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Home My WebLink AboutCouncil Packet - 5/22/2019 10:30amTHE CI T Y COUNCIL OF THE CITY OF WATERLOO, IOWA, SPE CIA L MEETING TO BE HELD AT Harold E. Getty Council Chambers Wednesday, May 22, 2019 10:30 AM CITY OF WATERLOO GOALS 1. Support the creation of new, livable wage jobs through a balanced economic development approach of assisting existing businesses, fostering start-ups, attracting new employers and cultivating an adequate workforce. 2. Implement a Community Policing strategy that creates a safe environment in Waterloo. 3. Reduce the City's property tax levies through a responsible balance of cost reduction in City operations and increases in taxable properly valuations to ensure that Waterloo is a competitive, affordable, and livable city. 4. Enhance the image of Waterloo and the City to residents and businesses inside and outside of the community. General Rules for Public Participation 1. At the chair/presider's discretion, you may address an item on the current agenda by stepping to the podium, and after recognition by the chair/presider, state your name, address and group affiliation (if appropriate) and speak clearly into the microphone. 2. You may speak one (1) time per item for a maximum of five (5) minutes as long as you have registered with the City Clerk's office no later than 4:00 p.m. on the day of the Council Meeting. If not registered with the City Clerk's office you may speak one (1) time per item for a maximum of three (3) minutes. 3. If there is a hearing scheduled as part of an agenda item, the chair/presider will allow everyone who wishes to address the council, using the same participation guidelines found in these "general rules". 4. Although not required by city code of ordinances, oral presentations may be allowed at the chair/presider's (usually the Mayor or Mayor Pro Tem) discretion. The "oral presentations" section of the agenda is your opportunity to address items not on the agenda. You may speak one (1) time per item for a maximum of five (5) minutes as long as you have registered with the City Clerk's office no later than 4:00 p.m. on the day of the Council Meeting. If not registered with the City Clerk's office a speaker may speak to one (1) issue per meeting for a maximum of three (3) minutes. Official action cannot be taken by the Council at that time, but may be placed on a future agenda or referred to the appropriate department. 5. Keep comments germane and refrain from personal, impertinent or slanderous remarks. 6. Questions concerning these rules or any agenda item may be directed to the Clerk's Office at 291-4323. 7. Citizens are encouraged to register with the Clerk's Office by 4:00 p.m. on Monday of the day of the City Council meeting to appear before the City Council (may also register by phone). Registered speakers will be given first priority. Page 1 of 3 Roll Call. Agenda, as proposed or amended. OTHER COUNCIL BUSINESS 1. $6,790,000 General Obligation Bonds, Series 2019A Receive and file sealed bids, BUT NOT OPENED. City Clerk declares time for filing sealed bids be closed and sealed bids be opened. City Clerk announces electronic bids received. Refer to Speer Financial, Inc. Submitted By: Michelle Weidner, Chief Financial Officer ADJOURNMENT Motion to adjourn. Kelley Fel chl e City Clerk Page2of3 CITY OF WATERLOO Council Communication $6,790,000 General Obligation Bonds, Series 2019A City Council Meeting: 5/22/2019 Prepared: 5/19/2019 REVIEWERS: Department Reviewer Action Date ::. mince Weidner, car, Michclie 2 ,,,,,, PM Clerk 0 five 1: 1gby, Nancy Approved 5/21 /201 9 9: 7 SUBJECT: Receive and file sealed bids, BUT NOT OPENED. City Clerk declares time for filing sealed bids be closed and sealed bids be opened. City Clerk announces electronic bids received. Refer to Speer Financial, Inc. Submitted by: Submitted By: Michelle Weidner, Chief Financial Officer Page3of3 KEVIN McCANNA Chairman Speer Financial, Inc. INDEPENDENT MUNICIPAL ADVISORS DANIEL FORBES President DAVID PHILLIPS Executive VP The Honorable Quentin M. Hart, Mayor and Members of the City Council City of Waterloo 715 Mulberry Street Waterloo, IA 50703 Dear Mayor Hart and Council Members: RAPHALIATA McKENZIE Senior VP MAGGIE BURGER Senior VP May 22, 2019 ANTHONY MICELI Senior VI' Bids were received today for the $6,790,000 General Obligation Bonds, four bids received, which are listed at the bottom of this letter. Upon examination, it is our opinion that the bid of Raymond James & Illinois, is the best bid received, and it is further our opinion