CDFA / / BNY MELLON DE DEVELOPMENT FIN FINANCE WEBCAST SE SERIES Bonds + Financing Sustainability The Broadcast will Begin at 1:00pm Eastern Submit your questions in advance using the GoToWebinar control panel View previous webcast recordings online at www.cdfa.net WWW.CDFA.NET / / WWW.BNYMELLON.COM
Hello! Welcome to the webcast. Thomas Leonard Program Coordinator Council of Development Finance Agencies Columbus, OH Are you a CDFA Member? Members receive exclusive access to thousands of resources in the CDFA Online Resource Database. Create your unique login today at www.cdfa.net WWW.CDFA.NET / / WWW.BNYMELLON.COM
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Bonds + Financing Sustainability Panelists Rena Nak akashima, , Mod oderator Senior Product Manager The Bank of New York Mellon Sharon Woj Sh ojda Finance Director City of Bend, Oregon CDFA Training Institute St Stephen Pear earlman Founding Partner 16 courses in development finance Pearlman & Miranda, LLC designed for all skill levels. Learn more and register today at www.cdfa.net WWW.CDFA.NET / / WWW.BNYMELLON.COM
Bonds + Financing Sustainability Rena Nakashima Senior Product Manager The Bank of New York Mellon Los Angeles, CA What are you reading? Your development finance toolbox isn’t complete without a set of CDFA reference guides. Members save 15% on every purchase. Order today at www.cdfa.net. WWW.CDFA.NET / / WWW.BNYMELLON.COM
Bonds + Financing Sustainability Sharon Wojda Finance Director City of Bend Bend, Oregon CDFA Training Institute 16 courses in development finance designed for all skill levels. Learn more and register today at www.cdfa.net WWW.CDFA.NET / / WWW.BNYMELLON.COM
BONDS + FINANCING SUSTAINABILITY PROJECTS SHARON WOJDA, FINANCE DIRECTOR CITY OF BEND, OR NOVEMBER 14, 2017 CITY OF BEND |
TOPICS COVERED 1. City of Bend 2. Revenue Bonds 3. Water System 4. Bridge Creek Project CITY OF BEND |
CITY OF BEND CITY OF BEND |
BEND, OREGON CITY OF BEND |
BEND, OREGON CITY OF BEND |
GREAT WATER, GREAT LIFE! CITY OF BEND |
REVENUE BONDS CITY OF BEND |
2016 WATER REVENUE BONDS • Project substantially completed April 2016 • Revenue Bonds issued July 2016 • Total proceeds $62.8 million • $60.4M new money (including line of credit repayment) • $2.4M refund loan from State of Oregon • Water System Improvements (the Bridge Creek Project): • Replaced pipeline • Upgraded intake facility • New water treatment plant • Maintain dual water source CITY OF BEND |
REVENUE BOND PROCESS - OVERVIEW • Select municipal advisor and bond counsel • Formal governing body actions: • Adopts intent to reimburse resolution (if necessary) • Adopts resolution to authorize issuance of bonds • Draft Documents: • Preliminary Official Statement (POS) • Master Bond Declaration • Rating agency and investor roadshow presentations • Pricing and bond sale • Documents signed, bonds closed, funds received • Update EMMA CITY OF BEND |
2016 WATER REVENUE BONDS • Throughout process - hands on involvement from Engineering Director and City Manager • Brought both Moody’s and S&P onsite for rating presentations • Separate presentations with joint tour of water system CITY OF BEND |
WATER SYSTEM CITY OF BEND |
WATER SERVICE AREA • Private water providers serve about 25% of the population and City • Water System Coverage & Service: • Residential service population of about 65,000 • Approx 25,000 water service connections CITY OF BEND |
WATER SYSTEM OVERVIEW CITY OF BEND |
DUAL SOURCE SYSTEM BENEFITS CITY OF BEND |
BRIDGE CREEK PROJECT CITY OF BEND |
BRIDGE CREEK PROJECT CITY OF BEND |
PROJECT CORRIDOR New Water Treatment Facility New Water Pipeline Upgrade of Water Intake Facility CITY OF BEND |
ENVIRONMENTAL PROTECTION AGENCY LT2 RULE Requires all surface water systems to install treatment to remove or inactivate cryptosporidium, a pathogenic microorganism that is resistant to chlorine CITY OF BEND |
ENGINEERING APPROACH • 2011 feasibility analysis on reinvestment of surface water supply • Water distribution analysis CITY OF BEND |
OPTIMIZATION ANALYSIS RESULTS Utilize Surface Water more and use wells less • Less energy • Construct membrane treatment to increase reliability in the event of wildfire and address regulatory requirements • Build new pipeline and intake in roadway to reduce risk of failures Membrane Filtration and lessen environmental impact CITY OF BEND |
