city of phoenix civic improvement corporation cvc imp investor... · tye burgess, vice president...
TRANSCRIPT
Investor PresentationApril 10, 2015
City of Phoenix Civic Improvement CorporationSubordinated Excise
Tax Revenue Refunding Bonds,Series 2015A
Subordinated Excise Tax Revenue
Refunding Bonds,Series 2015B (Taxable)
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Disclaimer
This document and any other materials accompanying or cross‐referenced in this document (collectively, the “Materials”) are provided for your information. By accepting any Materials, the recipient acknowledges and agrees to the matters set forth below.
The Materials are not part of the preliminary official statement or the final official statement as those terms are defined in SEC rule 15c2‐12, and are qualified in all respects by reference to the Preliminary Official Statement. Prospective purchasers of the City of Phoenix Civic Improvement Corporation Subordinated Excise Tax Revenue Refunding Bonds, Series 2015A (the “Tax‐Exempt Bonds”) and Subordinated Excise Tax Revenue Refunding Bonds, Series 2015B (Taxable) (the “Taxable Bonds” and together with the Tax‐Exempt Bonds, the “Bonds”) should rely only on the Preliminary Official Statement, and not the Materials, in making an investment decision. The Materials and statements contained in this presentation do not constitute an offer to sell or a solicitation of any offer to buy any securities of the City of Phoenix Civic Improvement Corporation or the City of Phoenix, Arizona (collectively, the “Issuer”) to any person in any jurisdiction, nor shall there be any sale of securities in any jurisdiction in which such offer, solicitation or sale would be unlawful prior to registration or qualification under the securities laws of such jurisdiction. To the extent there are conflicts between statements made in the Preliminary Official Statement and this presentation, the information contained in the Preliminary Official Statement should be deemed more reliable.
The Materials are not intended as investment advice or as a confirmation of any transaction. Externally sourced information contained in the Materials has been obtained or derived from sources believed to be reliable, but Wells Fargo Securities makes no representation or warranty, express or implied, with respect thereto, and does not represent or guarantee that such information is accurate or complete. Such information is subject to change without notice and Wells Fargo Securities accepts no responsibility to update or keep it current. Wells Fargo Securities does not assume or accept any liability for any loss which may result from reliance thereon. Wells Fargo Securities and/or one or more of its affiliates may provide advice or may from time to time have proprietary positions in, or trade as principal in, any securities or other financial products that may be mentioned in the Materials, or in derivatives related thereto.
Any opinions or estimates contained in the Materials represent the judgment of Issuer at this time, and are subject to change without notice. Interested parties are advised to contact Wells Fargo Securities for more information.
The Materials are not intended to provide, and must not be relied on for, accounting, legal, regulatory, tax, business, financial or related advice or investment recommendations and does not constitute advice within the meaning of Section 15B of the Securities Exchange Act of 1934. No person providing the Materials is acting as fiduciary or advisor with respect to any transaction described or contemplated therein unless expressly agreed to in a written financial advisory or similar agreement. You must consult with your own advisors as to the legal, regulatory, tax, business, financial, investment and other aspects of the Materials.
This presentation may contain statements that, to the extent they are not recitations of historical fact, may constitute “forward‐looking statements.” In this respect, the words “estimate”, “project”, “anticipate,” “expect, “intend,” “believe” and similar expressions are intended to identify forward‐looking statements. Any forward‐looking statements made herein are subject to a variety of risks and uncertainties that could cause actual results to differ materially from those that have been projected. Such risks and uncertainties which could affect the revenues and obligations of the Issuer include, among others, changes in economic conditions, mandates from other governments, reduced governmental allocations, and various other events, conditions and circumstances, many of which are beyond the control of the Issuer. Such forward‐looking statements speak only as of the date of the Preliminary Official Statement of April 10, 2015. The Issuer disclaims any obligation or undertaking to release publicly any updates or revisions to any forward‐looking statement contained herein to reflect any changes in the Issuer’s expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. Given these uncertainties, readers are cautioned not to rely on forward‐looking statements.
