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Home My WebLink About2024.08.27 Presentation on Municipal Bonding for PPFDPasco Public Facilities District, Washington Presentation to the Board Sales Tax Bonds, 2024 August 27, 2024 2 Agenda •Current Bond Market •Certain Terms and Concepts of the Bond Resolution •Sales Tax Revenue •Plan of Finance for the 2024 Bonds •Phase 2 Scenarios •Schedule 3 Current Bond Market The charts below show an index of 20-year, general obligation tax-exempt bonds, with Aa2/AA average ratings 4 Certain Terms and Concepts from the Bond Resolution Below are a couple of the terms and concepts from the Bond Resolution •Coverage –Ratio of Gross Sales Tax Revenue divided by Debt Service •Additional Bonds Test (ABT) –The Bond Resolution will place restrictions on the issuance of new debt –The PFD will need to demonstrate sufficient Sales Tax Revenue to Debt Service (Coverage) prior to issuing the Phase 2 bonds –The higher the ABT level, the more restrictive it is to issue future parity bonds. However, the PFD may benefit in the form of a better bond rating for the 2024 Bonds –Also helps ensure sufficient funds to pay the Net Operating Loss, administration expenses, and provide capital for reserves and Phase 2 •Statutory Non-Voted Debt Capacity –The PFD is limited to outstanding principal of not to exceed 0.50% of Assessed Value 5 Certain Terms and Concepts from the Bond Resolution •The Executive Director will be authorized to execute the sale and approve the final terms of the bonds so long as they are consistent with the Sale Parameters in Exhibit A •The Exhibit A parameters and how they compare with the market rates* are shown below •Section 12 –Additional Bonds Test –Sales Tax Revenue in 12 consecutive months out of the prior 30 months must exceed maximum annual debt service by 1.50x Market*Limit Principal $ 49,365,000 $ 52,000,000 Interest Rate 5.25%Max 7.00% TIC 5.00%Max 5.50% Purchase Price 102%95% -130% Final Maturity 30.1 <31 Years *Plus 0.50% above current market 6 Sales Tax Revenue •The PFD has imposed the 0.2% Sales Tax since January 2023 (month of activity), receiving Sales Tax Revenue starting February 2023 (month received) •The chart below shows the Total Taxable Sales for Pasco from 2013 to 2023 multiplied by 0.2% to estimate what historical Sales Tax Revenue collections would have been •2023 Actual Sales Tax Revenue based on Jan-Dec Month of Activity: $4,786,150 •2024 Trailing 12 Months: $5,106,724 •Activity: Jun 23-May 24 / Received: Aug 23-Jul 24 -5% 0% 5% 10% 15% 20% 25% $- $1 $2 $3 $4 $5 $6 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Mi l l i o n s 0.2% of Total Taxable Sales 2024 Trailing % Change 5 per. Mov. Avg. (% Change) 7 Plan of Finance for the 2024 Bonds •Provide $47 million for the Aquatic Facility construction and reimbursement •Structure with level annual debt service (equal payments) •Provide a margin between Sales Tax Revenue (see next page) and debt service payments to sufficient to pay estimated Net Operating Losses •Fund a Reserve