General obligation bonds (“G.O. bonds”) are the oldest and most secure form of bonds. They are secured by a property tax that can be adjusted (without limit) to meet the revenue needs (debt service) of any authorized bond. NHA Advisors has worked with many cities, special districts, and school districts to develop successful voter-approved G.O. bond programs to fund major capital projects, including: schools, libraries, parks, sports facilities, open space, community centers, and public safety buildings.
Relevant Case Studies: Industry TAB, Sales Tax and GO Bond Financings, Claremont USD GO Bond Elections and Bond Issuance, Selma Police Station Project/General Obligation Bond Authorization and Berkeley Affordable Housing General Obligation Bond Authorization
Revenue bonds are secured solely by a dedicated revenue source. They are typically used for utilities (water, sewer, and electric), parking, or other reliable revenue generating operations. NHA Advisors has structured revenue bond transactions for theme parks; municipal utilities such as electric, water, and sewer; parking operations; and transportation.
Relevant Case Studies: Berkeley New Downtown Parking Garage – Parking Revenue Bond, Corning Utility Refinancing Addressing Technical Default, Yuba County/YCWA Road Project Financing Using Unique Revenue Source (SB 1 Funds), PVWMA SRF Loan Consolidation and Bond Refinancing, CCWD CalPERS UAL Restructuring, CCSD Emergency Water Supply Project Financing, Oxnard Debt Portfolio De-Risking and Restructurings, Rating Upgrade & CD Clean Up, Riverside Sewer Restructuring for Savings/Rate Management & Rating Upgrade, Selma Police Station Project/General Obligation Bond Authorization and Berkeley Affordable Housing General Obligation Bond Authorization
Dating back to 1911, assessment bonds are one of the oldest dedicated tax mechanisms. An assessment is a lien against real property that is limited by the amount agreed to by the property owner(s). The lien allows for an annual property tax levy which serves as the revenue pledge for a limited obligation improvement bond which is typically used to fund public improvements that are local to the encumbered property. The assessment lien is based on the benefit received from the bond-funded project and is typically a fixed annual amount. NHA Advisors has extensive experience using assessment bonds to fund public infrastructure (curbs, gutters, storm drains, utilities, recreation facilities, and landscape improvements).
Relevant Case Studies: Palmdale Citywide Assessment for Park & Recreation Projects
Similar to an assessment, a special tax is a dedicated tax that is generally used to make debt service payments on bonds that fund the purchase, construction, expansion, improvement, or rehabilitation of public facilities or public services. Community facility districts (CFD) are generally more flexible than assessment districts because they allow the allocation of a special tax without regard to benefit. As a result, the majority of public infrastructure projects are funded issuing special tax bonds rather than assessment bonds. NHA Advisors is an expert in the area of special tax structures and has developed financing programs for both public facilities (streets, water and sewer systems, storm drainage, schools, libraries, recreation facilities, parks, landscaping, etc.) and services (police and fire protection, ambulance services, park maintenance, flood protection, environmental cleanup, etc.).
Relevant Case Studies: Davis Cannery Development CFD Financing and Rancho Cordova Development Infrastructure CFD Financings
A capital lease is a financing structure that allows a public agency to generate proceeds for capital projects without voter approval. Capital lease structures are similar to traditional equipment leases where an asset is pledged and the lease payments represent the use and possession of the asset. For public leases in California, a lender only has the ability to re-lease an asset in the event the public agency does not make payments. There is no ability to foreclose or liquidate the asset through a sale. Prior to the formation of NHA, some of the firms principals were involved in the first certificates of participation financing in 1984 and have worked on unique lease structures for projects ranging from streets to building acquisition and improvements.
