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Home My WebLink AboutCRA-R-12-0028 04-30-12 BackupPFM The PFM Group Public Financial Management, Inc. PFM Asset Management LLC PFM Advisors Memorandum 2121 Ponce de Leon Blvd. 305 448-6992 Suite 510 305 448-7131 fax Coral Gables, FL 33134 www.pfm.com March 26, 2012 To: City of Miami Community Redevelopment Agency (SEOPW) From: Public Financial Management, Inc. Re: Southeast Overtown Park West CRA — Refunding & New Money Financing Public Financial Management, Inc. (PFM), as the financial advisor to the City of Miami and the Community Redevelopment Agency (the "Agency"), has drafted the following memorandum in order to outline the progress made to date and the upcoming steps with respect to the Agency's capital projects financing for the Southeast Overtown Park West CRA (SEOPW). In November of 2011, PFM began working with the Agency and the City in order to determine the outstanding items that needed to be addressed prior to proceeding with the capital financing. This process began with a thorough review of the Agency's existing debt and other obligations, and also included a detailed review of the existing documents under which the Agency previously financed capital projects (Series 1990 Bonds). These steps were necessary in order to determine the Agency's debt service capacity as well as the most efficient method to implement the financing. Upon review of the Agency's existing documentation and financial commitments, the Agency is now in better position to proceed with the 2012 financing. At this point in time the next steps will require the Agency to make a determination with respect to the type of financing mechanism utilized (publicly offered bonds versus direct bank lending). Additionally, the actual amount of the new money financing will be determined by a combination of factors, including the coverage requirements of the lender, and the interest rate at which the CRA can borrow. The estimates provided herein are based on current market conditions and reasonable expectations for lender's requirements. However please note that they are estimates for discussion purposes only, and will be subject to market conditions and lender requirements at the time the financing is implemented. The Agency's capital financing capacity estimates are based on revenue estimates provided by Agency staff, and assume that a lender will require (a) a minimum of 2x coverage (revenues divided by debt service), and (b) no growth in the SEOPW's tax revenues going forward. As such we utilized the FY 2012 revenue of $8,098,295 in order to estimatehow much debt service capacity was available. In addition, from a cash flow perspective we incorporated the SEOPW's existing financial commitments in order to ensure that the Agency could meet its financial commitments on an annual basis after issuance of the new money financing. The following existing financial commitments were taken into consideration: • Existing 1990 City of Miami / SEOPW CRA Bonds. The 1990 Bonds are secured by a pledge of the City's Guaranteed Entitlement Revenues as well as the SEOPW's TIF revenues. The City currently pays $300,000 towards that loan repayment as part of a prior settlement with the CRA. However CRA staff, in discussions with City officials, has determined that the CRA will refinance the debt obligation and secure it solely with CRA revenues, thereby The PFM Group City of Miami SEOPW CRA Financing Summary Page 2 relieving the City of this obligation. City/CRA officials can then determine the appropriate use of the $300,000 of "freed -up" Guaranteed Entitlement Revenues. • City of Miami 2011 Special Obligation Bonds (Gibson Park Financing). In 2011 the City refinanced existing Sunshine State loans, which included the $8 million Gibson Park project. The CRA's portion of the financing is approximately 12.53%, which is calculated on a pro rata basis of the existing debt schedule through 2031. • Camillus House. The Agency anticipates providing a grant in the amount of $2 million annually through FY 2015. • Other Redevelopment Expenses. The Agency maintains ongoing funding programs in an estimated amount of $1.2 million annually. • SEOPJ47Administrative Expenses. The Agency maintains operating expenses of approximately $1.5 million annually. Based on the SEOPW's FY 2012 Revenue and the cash flow requirements outlined above, we have estimated the .Agency will have a capacity in the range of $30 to $39 million. As mentioned earlier, capacity is ultimately dependent on the market conditions and lender requirements at the time the financing is implemented. The estimated cash flows are provided in the table below. 