Account, if necessary •Typically equal to one year of debt service •Utilize a Reserve Surety, if available •Obtain an Investment Grade bond rating from S&P Global Ratings •Utilize Bond Insurance, if available •Bond Details •First Interest Payment: June 1, 2025 •First Principal Payment: December 1, 2025 •Final Maturity: December 1, 2054 (30 years) •Call Date: December 1, 2034 •Security: Pledge of Gross Sales Tax Revenue 8 Plan of Finance for the 2024 Bonds Uses Construction Proceeds $47,000,000 Reserve Account 3,305,138 Costs of Issuance 505,746 Total Sources $50,810,884 •Shown below are the estimated debt service payments on 2024 Bonds versus trailing 12 months of Sales Tax Revenue •Uses of remainder of Sales Tax Revenue •Pay Net Operating Loss, City of Pasco Payments •PFD Administrative Expenses •Deposit to Reserves or for other allowed purposes •Payments on future (Phase 2) bonds Sources Principal Amount $49,365,000 Premium 1,445,884 Total Sources $50,810,884 $- $1 $2 $3 $4 $5 $6 Mi l l i o n s 2024 Bonds Debt Service Sales Tax Revenue (12 Months Aug 23-Jul24) Coverage = 1.54x 9 Phase 2 Scenarios •The scenarios on the next two pages illustrate the issuance of bonds for Phase 2 •Both assume 2024 Sales Tax Revenue at the trailing 12 months amount ($5.1M) •The first scenario assumes no growth in Sales Tax Revenue •The second scenario assumes Sales Tax Revenue grows at 7% •To issue additional bonds, the PFD will need to meet or exceed the Additional Bonds Test and have sufficient statutory debt capacity •The ability to issue additional bonds will be dependent on many factors including: •Sales Tax Revenue growth and amount available •Amount and timing of bonding •Market interest rates at the time of bonding •Shape of the debt 10 Phase 2 Bonds – Case 1 2024 ST Revenue: $5,106,724 (Trailing 12 Months) – Growth Rate 0% Phase 1 Bonds: $47M Project + Reserve Account; Level Debt; Rates = Current Market + 0.50% Phase 2 Bonds: $25M Project + Reserve Account; Level Debt; Rates = Current Market + 0.50%; Issued Late 2029 2025 2026 2027 2028 2029 2030 2031 2032 Sales Tax Revenue 5,106,724$ 5,106,724$ 5,106,724$ 5,106,724$ 5,106,724$ 5,106,724$ 5,106,724$ 5,106,724$ Phase 1 Debt Service 3,319,844$ 3,318,875$ 3,320,125$ 3,319,375$ 3,321,625$ 3,321,625$ 3,319,375$ 3,319,875$ Phase 2 Debt Service -$ -$ -$ -$ -$ 1,768,125$ 1,773,875$ 1,773,375$ Total Debt Service 3,319,844$ 3,318,875$ 3,320,125$ 3,319,375$ 3,321,625$ 5,089,750$ 5,093,250$ 5,093,250$ Balance Available for Ops 1,786,880$ 1,787,849$ 1,786,599$ 1,787,349$ 1,785,099$ 16,974$ 13,474$ 13,474$ DS Coverage 1.54x 1.54x 1.54x 1.54x 1.54x 1.00x 1.00x 1.00x Net Operating Loss (1)-$ (813,699)$ (945,096)$ (972,484)$ (1,116,146)$ (1,150,877)$ (1,307,988)$ (1,351,028)$ Less: Road Improvement (300,000)$ (300,000)$ (300,000)$ (300,000)$ (300,000)$ (300,000)$ (300,000)$ (300,000)$ Balance Available for Other Purposes 1,486,880$ 674,150$ 541,503$ 514,865$ 368,953$ (1,433,903)$ (1,594,514)$ (1,637,554)$ All-in Coverage 1.41x 1.15x 1.12x 1.11x 1.08x 0.78x 0.76x 0.76x Cummulative