Proposed Tobacco Refunding

Board of Supervisors Meeting October 6, 2020 Proposed Tobacco Securitization Refunding

Action Requested a) Receive information on the opportunity to refund the County’s Tobacco Settlement Asset-Backed Bonds (Gold Country Settlement Funding Corporation), Series 2006 related to the proposed 2020 Tobacco Refunding Bonds, and approve the following actions recommended by the County Finance Committee and directed by the County Executive Officer: 1. to proceed with the issuance of Tobacco Settlement Bonds (Gold Country Settlement Funding Corporation) Series 2020 (the “2020 Tobacco Bonds”), refunding the County’s Tobacco Settlement Asset-Backed Bonds (Gold Country Settlement Funding Corporation), Series 2006 (the 2006 Tobacco Bonds”), and 2. to use the proceeds to finance infrastructure improvements at the DeWitt Center (including sewer, water and roadway improvements), and costs related to the construction of a new Health and Human Services Building, including reimbursement of project funds spent to date, and additional projects approved by your Board to ensure all proceeds are spent. b) Request the Treasurer to return to the Board with the necessary resolution approving documents and other matters at its October 27, 2020 Board meeting. c) Approve the following non-contingent contracts for services related to the 2020 Tobacco Refunding Bonds and authorize the Treasurer and County Executive Officer to execute the contracts: 1. a contract for and disclosure counsel services with Norton Rose Fulbright in an amount not-to-exceed $205,000 (a maximum of $105,000 is non- contingent on the issuance of bonds). 2. S & P Global Ratings for bond rating services in an amount of $150,000, non- contingent on the issuance of bonds, and an additional amount of $20,000 per year for ongoing monitoring and ratings over the life of the bonds. Proposed Tobacco Securitization Refunding

Tobacco Revenues & the Master Settlement Agreement (“MSA”)

• 1997 Four states sued tobacco companies for damages related to negative health consequences from smoking tobacco. • Other states later joined the suit. • 1998 MSA: California Attorney General, along with attorneys general totaling 46 states and several other US jurisdictions, entered into a settlement agreement. • The MSA prohibited the tobacco companies from certain types of advertising (youth in particular) and from spreading misinformation and hiding the negative impacts of smoking. • The MSA also provided up-front payment and annual financial payments to the “Settling States” based on annual tobacco consumption. • Annual MSA payments are required to be made in perpetuity. • MSA payments are shared with counties/cities that provide health services. • All 58 California counties and four cities receive a share of the State’s annual MSA payments. Proposed Tobacco Securitization Refunding Tobacco Securitization • Securitization is the sale of a future stream of revenue in exchange for a lump-sum. • The amount received from securitization of MSA payments depends on cigarette consumption forecasts, rates and other factors (i.e. inflation). • MSA payments have declined due to reductions in tobacco consumption which have outpaced adjustments for inflation. • Placer County issued bonds in 2002 and 2006 to securitize its share of MSA payments. • To address MSA requirements and federal tax laws, tobacco require and agreements between three primary entities: • the County, • the California County Tobacco Securitization Agency (a statewide JPA utilized by 9 counties for tobacco securitization), and • the Gold Country Settlement Funding Corporation (a Placer County formed single-purpose, non-profit corporation). Proposed Tobacco Securitization Refunding

County’s Prior Tobacco Securitizations

• Since 2002, the County has assigned is annual MSA payments to a Trustee for the payment of tobacco bond service; securitization does not require further general fund contribution for debt service.

• The County has used the proceeds tobacco bonds to construct facilities: • 2002 Community Development and Resource Agency Building, bond proceeds $41.59 million, • 2006 South Placer Justice Center Courthouse, net proceeds after paying off 2002 balance $13.56 million. • The proposed 2020 tobacco securitization is expected to result in net proceeds of $3.5 million to $5 million. • The County Executive has recommended utilizing the proceeds for infrastructure improvements at the Placer County Government Center, the Health and Human Services Building and other Board approved facilities. • The County’s Finance Committee concurred with the CEOs recommendation to proceed. Proposed Tobacco Securitization Refunding

Estimated Cost of Issuance*

• Based on the recommendation of the Finance Committee and direction of the CEO, Bond/Disclosure Counsel has been directed to proceed (max amount $102,500). • Today’s actions will result in total non-contingent expenditures of $252,500.

*Does not include fees in the estimated amount of $622,000, which are dependent upon the sale of bonds and the total securitization amount.

• All other fees are contingent on the sale of bonds. • The sale of bonds is not binding until bids are awarded to investors, after pricing is complete. Proposed Tobacco Securitization Refunding

Next Steps: Subject to the Board’s approval to proceed and take the actions requested today:

• October 27, 2020 • Staff will provide technical information related to authorizations and approval of tobacco securitization documents required by the Board.

• Staff will return with a resolution: • authorizing the execution of agreements, and • approving related documents, and • approving contracts contingent on the sale of bonds for the financial team and technical consultants.

• Mid-November - Bond pricing and award of bids, subject to bid results

• Early December – Bond closing, proceeds received by County

Questions?