MEETING OF THE Budget and Finance Subcommittee MEETING DATE November 19, 2013 TIME LOCATION 12:00 p.m. Valley Metro 101 N. 1 st Ave. 10 th Floor Board Room Phoenix, AZ 85003 VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ 602-262-7433
November 15, 2013 Budget and Finance Subcommittee Tuesday, November 19, 2013 Lake Powell Conference Room 101 N. 1 st Avenue, 10 th Floor 12:00 p.m. For those participating by telephone, please mute your phone when not speaking. Members please make sure your microphone is turned on when speaking and turned off when you are not speaking. Action Recommended 1. Public Comment For information An opportunity for general public comment on issues related to Valley Metro. Up to three (3) minutes will be provided for each speaker. 2. FY 2014 Bond Authorization Paul Hodgins, Manager Revenue Generation and Financial Planning will present the proposed supplemental resolution for the issue of up to $115 million in tax-exempt, senior lien bonds. 3. Future BFS Agenda Items Request Information on possible action For information Chair McDonald will request future BFS agenda items from members. 4. Next Meeting For information The next meeting of the BFS is scheduled for Thursday, January 16, 2014 at 12:00 p.m. Qualified sign language interpreters are available with 72 hours notice. Materials in alternative formats (large print, audiocassette, or computer diskette) are available upon request. For further information, please call Rosalia Castro, Valley Metro at 602-495-8211 or TTY at 602-251-2039. To attend this meeting via teleconference, contact the receptionist at 602-262-7433 for the dialin-information. The supporting information for this agenda can be found on our web site at www.valleymetro.org VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ 602-262-7433
DATE AGENDA ITEM 1 November 15, 2013 SUBJECT Public Comment PURPOSE For information BACKGROUND/DISCUSSION/CONSIDERATION An opportunity for general public comment on issues related to Valley Metro. Up to three (3) minutes will be provided to each speaker. COST AND BUDGET COMMITTEE PROCESS RECOMMENDATION For information only CONTACT John P. McCormack Chief Financial Officer 602-262-7433 jmccormack@valleymetro.org ATTACHMENTS VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ 602-262-7433
DATE AGENDA ITEM 2 November 15, 2013 SUBJECT Bond Issuance Authorization PURPOSE To request Board authorization for the issuance of up to $115 million in tax-exempt, senior lien bonds in Fiscal Year 2014. BACKGROUND/DISCUSSION/CONSIDERATION RPTA has the statutory authority to issue revenue bonds to support the capital projects in the Transit Life Cycle Program (TLCP). The FY 2014 Capital Budget includes bond proceeds, up to $115 million, for light rail capital costs. RPTA will manage the proceeds and pass them through to METRO to fund the Central Mesa Extension, Northwest Extension and Tempe Streetcar and other TLCP projects. RPTA adopted a Master Resolution in May 2009. The bonds authorized through this Second Supplemental Resolution are in accordance with the Master Resolution. The bonds will be issued as tax-exempt, senior lien bonds. This Second Supplemental Resolution was developed by the agency s Bond Counsel, Squire Sanders, in association with the agency s Financial Advisor, RBC Capital Markets. The Second Supplemental Resolution authorizes the issuance of up to $115,000,000 in Senior Lien Bonds, the proceeds of which will be used by METRO to fund capital projects outlined in the Regional Transportation Plan (RTP). The proceeds and associated debt service will be allocated to the rail program. The bond issuance is currently envisioned to have a par value of $115 million; with coupon rates of 4 percent and 5 percent, depending on the maturity; and sold at a premium. The agency is rated by Standard & Poor at AA+ and by Fitch at AA. Yields are expected to be between 0.8% and 3.6% depending on the maturity, but market conditions at the time of closing may be different that forecasted. The True Interest Cost (TIC) is currently estimated to be around 3%. For comparison, the tax-exempt Series 2009A bonds were sold at a premium with coupons of 3.25%, 4% and 5% depending on maturity; yields between 1.39% and 4.40% depending on maturity; and a TIC of 3.97%. VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ 85003 602-262-7433
Following are the highlights of the Supplemental Resolution: Authorizes the issuance of the 2014 Bonds and delegates to the CEO and CFO of RPTA the authority to negotiate the sale of the 2014 Bonds, for not less than 99 percent of par value, to a group of underwriters to be selected by the RPTA officers from among the pool of underwriters which has previously been qualified by the State of Arizona for its financings. Specifies limits or parameters on the financial terms of the 2014 Bonds, including; aggregate principal not to exceed $115,000,000; yields not to exceed seven percent as computed for arbitrage purposes; and final maturity date not to exceed July 1, 2025. RPTA officers are also authorized to: o Prepare a Preliminary Official Statement and a Final Official Statement describing the 2014 Bonds and their security for distribution by the Underwriters to prospective purchasers of the 2014 Bonds; o Negotiate the form of a Bond Purchase Agreement with the Underwriters; o Designate a Bond Registrar and Paying Agent for the 2014 Bonds; and o Enter into other customary financing documents. Contains covenants of RPTA to take all actions necessary to maintain the taxexempt status of the 2014 Bonds including entering into a Tax Certificate and Agreement prepared by Bond Counsel. Authorizes RPTA to spend proceeds of 2014 Bonds for the 2014 Projects listed. Authorizes RPTA to take all actions necessary to comply with Bond Resolutions and other bond documents. The underwriters will be selected from the pool of underwriters on the state contract. The Financial Advisor will conduct a bid process for all qualified underwriters