that the bid should be accepted. We therefore recommend that the Tax -Exempt Bonds a price of $7,063,579.50, being at a true interest rate of 2.2756%. MB/mr ESTABLISHED 1954 LARRY BURGER Vice President MARK JERETINA Vice President Series 2019A. There were Associates, Inc., Chicago, is favorable to the City and be awarded to that bidder at True Account Managers Interest Rate Raymond James & Associates, Inc., Chicago, Illinois 2.2756% Robert W. Baird & Co., Inc., Milwaukee, Wisconsin 2.2765% D.A. Davidson Company, Denver, Colorado 2.2794% Hutchinson, Shockey, Erley & Co., Chicago, Illinois 2.3396% Respectfully submitted, SPEER FINANCIAL, INC. Maggie Burger, Sr. Vice President Enclosures SUITE 4100 • ONE NORTH LASALLE STREET • CHICAGO, ILLINOIS 60602 • (312) 346-3700 • FAX (312) 346-8833 SUITE 608 • 531 COMMERCIAL STREET • WATERLOO, IOWA 50701 • (319) 291-2077 • FAX (319) 291-8628 U.S. PUBLIC FINANCE MOODY'S INVESTORS SERVICE CREDIT OPINION 20 May 2019 V Rate this Research Contacts Daniel Simpson Anays, dan.simcson„amoodys com Coley J Anderson AO' Analyst coley ardersor1@ CLIENT SERVICES Americas Asia Pacific Japan EMEA 000� +1,312,706.9965 +1.312.706.9961 1-212-553-1653 852-3551-3077 81-3-5408-4100 44-20-7772-5454 Waterloo (City of) IA Update to credit analysis Summary The City of Waterloo (Aa2), Iowa is part of the Cedar Falls (Aa1)-Waterloo metropolitan area and is an employment hub and population center for the region. The city's tax base is stable, though full value per capita and resident incomes are slightly below the national medians. The city's well-managed finances have resulted in a stable operating history and maintenance of healthy reserves. The city's primary credit challenges are its above average debt and pension burdens and associated fixed costs. Credit strengths » Diverse tax base that is a regional economic center in eastern Iowa » Sound financial management has resulted in stable operating history and maintenance of healthy reserves Credit challenges » Above average debt and pension burden » Full value per capita and resident incomes are below average compared to like rated peers Rating outlook Moody's does not typically assign outlooks to local governments with this amount of debt. Factors that could lead to an upgrade » Reduction in city's debt and pension burdens » Significant and sustained improvement in reserves Expansion of city's the tax base and strengthening in resident and incomes Factors that could lead to a downgrade » Growth in the city's debt and pension burden Declines in financial reserves • Contraction of the city's tax base or weakening of resident incomes MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE Key indicators Exhibit 1 Waterloo (City of) IA 2014 2015 2016 2017 2018 Economy/Tax Base Total Full Value ($000) $3,706,644 $3,806,814 $3,834,111 $3,891,239 $3,976,923 Population 68,392 68,432 68,357 68,146 68,406 Full Value Per Capita $54,197 $55,629 $56,090 $57,102 $58,137 Median Family Income (% of US Median) 80.4% 79.3% 81.4% 79.5% 79.5% Finances Operating Revenue ($000) $61,967 $62,739 $64,467 $65,853 $67,190 Fund Balance ($000) $18,224 $18,193 $17,679 $18,009 $17,633 Cash Balance ($000) $22,710 $20,512 $24,084 $23,894 $23,671 Fund Balance as a % of Revenues 29.4% 29.0% 27.4% 27.3% 26.2% Cash Balance as a % of Revenues 36.6% 32.7% 37.4% 36.3% 35.2% Debt/Pensions Net Direct Debt ($000) $70,787 $69,128 $77,051 $84,322 $89,070 3 -Year Average of Moody's ANPL ($000) $132,351 $126,045 $131,232 $137,677 $151,946 Net Direct Debt / Full Value (%) 1.9% 1.8% 2.0% 2.2% 2.2% Net Direct Debt / Operating Revenues (x) 1.1x 1.1x 1.2x 1.3x 1.3x Moody's - adjusted Net Pension Liability (3 -yr average) to Full Value (%) 3.6% Moody's - adjusted Net Pension Liability (3 -yr average) to Revenues (x) 2.1x 3.3% 3.4% 2.0x 2.0x 3.6% 3.8% 2.2x 2.3x Tax base data is displayed on a tax year basis, while financial data is displayed on a fiscal year basis. Source: City's audited financial statements, Moody's Investors Service, Inc., U.S. Census Bureau Profile The City of Waterloo is located in northeastern Iowa, approximately 50 miles northwest of Cedar Rapids (Aal stable). The city provides municipal services to a population of approximately 68,000 residents and is the county seat of Black Hawk County (Aa2) Detailed credit consideration Economy and tax base: employment and population hub in eastern Iowa Waterloo's tax base and economy will likely remain stable due to its rote as a regional commercial and industrial hub. Waterloo is located in eastern Iowa's Black Hawk County (Aa2), approximately 50 miles northwest of the City of Cedar Rapids (Aa1 stable). The city's tax base is stable and has grown at an average annual rate of 1.6% over the last five years and is currently valued at nearly $4 billion.