IRS Circular 230 Disclosure:To ensure compliance with requirements imposed by the IRS, we inform you that any tax advice contained in the Materials is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax penalties or (ii) promoting, marketing or recommending to another party any transaction or matter addressed herein.Wells Fargo Securities is the trade name for certain securities‐related capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including Wells Fargo Bank, N.A.
Link to Preliminary Official Statement: https://www.sendd.com/r_netdistro_webpage.cfm?project_id=3194
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Neal Young, Chief Financial OfficerKathleen Gitkin, Acting Deputy Finance DirectorScot Obal, Accountant IV
Key Personnel
City of PhoenixFinance
Department
Financial Advisor: Public Resources Advisory Group
Underwriter: Wells Fargo Securities
Bob Kinney, Managing DirectorTye Burgess, Vice President
Steve Peyser, PresidentBarry Valentinsen, Senior Managing Director
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Agenda
• Transaction Overview
• City of Phoenix Economy and Economic Development
• Excise Tax Revenues and Outstanding Debt
• Plan of Finance
• Financing Schedule
• Investor Relations and Contact Information
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Financing Summary
• $330,325,000* Subordinated Excise Tax Revenue Refunding Bonds, Series 2015A
• $61,015,000* Subordinated Excise Tax Revenue Refunding Bonds, Series 2015B (Taxable)
PurposeThe Bonds are being issued for the purpose of refunding a portion of certain issues of the Civic Improvement Corporation’s (the “Corporation”) outstanding excise tax revenue bonds and other obligations of the City
Amortization* 2015A (Tax‐Exempt): July 1, 2017 ‐ 20412015B (Taxable): July 1, 2016 – 2035
Tax Status 2015A: Tax‐Exempt12015B: Taxable
Optional Redemption Callable July 1, ____ at par*
SecuritySubordinated lien on all excise, transaction, privilege, business and franchise taxes, state‐shared sales and income taxes, and receipts from licenses and permits not restricted to use for a contrary or inconsistent purpose
Pricing Date April 21, 2015*
Delivery Date May 12, 2015*
Confirmed Ratings Moody’s: Aa3 (Stable)Standard & Poor’s: AA+ (Stable)
Senior Manager Wells Fargo Securities
Co‐Managers Goldman, Sachs & Co. Jefferies BAIRDEstrada Hinojosa & Company, Inc. Hutchinson, Shockey, Erley & Co.
*Preliminary, subject to change; when, as, and if issued.(1) Upon issuance of the bonds, Bond Counsel is expected to deliver an opinion that interest on the 2015A Bonds is excludable from gross income for Federal and Arizona state income tax purposes, and is not includable for purposes of computing the federal alternative minimum tax. The form of Bond Counsel’s opinion is available in the Preliminary Official Statement. Before purchasing bonds, you should consult with your tax advisor concerning your particular tax situation.
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City of Phoenix Overview
• The City of Phoenix operates under a Council‐Manager form of governmento The Phoenix City Council consists of a Mayor and eight Council
members and is responsible for setting policyo The City Manager is responsible for executing Council policies and
administering City operations
• 6th largest city in the U.S. based on population; population has grown to over 1.5 million reflecting a 53% increase since 1990
• Top national and international tourism destination
• The Phoenix MSA accounts for approximately 72% of Arizona’s employment
• The Phoenix MSA unemployment rate is 6.0%
Source: City of Phoenix
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Core Economic Strengths Drive Excise Tax Revenue Growth
1. Large, diverse and growing population and employment base
2. Residential and commercial sectors are growing
3. Biotech, healthcare and higher education are key growth sectors for jobs and investment
4. Downtown Phoenix is an engine of economic activity
