Discussion and possible action to adopt RES. VCFD 2020-03 authorizing and approving: (1) an Amended and Restated Feasibility Report; (2) the sale and issuance of general obligation bonds series 2020; and (3) approving the form and authorizing the execution of an Amended and Restated Development, Financing Participation and Intergovernmental Agreement, the Standby Contribution Agreement, Letter of Credit Depository Agreement and all other necessary documents relating to the series 2020 bond transaction; (4) awarding the bonds to the purchaser; (5) delegating the determination of certain bond terms and matters related to the foregoing to the District CFO; (6) ratifying the form and distribution of the Preliminary Official Statement and authorizing the Final Official Statement; (7) authorizing the levying of an ad valorem property tax with respect to the bonds; and (8) adopting post-issuance tax compliance and continuing disclosure procedures; and (9) authorizing the taking of all other actions necessary to the consummation of the transactions contemplated by the resolution.

The District Board is asked to consider the attached Resolution to accomplish the following objectives:

(A) Interest Rate Savings - The proposed  issuance of series 2020 refunding bonds will refund in whole the current outstanding series 2015 bonds to realize interest rate savings in today's low interest rate environment; the outstanding series 2015 bonds have an interest cost of 3.49%. The series 2020 bonds are currently estimated to have an interest cost of less than 2.0%, generating a net present value savings of approximately $2.4 million or 9.26% of refunded debt service. The refunding will not extend the maturity of the existing bonds and will not increase the $2.10 target tax rate. The savings will allow for a reduction in the annual debt service payments as well as issuance of new bonds (up to approximately $2 million) to reimburse the developers for additional infrastructure costs incurred to serve the District. 

(B) Issuance of Up To Approximately $2 million in New Bonds - The proposed series 2020 bonds will include up to approximately $2 million in new bond proceeds to be used to acquire portions of the Lone Mountain Road waterline and Westland Road Reservoir and Pump Station constructed by the developer. A portion (no more than 75%) of the interest rate savings, along with premiums generated from the bond sale, will be used towards the issuance of up to approximately $2 million in new bonds. The issuance of new bonds will not extend the maturity of the bonds beyond the existing maturity and will not increase the $2.10 target tax rate.

(C) Enter into Agreements with New Developers and Indemnitors-  The current developers, guarantors and indemnitors, Vistancia Land Holdings LLC, Shea Homes Limited Partnership (Shea) and SLFIII- Vistancia LLC (Stratford), have sold their interest in the Vistancia development to new developers, Vistancia Master Holdings LLC., Vistancia Residential LLC. and Vistancia Commercial LLC. The attached Resolution approves the amendment of the District Development, Financing Participation and Intergovernmental Agreement (Development Agreement) to replace the existing developers and indemnitors with the new developers and indemnitors Vistancia Master Holdings LLC and Vistancia Residential LLC., and to add new terms, condition and requirements for the new developers and indemnitors.

Contents of the Resolution:

Major contents of the attached Resolution are as follows: 

1. Approve the Second Amended and Restated Feasibility Report and Notice of Public Hearing

The Resolution approves the Notice of Public Hearing (attached as an exhibit to the Resolution) and approves the Second Amended and Restated Feasibility Report as presented with the corresponding Public Hearing item on the agenda.  The Notice of Public Hearing was published in the Peoria Times on August 27, 2020 and posted on the District website in accordance with State Statutes.

2. Approve the Sale and Issuance of Series 2020 General Obligation Bonds

The proposed series 2020 bonds is the fifth and final series of bonds for the District. The Resolution approves the following major terms for the series 2020 refunding bonds:

• Net present value savings from the refunding will be at least 5%,
• The refunding will not extend the maturity of the bonds beyond the current maturity of July 2026, 
• The refunding will not increase existing annual debt service payments,  
• Debt service will be structured as level annual debt service, and annual debt service for new bonds will not exceed 75% of gross savings generated from the refunding in each year.
  
  

3. Approve the Amended and Restated Development Agreement and All Other Documents Related to the Sale of the Series 2020 Bond

The Resolution approves the following documents related to the series 2020 bond transaction  and authorizes the District CFO to determine all the necessary terms and matters to complete all documents for the bond sale transaction. 

i) Amended and Restated Development Agreement (Exhibit A) - as discussed above, the Development agreement is amended to replace the developer and indemnitors and incorporate terms, conditions and requirements including the requirement for the new developer to provide a letter of credit deposit of $1.5 million for indemnity. This letter of credit will automatically be reduced to $1.0 million in the second year if not drawn upon, and will remain in place until the District is dissolved. 

ii) Series 2020 Standby Contribution Agreement (SCA) (Exhibit B) - the SCA obligates the developer, Vistancia Residential LLC. to provide annual shortfall contributions if net tax collections at the $2.10 tax rate is not sufficient to pay debt service.  The developer's obligation under this agreement is secured by a letter of credit equal to 10% of the par amount of the series 2020 bonds (the par amount is expected to be approximately $22 million).   The letter of credit will automatically reduce to 5% of the par amount when the $2.10 tax rate is sufficient to cover annual debt service. The SCA is in place until the series 2020 bonds are paid off.  

iii) Series 2020 Letter of Credit Depository Agreement (Exhibit C) - Under this agreement, the Trustee of the series 2020 bonds (US Bank) will ensure that the letter of credit securing the SCA is in place and will draw upon the letter of credit if the developer fails to make shortfall contributions under the SCA.  This agreement also allows the letter of credit amount to be reduced by 50% when the $2.10 tax rate is sufficient to cover debt service, and allows for the full release of the letter of credit when the net tax collections at the $2.10 rate is sufficient to cover debt service for 3 consecutive years. 

iv) Series 2020 Indenture of Trust and Security Agreement (Exhibit D) - this agreement between the District and the Trustees of the series 2020 bonds, (US Bank), provides for the responsibilities of the parties to ensure the payment of the bonds and the obligations and covenants to the bondholders are met.

v) Bond Purchase Agreement (Exhibit E) - This agreement between the District and the Underwriters (Stifle, Nicolaus and Co) pertains to the purchase of the bonds by the Underwriters, determining the price and terms of the bonds and other conditions necessary for the bond sale transaction.

