Unique Characteristics of Project: Refinancing one of three outstanding TABs to bring savings to City’s general fund and other taxing entities. Maintained original security pledge and executed partial subordination of pass throughs to strengthen the credit and obtain a rating upgrade.
Executive Summary: NHA worked with the Successor Agency to the El Centro Redevelopment Agency to structure a refinancing of the Agency’s 2007A Tax Allocation Bonds (TABs) while leaving the 2007B (non-callable) and 2011 TABs (not currently callable) outstanding. NHA managed the underwriter RFQ process and developed a comprehensive application for the California Department of Finance (DOF) formal review process. During the DOF approval period, NHA evaluated both private placement and public offering methods of sale, ultimately moving forward with a public offering due to increased savings potential. The refunding bonds utilized a unique security pledge (86% from non-housing revenues + 14% from housing revenues + a subordinate pledge of surplus RPTTF) to establish a strong credit profile. The financing team also decided to pursue a partial subordination of pass-through payments to increase coverage while not delaying the financing process. These factors, combined with an excellent presentation from City staff on the region’s improving economy, resulted in a credit rating upgraded from “A” to “A+” by S&P.
The refunding bonds were structured with level savings, yielding approximately $270,000 annual cashflow savings. The City’s general fund receives approximately 28% of the residual allocation, translating into approximately $75,000 of annual savings to the City’s general fund. Cumulative net present value of these savings was over $2 million (9.7% of refunded par).