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Finance Department • (509) 545-3420 • Fax (509) 544-3082
P.O. Box 293 • 525 N.Third Ave. • Pasco,WA 99301
DATE: September 19, 2023
TO: Pasco Public Facilities District Board (PPFD) Members
FROM: Darcy Buckley, City of Pasco Finance Director
SUBJECT: Overview of Debt Financin Pro'ect
As part of planning a capital project, it is worthwhile to review and anticipate financing options
and related steps depending upon decisions made.
Integral in PPFD construction of the Aquatic Facility is planning the timing of construction and
related spending. It is possible to spend local dollars toward a project that will ultimately be debt
financed prior to the bonds being sold. To reimburse use of locally received dollars with bond
proceeds,however, appropriate steps must be followed.
Currently, the only dollars available for PPFD expenditures,both operating and capital, are the
result of PPFD sales tax receipts.No City of Pasco funding, either loaned or gifted, is budgeted
to support PPFD activity. With the successful passage of PPFD local sales tax and associated
receipts, a recurring revenue stream exists to support PPFD activity. Therefore, as noted above,
cash analysis and budget monitoring are a necessary element of planning.
The process is both collaborative and iterative requiring close communication between PPFD
administration and the larger finance team. Based on this communication, decisions are made
throughout the many months process.
Below is a glossary of terms and related information that will be a part of the narrative around
the capital spending process:
Financing Team: Typical the debt issuance process includes a team composed of the issuer
(PPFD), bond counsel (legal advisor), a municipal advisor(financial guidance), and an
underwriter(sells bonds). The benefits provided by the external partners is invaluable. As
experts in the issuance of debt, they are familiar with the process, provide legal oversight and
prepare documents. Jointly the team possess market-based expertise to structure the bond,
coordinate the effort and communication with a rating agency and insurers. Finally, they take the
bonds to the financial market to complete the transaction.
Declaration of Official Intent: If project costs are incurred prior to debt issuance, the PPFD
must sign a formal declaration describing the project and planned debt issued support. This form
is necessary to meet federal tax requirements. This step allows reimbursement for project
spending that occurs before the debt is issued,meaning that any PPFD cash that was spent before
the bond proceeds are received can be reimbursed once bond is issued. Once declaration is
Overview of Debt supparted Project �inancing
September 19, 2E)23
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signed, regular PPFD cash can be spent toward the project. Upon completion of debt issuance,
the bond proceeds reimburse the regular cash use.
Tax-Exempt Bonds: For bonds to be issued as exempt from Federal income tax, the product of
proceeds must serve a governmental, capital purpose. There are limits on private activity benefit.
Spending of Debt Proceeds: Typically,bond proceeds must be spent within 18 months of
issuance. This timeline is necessary to avoid exceeding certain IRS limitations.
Official Statement: The financing team will collaborate with PPFD to produce an Official
Statement to provide to investors prior to sale.
Bond Rating: A rating agency will evaluate financial and community attributes affecting PPFD.
From this assessment, they will evaluate credit worthiness and assign a bond rating. The rating
impacts interest rate assigned to debt. Ultimately, the rating also affects the marketability of the
debt.
Continuing Disclosure: Post issuance disclosure of material events is required. Some of the
items included are annual financial statements, compliance with bond ordinance and covenant
requirements, incurrence of a financial obligation, etc.