Memorandum
Date: December 3, 2024
To: The Honorable Bruno Sabatier, Chair, Lake County Board of Supervisors
From: Susan Parker, County Administrative Officer/Executive Director, Lake County Public Financing Authority
Stephen L. Carter Jr., Assistant County Administrative Officer
Jenavive Herrington, Auditor - Controller / Clerk
Patrick Sullivan, Treasurer - Tax Collector
Subject: 9:05 A.M. - PUBLIC HEARING - (a) Consideration of Lease Financing by the County of Lake and Lake County Public Financing Authority (the “Authority”) to provide financing for certain public capital improvements (Seated as the Lake County Board of Supervisors and Board of Directors for Lake County Public Financing Authority)
(b) Seated as the Lake County Board of Supervisors, Consideration of Resolution of the County of Lake approving proceedings by the Lake County Public Financing Authority for the issuance of Lease Revenue Bonds in an initial aggregate principal amount not to exceed $25,000,000 in connection with financing certain capital improvements for the County, authorizing and directing execution of a site lease and a lease agreement, and certain other documents, approving an official statement, and authorizing other related actions
(c) Seated as the Board of Directors for Lake County Public Financing Authority, Consideration of Resolution of the Lake County Public Financing Authority authorizing the issuance of Lease Revenue Bonds in an initial aggregate principal amount not to exceed $25,000,000 in connection with financing certain capital improvements for the County of Lake, authorizing and directing execution of an indenture of trust, a site lease, a lease agreement, an assignment agreement, and certain other documents, approving an official statement, and authorizing other related actions.
Executive Summary:
On July 16, 2024, your Board provided authorization for staff to explore two options to finance the Armory Repurposing Project and directed staff to bring back final bond issuance documents for Approval. Additionally, you acted to Approve the Fund Balance, General Reserve, and Debt Management Policy, and Lake County Debt Advisory Committee Policy. In the time since, finance leadership and staff have worked diligently to prepare the County for bond issuance.
Before your Board, for Approval, are a series of documents pertinent to execution and delivery of Lake County Public Financing Authority 2024 Lease Revenue Bonds (“2024 LRBs”), which will support renovation of the former National Guard Armory Facility (located in North Lakeport) and further public capital improvements to be completed in the next three years.
For this item, your Board will be sitting as the Board of Supervisors of the County of Lake and Board of Directors for the Lake County Public Financing Authority.
The Sheriff’s Facility Project
As your Board is aware, the County took possession of the former National Guard Armory Facility (located in North Lakeport) on September 8, 2023. The 2024 LRBs are being issued primarily to finance renovation that facility into an enduring and appropriate home for the Lake County Sheriff’s Office. The new Sheriff’s Facility will support their 126-member staff and include a secure evidence storage area, locker room, and training facility. The Construction Agreement is expected to be brought before your Board Tuesday, December 17, and a sixteen-month timeframe for construction is anticipated.
2024 Lease Revenue Bonds (LRBs)
To fund these improvements, the County will be issuing Lease Revenue Bonds (LRBs), which is a borrowing tool commonly utilized by California municipal entities, including counties, to finance capital projects. The 2024 LRBs will be issued as tax-exempt fixed-rate obligations that will pay principal annually and interest semi-annually for a term of approximately 25 years. Their final maturity date is June 1, 2049.
The 2024 LRB structure includes lease and sublease of County-owned property between the County of Lake and Lake County Public Financing Authority (“LCPFA”). The leased property will consist of the Hill Road Correctional Facility and the site of the former National Guard Armory Facility, which staff determined to add as additional leased property upon recommendation of the County’s financing team. Following completion of the new Sheriff’s Facility, the intent is to release the Hill Road Correctional Facility from the financing.