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The Phoenix MSA Economy is Recovering and Growing
Source: U.S. Bureau of Labor Statistics and Bureau of Economic Analysis, Phoenix MSA represents the Phoenix-Mesa-S, AZ Metropolitan Statistical Area
Unemployment Rates (Seasonally Adjusted)Unemployment Rates (Seasonally Adjusted)
City of Phoenix Population Growth City of Phoenix Population Growth
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
14%
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Arizona Phoenix MSA
YOY Percent Change in Personal IncomeYOY Percent Change in Personal Income
Non Farm Employment by SectorNon Farm Employment by Sector
0 500 1,000 1,500 2,000
2009
2014
Mining, Logging, Construction
Manufacturing
Transportation, Warehousing &Public UtilitiesWholesale Trade
Retail Trade
Financial Activities
Information
Professional & BusinessServicesEducation and Health Services
Leisure and Hospitality
Other Services
Government0%
2%
4%
6%
8%
10%
12%
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
U.S. Arizona Phoenix MSA
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1,600,000
1950 1970 1990 2000 2010 2014
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The Employment Base in Phoenix is Large and Diverse
#1 in the Nation for Entrepreneurial Activity, 2012 (Kauffman Foundation)
#5 Fastest Growing Tech Market, 2014 (Fortune Magazine)
Major Employers in Phoenix• Banner Health – Health Care• Apollo Group – Education• Honeywell – Aerospace• American Express – Financial• St. Joseph’s Hospital – Health Care• Bank of America – Financial• U‐Haul International – Transportation/Logistics• Wells Fargo – Financial• Charles Schwab – Financial• Mayo Clinic – Health Care
1010
Housing and Real Estate Sectors Continue to Recover
• The value of building permits in the City of Phoenix is 36% above the 2009 recessionary low point
• New housing starts in the City are growing rapidly and in 2014 were preliminarily over 3 times the 2011 low point
• According to the National Association of Realtors single family home prices in the Greater Phoenix area increased 24% from 2012 to 2013 and 8.1% between 2013 and 2014
• Prices are showing solid growth since pre‐recession levels
Value of Building Permits City of Phoenix
($ in thousands)Year Residential Commercial Industrial Other Total2014 $633,010 $1,040,100 $206,052 $1,271,799 $3,150,9612013 578,547 374,888 208,293 1,348,127 2,509,8552012 780,212 641,175 134,309 1,559,364 3,115,0602011 410,471 312,988 22,201 2,089,013 2,834,6732010 482,385 294,150 106,844 1,656,489 2,539,8682009 479,978 180,266 111,477 1,548,876 2,320,5972008 540,212 1,662,219 157,418 1,950,777 4,310,6262007 1,213,859 1,860,839 169,311 2,030,506 5,274,5152006 1,784,298 1,218,767 163,873 1,864,197 5,031,135
Source: City of Phoenix CIC Subordinated Excise Tax Revenue Refunding Bonds, Series 2015 POS
New Housing Starts 1
City of Phoenix
YearCity of
PhoenixMaricopa County
2014 2 5,674 18,6082013 3,131 16,5932012 4,434 14,1312011 1,628 8,1032010 2,401 7,3352009 1,971 7,6382008 5,046 18,3662007 13,277 35,4652006 12,413 40,294
1 - Reflects housing permits authorized, by units, including single-family, multi-family and mobile homes.2 - Data for 2014 is preliminary.Source: City of Phoenix CIC Subordinated Excise Tax Revenue Refunding Bonds, Series 2015 POS
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Economic Development = Investment and Jobs
Biotechnology and Healthcare
Arizona Biomedical Center
• 600 acres• Collaboration among Mayo
Clinic, Arizona State University (ASU), City of Phoenix and KUD International
• ASU Health education and biosciences research campus
• Mayo Clinic Medical School campus
Privately financed by KUD with estimated $1 billion investment at build out
Higher Education
Phoenix Biomedical Campus
• 30 acres downtown• Collaboration among ASU,
University of Arizona and Arizona Board of Regents
Estimated $1.3 billion economic impact
Source: City of Phoenix
Arizona State University
• Downtown Campus Development
