Adopt a resolution of the Yolo County Financing Corporation authorizing the substitution of collateral relating to the 2012 Certificates of Participation; and authorize Corporation 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)

Yolo County Financing Corporation
The Board of Supervisors in 1998 created the Yolo County Financing Corporation. The Financing Corporation is utilized as a party to certain financing transactions as in lease financing transactions, there is the requirement to have another party who materially participates in the lease transaction. This type of financing was used for the 1998 Certificates of Participation and the 2012 Certificates of Participation (COPs). As such, the Board has to convene as both the County and Financing Corporation to perform the amendments to the 2012 COPs described further below. 

Background
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. 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). The County was required to utilize public facilities as collateral to provide security for the COPs and Lease Revenue Financings. 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 act as security for the building. Since this financing, additional financings have happened in 2017, 2019, and 2020 which utilized other facilities for collateral. 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 available 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.

As part of the annual 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. 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 a borrowing is necessary as it could complicate that future transaction. 

In order to proceed with the Substitution of Property, the Board as the Corporation Board of Directors would need to approve a Resolution authorizing the substitution of collateral on the 2012 Certificates of Participation and to authorize Corporation officers to take appropriate actions and deliver documents to complete the substitution. This would allow staff of the Financing Corporation to execute amended Ground Leases, Facility Leases, and a Trust agreement that would allow completion of this substitution. The Corporation 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 included 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