• The County will lease the leased property to the LCPFA pursuant to a Site and Facility Lease, in return for an upfront site lease payment equal to the principal amount of the 2024 LRBs; and
• The County will simultaneously sublease the property back from the LCPFA pursuant to a Lease Agreement, in return for semi-annual lease payments that will be sized to equal debt service on the 2024 LRBs; and
• LCPFA will assign its right to receive the County’s lease payments to the Trustee pursuant to an Assignment Agreement; and
• The Trustee will apply the lease payments to make debt service payments on the 2024 LRBs.
Estimated Sources and Uses
Below is an estimate of the sources and uses of the 2024 LRBs, based on market conditions as of November 18, 2024. Please note, these figures are preliminary and subject to changes in market conditions until the pricing of the 2024 LRBs has occurred.
Footnotes:
1. Project fund is gross funded.
2. Reserve fund is sized to equal maximum annual debt service payment.
3. Cost of issuance includes fees for bond counsel, disclosure counsel, municipal advisor, credit rating, bond trustee, title insurance, financial printer, etc.
4. Underwriter’s discount assumed at $5.00 per $1,000 of bond par amount.
5. True interest cost based on market conditions for “A” rated LRBs as of November 18, 2024 (Preliminary and subject to changes in market conditions).
Documentation for Approval
The Lake County Board of Supervisors, in its capacities as County Board of Supervisors and Board of Directors of the LCPFA, is approving the form of several documents, each of which is summarized below:
County Resolution (Approved as Lake County Board of Supervisors)
The County Resolution approves the form of the further documents described below, as well as key parameters for the sale of the 2024 LRBs, including not-to-exceed par amount, borrowing rate, underwriter’s discount, and others. The County Resolution instructs County staff to complete the transaction, pursuant to specified parameters, and designates certain County Officers as “Designated Officers” who are authorized to sign the documents approved by the County Resolution.
Authority Resolution (Approved as LCPFA Board of Directors)
The Authority Resolution (signed by your Board, seated as the Board of Lake County Public Financing Authority) similarly approves the form of each of the documents described below, as well as key parameters for the sale of the 2024 LRBs, including not-to-exceed par amount, borrowing rate, underwriter’s discount, and others. The Authority Resolution and designates certain Authority Officers as “Designated Officers” who are authorized to sign the documents approved by the Authority Resolution.
Indenture of Trust (Approved as LCPFA Board of Directors)
The Indenture of Trust is an agreement between the bond trustee (U.S. Bank) and the LCPFA that effectuates the execution and delivery of the 2024 LRBs. The Indenture of Trust sets forth all of the terms and conditions of the 2024 LRBs.
Preliminary Official Statement (Approved as Lake County Board of Supervisors and LCPFA Board of Directors)
The Preliminary Official Statement (POS) serves as the primary disclosure document summarizing key credit features of the County. Potential investors will base their investment decision on information disclosed in the POS. While prepared and reviewed by third party consultants, the POS is ultimately a County of Lake document, and should be reviewed carefully for accuracy. Under federal securities laws, the Preliminary Official Statement must include all facts that would be material to an investor. Information is “material” if there is a substantial likelihood it would have actual significance in the deliberations of a reasonable investor when deciding whether to buy or sell securities. The proposed Resolutions approve the Preliminary Official Statement, and delegates to staff (a) the ability to make additional changes if needed, and (b) to sign a certificate on behalf of the County that deems the Preliminary Official Statement final for purposes of the federal securities laws.
Site and Facility Lease (Approved as Board of Supervisors and LCPFA Board of Directors)
The County of Lake will lease the leased property to the LCPFA under the Site and Facility Lease.
Lease Agreement (Approved as LCPFA Board of Directors and Board of Supervisors)
LCPA will sublease the leased property to the County of Lake under the Lease Agreement. Key provisions in the Lease Agreement include a covenant to budget and appropriate lease payments each year while the 2024 LRBs are outstanding, and to maintain insurance on the leased property.
Memo of Lease Agreement (Approved as Board of Supervisors and LCPFA Board of Directors)
The Memo of Lease Agreement will be recorded with the Lake County Assessor-Recorder, in lieu of recording the entirety of the Lease Agreement.
