REPORT TO THE CITY COUNCIL
FROM: HENRY THOMPSON, Director of Aviation
Airports Department
SUBJECT
Title
Actions pertaining to the City of Fresno Airport Revenue Bonds:
1. TEFRA HEARING - Tax Equity and Fiscal Responsibility Act (TEFRA) to hear and consider information concerning the proposed issuance of tax-exempt bonds by the City of Fresno of exempt facility bonds for the purpose of financing various improvements at Fresno Yosemite International Airport
2. ***RESOLUTION - Authorizing the issuance, sale and delivery of City of Fresno Airport Revenue Bonds, Series 2023 Bonds, authorizing the execution and delivery of a fourth supplemental indenture, bond purchase contract, escrow agreement, continuing disclosure certificate, official statement, and related documents, and authorizing certain other actions and the execution of certain other documents in connection therewith. (Requires 5 Affirmative Votes) (Subject to Mayor’s veto)
Body
RECOMMENDATION
Staff recommends that the City Council hold a Tax Equity and Fiscal Responsibility Act (TEFRA) public hearing on behalf of The City of Fresno in the aggregate principal amount not to exceed $110,000,000; and authorize the issuance, sale and delivery of Airport Revenue Bonds, Series 2023 Bonds for the financing of a portion of the Terminal Expansion Project and to refinance the Airports Series 2013 bonds for savings.
EXECUTIVE SUMMARY
The City of Fresno is seeking to obtain financing for the constructing, installing, equipping, and furnishing of Airport Facilities (as defined below). The new Bonds will be issued by the City of Fresno. As the governing body of a jurisdiction in which the Facilities are located, the Council must hold a public hearing in accordance with Section 147(f) of the Internal Revenue Code for the purpose of receiving any public testimony regarding the project before it considers authorizing the Authority to issue bonds for this purpose.
The City of Fresno has undertaken an expansion of Fresno Yosemite International Airport (FAT) Terminal facilities (Project) to meet the growing air travel needs of the region. The vision for this Project began in 2018 and has proceeded through the planning, environmental, and design phases. Funding for the estimated $145,000,000 project has been identified and committed from numerous sources (52%) with an estimated $70,000,000 (48%) required through debt service financing in the form of Airport Revenue Bonds. The Airport also intends to refinance existing 2013 Series A and B bonds, estimated at a combined $20,000,000 to be refinanced under this transaction for savings.
BACKGROUND
The City of Fresno has undertaken an expansion of Fresno Yosemite International Airport (FAT) Terminal facilities (Project) to meet the growing air travel needs of the region. The vision for this Project began in 2018 and has proceeded through the planning, environmental, and design phases. Funding for the estimated $145,000,000 project has been identified and committed from numerous sources (52%) with an estimated $70,000,000 (48%) required through debt service financing in the form of Airport Revenue Bonds. The Airport also intends to refinance existing 2013 Series A and B bonds, estimated at a combined $20,000,000 to be refinanced under this transaction for savings.
Under the provisions of TEFRA as codified in Section 147(f) of the Internal Revenue Code, the City in which the proposed Facilities are located must conduct a public hearing. This notice of the public hearing was posted on the City’s website on April 19, 2023. No testimony regarding this proposed issuance has been received as of today.
On December 1, 2022, the Council adopted a resolution expressing its intent to use the proceeds of indebtedness to reimburse certain expenditures related to the Fresno Yosemite International Airport Terminal Expansion Project.
In accordance with city policy, City Finance staff engaged a “Bond Team”, to support the transaction and ensure all requirements were met. Included on this team was Unison Consulting Group who was hired to conduct a financial feasibility study to determine the airport’s capacity to support the new debt requirement to support the terminal expansion project.
On September 29, 2022, Fresno City Council approved the execution of an agreement with Unison, Inc. to undertake a feasibility study for the purpose of issuing debt. That study under final review and preliminary results supports the feasibility of debt for the FAT Terminal Expansion Project. The Preliminary Financial Feasibility Report confirms the strength of the airport’s financial position and its ability to support the proposed debt.
In reviewing current market conditions and analyzing the Airports existing Series 2013 Series A and B bonds, it is recommended by the bond team that the City pursue refinancing these existing bonds for more favorable market rates. Refinancing as part of the Series 2023 transaction will result in net savings in accordance with City debt refinance requirements.
The combined debt requirement for the Series 2023 Bonds will be approximately $110,000,000 as described below:
|
Project Proceeds |
$70,000,000 |
|
Capitalized Interest Fund |
12,112,000 |
|
Reserve Fund |
6,598,000 |
|
COI |
1,000,000 |
|
Escrow |
20,290,000 |
|
Totals |
$110,000,000 |
ENVIRONMENTAL FINDINGS
Pursuant to California Environmental Quality Act (CEQA) Guidelines Section 15378, this item is not a project for the purposes of CEQA.
LOCAL PREFERENCE
Local preference is not applicable to this Project pursuant to Fresno Municipal Code 4-109(b).
FISCAL IMPACT
There is no impact to the General Fund or to the ratepayers of the City of Fresno from this action. The Series 2023 Issuances will provide approximately $110,000,000 to support $70,000,000 for Terminal Expansion and approximately $20,000,000 in refinance cost for Series 2013 A and B bonds. Debt service payments are secured by airport revenues, including authorized Passenger Facility Charges (PFC’s).
Attachments:
• Resolution and Exhibit A
• Escrow Agreement
• TEFRA Notice