=White tax base growth is relatively modest, there is a considerable amount commercial and industrial development taking place within the city that should facilitate faster near-term growth. Taxpayer concentration is modest with the top ten taxpayers comprising a modest 6% of the city's taxable value. The city's economy is dominated by manufacturing, with additional employment opportunities in the government, health care, and higher education sectors. The city's largest employer is Deere and Company (A2 stable), which employs approximately 5,600 people representing 17% of the city's workforce. While Deere has tayed off employees over the Last five years, operations have stabilized and the company has continued to invest in its focal operations. The city's labor market continues to Lag the nation as a whole with total employment remaining around 6% below its prerecession peak. The unemployment rate as of March 2019 was 3.6%, above the state rate of 2.8% and national rate of 3.9%. Financial operations and reserves: sound financial profile supported by prudent management The city's financial position is currently sound and operations remain stable. The city closed fiscal 2018 with an available general fund balance of $15 million, or 30% of annual revenues. Across the city's major operating funds (which include the general, debt service, and trust and agency funds), available fund balance ended fiscal 2018 at $18 million, or 26% of operating revenues. For fiscal 2019, the city expects a modest improvement in unassigned general fund balance to $9.6 million from $9.4 million in fiscal 2018. This publication does not announce a credit rating.action. For any credit ratings referenced in - his ;publication, please see the w,vw moodys.corn for the most updated credit rating action information and rating history. do the issuerlerrt:ty page on 20 May 2019 Waterloo (City of) IA: Update to credit analysis MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE The city is exposed to some enterprise risk due to its operation of the Cedar Valley SportsPlex. The 125,000 square foot facility was financed through a combination of private donations and grants from the Black Hawk County Gaming Association. The city acquired the property and signed a lease purchase agreement to operate the facility for $100 per year from the Waterloo Development Corporation in 2014. The annual budget for the SportsPlex is approximately $1.1 million or less than 2% of total operating revenues and has generated operating surpluses each year. LIQUIDITY Liquidity across the city's operating funds is sound. At the close of fiscal 2018, available cash totaled $24 million, equal to a healthy 35% of operating revenue. Debt and pension: above average debt and pension burdens The city's above average debt burden will likely moderate given future plans to finance capital projects on a pay-as-you-go basis. Inclusive of the Series 2019A and 2019B, the city's debt burden will total $110 million which is 2.5% of full value and 1.5x fiscal 2018 operating revenues. The city plans to issue approximately $10 million of GO debt annually to fund its capital improvement program. A significant portion of the city's GO debt is supported by TIF and hotel revenues. The net direct debt figure above is net of $18 million of GO debt that is self-supporting from sewer system revenues. Debt service expense has historically consumed 20% of the city's operating revenues. The city's pension burden is also elevated. The city's three-year average Moody's adjusted net pension liability (ANPL) totaled $152 million, or an additional 3.8% of full value and 2.3x fiscal 2018 operating revenues. In comparison, the city's reported net pension liability, which is based on higher discount rates, was $49 million. Fixed costs, consisting of debt service and pension funding, have historically consumed around 30% of annual operating revenues. The city's above average fixed costs are driven debt service and are somewhat mitigated by unlimited property tax levies that can be utilized for debt service and pension contributions. DEBT STRUCTURE All of the city's debt is fixed rate and long-term. Amortization is rapid with 86% of principal scheduled to mature within ten years. DEBT -RELATED DERIVATIVES The city is not a party to any derivative agreements. PENSIONS AND OPEB Waterloo participates in