Assignment Agreement (Approved as LCPFA Board of Directors)
The LCPFA assigns its rights to receive Lease payments under the Lease Agreement to the Trustee for the benefit of the 2024 LRBs owners via the Assignment Agreement.
Official Notice of Sale (Approved as Board of Supervisors and LCPFA Board of Directors)
The 2024 LRBs are anticipated to be sold via a competitive method of sale. The Official Notice of Sale sets forth the terms and conditions on which underwriting firms will submit competitive bids.
Bond Purchase Agreement (Approved as Board of Supervisors and LCPFA Board of Directors)
It is anticipated the 2024 LRBs will be sold via a competitive method of sale. However, if market conditions change, the Resolution authorizes staff to switch to a negotiated method of sale. The selected underwriter commits to the purchase of the 2024 LRBs under the terms and conditions specified in the draft Bond Purchase Agreement, which is finalized and executed on the day of sale of the 2024 LRBs.
Continuing Disclosure Certificate (Approved as Board of Supervisors and LCPFA Board of Directors)
The Continuing Disclosure Certificate is an undertaking by the County for the benefit of the investors in the 2024 LRBs under which County agrees to provide annual updates regarding the County and its finances, in the form of the ACFR and updates to certain tables in the Official Statement.
If not budgeted, fill in the blanks below only:
Estimated Cost: ________ Amount Budgeted: ________ Additional Requested: ________ Future Annual Cost: ________
Purchasing Considerations (check all that apply): ☒ Not applicable
☐ Fully Article X. <https://library.municode.com/ca/lake_county/codes/code_of_ordinances?nodeId=COOR_CH2AD_ARTXPU_S2-38EXCOBI>- and/or Consultant Selection Policy <http://lcnet.co.lake.ca.us/Assets/Intranet/Policy/Policies+$!26+Procedures+Manual/Ch4_2021v2.pdf>-Compliant (describe process undertaken in “Executive Summary”)
☐ Section 2-38 <https://library.municode.com/ca/lake_county/codes/code_of_ordinances?nodeId=COOR_CH2AD_ARTXPU_S2-38EXCOBI> Exemption from Competitive Bidding (rationale in “Executive Summary,” attach documentation, as needed)
☐ For Technology Purchases: Vetted and Supported by the Technology Governance Committee <http://lcnet.co.lake.ca.us/Assets/Intranet/Intranet+Forms/Information+Technology/AdvPlan.pdf> (“Yes,” if checked)
☐ Other (Please describe in Executive Summary)
Consistency with Vision 2028 <http://www.lakecountyca.gov/Government/Directory/Administration/Visioning/Vision2028.htm> (check all that apply): ☐ Not applicable
☒ Well-being of Residents ☒ Public Safety ☒ Disaster Prevention, Preparedness, Recovery
☐ Economic Development ☒ Infrastructure ☒ County Workforce
☐ Community Collaboration ☐ Business Process Efficiency ☐ Clear Lake
Recommended Action:
(a) Conduct the Public Hearing, in your capacities as Board of Supervisors and Board of Directors.
(b) As the Lake County Board of Supervisors:
• Adopt Resolution of the County of Lake Approving proceedings by the Lake County Public Financing Authority for the issuance of Lease Revenue Bonds in an initial aggregate principal amount not to exceed $25,000,000 in connection with financing certain capital improvements for the County, authorizing and directing execution of a site lease and a lease agreement, and certain other documents, approving an official statement, and authorizing other related actions.
(c) As the Board of Directors for Lake County Public Financing Authority:
• Adopt Resolution of the Lake County Public Financing Authority authorizing the Issuance of Lease Revenue Bonds in an initial aggregate principal amount not to exceed $25,000,000 in connection with financing certain capital improvements for the County of Lake, authorizing and directing execution of an indenture of trust, a site lease, a lease agreement, an assignment agreement, and certain other documents, approving an official statement, and authorizing other related actions.