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HomeMy WebLinkAbout09-16-14 PFA Final Agenda Packet City of San Luis Obispo, Council Agenda, City Hall, 990 Palm Street, San Luis Obispo Public Financing Authority Tuesday, September 16, 2014 4:00 PM SPECIAL MEETING OF THE PUBLIC FINANCING AUTHORITY Council Chambers 990 Palm Street CALL TO ORDER: Chair Jan Marx ROLL CALL: Authority Members John Ashbaugh, Dan Carpenter, Kathy Smith, Vice Chair Carlyn Christianson, and Chair Jan Marx BUSINESS ITEM PFA B1. AUTHORIZE THE ISSUANCE OF UP TO $8,305,000.00 PAR VALUE LEASE REVENUE BONDS FOR THE EXPANSION OF THE LOS OSOS VALLEY ROAD (LOVR)/HIGHWAY 101 OVERPASS - RESOLUTION (PADILLA – 15 MINUTES) Recommendation Adopt a Resolution entitled “A Resolution of the Governing Board of the San Luis Obispo Public Financing Authority, California, authorizing the issuance, sale and delivery of San Luis Obispo Public Financing Authority Lease Revenue Bonds; the execution and delivery of a Trust Agreement, a Site Lease, a Facility Lease, and an Official Statement relating to the aforesaid bonds; and certain other actions in connection with such transactions.” ADJOURNMENT City of San Luis Obispo, Council Agenda Report, Meeting Date, Item Number Public Financing Authority FROM: Wayne Padilla, Finance and Information Technology Director SUBJECT: AUTHORIZE THE ISSUANCE OF UP TO $8.305 MILLION PAR VALUE LEASE REVENUE BONDS FOR THE EXPANSION OF THE LOS OSOS VALLEY ROAD (LOVR) / HIGHWAY 101 OVERPASS RECOMMENDATION ADOPT THE RESOLUTION AUTHORIZING THE ISSUANCE OF UP TO $8.305 MILLION PAR VALUE LEASE REVENUE BONDS FOR THE LOS OSOS VALLEY ROAD INTERCHANGE PROJECT AND APPROVING THE FORM OF DOCUMENTATION FOR ITEMS RELATED TO THE FINANCING AND THE ACTIONS NECESSARY TO ISSUE THE DEBT DISCUSSION The City Council, functioning as the City of San Luis Public Financing Authority will consider the plan for financing the LOVR Interchange Project. Staff has worked with the City’s financial advisor PFM and bond counsel, Orrick Herrington to develop the documentation required to issue up to $8.305 million par value (the gross amount of the bonds issued) lease revenue bonds. As a part of such consideration, the City Council will conduct a public hearing and make certain findings and determinations pursuant to Section 6586.5 of the Government Code, as more particularly described in the City’s resolution. Background The City Council authorized the call for construction bids to construct the LOVR Interchange Project on June 10, 2014. Bids have been received and a separate agenda item has been prepared for this Council meeting to allow the City Council to consider sta ff’s request to award the construction bid. Based on the bids received, the City Engineer has set the final construction cost of the LOVR improvements remaining to be funded at $23,338,000. Of this amount $16,000,000 will come from a state grant and approximately $7.5 million will come from the issuance of lease revenue bonds if the City Council approves staff’s recommendations this evening. The excess amount borrowed over the estimated construction cost will be applied to costs of issuance, a bond reserve fund and a contingency amount in the event that construction costs exceed the estimate. If the excess bond proceeds are not used for this construction, the contingency amount may be applied to another roadway construction project. Proposed Financing Structure and Documents The proposed debt is based on a 30-year lease financing structure. When a lease revenue bond transaction is created, a city-owned property is identified as the subject of the lease in order to provide security for the debt transaction. Under the proposed financing the city would enter into a lease agreement with the Public Financing Authority in order to lease to them and then lease back from that entity, the property that is serving as the collateral for the debt. The payments made by the City under this arrangement would fund the debt payments for the bonds that have Sept. 16, 2014 PFA - B1 PFA B1-1 AUTHORIZE THE ISSUANCE OF UP TO $8.05 MILLION PAR VALUE LEASE REVENUE BONDS FOR THE EXPANSION OF THE LOS OSOS VALLEY ROAD (LOVR) / HIGHWAY 101 OVERPASS Page 2 been issued under an assignment agreement created by the Public Financing Authority that provides that the payments are being made for the benefit of the bondholders. Under the financing plan proposed for the LOVR Interchange Project, the par amount of the bonds is currently estimated not to exceed $8.305 million. Par value represents the total value of the bonds issued. The breakout of this amount is shown below (all amounts are estimates): Project Funds $7,502,550 Cost of Issuance $ 200,000 Underwriter’s Discount $ 83,050 Debt Service Reserve $ 519,400 Total: $8,305,000 The final par amount of the debt will be determined