and invite them to describe why they should manage the sale of the agency s bonds, what their marketing strategies will be and who their key contacts are. RPTA officers, along with the Financial Advisor, will select the underwriters that best fit the agency s needs. The underwriters are compensated based on the price per $1,000 bond, and the compensation will be paid by the Trustee from bond proceeds. RPTA has elected to sell the bonds through a negotiated sale primarily for market timing flexibility in seeking the best possible price. Given potential uncertainties in the bond markets around federal budget and debt ceiling discussions, selecting a collection of qualified underwriters and working closely with them to determine the preferred timing and structure for the issue to maximize investor interest is our preferred approach over a competitive sale arrangement which would be less flexible concerning timing and structuring issues. RPTA will use the bond proceeds for the payment or reimbursement of costs of capital expenditures in the regional transportation plan including, without limitation: relocation of utilities relating to the light rail system; planning, acquisition, construction and 2
equipping expansions of the light rail system, specifically the Northwest Light Rail Extension, the Central Mesa Light Rail Extension and potentially the Tempe Streetcar and other projects in the current TLCP and RTP. COST AND BUDGET The bond issuance is included in the FY14 Operating and Capital Budget. It is anticipated that the issuance will not exceed the amount specified in the budget. The costs of issuance include fees paid to the agency s financial advisor, bond counsel, trustee, ratings agencies and underwriters takedown. It is estimated that these costs will total approximately $600,000. Most of these costs are calculated per $1,000 par value, so the final costs will vary if the par value of the issuance is adjusted before pricing and closing. The issuance costs and underwriters fees are paid from the bond proceeds on closing. For comparison, the total costs of issuance for the Series 2009 were $877,260. This is primarily because in 2009 bond counsel had to prepare a master resolution, as this was the agency s first bond issuance, and the Series 2009 had two separate series of bonds, some tax-exempt and some taxable Build America Bonds. COMMITTEE PROCESS RTAG: October 22, 2013 - for information TMC: November 7, 2013 - approved BFS: November 19, 2013 for information and possible action Board of Directors: November 21, 2013 - for action RECOMMENDATION It is recommended that the Board of Directors adopt the Second Supplemental Resolution authorizing the issuance of up to $115 million in tax-exempt, senior lien bonds in FY 2014. CONTACT Paul Hodgins Manager, Revenue Generation and Financial Planning 602-262-7433 phodgins@valleymetro.org John P McCormack Chief Financial Officer 602-262-7433 jmccormack@valleymetro.org ATTACHMENTS 2014 Bond Issuance PowerPoint Second Supplemental Resolution is available upon request. 3
2014 Bond Issuance Budget and Finance Subcommittee November 19, 2013 Series 2014 Overview Up to $115 million in bond proceeds Issued as tax-exempt bonds Plan to issue full par value of $115 million Projected True Interest Cost of about 3.0% based on current market Estimated issuance costs of $600,000 No refunding of Series 2009 All for light rail program Central Mesa Extension Northwest Extension, Phase I 2
Supplemental Resolution Key Points Authorizes the issuance of the 2014 Bonds and delegates to the CEO and CFO of RPTA the authority to negotiate the sale of the 2014 Bonds to a group of underwriters to be selected by the RPTA officers from among the pool of underwriters which has previously been qualified by the State of Arizona for its financings. Specifies limits or parameters on the financial terms of the 2014 Bonds, including; aggregate principal not to exceed $115,000,000; and final maturity date not to exceed July 1, 2025. 3 Supplemental Resolution Key Points RPTA officers are also authorized to: Prepare a Preliminary Official Statement and a Final Official Statement describing the 2014 Bonds and their security for distribution by the Underwriters to prospective purchasers of the 2014 Bonds; Negotiate the form of a Bond Purchase Agreement with the Underwriters; Designate a Bond Registrar and Paying Agent for the 2014 Bonds; and Enter into other customary financing documents. 4
Negotiated Sale Primarily for market timing flexibility Potential uncertainties in the bond markets Federal budget and debt ceiling Work with team of underwriters to determine preferred timing and structure Maximize investor interest to obtain best price 5 Recommendation It is recommended that the Board of Directors approve the Second Supplemental Resolution authorizing the issuance of up to $115 million in taxexempt, senior lien bonds in FY 2014. 6
DATE AGENDA ITEM 3 November 15, 2013 SUBJECT Future BFS Agenda Items Request PURPOSE For information BACKGROUND/DISCUSSION/CONSIDERATION Chair McDonald will request future BFS agenda items from members. COST AND BUDGET COMMITTEE PROCESS RECOMMENDATION For information only CONTACT John P. McCormack Chief Financial Officer 602-262-7433 jmccormack@valleymetro.org ATTACHMENTS BFS Meeting Agenda Future Items VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ 602-262-7433
Budget and Finance Subcommittee Meeting Agenda Future Items Thursday, January 16, 2014 at 12:00 PM Second Quarter FY 2014 Review FY 2014 Mid Year Budget Adjustments 2
DATE AGENDA ITEM 4 November 15, 2013 SUBJECT Next Meeting PURPOSE For information and discussion BACKGROUND/DISCUSSION/CONSIDERATION The next meeting of the BFS is scheduled for Thursday, January 16, 2014 at 12:00 p.m. COST AND BUDGET COMMITTEE PROCESS RECOMMENDATION For information only CONTACT John P. McCormack Chief Financial Officer 602-262-7433 jmccormack@valleymetro.org ATTACHMENTS VALLEY METRO 101 N 1ST AVE STE 1300 PHOENIX AZ 602-262-7433