AgdaPkt 2016-10-24 Closed and Joint SA PFA HHCC

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8.3.C. - Page 1 REPORT To the Honorable Mayor and City Council From the City Manager October 24, 2016 SUBJECT Selection of the financing team to refund the outstanding Public Financing Authority Water Revenue Bonds Series 2007A RECOMMENDATION Adopt a resolution (a) appointing the consultants in connection with the refunding of the Public Financing Authority Water Revenue Bonds, Series 2007A (b) directing City staff to take necessary actions in preparation for a refinancing of the Public Financing Authority Water Revenue Bonds, Series 2007A, and (c) appointing Jones Hall, a Professional Law Corporation, to provide bond disclosure training to City staff and City Council BACKGROUND The City purchases all of its potable water supplies from the San Francisco Public Utilities Commission (SFPUC) via the Hetch Hetchy regional water system. Historically, the City's demand for water consistently exceeded its assured supply of water from the SFPUC. To address this imbalance, the City initiated a water recycling project in 2005. The project consists of water recycling equipment and storage tanks at the Silicon Valley Clean Water Authority (SVCW, formerly SBSA) treatment facility in Redwood Shores, and distribution pipes, meters and associated infrastructure for irrigation and industrial use by businesses and homeowner associations east of US 101 in and around Redwood Shores and Seaport Boulevard. Bonds were sold in the amounts of $35.8 million in 2005, $26.0 million in 2006, and $15.2 million in 2007 to finance construction of the then-estimated $72.4 million project. Approximately $2.0 million of the project cost was financed with cash and available interest earnings on bond proceeds, and $70.4 million was financed with bond proceeds. The balance of the bond proceeds, $6.5 million, was used to pay bond issuance-related expenses and fund debt service reserve funds. The 2005 Bonds were refinanced (or "refunded") with lower cost bonds in June 2013, and the 2006 Bonds were refunded in May 2015. The 2007 Bonds are approaching their first optional bond redemption date in February 2017, and now can be efficiently refunded with lower interest cost bonds to produce lower debt service payments and aggregate net present value (NPV) savings. These bonds will have an outstanding balance in the amount of $12.0 million at the time of refinancing. NPV savings will depend on interest rates at the time refunding bonds are sold, but are presently estimated at approximately $1.5 million, or 14.8% of the amount of refunding bonds sold, which is more than 4 times the Government Finance Officers Association (GFOA) recommended "best practices" 3% minimum NPV savings. The 2005 and 2006 Bonds were refunded with savings of 4.57%