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2029 2030 Total TIF Flow of Funds Net of Annual Estimated (20 /a per year) SENIOR 2012 Loan Debt Service Excess Available for Subordinate Commitments Subordinate Gibson Park City of Miami Debt Service Subordinate Camillus House Subordinate Other Redev. Exp. Subordinate Excess SEOPW CRA Admin Available Cashfiow for Coverage Ad Valorem Value Adjustment $8,098,295 - 8,098,295 ($500,416) ($2,000,000) ($1,200,000) ($1,500,000) $2,897,879 $8,098,295 (2,909,133) 5,189,162 ($486,891) ($2,000,000) ($1,200,000) ($1,500,000) $2,271 $8,098,295 (2,911,000) 5,187,295 ($486,891) ($2,000,000) ($1,200,000) ($1,500,000) $404 $8,098,295 (2,909,250) 5,189,045 ($486,891) ($2,000,000) ($1,200,000) ($1,500,000) $2,154 $8,098,295 (4,048,000) 4,050,295 ($486,891) $0 ($1,200,000) ($1,500,000) $863,404 $8,098,295 (4,046,600) 4,051,695 ($877,425) $0 ($1,200,000) ($1,500,000) $474,270 $8,098,295 (4,044,200) 4,054,095 ($877,309) $0 ($1,200,000) ($1,500,000) $476,786 $8,098,295 (4,045,500) 4,052,795 ($877,243) $0 ($1,200,000) ($1,500,000) $475,553 $8,098,295 (4,044,900) 4,053,395 ($877,286) $0 ($1,200,000) ($1,500,000) $476,110 $8,098,295 (4,047,100) 4,051,195 ($877,255) $0 ($1,200,000) ($1,500,000) $473,940 $8,098,295 (4,046,500) 4,051,795 ($877,355) $0 ($1,200,000) ($1,500,000) $474,441 $8,098,295 (4,047,800) 4,050,495 ($876,953) $0 ($1,200,000) ($1,500,000) $473,542 $8,098,295 (4,045,400) 4,052,895 ($876,998) $0 ($1,200,000) ($1,500,000) $475,897 $8,098,295 (4,049,000) 4,049,295 ($877,057) $0 ($1,200,000) ($1,500,000) $472,238 $8,098,295 (4,047,700) 4,050,595 ($877,374) $0 ($1,200,000) ($1,500,000) $473,221 $8,098,295 (4,046,200) 4,052,095 ($877,464) $0 ($1,200,000) ($1,500,000) $474,632 $8,098,295 (4,048,900) 4,049,395 ($877,544) $0 ($1,200,000) ($1,500,000) $471,851 $8,098,295 (4,044,900) 4,053,395 ($877,381) $0 ($1,200,000) ($1,500,000) $476,014 $8,098,295 (4,043,900) 4,054,395 ($877,018) $0 ($1,200,000) ($1,500,000) $477,377 $153,867,609 ($69,425,983) $84,441,626 ($14,729,641) ($8,000,000) ($22,800,000) ($28,500,000) $10,411,985 ""'"""PFM. The PFM Group City of Miami SEOPW CRA Financing Summary Page 3 Coverage Calculations FY SENIOR 2012 Loan Subordinate Gibson Park City of Miami Debt Service Subordinate Camillus House Subordinate Other Redev. Exp. Subordinate SEOPW CRA Admin 2012 #D!V/0! 16.18 3.24 2.19 1.56 2013 2.78 10.66 2.09 1.41 1.00 2014 2.78 10.65 2.09 1.41 1.00 2015 2.78 10.66 2.09 1.41 1.00 2016 2.00 8.32 8.32 2.40 1.27 2017 2.00 4.62 4.62 1.95 1.13 2018 2.00 4.62 4.62 1.95 1.13 2019 2.00 4.62 4.62 1.95 1.13 2020 2.00 4.62 4.62 1.95 1.13 2021 2.00 4.62 4.62 1.95 1.13 2022 2.00 4.62 4.62 1.95 1.13 2023 2.00 4.62 4.62 1.95 1.13 2024 2.00 4.62 4.62 1.95 1.13 2025 2.00 4.62 4.62 1.95 1.13 2026 2.00 4.62 4.62 1.95 1.13 2027 2.00 4.62 4.62 1.95 1.13 2028 - 2.00 4.61 4.61 1.95 1.13 2029 2.00 4.62 4.62 1.95 1.13 2030 2.00 4.62 4.62 1.95 1.13 As discussed throughout this memorandum the actual capacity and cash flow schedules will be finalized based on the final lending parameters. Going forward, the Agency's financing team will continue to work with City staff/officials to proceed expeditiously. Below we have provided a tentative schedule of the City and County approval process to move forward. March 29`h - Update to CRA Board... Progress to date and next steps March 30`'' - CRA circulates RFI for projects within SEOPW Week of April 15th - CRA receives RFI responses April 26th - Project list submitted to CRA/City Board for approval Week of April 30`h - Miami -Dade County TIF Committee May 8th (or June 12`h*) - Miami -Dade County Internal Management & Fiscal Responsibility Committee June 5th (or June 19`h*) - Miami -Dade County Board of County Commissioners *Depending on ability to meet Agenda deadlines and/or see waiver .--`PPM. — The PFM Group City of Miami SEOPW CRA Financing Summary Page 4 Below we have also included a brief summary of the considerations when deciding between financing through a publicly offered bond issuance or a direct bank loan. Based on the characteristics of the Agency as well as the financing being considered, the bank loan mechanism may be suitable. We will continue to monitor conditions going forward to assess the most efficient financing mechanism. Type of Financing Pros Cons Direct Bank Lending • • • • Does not require credit ratings, rating agency review, or credit enhancement Allows multiple banks to respond based on interest By allowing banks to internally determine credit/coverage requirements capacity could be increased Typically does not require funding a debt service reserve • • Typically longest allowable term is 20 years (not applicable given CRA's 2030 expiration date) Interest rates may be subject to increase in the future if tax laws change or loan is deemed taxable in the future • Fewer administrative requirements Publicly Offered Bonds • Able to reach a broad market of investors • Require ratings and/or credit • Ability to finance significantly larger par amounts enhancement and debt service reserve • Can issue bonds out to 30-years fund • Higher costs of issuance • Greater administrative requirements We look forward to continuing to assist the Agency and City in securing the financing for the SEOPW capital projects. Please feel free to contact us with any questions.