R-17-25RESOLUTION NO. R-17-25
RESOLUTION APPROVING A PLAN TO REPLACE FIRE STATION 33 TO
INCLUDE THE AUTHORIZATION OF THE PROPOSED LEASE FINANCING
PLAN.
WHEREAS, Fire Station 33, owned by and located in the City of Fairfax, Virginia (the
"City"), has reached its useful life cycle and no longer meets the current needs of the City's
Fire Department; and
WHEREAS, a new facility would increase the operational readiness of the Fire Department,
improve the safety and health conditions and quality of life for staff, and
WHEREAS, the City Council of the City (the "Council") hereby determines that it is in the
best interests of the City and its residents to demolish the existing Fire Station 33, and design
and construct a replacement Fire Station 33 on the current site (the "Project"); and
WHEREAS, the Council desires to fund the Project with loan proceeds pursuant to the plan
of lease financing as proposed by City Staff and Davenport & Company LLC, as the City's
financial advisor (the "Financial Advisor"); and
NOW, THEREFORE, BE IT RESOLVED BY COUNCIL OF THE CITY OF
FAIRFAX, VIRGINIA:
1. The plan to demolish the existing Fire Station 33 and design and construct a
replacement Fire Station 33 (see attached "Design and Construction Timeline"
document) is here by approved.
2. The attached plan of lease refinancing (Financial Advisor Memo) is hereby approved.
This plan of lease financing shall contain such additional requirements and provisions
as the City Manager (which term for purposes of this Resolution includes the Assistant
City Manager/Director of Finance) may approve and determine to be in the best
interests of the City.
3. All other actions of the officers of the City that are in conformity with the purposes
and intent of this Resolution are hereby approved and ratified. All resolutions or parts
of resolutions in conflict herewith are repealed.
4. This Resolution shall take effect immediately.
Adopted this 27th day of June, 2017.
Mayor
Attest:
The vote on the motion to approve was recorded as follows:
VOTE:
Councilmember DeMarco
Aye
Councilmember Drummond
Aye
Councilman Greenfield
Aye
Councilmember Miller
Nay
Councilmember Schmidt
Nay
Councilmember Stehle
Aye
DmENPoRT
& COMPANY LLc
EST. 1863 • MEMBER: NYSE • FINRA • SIPC
Memorandum
To: Mr. David E. Hodgkins — City of Fairfax
From: Mr. Kyle A. Laux — Davenport & Company LLC
RE: Plan of Finance for New Fire Station #33 Project
Date: June 22, 2017
CC: Mr. Robert L. Sisson — City of Fairfax
Mr. Christopher G. Kulp — Hunton & Williams
Mr. David P. Rose — Davenport & Company LLC
Mr. Griffin W. Moore — Davenport & Company LLC
Overview
Public Finance Department
804-697-2900
Post Office Box 85678
Richmond, Virginia 23285-5678
One James Center
901 East Cary Street
Richmond, Virginia 23219-4037
In our capacity as Financial Advisor to the City of Fairfax, Virginia (the "City"), Davenport and Company LLC
("Davenport") understands that the City is contemplating moving forward with a new Fire Station #33 Project
(the "Fire Station Project"). We understand that the Fire Station Project is expected to cost in the range of $9.6
million with construction occurring over a multi-year period. To that end, we expect to work with you and your
staff to develop a comprehensive Plan of Finance for the Fire Station Project with the following goals in mind:
Maintain the City's "Aaa/AAA" credit ratings;
Obtain cost effective and flexible financing for the Fire Station Project;
Structure the financing to minimize the up -front budgetary impact of the Fire Station Project while
also repaying the loan in a responsible manner.
We further understand that the City desires to finance the Fire Station Project via a lease financing arrangement.
This lease financing structure has been used by the City successfully for numerous other projects and is a widely
accepted and widely utilized financing option for local governments across the Commonwealth. We expect
lease financing to be especially cost effective for the City given its existing "Aaa/AAA" credit ratings.
