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HomeMy WebLinkAboutMINUTES - 07221997 - C8 -I t TO: BOARD OF SUPERVISORS FROM: J. MICHAEL WALFORD, PUBLIC WORKS DIRECTOR DATE: JULY 22, 1997 SUBJECT: CONTRA COSTA COUNTY AIRPORTS - REFINANCE OF AIRPORT FUNDING SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION I. Recommended Action: 1. APPROVE a Refinancing (including funding an escrow to make payments thereunder), and a Lease/ Lease-Back Agreement with Transocean Funding, Inc. to replace existing Lease and Lease-Back and License and Lease-Purchase Agreements for improvements to the Buchanan Field and Byron Airports. 2. AUTHORIZE the Public Works Director, or his designee, to EXECUTE, on behalf of the County, all necessary documents to complete the transaction, and to make any minor, non- - substantial changes as may be appropriate to finalize language of the agreement. II. Financial Impact: Refinancing existing Airport funding agreements will reduce the interest costs to the Airport Enterprise Fund, and will match the debt service to anticipated cash flows in the future. III. Reasons for Recommendations and Background: Over the years, the County's Airports has received millions of dollars in grants from the Federal Aviation Administration (FAA) to construct the Byron Airport and to complete various other Airport improvements at the Buchanan Field Airport. The FAA grants provided 90% of the total cost of the improvements, and the County Airports were required to fund the remaining 10%. To fund the 10% local share, the County, on behalf of its Airports, borrowed money from Caltrans' Division of Aeronautics through various loan agreements. Continued on Attachment: X SIGNATURE: _RECOMMENDATION OF COUNTY ADMINISTRATOR _RECOMMENDATION BOARD COMMITTEE APPROVE OTHER SIGNATURE(S): ACTION OF BOARD ON APPROVED AS RECOMMENDED OTHER VOTE OF SUPERVISORS UNANIMOUS(ABSENT ) AYES: NOES: ABSENT: ABSTAIN: JMW:DLM:DRA I hereby certify that tuts Is a true and correct copy ct C:BO/BO22.t7.wpd an action taken and entered on the minutes oi-the Board of Supervisors on the data shown. XTTESTED: �97 Orig Div: Airports (Dick Awenius 6-5722) PHIL e CH a, rkoftle�ooard cc: County Administrator of supervisors dCountyAdministrator . Public Works Director Public Works Accounting �� ► Auditor/Controller Aviation Advisory Committee (via A/P) Federal Aviation Administration (via A/P) Transocean, Inc. (via A/P) Contra Costa County Airports - Refinance of Airport Funding July 22, 1997 Page Two In 1994, the County, again on behalf of its Airports, entered into two financial agreements 1) to raise additional funds necessary for the completion of improvements to the Byron Airport that were not otherwise eligible for FAA funding, and 2)to refinance the outstanding Caltrans loans that were at relatively high interest rates. These existing agreements are in the form of a Lease and Lease- Back agreement and a License and Lease-Purchase agreement. The agreements provide for semi-annual interest-only payments up to May 1, 1999, and semi-annual principal and interest payments through May 1, 2002. The principal of the two agreements totaled $3.495 million. It was the original intent with the existing agreements that they be refinanced on or about May 1, 1999. However, due to current favorable market conditions, staff recommends refinancing the existing agreements today and replacing them with one new financing agreement. The proposed advance refunding is an eight-year contract under which Transocean will pay approximately $3,646,000 into an escrow account on the County's behalf. Transocean will then, make the interest-only payments on the existing obligations up to May 1, 1999. On May 1, 1999, Transocean would then pay off the existing obligations, and those agreements would be retired. In return, the County would be obligated to make interest-only payments on the $3,646,000 to Transocean up to May 1, 1999, at which time a new, pre-executed Lease and Lease-Back agreement would become effective. The new agreement would obligate the County to pay off all principal and interest over the remainder of the eight-year period. The two year advance refunding structure is necessary, as opposed to an immediate payoff of the existing agreements, because the existing agreements do not provide for prepayment prior to May 1, 1999. Staff recommends the proposed advance refunding for the following reasons: 1. the economic incentive to refinance will reduce the County's interest costs by locking in a lower interest rate. Interest rates bottomed out most recently in 1993 at 5.35%. With this financing, the County will lock in a fixed rate of 5.75%, which is considered to be very favorable. Interest rates are not guaranteed to stay as low by the year 1999; 2. the proposed agreement provides for beginning the repayment of principal as provided in the existing agreements, but spreads these payments over a longer period, which will more accurately match anticipated Airport revenues with debt payments up to May 1, 2005; 3. the proposed refinancing provides that the outstanding principal balance can be prepaid annually, as opposed to the one-time-only prepayment provision of the existing agree- ments. IV. Consequences of Negative Action: The proposed Airport refinancing will not be approved and potential debt savings will not occur, increasing the potential for the subsidization of the Airport Enterprise Fund by the General Fund.