Adopt resolution authorizing the substitution of collateral relating to the 2012 Certificates of Participation; and authorize County officers to execute and deliver documents and related actions to complete the substitution of property for the 2012 Certificates of Participation. (No general fund impact) (Rinde)

The County of Yolo, in December 2012, completed a financing utilizing Qualified Zone Academy Bonds (QZABs) issued structurally as Certificates of Participation (COPs) to construct 5.8 megawatts of solar generation capacity at the corner of N. Ashley and W. Woodland (Beamer & Cottonwood site) and at a section of unutilized land at the northwest corner of the Grasslands Regional park. In addition, as part of this financing, the County refunded the 1998 Certificates of Participation related to the acquisition of District Attorney Building (301 Second Street, Woodland, CA). The total amount financed was $26.1 million and included annual principal and interest payments until December 1, 2035 (a term of 23 years).

As part of this financing, the County was required to utilize public facilities as collateral to provide security for the financing which is required for COPs and Lease Revenue Financings. As part of the security for this financing, the Bauer Health Building (insured presently for $20.399 million) and the Erwin Meier Administration Building (insured presently for  $18.861 million), are the two facilities that are security for the finacing. Since this financing, additional financings have happened in 2017, 2019, and 2020 which utilized other facilities for collateral as well as the County has several criminal justice facilities where County facilities are required to serve as collateral for the State Public Works Board Financings associated with AB900, SB863, and SB1022. As a result, the County of Yolo has very limited collateral to be able to utilize on any future borrowings. A current list of facilities committed is included in Appendix A of the Capital Improvement Plan adopted by the Board on October 11, 2022. That is included as Attachment E to this Board item.

As part of the annual performance of a review of the County's debt portfolio with the County's public finance consultant, Government Financial Services Joint Powers Authority (GFSJPA), it was determined that due to having paid down principal on the outstanding 2012 COPs and in part due to the defeasance of the refunding 2012 COPs portion associated with the District Attorney's building (performed in December 2022), there may be an opportunity to reduce collateral pledged against the remaining amounts outstanding on the 2012 COPs. The COPs presently have remaining principal outstanding in the amount of $15.295 million while the combined value of the Bauer Building and Meier Building are $39.261 million. Thus, in order to provide maximum flexibility for the County to meet future fiscal and borrowing needs, the Department of Financial Services worked with GFSJPA and Parker & Covert LLP, Bond Counsel, to bring forward a Substitution of Property. This Substitution of Property allows the County to have only one facility collateralize the financing instead of having both of these facilities continue securing the remaining principal, thereby freeing up approximately $19 million in collateral that could be used in a future financing transaction. This type of active management of the debt portfolio working with a financial advisor is in line with the best practices promulgated by the Government Finance Officers Association.
 
While the County doesn't have any planned financing at this time that needs this collateral, it's prudent to take this action now while staff have the capacity and ability to complete this item rather than waiting until an emerging borrowing is necessary as it could complicate that future transaction. 

In order to proceed with the Substitution of Property, the Board would need to approve a Resolution authorizing the substitution of collateral on the 2012 Certificates of Participation and to authorize County officers to take appropriate actions and deliver documents to complete the substitution. This would also include in a related item having the Board acting as the Yolo County Public Financing Corporation to approve a related resolution. This would allow staff of the County and similar staff or the Financing Corporation to execute amended Ground Leases, Facility Leases, and Trust agreement that would allow completion of this substitution. The County Resolution is included as Attachment A and Draft Copies of the Amended Ground Lease, Facilities Lease, and Supplemental Trust Agreement and included as Attachments B, C, and D, respectively. These are inclued as to form and will be finalized by County officials as part of the closing of the transaction. 

The Department of Financial Services collaborated with the County Administrator's Office as well as the County's financial advisor, GFSJPA on this item. 

Not applicable