To: Board of Directors
From: Monica Nino, County Administrator
Report Title: APPROVE REDEMPTION OF 2017 SERIES B LEASE REVENUE BONDS
☒Recommendation of the County Administrator ☐ Recommendation of Board Committee
RECOMMENDATIONS:
Acting as the Governing Board of the County of Contra Costa Public Financing Authority:
1. ADOPT Resolution No. 2025-142 authorizing redemption of County of Contra Costa Public Financing Authority 2017 Lease Revenue Bonds, Series B, in an approximate amount of $58,575,858; and
2. APPROVE and AUTHORIZE the forms of and direct the execution of a First Amendment to Trust Agreement dated as of May 15, 2025, a 2017B Bonds Lease Termination Agreement and related financing documents;
3. APPROVE and AUTHORIZE the taking of necessary actions and the execution of necessary documents in connection therewith.
FISCAL IMPACT:
To redeem the bonds early, staff estimates that the County will need to provide a payoff amount of approximately $58,575,857.50 to JPMorgan Chase Bank, National Association, in its capacity as bondholder representative on behalf of DNT Asset Trust (collectively, “JPMorgan”), holder of the bonds, to complete the redemption. The funding amount of $58,575,857.50 is composed of a principal amount of $57,885,000 plus an interest payment due on June 1, 2025 in the amount of $690,857.50. The early redemption of the bonds will result in avoidance of future interest costs in the amount of $5,006,732.66 for the period December 1, 2025 through June 1, 2032. The Net Present Value (NPV) of those interest payments is $4,687,031 in 2025 dollars. NPV is a calculation of the present value of future cash flows expressed in current year dollars.
Today’s action also appropriates $51,230,000 from General Fund Unassigned fund balance to complete the redemption. The balance of $7,345,857.50 (composed of $6,655,000 in principal and $690,857.50 in interest) is already budgeted in the current year by the Public Works department in anticipation of the scheduled June 1, 2025 debt service payment.
BACKGROUND:
On May 23, 2017, the Board of Supervisors authorized issuance of up to $110,000,000 of bonds to fund various capital projects, including construction of the new County Administration Building, located at 1025 Escobar Street, Martinez and the Sheriff’s Administration and Emergency Operations Center building located at 1850 Muir Road, Martinez. Ultimately, the County ended up issuing $100,285,000 of lease revenue bonds through a direct placement with JPMorgan at an interest rate of 2.387% for a term of 15 years. A direct placement is a form of bond issuance where one bondholder, typically a bank, purchases all of the bonds offered by the municipality outside of the municipal bond market. Below is a description of each of the capital projects funded by the bond proceeds:
2017 Series B (Capital Projects) - $100,285,000
County Administration Building. This project consists of a four-story, 72,000 square-foot, building that is home to the Board of Supervisors, the Board Chamber where the Supervisors meet, County Administration, County Counsel and Human Resources departments. The project began in March 2018 and was built using the design-build method by Hensel Phelps Construction with construction management provided by Vanir Construction Management. The building gets 95% of its electrical power from the solar arrays on the County parking lot across the street, achieved LEED Gold certification and was occupied in August 2020.
Sheriff’s Administration/Emergency Operations Center. This project consists of a two-story, 38,000-square foot building equipped with state-of-the-art disaster management and public safety technology. Sheriff’s Administration, Fiscal, Personnel, and Emergency Services are located in this building. The facility is designed to operate independently during an emergency if public utilities become unavailable. The property was designed and built with sustainability in mind by implementing bio-retention basins and pervious paving to manage 100% of the anticipated rainwater runoff, keeping it out of the county storm water system. The building utilizes hardscaping, lighting, led lighting and variable air volume fans for a small carbon footprint and an estimated 35% reduced water usage through low flow fixtures. The building’s energy is provided by solar panels that generate enough energy load to cover the building’s use, to include electric vehicle powering stations and return energy into the power grid. The project achieved LEED Gold certification and was occupied in June 2020.
Redemption of the Bonds
When the County executed the 2017 Series B direct placement with JPMorgan, there was no “call option” purchased or otherwise priced into the transaction. A “call option” is a financial instrument that allows the issuer (such as the County) of bonds an opportunity to redeem the bonds at a future point in time. Because there was no call option included in the direct purchase agreement, earlier this year, staff began to negotiate with JPMorgan to determine whether or not the bank would be willing to allow the County to redeem the bonds early with no prepayment penalty. Ultimately, JPMorgan offered the County a “par-call” settlement. A “par-call” settlement allows the County to redeem the bonds for the remaining par amount (or principal) outstanding plus any interest that might have accrued through the date of the redemption. This offer is advantageous to the County as such an option would typically be priced into the bonds (typically through an increased interest rate) at the issuance of the bonds. For these reasons, staff is recommending that the Board proceed with a redemption by accepting the “par-call” offer as the best financial option for the County.
Below are additional considerations supporting staff’s proposed early redemption of the Bonds:
1. Positive Net Present Value (NPV) Savings: Results in the avoidance of $5,006,733 in future interest costs, which combined with the June 1, 2025 interest payment due at redemption, have an estimated NPV savings amount of $320,460k.