Balance 1,486,880$ 2,161,029$ 2,702,532$ 3,217,396$ 3,586,349$ 2,152,446$ 557,931$ (1,079,623)$ Non-Voted Debt Capacity (3% AV Growth)63,505,409$ 65,410,571$ 67,372,888$ 69,394,075$ 71,475,897$ 73,620,174$ 75,828,779$ 78,103,642$ Remaining Capacity ($)17,015,409$ 19,455,571$ 22,192,888$ 25,029,075$ 1,415,897$ 4,460,174$ 7,998,779$ 11,673,642$ Remaining Capacity (%)27%30%33%36%2%6%11%15% $- $2 $4 $6 $8 $10 2025 2026 2027 2028 2029 2030 2031 2032 Mi l l i o n s (1) From Pasco PFD Marks Sheet - 06-16-2024 HG Sales Tax Revenue 2024 Bonds’ Debt Service Phase 2 Bonds’ Debt Service Ratio between revenue and DS must exceed 1.50x 11 Phase 2 Bonds – Case 3 2024 ST Revenue: $5,106,724 (Trailing 12 Months) – Growth Rate 7% Phase 1 Bonds: $47M Project + Reserve Account; Level Debt; Rates = Current Market + 0.50% Phase 2 Bonds: $25M Project + Reserve Account; Level Debt; Rates = Current Market + 0.50%; Issued Late 2029 2025 2026 2027 2028 2029 2030 2031 2032 Sales Tax Revenue 5,464,194$ 5,846,688$ 6,255,956$ 6,693,873$ 7,162,444$ 7,663,815$ 8,200,282$ 8,774,302$ Phase 1 Debt Service 3,319,844$ 3,318,875$ 3,320,125$ 3,319,375$ 3,321,625$ 3,321,625$ 3,319,375$ 3,319,875$ Phase 2 Debt Service -$ -$ -$ -$ -$ 1,768,125$ 1,773,875$ 1,773,375$ Total Debt Service 3,319,844$ 3,318,875$ 3,320,125$ 3,319,375$ 3,321,625$ 5,089,750$ 5,093,250$ 5,093,250$ Balance Available for Ops 2,144,350$ 2,527,813$ 2,935,831$ 3,374,498$ 3,840,819$ 2,574,065$ 3,107,032$ 3,681,052$ DS Coverage 1.65x 1.76x 1.88x 2.02x 2.16x 1.51x 1.61x 1.72x Net Operating Loss (1)-$ (813,699)$ (945,096)$ (972,484)$ (1,116,146)$ (1,150,877)$ (1,307,988)$ (1,351,028)$ Less: Road Improvement (300,000)$ (300,000)$ (300,000)$ (300,000)$ (300,000)$ (300,000)$ (300,000)$ (300,000)$ Balance Available for Other Purposes 1,844,350$ 1,414,114$ 1,690,735$ 2,102,014$ 2,424,673$ 1,123,188$ 1,499,044$ 2,030,024$ All-in Coverage 1.51x 1.32x 1.37x 1.46x 1.51x 1.17x 1.22x 1.30x Cummulative Balance 1,844,350$ 3,258,464$ 4,949,199$ 7,051,213$ 9,475,886$ 10,599,074$ 12,098,118$ 14,128,142$ Non-Voted Debt Capacity (3% AV Growth)63,505,409$ 65,410,571$ 67,372,888$ 69,394,075$ 71,475,897$ 73,620,174$ 75,828,779$ 78,103,642$ Remaining Capacity ($)17,015,409$ 19,455,571$ 22,192,888$ 25,029,075$ 1,415,897$ 4,460,174$ 7,998,779$ 11,673,642$ Remaining Capacity (%)27%30%33%36%2%6%11%15% $- $2 $4 $6 $8 $10 2025 2026 2027 2028 2029 2030 2031 2032 Mi l l i o n s (1) From Pasco PFD Marks Sheet - 06-16-2024 HG Sales Tax Revenue 2024 Bonds’ Debt Service Ratio between revenue and DS must exceed 1.50x Phase 2 Bonds’ Debt Service 12 Schedule •Today: Board Briefing •Sept. 17 or 24: Board Considers Adoption of Bond Resolution •September 20: Call with S&P Global Rating (Bond Rating Agency) •October 3: Receive Rating •October 15: Bond Pricing •October 29: Bond Closing, Funds Available 16 Scott Bauer Principal Scott@NWMunicipalAdvisors.com (425) 452-9551 Malinda Okerlund Municipal Advisor Malinda@NWMunicipalAdvisors.com (425) 452-9553 Ryan Neumeister Municipal Advisor Ryan@NWMunicipalAdvisors.com (425) 452-9552