MOTION TO ADOPT Resolution No. 2017-652 of the Board of County Commissioners of Broward County, Florida, authorizing the issuance of Broward County, Florida Half-Cent Sales Tax Revenue Refunding Bonds, Series 2017A in the principal amount of not to exceed $67,500,000 for the purpose of financing the advance refunding of all or a portion of the County’s Half-Cent Sales Tax Revenue Bonds (Main Courthouse Project), Series 2010A and paying certain costs of issuance related thereto; authorizing the issuance of Broward County, Florida Half-Cent Sales Tax Revenue Refunding Bonds, Series 2017B in the principal amount of not to exceed $76,590,000 for the purpose of financing the crossover refunding of all or a portion of the County’s Half-Cent Sales Tax Revenue Bonds (Main Courthouse Project), Series 2010B (Federally Taxable - Build America Bonds - Direct Payment) and paying certain costs of issuance related thereto; authorizing the issuance of Broward County, Florida Half-Cent Sales Tax Revenue Refunding Bonds, Series 2017C in the principal amount of not to exceed $53,410,000 for the purpose of financing the crossover refunding of all or a portion of the County’s Half-Cent Sales Tax Revenue Bonds (Main Courthouse Project), Series 2010C (Federally Taxable - Recovery Zone Economic Development Bonds - Direct Payment) and paying related costs of issuance; providing for the payment of such bonds from the local government half-cent sales tax allocated to the County; providing covenants with respect to such Series 2017 Bonds; delegating authority to proper officials of the County, in consultation with the County’s financial advisor, to select and to accept the best proposal for the purchase of the Series 2017 Bonds and to award the sale of the Series 2017 Bonds to such purchaser or purchasers, subject to certain parameters and other matters set forth in this resolution; authorizing the execution and delivery of covenant agreements with the purchasers of the Series 2017 Bonds to set forth additional covenants of the County and matters relating to the Series 2017 Bonds as may be required by the purchasers; authorizing the execution of a bond purchase agreement and interest rate lock agreement in connection with sale of such Series 2017 Bonds approving the forms of and authorizing the execution and delivery of escrow deposit agreements; authorizing the proper officials of the County to do all other things deemed necessary or advisable in connection with the issuance of the Series 2017 Bonds; providing for certain other matters in connection therewith; and providing an effective date.
(Commissioner Udine pulled this item.)
ACTION: (T-10:39 AM) Approved. (Refer to minutes for full discussion.) (See the Yellow-Sheeted Additional Material, dated Tuesday, December 12, 2017, submitted at the request of the Finance and Administrative Services Department.)
VOTE: 9-0.
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THE FINANCE AND ADMINISTRATIVE SERVICES DEPARTMENT RECOMMENDS APPROVAL OF THE ABOVE MOTION.
On June 8, 2010 (Item No. 35), the Board adopted Resolutions 2010-359 and 2010-360 authorizing the issuance of Half-Cent Sales Tax Revenue Bonds, Series 2010A, B, & C for the Main Courthouse Project. The Series 2010B and 2010C Bonds included the use of tax-exempt Build America Bonds (BAB) and Recovery Zone Bonds (RZB) with subsidies of 35% and 45%, respectively. Since 2013, the subsidies have been subject to sequestration, automatic spending cuts applied to the subsidy payments by the U.S. Government, with the current subsidies at 32.69% and 42.03%, respectively. It is anticipated that if the Tax Cuts and Jobs Act ("Tax Reform") (see below) passes, the subsidy will decrease further and projections suggest that the subsidy may be reduced to 0%.
All three Series 2010 Bonds were issued with a ten-year call date of October 1, 2020. Prior to the call date, the Series 2010B and Series 2010C are subject to make-whole optional redemption and/or extraordinary optional redemption, currently $18,983,871 and $28,014,467, respectively.
On November 16, 2017, the House of Representatives passed the Tax Reform bill which included provisions to terminate private activity bonds (PABs), which are utilized for Airport and Seaport bonds, and advance refunding bonds, which municipalities currently utilize to refinance bonds prior to the stated call date. On December 2, 2017, the Senate passed its version of Tax Reform, which also prohibits tax-exempt advance refunding bonds. Advance refundings allow municipalities to realize savings by refinancing bonds when interest rates drop. The House and Senate have begun the process of reconciling the two bills, and the fate of PABs and advance refundings are unknown at this time.
The combination of low interest rates, unfavorable provisions in the Tax Reform bills recently passed by the House of Representatives and Senate, and uncertainty regarding Sequestration in the future (i.e. potential elimination of the BAB and RZB subsidies) has led the County to consider refunding all, or a portion, of the $192.7 million remaining Half-Cent Sales Tax Revenue Bonds, Series 2010.
With the potential elimination of the Advance Refunding authority in the Tax Reform bill expected to go into effect January 1, 2018, the County is seeking a financing to advance refund all, or a portion, of the County's current Half-Cent Sales Tax Bonds, Series 2010 in the most efficient manner, considering overall borrowing costs and terms and conditions.
The Series 2017A Refunding Bonds are anticipated to be a straight forward fixed rate bond transaction and will advance refund all, or a portion, of the Series 2010A Bonds (currently outstanding in the principal amount of $73,985,000) and pay the costs of issuance related to the Series 2017A Bonds. The proceeds of the Series 2017B Bonds will be used to (a) refund all, or a portion, of the Series 2010B Bonds (currently outstanding in the principal amount of $69,950,000) and (b) pay the costs of issuance related to the Series 2017B Bonds. The proceeds of the Series 2017C Bonds will be used to (a) refund all, or a portion, of the Series 2010C Bonds (currently outstanding in the principal amount of $48,780,000) and (b) pay the costs of issuance related to the Series 2017C Bonds. The Series 2017B&C Bonds will be issued as “Crossover” bonds. Crossover bonds are secured initially by the escrow of investments created from the crossover bond proceeds, while the bonds to be refunded continue to be secured by the original revenue stream. On a specified "crossover" date, the refunded bonds are redeemed from the funds held in escrow, and the crossover bonds become payable from the original revenue stream.
The crossover bond structure will be used to allow the County to continue to receive the subsidies on the Series 2010B&C Bonds up until the call date of October 1, 2020. On the call date, the funds that had been held in escrow will be used to Current Refund the Series 2010B&C Bonds. According to bond counsel, this should allow the Federal subsidy on the refunded BABs and RZBs to continue to flow as long as the subsidy remains in effect.
An RFP for the bonds was solicited on December 1, 2017 with responses requested by December 12, 2017 at 1:00 p.m. and an ultimate closing date of December 28, 2017. Nothing in the Resolution requires the issuance of the Bonds. If the proposed federal tax legislation were to change or be abandoned, the County may elect to not issue the Bonds.
The Resolution (Exhibit 1) authorizes County staff to select the appropriate lender and negotiate the terms of the transaction within the parameters set forth in the Resolution. It also authorizes the County Administrator, Mayor or Vice-Mayor, and appropriate County staff to execute loan documents, subject to approval by the Office of the County Attorney and Bond Counsel.
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