once the bids from prospective underwriters have been received and evaluated. The amount shown is a not to exceed amount. The estimated average annual debt service payments will be $517,000. This is slightly higher than the financial forecast estimate of $493,000 starting in 2015-16. The documents provided for the proposed financing are described below. The documents are in substantially final form but there may be technical changes required as the financing is finalized and such changes will be reviewed by Bond Counsel and city staff to reflect the final financing terms derived and will be amended by bond counsel to reflect the final financing terms derived from the closing of this borrowing within the parameters approved by the Public Financing Authority in the reception. Preliminary Official Statement – This serves as a form of prospectus for the debt and provides information on the project, demographics for the City and information about the City’s finances and ability to pay the debt. Site Lease – As stated above, this type of financing requires the identification of one or more General Fund properties having a combined value equal to the par amount of the debt and which will serve as the collateral for the financing. The proposed Lease Agreement identifies the use of the parking structure at 842 Palm along with the fire station 3 located at 1280 Laurel Lane and fire station 4 located at 1395 Madonna Road for this purpose. Staff is awaiting an appraisal for the land value of these properties. If the total of the land and structure values for 842 Palm is sufficient to secure this debt, no other property needs to be included and the Site Lease and Facility Lease documents will be amended to reflect that change. Other structures owned by the City such as City Hall have been encumbered in previous lease revenue financings and are not eligible for consideration in this financing. The Site Lease, together with the Facility Lease described below creates the lease back arrangement between the City and the Public Financing Authority. Facility Lease – This document relates to the same property identified in the site lease and establishes the City’s obligation to make payments under the lease equal to the annual debt service payments on the lease revenue bonds. This document contains the payment terms PFA B1-2 AUTHORIZE THE ISSUANCE OF UP TO $8.05 MILLION PAR VALUE LEASE REVENUE BONDS FOR THE EXPANSION OF THE LOS OSOS VALLEY ROAD (LOVR) / HIGHWAY 101 OVERPASS Page 3 applicable to the City and various covenants necessary to provide security to the bondholders, such as insurance requirements and a covenant to budget and appropriate the rent in each year. Trust Agreement – The City utilizes a third party trustee to track payment call dates and handle administrative matters on behalf of the bondholders. This agreement spells out the terms and conditions under which the trustee will provide those services, as well as authorizing the trustee to enforce the provisions of the documents, and handle any amendments or required bondholder consents. Project Highlights The project will correct operational deficiencies and improve safety at the southern entry to the City at LOVR by widening LOVR to four lanes between the recently constructed Calle Joaquin intersection and South Higuera Street. To accomplish this, a new two-lane bridge structure will be constructed south of, and adjacent to, the existing overcrossing. The existing bridge will carry the westbound traffic and the new bridge will carry eastbound traffic. An adjacent bridge crossing of San Luis Obispo Creek will be widened to accommodate the four travel lanes. The project will also include minimum 6-foot wide sidewalks over the freeway, 6.5-foot wide bike lanes, and will improve the on and off-ramps. Sidewalks across the San Luis Obispo Creek Bridge will be widened to allow additional area for pedestrians and bicyclists accessing the Bob Jones Trail and future integration with the Trail segment south of LOVR. The City is the project sponsor, with the California Department of Transportation (Caltrans) serving in an oversight role since they are stewards of the State Highway System. All necessary property acquisitions have been secured. FISCAL IMPACT If the debt issuance is approved along with the proposed form of documents the construction fund proceeds of $7.5 million will be received by the City and disbursed to the contractor working on the LOVR project. Any remaining construction proceeds not needed for the project can be utilized on eligible and priority roadway projects. The annual debt service payments have been programmed in the City’s budget and 5 Year Financial Forecast beginning in 2014-15. Since the debt is being issued after the start of the fiscal year the first year payment will be less than the budget