two defined benefit multiple -employer cost-sharing plans, the Iowa Public Employees' Retirement System (IPERS) and Municipal Fire and Police Retirement System of Iowa (MFPRSI). On an annual basis, each plan establishes local government retirement contributions as a share of annual payroll based on actuarial requirements. The city has routinely made its full statutory contributions. The city contributed $5.5 million to both plans in 2018, an amount equal to 8% of operating revenue. Statewide contributions to the plans in fiscal 2018 were equivalent to 103% and 84% of plans' respective "tread water" indicators. This measures annual employer contributions required to prevent reported net pension liabilities from growing, assuming other plan assumptions hold. After accounting for employee contributions, annual government contributions that tread water equal the sum of employer service cost and interest on the reported net pension liability at the start of the fiscal year. The city operates a single -employer health benefit plan which provides medical/prescription drug benefits for employees, retirees and their spouses. Retirees are required to pay the current premium equivalent amounts less a contribution subsidy provided by the City for those employees hired prior to July 1, 1990. For fiscal 2018, the city contributed $1.8 million or 2% of operating revenues to the plan. As of June 30, 2018, the most recent actuarial valuation date, the city's total OPEB liability was $20 million. Management and governance: very strong institutional framework reflects ability to adjust revenues and expenditures Iowa cities have an Institutional Framework score of Aaa, which is high. Institutional Framework scores measure a sector's legal ability to increase revenues and decrease expenditures. Even with property tax caps on general and emergency levies, cities have strong revenue -raising flexibility due to various additional levies, including an unlimited levy for employee benefits. Waterloo levies at the full state -imposed property tax cap of S8.10 along the with emergency levy of $0.27 per $1,000 of assessed valuation. The city also utilizes separate levies for debt service and employee benefits; however, the city has approximately $1.6 million in revenue raising flexility under the Employee Benefits and Insurance levies. In addition to the city's moderate property tax revenue raising flexibility, City Council 20 May 201,1 Waterloo "(City of) IA: Updateto credit ysi MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE may elect to increase its franchise fee, which currently stands at 4% for electric and gas utilities. Voters renewed the city's 1% local option sales tax (LOST) that generates approximately S10 million annually and is designated for street construction and improvements, which reduces the city's need to borrow for capital improvements going forward. The LOST currently sunsets in 2025. The city's management team has a history of positive budget to actual variances for both operating revenues and expenditures. The city has a formal policy of maintaining general fund cash reserves equivalent to at least 5% of revenues. Officials also report an informal target of achieving an unassigned general fund balance of 25% of revenues, compared to the 19% of revenue it closed with in fiscal 2018. Unpredictable revenue fluctuations tend to be minor for Iowa cities. Across the sector, fixed and mandated costs are generally moderate. However, Iowa has public sector unions, which can limit the ability to cut expenditures. Expenditures mostly consist of personnel costs, which are highly predictable. Waterloo's management team has a history of positive budget to actual variances for both operating revenues and expenditures. Management maintains sufficient revenue raising flexibility Rating methodology and scorecard factors The US Local Government General Obligation Rating Methodology includes a scorecard, a tool providing a composite score of a local government's credit profile based on the weighted factors we consider most important, universal and measurable, as welt as possible notching factors dependent on individual credit strengths and weaknesses. Its purpose is not to determine the final rating, but rather to provide a standard platform from which to analyze and compare local government credits. Exhibit 3 Waterloo (City of) IA Rating Factors Measure Score Economy/Tax Base (30%) MI Tax Base Size: Full Value (in 000s) $3,976,923 Aa Full Value Per Capita $58,137 A Median Family Income (% of US Median) 79.5% A Finances (30%) Fund