Relevant Case Studies: Oxnard Debt Portfolio De-Risking and Restructurings, Rating Upgrade & CD Clean Up, Newark Civic Center Project Financing (Sales Tax Revenue Pledge) and El Monte CalPERS/PARS UAL Restructurings
Pension obligation bonds (“POBs”) are typically issued to fund all or a portion of a public agency pension plan’s unfunded actuarial liability. Although POBs are generally taxable, local agencies can often borrow at interest rates lower than the imputed cost of funds built into pension programs. POBs are also used to manage the future cash flow requirements of a public agency and smooth out uneven or rapidly escalating repayment schedules required by CalPERS. NHA’s Pension Group works with over 40 across the state on various pension cost management strategies and have worked on over $1.5 billion of UAL restructurings just in 2020. NHA prides itself on delivering a comprehensive and transparent evaluation process for stakeholders given the complexity and risks associated with pension bonds. There are a multitude of options on how to structure pension bonds (POBs, lease/COP, utility revenue, etc.) and hundreds of ways agencies can optimize the potential savings and resiliency of a restructuring through different sizing, repayment shapes, loan duration and UAL pay off components. We encourage you to review some of our recent NHAlerts, three of which focus on pensions and POBs.
Relevant Case Studies: CCWD CalPERS UAL Restructuring, Riverside Pension Education, Analysis and UAL Restructuring, El Monte CalPERS/PARS UAL Restructurings and NCFPD Pension Financing (Non-City Agency)
Notes typically have a maturity of less than two years and are generally used as short-term financing or as a bridge funding source that will ultimately have some other long-term financing (taxes, revenues, or bond proceeds). Public agencies can also use notes to fund operations when monthly expenses do not match up with revenues. The issuance of a tax and revenue anticipation note (“TRAN”) is common practice and requires a public agency to have sufficient revenues in any fiscal year to cover expenses (repayment cannot be deferred into the next fiscal year). NHA Advisors has experience assisting public agencies with the issuance of short-term notes, including: TRANs, bond anticipation notes (“BANs”), grant anticipation notes (“GANs”), revenue anticipation notes (“RANs”), and other short-term notes.
Relevant Case Studies: El Cerrito Short-Term Cash Flow Financing and Pension Prepayment
Traditionally used to fund redevelopment activity for cities, tax allocation bonds (“TABs”) are secured by future property tax revenues that are generated by improvements to properties which increase assessed value. Under redevelopment laws, the majority of incremental tax revenues can be captured by redevelopment agencies and pledged towards tax allocation bonds. NHA Advisors has a history of working with both small and large redevelopment agencies to develop financing plans for redevelopment project areas throughout California. Given the demise of redevelopment in California, NHA Advisors worked with the California Redevelopment Association Technical Advisory Committee to develop workout strategies for agencies most impacted by the termination of redevelopment powers.
Relevant Case Studies: El Centro TAB Refinancing and Credit Rating Upgrade, Industry TAB, Sales Tax and GO Bond Financings and FORA Base Reuse Financing (Multi-Jurisdictional Negotiation)
NHA has worked with cities throughout California to develop supplemental transaction and use tax measures to fund both capital projects and operational expenses. Our consulting group works with city staff, elected officials and outside consultants to develop the best approval odds while generating the appropriate revenue projections necessary to meet the city’s objectives. NHA has worked with dozens of cities to educate, analyze and strategically plan for tax measures that can help generate the critical revenues necessary to support the services and facilities of a public agency.
NHA’s approach includes an initial high level magnitude analysis to identify the amounts that could be generated under different tax rates and gets refined to quantify the conservative and aggressive projections for different terms of a potential tax measure. From this revenue projection, bonding capacity is calculated to determine the city’s ability to finance infrastructure or other capital project. NHA understands the various financial, political and policy constraints and can calculate the impact on revenue projections under different scenarios.
Examples of tax measures include land acquisition, libraries, community centers and road improvements. Additional information or project descriptions are available upon request.
Relevant Case Studies: Lancaster Street Project Financing (Dedicated County Transportation Revenues), Industry TAB, Sales Tax and GO Bond Financings and Newark Civic Center Project Financing (Sales Tax Revenue Pledge)