Inter-Departmental Correspondence

County Manager’s Office



November 4, 2009


November 10, 2009




Four-fifths vote



Honorable Board of Supervisors


David S. Boesch, County Manager


Resolution Authorizing the Issuance of up to $155 Million of 2009 Refunding Lease Revenue Bonds for the refunding of all or a portion of the San Mateo County Joint Powers Financing Authority’s 1997 Series A Lease Revenue Bonds (Capital Projects) and 1999 Refunding Series A Lease Revenue Bonds (Capital Projects)



Adopt a Resolution:

    1. Approving the issuance by the San Mateo County Joint Powers Financing Authority of Not to Exceed $155 million aggregate principal amount of refunding lease revenue bonds (Capital Projects) for the refunding of all or a portion of the Authority’s Lease Revenue Bonds (Capital Projects), 1997 Series A and Lease Revenue Bonds (Capital Projects), 1999 Refunding Series A;

    2. Authorizing the forms of and directing the execution and delivery of a bond purchase contract, a continuing disclosure agreement and an official statement;

    3. Authorizing a lease financing with the San Mateo County Joint Powers Financing Authority; and

    4. Approving the taking of all necessary actions in connection therewith.



The County received proposals from Wedbush Securities and E.J. de la Rosa to refund the San Mateo County Joint Powers Authority’s 1997 and 1999 Lease Revenue Bonds to generate ongoing reductions in annual debt service payments. The analysis demonstrated savings of approximately 4.7% on a total refunding of $155 million, resulting in total annual savings of approximately $730,000 for all funds and $440,000 for the General Fund, including reduced subsidies to the San Mateo Medical Center.


The 1997 bonds financed County Office Building #2 (555 County Center) and refinanced a portion of the 1994 Health Center bonds. The 1999 bonds refunded prior financings including the 1993 North County Satellite Clinic, the 1994 Health Center and the 1995 Capital Projects (2500 Middlefield Road, Hall of Justice 4th Floor remodel, Traffic/Small Claims Annex and debt financed equipment purchases).


The Financing Team has been assembled and includes Wedbush as the senior manager, E.J. de La Rosa as co-manager, Orrick Herrington & Sutcliffe as bond counsel, Sidley Austin LLP as underwriter’s disclosure counsel, Mark Epstein as Financial Advisor. US Bank would provide trustee services. The County would not likely purchase bond insurance and would instead rely on its strong underlying lease ratings with Moody’s (Aa3) and Standard & Poor’s (AA). Insurance would only be considered if it were to reduce the County’s debt service after taking into account the expense of the insurance premium.



It is recommended that the 1997 and 1999 bonds be refunded. Though the municipal bond market has fluctuated in recent weeks, rates are expected to remain low through mid-December. Given the County’s strong credit ratings, healthy reserves, and sound financial policies, it is anticipated that the County’s bonds will fair well in the current market, with total projected savings of approximately $15.6 million for all funds and $9.4 million for the General Fund over the next 23 years.


Under the terms of the Bond Purchase Contract, the interest rate on the Bonds shall not exceed a true interest cost of 4.75% per annum, the underwriting discount shall not exceed 0.80% of the principal amount of Bonds sold, and the refunding must result in net present value savings of at least 3.00% of the principal amount of the refunding bonds. Under the proposed structure, the bonds would be redeemable within 10 years from the date of issuance.


County staff and members of the Financing Team will be meeting with Moody’s and Standard & Poors on Friday, November 13 with the goal of maintaining the strongest credit ratings among California counties.


The San Mateo County Joint Powers Financing Authority reviewed and approved the refunding parameters at its November 4 meeting. An update of this refunding was provided to the Finance and Operations Committee at its November 3 meeting. County Counsel has reviewed and approved the resolution as to form and content


This Board action contributes to this Shared Vision 2025 outcome of a Collaborative Community by reducing the County’s long-term borrowing costs as well as the County’s structural budget deficit.



As a result of this refunding, long-term savings of approximately $15.6 million for all funds and $9.4 million for the General Fund would be realized over the next 23 years. The General Fund would realize moderate savings of approximately $69,000 in FY 2009-10, increasing to $440,000 beginning in FY 2010-11. The General Fund’s ongoing debt service obligations would be reduced from approximately $17.6 million to $17.1 million. Savings generated by this refunding would result in reductions in debt service charged to the appropriate departments. General Fund savings would result in corresponding reductions in Net County Cost, with no impact on services, to the Health System, Human Services Agency, and all tenants of 555 County Center, including Assessor-County Clerk-Recorder, Controller’s Office, Treasurer-Tax Collector and the Department of Public Works. Savings realized by the Department of Child Support Services, which has no Net County Cost, would free up Federal and State allocations for other operating purposes. The State would also benefit due to reduced claims from the Health System and the Human Services Agency and lower debt service obligations on the Courthouse Construction Fund.



Preliminary Official Statement – 2009 Refunding Series A Lease Revenue Bonds

Bond Purchase Contract

Continuing Disclosure Agreement

Sixth Supplemental Trust Agreement