Loading...
HomeMy WebLinkAbout65A - CREDIT ANALYSIS FUNDING SARTCgo • R'Lq IN CITY COUNCIL MEETING DATE: DECEMBER 1, 2015 TITLE: CITY OF SANTA ANA GENERAL CREDIT ANALYSIS & POTENTIAL ECONOMIC UNCERTAINTY RESERVE FUNDING FOR SARTC SCHEDULE {STRATEGIC PLAN NO. 4,2D) CITY MANAGER CLERK OF COUNCIL USE ONLY: APPROVED ® As Recommended © As Amended Q Ordinance on 1"Reading © Ordinance on 2ntlReading ® Implementing Resolution Ll Set Public Hearing For,,,_ CONTINUED TO FILE NUMBER Adopt the Credit Analysis Schedule as well as the timeline prior to taking action to fund the Santa Ana Regional Transportation Center improvements using Economic Uncertainty Reserve Funds. Staff will request specific action at a future City Council Meeting to make any changes necessary to the Economic Uncertainty Reserve Fund Policy if credit rating analysis is favorable. DISCUSSION City Credit Rating Analysis & Economic Uncertainty Reserve Fund Schedule for SARTC Funding At the November 3, 2015 City Council meeting, Councilmember Martinez requested that Agenda Item 65A on the Santa Ana Regional Transportation Center (SARTC) maintenance and improvements (Maintenance, Safety /Liability, Tenant space, signage) in the amount of $3,800,000 be re- agendized for a revote. The action before you provides the City Council the opportunity to adopt the timeline and actions necessary to establish a general credit rating for the City as well as outlining the actions necessary in order to use the Economic Uncertainty Reserve Account to fund the necessary improvements at SARTC. The City of Santa Ana has taken dramatic strides to ensure fiscal stability. Beginning with the adoption of the City's Fiscal Policy (Policy), the City established key strategies to ensure ongoing fiscal stability. A key element was the first ever Council adopted five -year forecast in February of 2014. The forecast allowed for a more effective method to project revenues that resulted in the presentation of balanced budgets, more specifically matching ongoing revenues with ongoing expenditures. In addition, with adoption of the City Manager's effort for innovation and efficiency, coupled with growth in the City's top six revenue generating categories (8.8% over the last three 65A -1 City of Santa Ana General Credit Analysis Schedule December 1, 2015 Page 2 years), the City was able to achieve a key objective outlined in the Policy of attaining 20% General Fund Reserves ($40.5 million by June of 2014). During this strong economic period, the City has implemented many positive changes. These changes included the modernization of the City's Utility Users Tax (adopted by 75% of the electorate), the ability to refinance debt which will save $10.5 million in costs and provided $5.9 million in capital for water projects, as well as negotiating the increase of the jail per diem. The increase in revenues has allowed the City to maintain and enhance existing programs and services and absorb the rise of pension costs which has remained at 11% of total general fund expenses. With the many positive attributes the City is experiencing, the positive financial trends provide an opportunity to secure an improved credit rating for the City. As such, on July 7, 2015, staff recommended and Council approved the release for proposals to the four financial advisory firms approved by Council on January 21, 2014. These firms included Public Financial Group (PFM), Fieldman Rolapp & Associates, First Southwest, and Urban Futures, (UFI). On August 5, 2015 the RFP was issued. All four firms responded and were responsive. Fieldman Rolapp & Associates was selected to perform the credit rating analysis. On October 29, 2015, staff met with representatives of Fieldman Rolapp and Associates to review a tentative schedule for the credit analysis development. The following is the tentative schedule: City of Santa Ana Credit Analysis Rating Schedule & Economic Uncertainty Reserve Fund Actions Required to Fund the Santa Ana Regional Transportation Center Weeks of November 9 — 20 City staff will provide unaudited financial information to Fieldman Rolapp & Associates for review and to begin formulating the various positive financial elements to include into the presentation for Standard and Poors. Staff will work with Fieldman Rolapp and Associates to highlight key facilities, and major projects in the Santa Ana Community for presentation inclusion as well. Week of November 23 Draft review of City Credit presentation with City Manager. Week of November 