estimate of $250,000 while the annual payments starting in 2015-16 are estimated to be $24,000 more than the amount included in the 5 Year Forecast. This difference may be offset by an increase in the amount transferred from the Traffic Impact Fee program each year. NEXT STEPS If this item is approved, staff will work with the Financial Advisor and Bond Counsel to sell the debt and complete the documents shown above to represent the final terms of the sale. As indicated above, if the value of the parking structure located at 842 Palm is adequate to secure the debt, none of the fire stations will need to be encumbered for this financing. PFA B1-3 AUTHORIZE THE ISSUANCE OF UP TO $8.05 MILLION PAR VALUE LEASE REVENUE BONDS FOR THE EXPANSION OF THE LOS OSOS VALLEY ROAD (LOVR) / HIGHWAY 101 OVERPASS Page 4 ALTERNATIVE Do not approve this financing transaction. This option is not recommended because the City does not have the resources to finance the construction of the LOVR project without the issuance of lease revenue bonds. ATTACHMENTS Resolution authorizing bond issuance COUNCIL READING FILE 1. Preliminary Official Statement 2. Site Lease 3. Facility Lease 4. Trust Agreement PFA B1-4 OHSUSA:758876383.5 RESOLUTION NO. _____ 2014 SERIES OF THE SAN LUIS OBISPO PUBLIC FINANCING AUTHORITY A RESOLUTION OF THE GOVERNING BOARD OF THE SAN LUIS OBISPO PUBLIC FINANCING AUTHORITY AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF SAN LUIS OBISPO PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS; THE EXECUTION AND DELIVERY OF A TRUST AGREEMENT, A SITE LEASE, A FACILITY LEASE, AND AN OFFICIAL STATEMENT RELATING TO THE AFORESAID BONDS; AND CERTAIN OTHER ACTIONS IN CONNECTION WITH SUCH TRANSACTIONS ____________________________________________________________ WHEREAS, the City of San Luis Obispo (the “City”) proposes to finance expansion of the Los Osos Valley Road interchange (the “Project”); WHEREAS, the San Luis Obispo Public Financing Authority (the “Authority”) was formed on September 8, 2014 by the City and the Parking Authority of the City of San Luis Obispo for the purpose, among others, of assisting the City in connection with financing public capital improvements such as the Project; WHEREAS, in order to assist in financing the Project, it is proposed that the City lease the real property located at 842 Palm Street, 1280 Laurel Lane and 1395 Madonna Road, San Luis Obispo, and improvements thereon (the “Leased Property”) to the Authority pursuant to a Site Lease (the “Site Lease”) and lease the Leased Property back from the Authority pursuant to a Facility Lease (the “Facility Lease”); WHEREAS, it is further proposed that the Authority issue its San Luis Obispo Public Financing Authority Lease Revenue Bonds in the aggregate principal amount of not to exceed $8,305,000 (the “Bonds”), pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code, for the purpose of making a payment to the City pursuant to the Site Lease to finance the Project, fund a debt service reserve account if deemed necessary and pay costs of issuance; WHEREAS, it is further proposed that the Authority issue the Bonds pursuant to a trust agreement (the “Trust Agreement”) by and between the Authority and The Bank of New York Mellon Trust Company, N.A., as trustee (the “Trustee”); WHEREAS, in order to take advantage of the bond issuance options under the Code to achieve debt service savings for the Authority and maximize benefits to the City, the Governing Board deems it necessary and desirable to authorize the sale of the Bonds by a competitive sale to the lowest true interest cost bidder; WHEREAS, it is in the public interest, convenience and welfare and for the common benefit of the inhabitants of the City that the City enter into this financing with the Authority to finance the Project; PFA B1-5 2 OHSUSA:758876383.5 WHEREAS, the Authority has prepared an official statement relating to the Bonds (the “Official Statement”) for use in preliminary form in connection with the marketing of the Bonds to potential purchasers and for use in final form for distribution to the actual purchasers thereof; NOW, THEREFORE, BE IT RESOLVED by the governing board of the San Luis Obispo Public Financing Authority (the “Governing Board”) as follows: Section 1. The foregoing recitals are true and correct and the Governing Board hereby so finds and determines. Section 2. The Governing Board hereby approves the issuance of the Bonds by the Authority in an aggregate principal amount not to exceed $8,305,000 to finance the Project, including reserve fund requirements if deemed necessary, costs of issuance and related fees and expenses; provided, however, that such bonds shall be sold on or before December 31, 2014, and shall mature no later than October 1, 2044. The Treasurer of the Authority (“Treasurer”) is