AGING SYSTEM – PIPELINE DETERIORATION CITY OF BEND |
EXTREME FIRE RISK CITY OF BEND |
WATER SYSTEM PRODUCTION DEMAND • Steady increase in new water service connections and corresponding demand since 2011 • Since 2011, annual demand increase ~5%/year CITY OF BEND |
FINAL PROJECT COSTS - $72.4 MILLION Intake Pipeline Treatment Hydro / Facility Facility Other Studies $1.9 M $28.4 M $ 5.0 M $37.1 M CITY OF BEND |
SUMMARY • Bridge Creek project: • Replaced pipeline • Upgraded intake facility • New water treatment plant • Maintained dual water source • Project Costs = $72 Million • $60 Million Water Revenue Bonds • $12 Million Rates “ Prowell Springs” – the source of Bend’s surface water system CITY OF BEND |
QUESTIONS? Sharon Wojda City of Bend Finance Director (541) 693-2158 swojda@bendoregon.gov CITY OF BEND |
Bonds + Financing Sustainability Stephen Pearlman Founding Partner Pearlman & Miranda, LLC Bloomfield, New Jersey Are you a CDFA Member? Members receive exclusive access to thousands of resources in the CDFA Online Resource Database. Create your unique login today at www.cdfa.net WWW.CDFA.NET / / WWW.BNYMELLON.COM
C OUNCIL OF D EVELOPMENT F INANCE A GENCIES BONDS + FINANCING SUSTAINABILITY Stephen B. Pearlman, Esq. Pearlman & Miranda, LLC, Bloomfield, NJ November 14, 2017
Part I Financing Government Renewable Energy Projects, Generally
A VAILABLE C APITAL M ARKETS For governments looking to finance renewable energy projects: Municipal bond market o Primary market, public offering, or other (see below) Notes or Bonds (have not seen COPs or o other interests) Tax-exempt or Taxable o If tax-exempt, interest from tax-exempt investors, including muni bond funds. No equity available to governments o Typically, no bank loans available, although o private placement purchase by banks (§265(b) bank qualified bonds deduction for cost of carry, post 1986 Tax Act, under $10M issuer)
T YPES OF O FFERINGS Public Offering with an underwriter • Limited Public Offering, or Private Placement • Tax Considerations: Tax-exempt Governmental Bonds v. Taxable (historically a 200bp spread) o Capital expenditures and related soft costs Safe harbor management contract guidelines (Rev. Proc. 2017-13 and Rev. Proc. 2016- 44) AMT (Qualified private activity bonds (PABs); restrictive rules including volume o cap, COI limitations) PABs: Sewage Facilities, Water Facilities, Solid Waste to Energy Facilities, Local District Heating and Cooling Facilities, Small Issue IDBs Tax Credit Bonds (clean renewable energy bonds (CREBs), qualified energy o conservation bonds (QECBs)) o Instead of current interest, bond holder receives tax credit = 70% of daily rate established by U.S. Treasury; see www.treasurydirect.gov/GA- SL/SLGS/selectQTCDate.htm) CREBs: Wind Facilities, Closed-Loop Biomass Facilities, Open-Loop Biomass Facilities, Geothermal or Solar Energy Facilities, Small Irrigation Power Facilities, Landfill Gas Facilities, Trash Combustion Facilities, Marine and Hydrokinetic Renewable Energy Facilities Federal Securities Law Considerations: Muni Market Exempt from Registration under Securities Act of 1933 o MSRB Rule 15c2-12; Back Door regulation of Official Statements (muni market o offering documents), post 1975 Tower Amendment, through regulation of underwriters Section 3(a)(2) exemption for tax-exempt bonds v. Reg D accredited investor and o “big - boy letter” for taxable securities Anti-Fraud provisions of Securities Exchange Act of 1934 still apply o
C HARACTERISTICS OF M UNICIPAL M ARKET Risk Adverse GO or bankable revenue stream, preferably with o rate and negative covenants Anti-dilution provisions (additional bond tests) o Full project entitlements obtained o Quantifiable Risk (investment grade rating system, no “story bonds”) Sufficient Size (too small to engender interest) Market Timing Considerations (Fed announcements) Liquid Secondary Market for Publicly Offered Debt
T YPES OF R ENEWABLE E NERGY P ROJECTS Solar (roof, ground mount and parking canopy) • Wind (on and offshore; small (up to 100kw) and large wind) • Energy Efficiency (energy savings offset capital cost; ESCO or • govt. model) Combined Heat and Power (CHP, formerly Cogen) • Fuel Cells • Geothermal • Microturbines • Energy Resiliency (Islanding and Blackstarting-backup fuel • source for CHP)
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