30 Updated draft incorporating changes from draft review. Week of December 7 Review of Audited Financial Statements to ensure no substantive changes since the initial review. Week of December 14 Set date for rating presentation to Standard & Poors. Request local presentation so as to include a City tour. Weeks of December 21 -31 Continued review/ holidays Week of January 4, 2016 Finalize Rating presentation Week of January 18, 2016 Rating Presentation to Standard & Poors and City tour. Week of January 25, 2016 Standard & Poors releases credit report for review of facts presented. Week of February 1, 2016 Formal release of credit report and press release. February (Special Meeting)) Presentation of credit rating analysis to Finance Economic Development & Technology (FEDT) Committee and actions required to fund SARTC using the Economic Uncertainty Fund March 1 , 2016 City Council meeting considering actions required to fund SARTC 65A -2 City of Santa Ana General Credit Analysis Schedule December 1, 2015 Page 3 It is anticipated that the City will receive a favorable rating. A favorable rating will allow the City to leverage future dollars at a reduced cost in order to address the many deferred maintenance and infrastructure needs as presented at the August 18, 2015 City Council retreat. In addition, the City will also be requesting a sensitivity analysis as it relates to its current reserve levels. The sensitivity analysis will address not only the City's General Fund Reserve but the Economic Uncertainty Reserve Account as well. The Economic Uncertainty Account was a direct result of the City's ability to meet higher than anticipated General Fund requirements. As stipulated under the City's Fiscal Policy once the City was able to hit the 10% reserve target, it allowed for the funding of an Economic Reserve Account that would be used for negative variations in the City's major revenues. Currently, $3.8 million is assigned to this account. If the sensitivity analysis of the City's current reserve levels is determined to be positive by the rating agency, then this would allow the City Council to designate some (to be determined) one- time funds for high priority projects. The Economic Uncertainty Reserve Account has been identified as a potential source to fund an immediate high priority project. The project currently identified is the Santa Ana Regional Transportation Center ( SARTC). SARTC which was constructed in 1985 is a five story facility with 35,000 square feet of rental space including conference rooms. The facility which is a major regional transportation hub has fallen in disrepair and is underutilized. Renovations would allow SARTC to be a highly utilized facility and be viewed as a major gateway to Santa Ana that would support continued efforts to link SARTC with the downtown and adjacent cities. However, in order to utilize the Economic Uncertainty Reserve Account, Council would need to consider and adopt several actions in the future: - Amend the fiscal policy to include language under the Economic Uncertainty Reserve Account to allow for one -time investments in City facilities and projects (majority vote). - Approve an appropriation adjustment assigning funds to SARTC (requires 5 votes). - Approve a replenishment plan for the Economic Uncertainty Reserve Account. Although it is still to be determined, it is anticipated that upon refurbishment of the facility that a portion of newly generated rents would be used to replenish the Economic Uncertainty Reserve Account (requires 5 votes). Upon receipt of the final credit analysis report currently scheduled for the beginning of February, staff will present findings to the FEDT committee. The next scheduled meeting during this period is March 14, 2016. However, staff will consider a special meeting in February. Depending on the FEDT meeting date, City Council consideration would be scheduled for either March 1, 2016 or March 15, 2016. STRATEGIC PLAN ALIGNMENT Approval of this item allows the City's to meet Goal #4 City Financial Stability, Objective #2 (Provide a reliable five -year financial forecast that ensures financial stability in accordance with 65A -3 City of Santa Ana General Credit Analysis Schedule December 1, 2015 Page 4 the strategic plan), Strategy D (Conduct an assessment of the City's financing options to achieve savings. FISCAL IMPACT There is no fiscal impact associated with this action. Francisco Gutierrez Executive Director Finance and Management Services Agency 65A -4