Balance as a % of Revenues 26.2% Aa 5 -Year Dollar Change in Fund Balance as % of Revenues -0.2% Baa Cash Balance as a % of Revenues 35.2% Aaa 5 -Year Dollar Change in Cash Balance as % of Revenues 5.3% A Management (20%) Institutional Framework Aaa Aaa Operating History: 5 -Year Average of Operating Revenues / Operating Expenditures 1 O A Debt and Pensions (20%) Net Direct Debt / Full Value (%) 2.5% A Net Direct Debt / Operating Revenues (x) 1.5x A 3 -Year Average of Moody's Adjusted Net Pension Liability / Full Value (%) 3 -Year Average of Moody's Adjusted Net Pension Liability / Operating Revenues (x) 3.8% A 2.3x A Scorecard -Indicated Outcome Aa3 Assigned Rating Aa2 [1] Economy measures are based on data from the most recent year available. [2] Notching Factors are specifically defined in the US Local Government General Obligation Debt methodology dated December 16, 2016. [3] Standardized adjustments are outlined in the GO Methodology Scorecard Inputs Updated for 2018 publication Source: US Bureau of Economic Analysis, Moody's Investors Service 4 20 May 2010 Waterloo (City ot) IA. Update to credit anatysis MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE 2 Moody's- Corporation, Moody's Investors Service, Inc., Moody's Analytics, Inc. and/or their licensors and affiliates (collectively, uMOODY'S). 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REPORT NUMBER 1176955 20 May 2019 Waterloo (City of) IA, Update to credit analysis MOODY'S INVESTORS SERVICE U.S. PUBLIC FINANCE CLIENT SERVICES Americas Asia Pacific Japan EMEA MOODY'S INVESTORS SERVICE 1-212-553-1653 BS2-3551-3077 81-3-5408-4100 44-20-7772-5454 5 20 May 2019 Waterino (City of) IA: Update to credit analysis INDEPENDENT MUNICIPAL ADVISORS • ESTABLISHED 1954 ff Speer Financial, Inc. SUITE 608 • 531 COMMERCIAL STREET • WATERLOO, IOWA 50701 • (319) 291-2077 • FAX (319) 291-8628 Investment Rating: Moody's Investors Service ... Aa2 CITY OF WATERLOO Black Hawk County, Iowa $6,790,000 General Obligation Bonds, Series 2019A Date of Sale: May 22, 2019 Average Life: 6.106 Years (Based on TIC) True Bidders Price Maturities Rates Interest* Raymond James & Associates, Inc. 104.029% 2020 - 2031 3.000% 2.2756% Chicago, Illinois $7,063,579.50 $970,201 Robert W. Baird & Co., Inc. 104.024% 2020 - 2031 3.000% 2.2765% Milwaukee, Wisconsin $7,063,245.60 $970,535 D.A. Davidson Company 109.058% 2020 - 2022 3.000% 2.2794% Denver, Colorado $7,405,104.95 2023 - 2031 4.000% $1,007,567 Hutchinson, Shockey, Erley & Co. 103.663% 2020 - 2031 3.000% 2.3396% Chicago, Illinois $7,038,765.50 $995,015 *The true interest rate reflects the time value of money where dollars spent in early years have a greater weight than dollars spent in later years. Speer Financial, Inc. INDEPENDENT MUNICIPAL ADVISORS City of Waterloo, Iowa $6,790,000 General Obligation Bonds, Series 2019A *** FINAL *** Debt Service Schedule Date Principal Coupon Interest Total P+I Fiscal Total 06/18/2019 - - 12/01 /2019 92,230.84 92,230.84 06/01/2020 560,000.00 3.000% 101,850.00 661,850.00 754,080.84 12/01/2020 - 93,450.00 93,450.00 06/01/2021 610,000.00 3.000% 93,450.00 703,450.00 796,900.00 12/01/2021 - 84,300.00 84,300.00 06/01/2022 625,000.00 3.000% 84,300.00 709,300.00 793,600.00 12/01/2022 - 74,925.00 74,925.00 06/01/2023 645,000.00 3.000% 74,925.00 719,925.00 794,850.00 12/01/2023 65,250.00 65,250.00 06/01/2024 660,000.00 3.000% 65,250.00 725,250.00 790,500.00 12/01/2024 - 55,350.00 55,350.00 06/01/2025 670,000.00 3.000% 55,350.00 725,350.00 780,700.00 12/01/2025 45,300.00 45,300.00 Call 06/01/2026 695,000.00 3.000% 45,300.00 740,300.00 785,600.00 12/01/2026 34,875.00 34,875.00 06/01/2027 445,000.00 3.000% 34,875.00 479,875.00 514,750.00 12/01/2027 28,200.00 28,200.00 - 06/01/2028 455,000.00 3.000% 28,200.00 483,200.00 511,400.00 12/01/2028 - - 21,375.00 21,375.00 - 06/01/2029 460,000.00 3.000% 21,375.00 481,375.00 502,750.00 12/01/2029 14,475.00 14,475.00 - 06/01/2030 475,000.00 3.000% 14,475.00 489,475.00 503,950.00 12/01/2030 7,350.00 7,350.00 06/01/2031 490,000.00 3.000% 7,350.00 497,350.00 504,700.00 Total $6,790,000.00 - $1,243,780.84 $8,033,780.84 Yield Statistics Bond Year Dollars Average Life Average Coupon Net Interest Cost (NIC) True Interest Cost (TIC) Bond Yield for Arbitrage Purposes All Inclusive Cost (AIC) IRS Form 8038 $41,459.36 6.106 Years 3.0000000% 2.3401261% 2.2756625% 2.0340384% 2.4238261% Net Interest Cost Weighted Average Maturity 19A Waterloo 6.790m GO TE I Issue Summary 1 5/22/2019 1 12:01 PM Speer Financial, Inc. Registered Municipal Advisor 2.1430276% 6.127 Years Page 1