4. Ratify and Authorize the Distribution of the Preliminary and Final Official Statements for the Series 2020 Bonds - The Preliminary Official Statement (POS) (attached as Exhibit F) is an important document that communicates information to potential investors and purchasers of the series 2020 bonds. The POS contains information from the District, the City, and the developer. It describes the District, the refinancing plan, the use of the new bond proceeds, the security and sources of payment for the bonds, the risk factors associated with the bonds, the bond ratings, and other information associated with the new bonds including information about the development provided by the developer. A Final Official Statement will be prepared in conjunction with the final bond sale transaction.

5. Authorize Subsequent Levying of Ad Valorem Tax - The Resolution authorizes the District to levy a secondary property tax for the repayment of the series 2020 bonds. The target tax rate is $2.10 per $100 of assessed value. 

6. Adopt Tax Compliance and Continuing Disclosure Compliance Procedures (Exhibits G and H) - The Resolution adopts the attached post-issuance debt compliance procedures necessary to comply with IRS and SEC requirements.

The Vistancia CFD was formed by the City Council in 2002 with "voter authorization" to issue up to $100 million in bonds to finance public water and wastewater infrastructure projects. To date $67.6 million of debt has been issued through three bond transactions (series 2002, 2005, and 2006). Each of the initial bond transactions had a 20 year term and was structured with level debt service payments.

A target tax rate of $2.10 per $100 of assessed value was established for the repayment of debt, with the developer making annual contributions for any shortfall in tax collected to pay the debt service. The developer is obligated to make such contributions via a Standby Contribution Agreement (SCA) that is secured by a letter or credit and/or surety bond. 

The developer's shortfall contributions under the SCA have decreased over time with development of the District and the corresponding growth of assessed values and tax collections at the $2.10 tax rate. The $2.10 tax rate has remained the same since its inception in 2002.

In 2015, the series 2002, 2005 and 2006 bonds were refunded (refinanced) to generate debt service savings of approximately $1.1 million  per year. The refunding allowed the developers to reduce their annual contributions by approximately $1.1 million.

In FY2019/20, the developers sold their interest in the development to new developers Vistancia Master Holdings LLC, Vistancia Residential LLC and Vistancia Commercial LLC. In 2019, Vistancia Master Holdings LLC and Vistancia Residential LLC petitioned the City to form the Vistancia North CFD to finance water and wastewater infrastructure for the continued development of Vistancia north of the Central Arizona Project canal, and allow for the sunset of the existing Vistancia CFD debt and $2.10 tax rate in 2026 when all the bonds are paid of. The Vistancia North CFD was approved by Council resolution in June 2020.

A: Adopt the attached RES. VCFD 2020-03 authorizing and approving: (1) an Amended and Restated Feasibility Report; (2) the sale and issuance of general obligation bonds series 2020; and (3) approving the form and authorizing the execution of an Amended and Restated Development, Financing Participation and Intergovernmental Agreement, the Standby Contribution Agreement, Letter of Credit Depository Agreement and all other necessary documents relating to the series 2020 bond transaction; (4) awarding the bonds to the purchaser; (5) delegating the determination of certain bond terms and matters related to the foregoing to the District CFO; (6) ratifying the form and distribution of the preliminary official statement and authorizing the final official statement; (7) authorizing the levying of an ad valorem property tax with respect to the bonds; and (8) adopting post-issuance tax compliance and continuing disclosure procedures; and (9) authorizing the taking of all other actions necessary to the consummation of the transactions contemplated by the resolution.

B: Not adopt the attached  RES. VCFD 2020-03 as presented.

Separate Legal Entity

The Vistancia CFD is a separate legal entity within the boundaries of the City. As such, any debt or other legal obligations of CFD are strictly obligations of CFD. They are not obligations of the City of Peoria. The financial obligations primarily include the debt service payments necessary to meet semi-annual principal and interest payments.

New Developer Entity and Indemnity Deposit

The new developer, guarantors and indemnitors of the CFD are single purpose limited liability companies created by the managing members and investors for the sole purpose of developing the Vistancia project. The ability of these developer entities to fully indemnify the CFD and City against claims and losses may be limited which creates risks for the CFD and the City. To mitigate such risks, the developer is required to provide a letter of credit deposit for indemnity of $1.5 million initially. The deposit will automatically be reduced to $1.0 million in the second year and will remain in place until all debt is paid off and the CFD is inactive for five consecutive years. The CFD has the authority to assess an operation and maintenance tax of up to $0.30 per $100 of assessed valuation for expenses but has not assessed this tax since inception and does not plan to do so. 

Target Tax Rate of $2.10 Not Maximum Rate

The debt service obligations of the CFD are the ultimate responsibility of the property owners within the CFD. They are not obligations of the City of Peoria. The CFD is legally obligated to establish the property tax rate at whatever tax rate is necessary to generate property tax revenues necessary to meet the debt service in any given year. The targeted $2.10 tax rate is not a maximum rate. However, as discussed above, the developer has agreed to make shortfall contributions under a Standby Contribution Agreement in order to maintain the tax rate at $2.10.

Currently the $2.10 tax rate generates $4 million in annual tax collections. With the issuance of the series 2020 refunding bonds, annual debt service is estimated to be $4.3 million.