• ASU Sandra Day O’Connor College of Law
Estimated economic impact –$570 million, 7,700 jobs
Downtown Economic Activity
• Phoenix Convention Center‐#2 Best to Hold an Event, 2014 (EXPO Magazine)
• 2015: 54 conferences booked with an estimated impact of $320 million
• 2016 Football National Championship and 2017 NCAA Final Four to be held in Phoenix Area
Convention Center and Hotel Destination
• Top 10 Arts District, 2014 (USA Today)
Phoenix Convention CenterBiomedical Campus ASU‐Phoenix Campus
Thriving Neighborhoods and Cultural Districts
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Excise Tax Revenues
$ in thousands
* Does not include dedicated excise tax revenues approved by voters for a specific purpose
• Maricopa County retail sales have recovered from 2009 lows
• Local retail sales contribute to the City transaction privilege (sales) tax and state‐shared sales taxes
FY2014ExciseTaxRevenueSources$386,757 *138,8062,775
127,005161,580$816,923FY2014Total
PrivilegeLicenseTaxandFeesUtilityFranchiseFeesLicenses&PermitsState‐SharedSalesTaxState‐SharedIncomeTax
Privilege License Tax and Fees
47.3%
Utility Franchise Fees17.0%
Licenses & Permits0.3%
State‐Shared Sales Tax15.5%
State‐Shared Income Tax
19.8%
Maricopa County Retail sales($ in millions)
Year Amount Percentage Change2014 46,720 4.7%2013 44,611 9.4%2012 40,772 5.0%2011 38,821 10.1%2010 35,260 0.7%2009 35,028 -10.6%2008 39,199 -10.3%2007 43,712 0.1%2006 43,686 7.9%
Source: City of Phoenix CIC Subordinated Excise Tax Revenue Refunding Bonds, Series 2015 POS
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Outstanding Excise Tax Revenue Bonds
Senior Lien Bonds $235,135,000
Subordinated Lien Bonds 587,115,000 *
Total Excise Tax Bonds $822,250,000
Senior Lien Bonds
Junior Lien Bonds 1
Subordinated Lien Bonds
GeneralFund
*$106.79 million are paid from solid waste revenues; amount calculated prior to issuance of Series 2015A and Series 2015B (Taxable) Bonds
• No Junior Lien Bonds are outstanding• Excise tax revenues remaining AFTER the
payment of senior and subordinated debt service are transferred to the General Fund
(1) Subordinated Hotel debt is secured by a junior lien pledge of sports facilities taxes, pursuant to the room block leaseback agreement.
June 30, 2014 Balances:
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Key Bond Indenture Provisions
Excise TaxesSubordinated lien on all excise, transaction, privilege, business and franchise taxes, state‐shared sales and income taxes, and receipts from licenses and permits not restricted to use for a contrary or inconsistent purpose. Loan payments are an unconditional obligation payable solely from Excise Taxes.
Transaction Privilege (Sales) Tax Sales tax is levied by the City upon persons on account of their business activities within the City.
State‐Shared Sales Taxes Pursuant to statutory formula, the City receives a portion of the State‐levied transaction privilege (sales) tax.
State‐Shared Income TaxesCities and towns are entitled by statutory formula to typically receive 15% of State personal and corporate income tax collections collected by the State two years earlier.
Other Excise Tax Revenues
Cities and towns have exclusive control over public rights of way dedicated to the municipality and may grant franchise agreements on utilities using those rights‐of‐way. The city has granted franchises to and imposed taxes on utility and cable providers. License and permit fees are also imposed within the City.
Additional Bonds Test
Parity Subordinated Junior Obligations may be issued if Prior Excise Taxes (in the preceding fiscal year) are at least equal to the highest combined total of the following for any succeeding 12 months: (i) principal and interest requirements on the Senior Obligations and the Junior Obligations during such period, plus (ii) 2.0x the principal and interest requirements for all Subordinated Junior Obligations including the Bonds and parity obligations then outstanding and proposed to be issued during such period.