2. Budget Flexibility: The 2017 Series B bonds have a remaining debt service requirement of $56,236,733 for fiscal years 2025-26 through 2031-32. It is important to note that the debt service requirement includes both principal and interest outstanding, which is different from the amount needed to redeem the bonds in that the latter reflects the principal outstanding at the time of the redemption plus the scheduled June 1, 2025 interest payment.
Redeeming the bonds early will result in additional budget flexibility from avoiding future debt service payments entirely. Because the 2017 Series B bonds were issued using a level debt service method, the annual debt service amount through fiscal year 2031-32 is $8.03 million each fiscal year. Redemption of the bonds frees up budgetary capacity in a like amount in each of those fiscal years.
Further, because the capital projects funded by the bonds support business activities funded by the General Fund, the $8.03 million in annual debt service savings will be realized within the General Fund for budgeting purposes. Below is a table showing the current debt service schedule (principal + interest) for the 2017 Series B, Lease Revenue bonds, by fiscal year, for reference:
3. Release of Leased Assets: Lease Revenue Bonds are secured by certain leased assets pledged at the time of issuance of the bonds. The 2017 Series B bonds currently rely on the following County properties:
Early redemption of the bonds would result in the above properties being released from securitizing the lease payments related to the bonds. This will allow the County additional flexibility as future development decisions are made surrounding the Capital Facilities Master Plan (CFMP), including the disposition of long-standing properties owned by the County without having to take subsequent action by the Board. A Lease Termination Agreement (attached) will be executed at the time of redemption to effectuate this release.
CONSEQUENCE OF NEGATIVE ACTION:
The County will continue to remit scheduled debt service payments related to the 2017 Series B Lease Revenue bonds through final maturity on June 1, 2032.
THE BOARD OF SUPERVISORS OF CONTRA COSTA COUNTY, CALIFORNIA
and for Special Districts, Agencies and Authorities Governed by the Board
RESOLUTION OF THE COUNTY OF CONTRA COSTA PUBLIC FINANCING AUTHORITY AUTHORIZING THE REDEMPTION OF CERTAIN 2017 LEASE REVENUE BONDS AND APPROVING CERTAIN ACTS IN CONNECTION THEREWITH AND CERTAIN OTHER MATTERS
WHEREAS, the County of Contra Costa Public Financing Authority (the “Authority”), a joint powers authority duly organized and existing under and pursuant to the Constitution and laws of the State of California and that certain Amended and Restated Joint Exercise of Powers Agreement, dated as of June 16, 2015, by and between the County of Contra Costa (the “County”) and the Contra Costa County Flood Control and Water Conservation District, proposes to undertake the redemption of certain bonds, as set forth below;
WHEREAS, the Board of Directors of the Authority (the “Board”) has previously caused the issuance of the Authority’s Lease Revenue Bonds (Capital Projects), 2017 Series B (the “2017B Bonds”) to be issued pursuant to a Trust Agreement, dated as of May 1, 2017, by and between the Authority and Computershare Trust Company, N.A. (the “Trustee”), as successor trustee thereunder to Wells Fargo Bank, National Association, as acknowledged by the County;
WHEREAS, the Board has determined that it is in the best interest of the Authority and the County to cause the redemption in full of the outstanding 2017B Bonds (the “Refunded Bonds”), and to approve a First Amendment to Trust Agreement in connection therewith (the “First Amendment”);
NOW, THEREFORE, the Board of Directors of the County of Contra Costa Public Financing Authority does hereby resolve as follows:
1. The First Amendment, in substantially the form attached hereto as Exhibit A, is hereby approved. The Chair of the Board or the designee thereof is hereby authorized and directed to execute and deliver the First Amendment with such changes, insertions and omissions as may be recommended by County Counsel or Stradling Yocca Carlson & Rauth LLP, as Special Counsel, and approved by the officer executing the same, said execution being conclusive evidence of such approval.
2. The Chair of the Board, the Executive Director and the Treasurer, or the designee of any of the foregoing, and any other proper officer of the Authority, acting singly, is hereby authorized and directed to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the redemption in full of the Refunded Bonds, the execution and delivery of the First Amendment and the intent of this resolution. Furthermore, each of such officers is hereby additionally authorized to execute and deliver any agreements, certificate or documents necessary to discharge real property liens associated with the Refunded Bonds.
3. This resolution shall take effect immediately.
The foregoing resolution was introduced at a regular meeting of the Board of Directors of the County of Contra Costa Public Financing Authority, held on the 13th day of May, 2025, by Director ___________, who moved its adoption. The motion was seconded by Director _____________ and a poll vote was taken, which stood as follows:
AYES:
NOES:
ABSTAIN:
ABSENT:
The motion having a majority of votes “Aye,” the resolution was declared to have been adopted, and it was so ordered.
Chair of the Board of Directors
[SEAL]
Attest:
Clerk to the Board of Directors