which is 6.00% of bonds refunded. The Administration proposed including a refinancing of a portion of the City’s Series 2011A&B Bonds with the second series of Stormwater Revenue Bonds. Although the City code does not require FCWPC review of refundings, this item was scheduled to be heard at the September 8, 2017 FCWPC meeting. This meeting was cancelled due to hurricane conditions. As such the item will be heard at the FCWPC meeting before the second public hearing of this resolution.
The foregoing information is summarized in the table below:
Based on the above combination of new issuance, refundings and related transactions costs, the Administration recommends approval of this issuance, not to exceed $175 million in aggregate principal amount of the bonds.
PROCEDURES GOVERNING THE ISSUANCE OF BONDS
In accordance with the provisions of Section 2-278 Procedures governing the issuance of bonds, the Administration prepared the required fiscal analysis which included the following breakdown of the proposed Stormwater Revenue Bond issue.
Sec. 2-278 (a) 1 (a) - estimated cost of the projects:
The Stormwater program, adopted in 2015 will design and implement the upgrade of the City's stormwater drainage system to meet the new design criteria set by the City Commission with a potential estimated cost of $500 million and with a target completion timeframe of approximately 8-10 years. The estimate includes the Stormwater portion of existing and future neighborhood projects, the retrofit of some previously constructed neighborhood Stormwater systems, and miscellaneous Stormwater upgrades that have been identified by the Public Works Department. The upgrades include the installation of approximately 60 new pump stations and the conversion of 21 injection pumps. The estimated portion of the projects, for which the bonds are to be issued, is $100 million.
Sec. 2-278 (a) 1 (b) - estimated revenues to be generated by the projects:
These projects will either replace or enhance portions of the existing Stormwater system; the operation of such system is funded entirely by user fees. No additional fees are anticipated to be earned as a result of these projects and no additional increase in the user fee is required at this time.
Sec. 2-278 (a) 1 (c) - estimated annual cost of maintaining, repairing and operating the projects:
Operating and maintenance costs for these enhancements were included in the cost model that resulted in the Stormwater rate increase from $9.06 per ERU to $16.67 per ERU which became effective October 1, 2014 and from $16.67 per ERU to $23.01 per ERU which became effective October 1, 2016. However, additional operating or maintenance costs will require future increases to user fees.
RESOLUTION
If approved by the City Commission, in accordance with Sec. 2-278 (a) 3, a second public hearing will be held for this proposed Stormwater Revenue Bond issue on October 18, 2017, and will be advertised at least fifteen (15) days prior to the public hearing date.
The Commission may approve by resolution other improvements as part of the Series 2018 Project in addition to and/or in lieu of one or more of the above improvements.
Because of the character of the Series 2018 Stormwater Bonds, the prevailing market conditions, the complexity of structuring a system-wide financing program for the Stormwater System and the recommendations of the Financial Advisor, it was further determined that the sale of the Series 2018 Stormwater Bonds on the basis of a negotiated sale rather than a public sale by competitive bid is in the best interest of the City.
The Resolution for the issuance of the Series 2018 Stormwater Bonds will delegate to the Mayor, relying upon the recommendation of the Chief Financial Officer and RBC Capital Markets (the City’s Financial Advisor), the determination of various terms of the Series 2018 Bonds, including whether to secure one or more Credit Facilities and/or Reserve Account Insurance Policies with respect to the Series 2018 Bonds, the final award of the Series 2018 Bonds, the dates of redemption of the Prior Bonds to be redeemed prior to maturity, the payment of all related costs and expenses in connection with the issuance of the Bonds and all other actions necessary or desirable in connection with the issuance of the Series 2018 Bonds.
The Chief Financial Officer is further authorized to establish procedures in order to ensure compliance by the City with the Series 2018 Continuing Disclosure Agreement, including the timely provision of information and notices. Prior to making any filing in accordance with such agreement, the Chief Financial Officer may consult with, as appropriate, the City Attorney or Bond Counsel. The Chief Financial Officer, acting in the name and on behalf of the City, shall be entitled to rely upon any legal advice provided by the City Attorney or Bond Counsel in determining whether a filing should be made.
In order to describe and specify the terms of the City’s continuing disclosure agreement, the Chief Financial Officer is hereby authorized and directed to enter into and deliver, in the name and on behalf of the City, a Disclosure Dissemination Agent Agreement (the “Series 2018 Continuing Disclosure Agreement”), with Digital Assurance Certification, L.L.C. (“DAC”), which is hereby appointed as disclosure dissemination agent with respect to the Series 2018 Bonds, in substantially the form presented at the meeting at which this Series Resolution was considered, subject to such changes, modifications, insertions and omissions and such filling-in of blanks therein as may be determined and approved by the Chief Financial Officer, after consultation with the City Attorney. The execution of the Series 2018 Continuing Disclosure Agreement, for and on behalf of the City by the Chief Financial Officer, shall be deemed conclusive evidence of the City’s approval of the Series 2018 Continuing Disclosure Agreement.
U.S. Bank National Association is hereby appointed as Bond Registrar for the Series 2018 Stormwater Bonds.
The officers, agents and employees of the City, the Bond Registrar and DAC are hereby authorized and directed to do all acts and things and execute and deliver all documents, agreements and certificates required of them by the provisions of the Series 2018 Bonds, the Bond Resolution, the Series 2018 Bond Purchase Agreement, the Series 2018 Continuing Disclosure Agreement and this Series Resolution, for the full, punctual and complete performance of all the terms, covenants, provisions and agreements.
The proposed Resolution appoints the following underwriters for the Series 2018 Bonds:
Senior Manager - Citigroup
Co-Manager - Wells Fargo Securities, Inc.
Co-Manager - Estrada Hinojosa & Co.
The underwriters for the Series 2018 Bonds were also approved at the City Commission meeting on March 1, 2017.
Additionally, the proposed Resolution provides the structure for the issuance of other bonds and other forms of indebtedness of the City payable from the Net Revenues of the Stormwater System for the purpose of paying all or any part of the cost of any other improvements to the Stormwater System or to refund or refinance all or a portion of the bonds or any other series or other indebtedness of the City incurred with respect to the Stormwater System then outstanding. All such additional actions would require approval of the Mayor and City Commission.