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Actual and Forecasted Pledged Excise Taxes Provide Strong Debt Service Coverage*
Source: City Financials and Preliminary Official Statement * Debt service for 2015-2019 is preliminary, subject to change
|‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐Forecasted‐‐‐‐‐‐‐‐‐‐‐‐‐‐‐|
Aggregate Debt Service Coverage 10.6x 16.8x 15.6x 10.9x 11.4x 11.8x 11.4x 11.6x 12.0x 12.5xSubordinated Debt Service Coverage 12.2x 17.1x 17.8x 13.6x 15.2x 16.9x 16.2x 17.4x 18.1x 18.9x
$0
$100,000
$200,000
$300,000
$400,000
$500,000
$600,000
$700,000
$800,000
$900,000
$1,000,000
FY 2010 FY 2011 FY 2012 FY 2013 FY 2014 FY 2015 FY 2016 FY 2017 FY 2018 FY 2019
$ Th
ousand
s
Privilege License Tax & Fees Utility Franchise Fees Licenses & PermitsState‐Shared Sales Tax State‐Shared Income Tax Aggregate Annual Debt Service
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Excise Tax Bonds
• The City of Phoenix plans to sell approximately $391 million of Subordinated Excise Tax Revenue Refunding Bonds, Series 2015A and Series 2015B (Taxable) on or about April 21, 2015
• In Summer 2015, the City also plans to sell approximately $120 million of Subordinated Excise Tax Revenue Bonds to fund improvements for public safety communications, upgrading its city‐wide phone system and replacing street lights with LEDs
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Combined Sources & Uses of Funds*
* Preliminary and subject to change.
Series 2015ATax‐Exempt Refunding
Series 2015BTaxable
Refunding TotalSources of Funds (000s)Par AmountPremiumTotal Bond ProceedsCity Deposit
Total Sources of Funds
$330,32543,577
$373,9026,950
$380,852
$61,0150
$61,0151,165
$62,180
$391,45043,577
$434,9178,115
$443,032
Uses of Funds (000s)Escrow CostFinancing Costs
Total Uses of Funds
$378,8362,016
$380,852
$61,830350
$62,180
$440,6662,366
$443,032
20
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
$80,000,000
$90,000,000
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
2026
2027
2028
2029
2030
2031
2032
2033
2034
2035
2036
2037
2038
2039
2040
2041Es
tim
ated
Deb
t S
ervi
ce (
$)
Fiscal Year
Aggregate Excise Tax Estimated Annual Debt Service (Pre and Post Refunding)
Subordinated Excise Tax Debt Service after Refunding Senior Excise Tax Debt Service Pre-Refunding Debt Service
Refunding is Structured to Provide Savings Through FY 2024*
• Also, prior to the end of fiscal year 2015, the City intends to refinance all of the Downtown Phoenix Hotel Corporation’s hotel revenue bonds. The Subordinated Hotel Bonds are currently supported by Sports Facilities Taxes. Such refinancing may be effected through a combination of hotel revenue bonds and bonds supported by Excise Taxes, but neither the amount of bonds to be secured by Excise Taxes, nor the priority of lien securing such bonds has been determined.
*Preliminary, subject to change
Area beneath pre‐refunding debt service line and above bars represents refunding savings
2121
City of Phoenix Excise Taxes Provide Strong Bondholder Protection
• Coverage is very strong even including debt service requirements supported by solid waste fees:
Range of coverage over the forecast period (based on projected excise tax revenues):• Senior ‐ 32.85x to 36.80x• Subordinated ‐16.20x to 18.91x• Aggregate ‐ 11.37x to 12.55x
• City remains committed to maintaining strong debt service coverage ratios
• Conservative additional bonds test• Diverse, vibrant and expanding economy• Long‐term economic development activity• Refunding generates significant savings without extending final maturity
2323
Series 2015A & B Schedule
APRIL MAY
S M T W T F S S M T W T F S
1 2 3 4 1 2
5 6 7 8 9 10 11 3 4 5 6 7 8 9
12 13 14 15 16 17 18 10 11 12 13 14 15 16
19 20 21 22 23 24 25 17 18 19 20 21 22 23
26 27 28 29 30 24 25 26 27 28 29 30
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*Key Dates• April 10: Post Preliminary Official Statement• April 20: Begin Pre‐Marketing & Receive Indications of
Interest on Series 2015B (Taxable) Bonds• April 21: Price Refunding Bonds• May 12: Closing*Preliminary, subject to change
Link to Preliminary Official Statement: https://www.sendd.com/r_netdistro_webpage.cfm?project_id=3194
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City of Phoenix Contact Information:(602) 262‐7166
Neal Young, Chief Financial [email protected]
Kathleen Gitkin, Acting City [email protected]
(602) 495‐0732
Senior Managing UnderwriterWells Fargo Securities
(801) 246‐1730
Questions Regarding the City of Phoenix 2015 A&B Excise Tax Revenue Refunding Bonds