Below please find a proposed schedule to enact the financing with an understanding that City Council desires to
take action in late summer/early fall. Given the City's strong history of results with competitively bid Direct
Bank Loans (with the most recent successful result occurring earlier this calendar year) we recommend that the
City consider a dual track approach to the financing. The first option is a Direct Bank Loan. To the extent that
a Direct Bank Loan is not viable or cost effective, the City can also explore borrowing the monies for the Fire
Station Project by issuing bonds in the public markets ("Public Sale"). Davenport will compare the interest
rate(s), terms and conditions and provide a recommendation on which financing option is best for the City in
time for the September City Council meetings. It is important to note that City Council is not out-of-pocket any
costs nor is it bound to any particular course of action until it decides it move forward with a financing, if any at
all, in the September/October time frame. A summary of key considerations for a Direct Bank Loan and a
Public Sale is shown on the next page.
Direct Bank Loan
➢ Interest rate and terms/conditions are known before the City makes a formal decision to move forward.
➢ Competitive bidding process.
➢ Typically more flexible prepayment provisions than Public Sale.
➢ Fixed rates through 10 to 12 years are typical. Fixed rates beyond 10 years may not be viable / cost
effective. Loans with a rate reset in the 10 to 12 year range may be viable.
➢ No need to obtain formal credit ratings or prepare a securities offering document.
➢ Lower costs of issuance than a Public Sale.
Public Sale
➢ Interest rate(s) rates are finalized the day of the sale. Rate(s) will float until day of the sale.
➢ Once the bonds are sold loans are fixed rate through final maturity (approximately 20 years in this case).
➢ Competitive bidding process.
➢ Principal that matures after the first 10 years can be prepaid. Principal that matures before the first 10
years typically cannot.
➢ Requires formal credit ratings and securities offering document.
➢ Typically higher costs of issuance than a Direct Bank Loan due to more complex nature of the borrowing.
The following page shows a summary of next steps for the Fire Station Project financing.
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Next Steps
A summary of the next steps for the Fire Station Project financing is included below:
Late June — City Council authorizes Staff / Davenport to explore financing options.
July City Council Meeting — Adopted reimbursement resolution which allows the City to reimbursement
expenses incurred for the project prior to closing on a loan but does not obligate the City to move forward a
loan.
Month of July / August — Davenport, Staff, and the City's Bond Counsel (Hunton & Williams) further refine
comparison of financing options including a non-binding competitive RFP process for Direct Bank Loan
financing.
September 5 City Council Work Session — Davenport and Staff present results of Direct Bank Loan RFP
bidding process and recommendation on which financing option to pursue.
Late September / Early October — City Council takes formal action to approve the financing including required
ordinance and financing documents. Public hearing is held.
By October 31 — Close on Direct Bank loan, if applicable.
Month of October — Sell bonds in the public markets, if applicable. Interest rates locked in for Public Sale
option.
By November 31 — Close on Public Sale, if applicable.
Municipal Advisor Disclaimer
The enclosed information relates to an existing or potential municipal advisor engagement.
The U.S. Securities and Exchange Commission (the "SEC") has clarified that a broker, dealer or municipal securities dealer engaging in
municipal advisory activities outside the scope of underwriting a particular issuance of municipal securities should be subject to
municipal advisor registration. Davenport & Company LLC ("Davenport") has registered as a municipal advisor with the SEC. As a
registered municipal advisor Davenport may provide advice to a municipal entity or obligated person. An obligated person is an entity
other than a municipal entity, such as a not for profit corporation, that has commenced an application or negotiation with an entity to
issue municipal securities on its behalf and for which it will provide support. If and when an issuer engages Davenport to provide
financial advisory or consultant services with respect to the issuance of municipal securities, Davenport is obligated to evidence such a
financial advisory relationship with a written agreement.
When acting as a registered municipal advisor Davenport is a fiduciary required by federal law to act in the best interest of a municipal
entity without regard to its own financial or other interests. Davenport is not a fiduciary when it acts as a registered investment advisor,
when advising an obligated person, or when acting as an underwriter, though it is required to deal fairly with such persons.
This material was prepared by public finance, or other non -research personnel of Davenport. This material was not produced by a
research analyst, although it may refer to a Davenport research analyst or research report. Unless otherwise indicated, these views (if
any) are the author's and may differ from those of the Davenport fixed income or research department or others in the firm. Davenport
may perform or seek to perform financial advisory services for the issuers of the securities and instruments mentioned herein.
This material has been prepared for information purposes only and is not a solicitation of any offer to buy or sell any security/instrument
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