SUBJECT: An Ordinance to approve Purchaser Term Sheet relating to the issuance of City of Houston, Texas Tax and Revenue Anticipation Notes, Series 2017A relating to Hurricane Harvey recovery costs.
RECOMMENDATION:
Approve an Ordinance to approve Purchaser Term Sheet submitted by Bank of America, N.A. relative to the issuance of City of Houston, Texas Tax and Revenue Anticipation Notes, Series 2017A relating to Hurricane Harvey recovery costs.
SPECIFIC EXPLANATION:
On May 3, 2017, City Council approved Ordinance No. 2017-0303, which authorized the issuance of Tax and Revenue Anticipation Notes (“TRANS”) in an amount not to exceed $400 million, of which $200 million was issued on July 11, 2017. In conjunction with the ordinance described above, the City also approved Ordinance No. 2017-0304 (the “Supplemental TRANS Ordinance”), which authorized additional supplemental TRANS borrowings to the extent needed during Fiscal Year 2018 up to the maximum amount described above. Taking into account the initial $200 million TRANS offering, the City has $200 million available to be issued as supplemental TRANS for fiscal year 2018.
The TRANS are issued because the City’s revenue inflows do not match expenditure outflows during the fiscal year. Due to Hurricane Harvey, the General Fund may incur unexpected costs related to the recovery effort. The proceeds from the issuance of the supplemental TRANS will mitigate the effects of these increased General Fund costs. While General Fund taxes and revenues will be pledged under the supplemental TRANS, the City expects that FEMA reimbursements will cover most of the costs associated with the recovery. The City expects to repay the TRANS by June 29, 2018.
The Supplemental TRANS Ordinance authorized the Mayor and City Controller to solicit term sheets from one or more purchasers relating to the structure, interest rate and maturity relating to the supplemental TRANS. The Supplemental TRANS Ordinance requires the City Council to approve the Purchaser Term Sheet as recommended by the Mayor and City Controller. Due to recent events and anticipated expenses related to Hurricane Harvey, this Request for Council Action is to authorize a supplemental borrowing, consistent with the Supplemental TRANS Ordinance in an amount up to $200 million. It is the intent of the Finance Working Group to structure the $200 million as similar to a “line of credit.” Credit will be drawn only as needed, not to exceed $200 million.
Based on the most favorable terms offered, the Mayor and City Controller recommends the attached Term Sheet submitted by Bank of America, N.A.
Recommendation
The FWG recommends approval of this transaction.