Template revised September 22, 2016 COMMISSION AGENDA MEMORANDUM Item No. CTION ITEM June 13, 2017 ACTION REQUESTED EXECUTIVE SUMMARY JUSTIFICATION ��COMMISSION AGENDA Action Item No. Page of Meeting Date June 13, 2017 ��Template revised September 22, 2016. In addition, the Bonds will include funding fo r an estimated $ million in Airport project costs. The Bonds will fund a portion of several major projects; cash, grants, passenger facility charges and existing and future bond proceeds will also provide funding for these projects. The major projects include the International Arrivals Facility , North Satellite Improvements , Alternative Utility Facility, Concourse D Hardstand Holdroom, Interim Baggage System Program and Baggage Makeup Space; a list of projects currently identified for 2017 Bond funding is provided in Exhibit A If project spending is delayed, Bond proceeds may be redirected to other projects within the limits established by the tax code; use of any bond proceeds is identified in project authorization requests and n ond proceeds can a ctually be spent on any projects without the appropriate project authorization. The total Bond amount will also include proceeds sufficient to pay cost of issuance, fund the required debt service reserve and pay a portion of the interest on the Bonds du ring construction (capitalized interest) as appropriate. DETAILS The Bonds are being issued pursuant to the Intermediate Lien Master Resolution No. 3540 and this Resolution No. . The Bonds will be issued in multiple series based on the tax status of the projects to be funded or refunded. Two series will be established for the refunding bonds. One of these will be issued as governmental bonds exempt from all federal income tax (non AMT) and used to refund the 2009A bonds which funded roadways associated with the CONRAC The other will be issued as taxable bonds in order to refund the 2009B 1 taxable bonds that funded the majority of the CONRAC construction; rental car facilitie s are not eligible for tax exempt financing. One or t wo additional eries will be issued as private activity bonds exempt from regular federal income tax, but subject to the Alternative Minimum Tax (AMT) and will be used to fund a total of approximately $420 million of Airport project spending; these pro jects do not quality as governmental purpose bonds. Most of the projects have long asset lives appropriate for long term bonds. pproximately $100 million of the projects have shorter asset ve and therefore may be funded with bonds that have a shorter final maturity , currently estimated to be ten years . Th e potential use of a fourth series with a shorter term to final maturity provide three benefits. First, the life of the bonds and the associated airline fee to pay debt service are tied to the facility life. Second, the interest rate on shorter term bonds is lower than on longer term bonds. Third, the regulatory compliance for this eries ends after final maturity in approximately ten years. To comply with tax code regulations the shorter term bonds will be sold separately, approximately two weeks after the sale of the other three s eries . While the two sale approach required for the compliance benefit , the other benefits may be achieved even with a common sales date and it is important to retain flexibility to sell the bonds on the same date if market conditions favor a combined sale. Resolution No. provides for this fle xibility. ��COMMISSION AGENDA Action Item No. Page of Meeting Date June 13, 2017 ��Template revised September 22, 2016. Resolution No. is similar in all material respects to other Intermediate Lien Series Resolutions and provides for a contribution to the common debt service reserve fund that provides security for all intermediate lien bonds. The Resolutio n delegates to the Port’s Chief Executive Officer the authority to approve interest rates, maturity dates, redemption rights, interest payment dates, and principal maturities for the Bonds (these are generally set at the time of pricing and dictated by mar ket conditions at that time). Commission parameters that limit the delegation are a maximum bond size, minimum savings rate for the refunding component, maximum interest rate for the new money bonds and expiration date for the delegated authority. If the Bonds cannot be sold within these parameters, further Commission action would be required. The recommended delegation parameters are: Maximum size: ,000,000 Minimum debt service savings: .0% Maximum interest rate: 5.25% Expiration of Delegation of Authority: six months Upon adoption, Resolution No. will authorize the Designated Port Representative (the Chief Executive Officer or the Chief Financial Officer) to approve the Bond Purchase Contract, the offic ial statement, escrow agreement , pay the cost of issuance and take other action appropriate for the prompt execution and delivery of the Bonds. The Bonds will be sold through negotiated sale to Citigroup Global Markets Inc.; Morgan Stanley and Co. LLC .; Barclays Capital Inc. Goldman Sachs & Co. LLC; J.P. Morgan Securities LLC; Merrill Lynch, Pierce, Fenner & Smith Incorporated and three small firms , Academy Securities, Inc; Backstrom McCarley Berry & Co., LLC; and Williams Capital Group, Inc. Piper Jaffray is serving as Financial Advisor, K&L Gates LLP is serving as bond counsel and Pacifica Law Group is serving as disclosure counsel on the transaction. ALTERNATIVES AND IMPLICATIONS CONSIDERED The 2009 bonds are callable in 2019 and the Port could delay refunding those bonds rather than refunding them now. Refunding the 2009 bonds now requires investing the 2017 bond proceeds at interests rates lower than the interest rate the Port pays on the refunding B onds; this reduces the amount of savings. Alternative 1 Delay refunding until 2019 when the bonds are callable. Pros (1) Reduces the need to invest at a lower short term interest rate ��COMMISSION AGENDA Action Item No. Page of Meeting Date June 13, 2017 ��Template revised September 22, 2016. Cons (1) Risks an increase in the long term interest rates the Port pays on the refunding bonds resulting in reduced savings or potentially the loss of the refunding opportunity altogether This is not the recommended alternative. Alternative 2 Refund the 2009 bonds now. Prior to recommending a refunding in advance of a call date, the Port analyses the savings percentage and the saving efficiency and reviews this in the context of market environment . The Port’s target savings rate for a refunding in advance of the call date is higher than for currently callable bonds; the 2009 bonds exceed that target. Although there is ine fficiency due to the need to invest the proceeds at a lower interest rate for two years, the efficiency is generally high. A similar analysis was done in 2016 to determine if a refunding was appropriate and the low efficiency resulted in a decision to wai t. Finally, the Port consider s the interest rate environment. Rates have already begun to rise and the market consensus is for continued rate increases making a refunding now, more likely to be appropriate. Pros (1) Lock in significant refunding savings. (2) Avoid the risk of a rising rate environment. Cons (1) Investing the proceeds until the call date at lower short term rates produces less savings than would be realized if the bonds were re unded on their call date, assuming the same or lower interest rates on the call date compared to current rates. This is the recommended alternative. ATTACHMENTS TO THIS REQUEST Draft Resolution No. PREVIOUS COMMISSION ACTIONS OR BRIEFINGS November 8, 2016 The Commission was brief on the Draft Plan of Finance ��COMMISSION AGENDA Action Item No. Page of Meeting Date June 13, 2017 ��Template revised September 22, 2016. EXHIBIT A Service Tunnel Renewal/Replace Alternate Utility Facility orth atellite Renovation International Arrivals Fac ility (IAF) Checked Bag Optimization Concessions Infrastructure Electric Utility SCADA N. Terminals Utilities Upgrade Concourse B Roof Replacement Add itional Baggage Makeup Space IAF Concourse B Gate Reconfiguration Fi Enhancement Project Term inal wide Voice Paging System Parking System Replacement Conc ourse A, B, C Carpet Replace ment Concourse D Hardstand Holdroom Plow / Broom S now Equipment atellite Transit System Cars Customer Experience OPS Lan Core Switch Upgrade Passenger Flow Image Analytics Interim Baggage System Program Holdroom Seating for Conc ourse B&C Hardstand Equipment Purchase