Calaveras County: DLR has closed on two land-secured refundings for Saddle Creek, a golf community in the Sierra Nevadas. The Sales and Trading Desk found buyers who understood the developer’s long-term strategy.  •  Palmdale: DLR was sole Senior Manager on federally taxable Certificates of Participation so the city could acquire 600 acres for a 550-megawatt power plant to attract and retain businesses.  •  Chowchilla: DLR senior-managed a special bond for critical infrastructure improvement until development impact fees can be raised to support $93 million in residential, commercial and industrial projects.  •  Pittsburg: DLR was Senior Manager on a tax-allocation bond that raised almost $100 million for housing and other projects, and saved the city’s Redevelopment Agency another $3.5 million by refinancing earlier bonds.  •  Chula Vista: DLR senior-managed a tax-allocation bond after Chula Vista demonstrated that the future assessed value of the city’s Bayfront-Town Centre offsets a highly concentrated tax base.  •  Los Angeles: As book-running Senior Manager, DLR structured a $34.5-million pooled financing for the city’s Community Redevelopment Agency without a yield spread to adhere to the CRA policy to complete separation between project areas.  •  DLR senior-managed refunding of all outstanding debt at Ontario Airport, increasing the L.A. Department of Airports’ flexibility to define net revenues and its debt-service reserve fund – and reaffirm its “A” rating.  •  Long Beach: The city recently issued more than $190 million in redevelopment project financing, including $115 million of taxable bonds, in a Marks-Roos pooled issue to fund projects in five areas.  •  From naval base to housing space: Few could envision a new community when the Alameda Point Naval Air Station was decommissioned a decade ago. Today, a highly successful development with 300 homes occupies part of the old base.  •  Riverside County: DLR senior-managed a $25-million Mello-Roos financing to improve street, water, sewer, and other public facilities at Lake Hills Crest, a development with 512 single-family detached units.
 

Palmdale Seizes Control of Energy Destiny

$19,960,000
City of Palmdale
Taxable Certificates of Participation
(2007 Land Acquisition Financing Project)
In April 2007, De La Rosa & Co. served as sole Senior Manager on the City of Palmdale’s federally taxable Certificates of Participation (COPs) to acquire about 600 acres for a 550-megawatt power plant and other uses.

Before the financing, Palmdale committed itself to providing some or all of its electrical power, believing this would significantly help attract and retain businesses. When this parcel became available, civic leaders set out to buy it for $18 million.

The city’s two key objectives were issuing the bonds for the property at low borrowing costs, and retaining maximum financial flexibility to redeem the bonds if the business plan changed. De La Rosa helped achieve those goals by securing a strong rating, pre-marketing broadly to investors, and tailoring specific and aggressive call features for flexibility.

Standard & Poor’s gave the COPs an underlying ‘A’ rating – remarkable considering that they were to be secured by raw land without a municipal facility or other essential asset. Based on this rating and the city’s intention to pay off the financing as soon as construction began on the power plant, DLR convinced officials they could save more than $500,000 by issuing the bonds without municipal insurance.

De La Rosa broadly pre-marketed to investors. Given the COPs’ taxable status, the firm targeted institutional investors and distributed a sales-point memo to familiarize the Sales and Trading Desk with the strengths of the credit and advantages of Palmdale’s business plan.

DLR bankers worked closely with officials to find a balance of optional redemption features that would accommodate the city’s needs and still be acceptable to the most aggressive investors in the marketplace. The COPs included a 10-year optional call feature with no prepayment penalty and two extraordinary call features: beginning April 1, 2010 (at par) from proceeds from the sale of any or all of the property; and on any date (at par) for the transfer of title, commencement of construction, or other key milestones relating to the development of the power plant.

Although there were no direct comparables given the COPs’ extraordinary call features, De La Rosa achieved pricing spreads similar to other taxable municipal transactions that came to market at the same time. Meeting Palmdale’s goals ensured a successful pricing and financial flexibility to develop the city’s power-generating capacity.
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