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TO: |
Board of Trustees |
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THROUGH: |
Jay Fox, Executive Director |
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FROM: |
Viola Miller, CFO |
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PRESENTER(S): |
Troy Bingham, Comptroller |
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Brian Baker, Zion Public Finance |
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TITLE:
title
R2023-06-06 - Resolution Authorizing Amendments to Escrow Agreements Executed in Connection with the Authority’s Federally Taxable Sales Tax Revenue Refunding Bonds, Series 2019B and Series 2021; and Related Matters
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AGENDA ITEM TYPE:
Resolution
RECOMMENDATION:
The Board of Trustees approve resolution R2023-06-06 authorizing amendments to escrow agreements executed in connection with the Authority’s Federally Taxable Sales Tax Revenue Refunding Bonds, Series 2019B and Series 2021
BACKGROUND:
UTA’s finance staff and municipal advisor have presented an opportunity to the Authority to consider selling the current 2019 and 2021 bond escrows and re-populating them with more efficient State and Local Government Securities (SLGS). State statutes governing UTA require several steps to consider a bond escrow substitution. Staff has consulted with the Local Advisory Council and now needs the Board of Trustees to act on a resolution to set terms of the potential escrow swap and to authorize financial agents to carry out the process. Staff will then start working with Zions Public Finance (the municipal advisor), Gilmore Bell (bond counsel), and Causey, Demgen & Moore PC (bidding and verification agent) to prepare bidding and legal documents for the escrow substitution.
DISCUSSION:
In November 2019 and 2021 escrows were originally created for 2015 Bond Refundings, UTA bid out the escrow and received better results from treasury securities than SLGS at that time. Currently, the shift in rates allows for a restructuring to capture savings and make the existing escrows more efficient. Present opportunities to generate cash savings are now available by doing an escrow substitution. The combined escrows hold approximately $500 million in securities that mature 15-30 days before they are needed to defease bonds in 2023-2025.
If approved by the Board, current escrow securities could be liquidated and SLGS would be purchased with those proceeds for less than the amount of the securities sold. UTA could execute the escrow substitution on any day where the bond market rallies through the day (so that the rates on the sold escrow securities will be lower compared to the available SLGS rates that were published in the morning). The difference between the price the escrow is liquidated for and the cost of the SLGS necessary to re-populate the escrow is UTA’s cash savings. SLGS rates are known at 8 AM Utah time, UTA would complete the escrow liquidation per the following parameters:
• Net savings should exceed $400,000
• The sale should occur within 3 months
The resolution would provide an exception to these parameters if at least two designated Board Officers were in agreement on the savings amount and/or time limit needed to change.
ALTERNATIVES:
Additional parameters could be set, escrow substitution can be stopped at this time.
FISCAL IMPACT:
Estimated savings to UTA of $400,000 or greater.
ATTACHMENTS:
Resolution