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6.C. - Page 13 of 57
<br />provides a reasonable approach, based on established business practice, to determine Atherton's proportionate
<br />share of outstanding debt as of December 31, 2020, in conformance with the requirements of the JPA Because the
<br />JPA requires a withdrawing Member Agency to liquidate in full its proportionate share of debt. This option assures
<br />that Atherton will be responsible for its full share of existing debt, which it agreed to when it became a member of
<br />the JPA; it is thus fair to both Atherton and the JPA's remaining Member Agencies. Under this option, the liquidation
<br />amount Atherton is required to pay is approximately $2,203,016.
<br />Option 2 — Partial Defeasance of 2019 bonds (exclusion of 20198 (new money) bonds) based on franchise
<br />tonnage (estimated cost $1,543,090). Atherton's consultant, NHA, suggests that Atherton should not be
<br />responsible for defeasing its portion of the 2019B (new money) bonds because, by leaving in December, it will not
<br />reap the future benefits the of capital raised by these bonds. In its review of NHA's analysis, KNN calculated what
<br />Atherton's liquidation amount would be if the 2019B (new money) bonds were excluded from the debt calculation.
<br />(Attachment 3, page 3.) The result of excluding the 2019B (new money) bonds is shown in the chart below.
<br />All bonds
<br />defeasance
<br />Atherton Share
<br />(3.24%)
<br />2019A (Refunding $44,511,685
<br />$ 1,443,090
<br />2019B (New Mone) 20,355,228
<br />659,926
<br />Total $645866,913
<br />$2)103,016
<br />As the chart shows, Atherton's cost to defease its proportionate share of the 2019B (new money) bonds is
<br />$659,926; subtracting that amount from its full liability would mean that Atherton's liquidation amount would be
<br />$1,443,090 (plus the $100,000 for defeasance costs), for a total estimated cost of $1,543,090.5
<br />If the Board agreed to exclude the 2019B (new money) bonds from the calculation, Atherton's portion of the debt
<br />would be assumed by the remaining Member Agencies. KNN provided a chart, shown below, in its updated analysis
<br />that breaks down the additional amount of debt each member agency would incur if Atherton's portion of the 2019B
<br />(new money) bonds were allocated amongst them (the total difference in the remaining members' debt service,
<br />$677,912, is somewhat higher than cost of defeasance, $661,545, because the cost of defeasance is calculated to
<br />the first call date on the bonds, whereas the debt service on the bonds goes through final maturity of the bonds).The
<br />far right column entitled "Total Difference" shows the additional amount each individual entity would pay:
<br />5 NHA's analysis calculates the amount be necessary for defeasing Atherton's share of only the 2019A refunding bonds as $1,466,259,
<br />rather than $1,443,090. This difference likely reflects different assumptions as to timing and interest rates. KNN's number is the more
<br />current, and therefore the better number to rely on for purposes of the Board's determination.
<br />SBWMA BOD PACKET 8/20/2020
<br />AGENDA ITEM: 5A - p5
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