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TO: |
Board of Trustees |
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THROUGH: |
Jay Fox, Executive Director |
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FROM: |
Viola Miller, Chief Financial Officer |
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PRESENTER(S): |
Viola Miller, Chief Financial Officer |
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Brian Reeves, Associate Chief Financial Officer |
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Brian Baker, Senior Vice President, Zions Public Finance, Inc |
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Randall Larsen, Gilmore & Bell |
TITLE:
title
R2025-05-02 - Resolution Authorizing the Issuance and Sale by the Authority of its Sales Tax Revenue and Refunding Bonds in the Aggregate Principal Amount of Not to Exceed $973,000,000
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AGENDA ITEM TYPE:
Resolution
RECOMMENDATION:
Approve Resolution R2025-05-02 to authorize the sale of the Authority’s Sales Tax Revenue and Refunding Bonds, for funding capital projects, a potential tender offer and refunding as presented.
BACKGROUND:
The Public Transit District Act, Sections 17B-2a-801, et seq., and the Utah Refunding Bond Act, Sections 11-27-1, et seq. of the Utah Code Annotated 1953, as amended , gives the Utah Transit Authority (UTA) Board of Trustees the authority to issue bonds to finance and refinance any improvements, facilities or property which UTA is authorized to acquire for use in our public transit system.
As of December 31, 2024, UTA has approximately $2 billion in outstanding senior and subordinate sales tax revenue bonds. These bonds play a crucial role for funding UTA’s capital assets, enabling transit services across a six-county region. They support the capital funding of bus, light rail, commuter rail and other operations vital to the community. Many of these capital assets depend on sales tax revenue bonds to supplement their funding. The complete legal basis of the Authority’s ability to seek these bonds is fully laid out in the resolution.
As part of the TRAX Forward project, which aims to enhance and expand service over the next decade, UTA has selected Stadler to manufacture forty new light rail vehicles to replace and grow its existing fleet. Additionally, with expanded transit services in the Ogden area, UTA needs to invest in infrastructure improvements, including a new administrative building along with new bus canopies and facility upgrades at UTA’s Mt. Ogden service unit. These capital projects require supplemental funding through targeted bond issuances.
UTA has also identified opportunities to optimize its existing debt profile by refinancing outstanding bonds to reduce overall debt service costs. This can be achieved through two key methods: first, by conducting bond tenders, a strategy UTA has successfully executed twice; and second, by refunding certain taxable bonds with tax-exempt bonds to secure more favorable financing terms.
DISCUSSION:
UTA’s staff along with Municipal Advisor, Zions Public Finance, and Bond Underwriter Wells Fargo, have explored three financing strategies to fund new capital projects, tender eligible outstanding debt, and refund taxable bonds with tax exempt bonds. The proposed bonding opportunity was presented to the Board of Trustees on April 23, 2025 for discussion. As required by Utah Code, the bonding proposal was brought to the Local Advisory Council (LAC) on May 7, 2025 to receive their consultation. Following this, the Authority submitted a bond sale and potential refunding resolution to the State Finance Review Commission (SFRC) on May 12, 2025, which received approval. As a result, this resolution authorizing bonding parameters is being brought before UTA’s Board of Trustees for their consideration and approval on May 28, 2025.
ALTERNATIVES:
This proposal is subject to available capital markets, potential investor appetite and UTA’s bond investors’ willingness to tender bonds.
Should the Authority not pursue these funding opportunities, the planned capital projects to replace and grow UTA’s fleet and infrastructure improvements will be delayed.
FISCAL IMPACT:
The total target for new money issuance is approximately $212 million, reflecting the projected bond funding needs for two key projects: light rail vehicles and facility upgrades located at UTA’s Mt. Ogden service unit. The bonds will be issued in two phases, with $128 million targeted for 2025 and $84 million for 2028.
The first phase, included in this proposed resolution, involves an issuance of $128 million. In the second phase, UTA staff will return in 2028 to the board, LAC, and SFRC for discussion, consultation, and approval of a request for an additional bond issuance of $84 million new money funds to complete the total funding necessary for the two capital projects specified in the discussion section above.
For the refinancing of UTA’s outstanding bonds, staff has identified $845 million in tenderable bonds to be included in the tender notice posting. The success of this refinancing depends on financial market conditions and investor willingness to tender their current UTA bond holdings. For any portion of the $845 million not tendered, there may be an opportunity to refund the bonds using proceeds from the bond issuance, which could then be reinvested to address the remaining outstanding liability.
The total 2025 issuance considered in this proposed resolution, including $128 million in new issue and $845 million in tendered and refunded bonds, is $973 million.
For tendered bonds, an aggregate net present value savings of at least $5 million and a target 3-5% range.
For refunded bonds, an aggregate net present value savings amount of at least $1 million and a target 1-3% range.
ATTACHMENTS:
Resolution R2025-05-02 (with exhibits)