hereby directed to perform the duties imposed upon him by the provisions of the financing documents, including the Trust Agreement, the Site Lease and the Facilities Lease. Section 3. The Governing Board authorizes the sale of the Bonds through a competitive sale to the lowest true interest cost bidder, subject to all of the terms and conditions of the Official Notice of Sale describing the Bonds. The true interest cost of the Bonds shall not be in excess of six percent (6%), and the Bonds shall otherwise conform to the limitations specified herein. The proposed forms of the Official Notice of Sale and the Notice to Sell Bonds in substantially the forms on file with the Authority are hereby approved. Public Financial Management, Inc., as financial advisor (the “Financial Advisor”), is hereby authorized and directed to cause to be delivered to prospective bidders for the Bonds copies of said Official Notice of Sale, in substantially said form with such additions, corrections and revisions as may be determined to be necessary or desirable by the Financial Advisor, any Authorized Officer, or Bond Counsel. The true interest cost limitations described in this Section, and the terms of the Bonds described in Section 2, shall apply to such competitive sale. Section 4. The Trust Agreement, in substantially the form submitted to this meeting, is hereby approved. The Executive Director of the Authority, or the designee of such officer (each, an “Authorized Officer”), each acting alone, is hereby authorized and directed, for and on behalf of the Authority, to execute and deliver the Trust Agreement in substantially said form, with such changes therein as any Authorized Officer, with the advice of the Authority’s counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 5. The Site Lease, in substantially the form submitted to this meeting, is hereby approved. Any Authorized Officer, each acting alone, is hereby authorized and directed, for and on behalf of the Authority, to execute and deliver the Site Lease in substantially said form, with such changes therein as any Authorized Officer, with the advice of the Authority’s counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. PFA B1-6 3 OHSUSA:758876383.5 Section 6. The Facility Lease, in substantially the form submitted to this meeting, is hereby approved. Any Authorized Officer, each acting alone, is hereby authorized and directed, for and on behalf of the Authority, to execute and deliver the Facility Lease in substantially said form, with such changes therein as any Authorized Officer, with the advice of the Authority’s counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 7. The preliminary form of the Official Statement to be used in connection with the offer and sale of the Bonds, is hereby adopted and approved, and any Authorized Officer, each acting alone, is hereby authorized to execute and deliver a certificate deeming the preliminary form of the Official Statement (including, if applicable, as modified by any amendment or supplement thereto) “final” within the meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 and to execute and deliver the same in final form, for and on behalf of the Authority, with such changes therein as the officer executing the same, with the advice of the Authority’s counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section 8. The Financial Advisor is hereby authorized and directed to cause to be supplied to prospective bidders for the Bonds copies of a preliminary Official Statement in such form, and to supply the winning bidder of the Bonds with copies of a final Official Statement, completed to include, among other things the interest rate or rates and final sale information. Any of the Authorized Officers is hereby authorized and directed to execute a certificate confirming that the preliminary Official Statement has been “deemed final” by the City for purposes of Rule 15c2-12. Section 9. The Bonds shall be executed by the manual or facsimile signature of the Treasurer of the Governing Board and attested by the manual or facsimile signature of the Secretary of the Authority, in accordance with the Trust Agreement. The Bonds, when so executed, shall be delivered to the Trustee for authentication by the Trustee. The Trustee is hereby requested and directed to authenticate the Bonds by executing the Trustee’s Certificate of Authentication appearing thereon, and to deliver the Bonds, when duly executed and authenticated, to the initial purchaser thereof in accordance with written instructions executed on behalf of the Authority by an Authorized Officer, which instructions the Authorized Officers are hereby authorized and directed, for and on behalf of the Authority, to execute and deliver to the Trustee. Said instructions shall provide for the delivery of the Bonds to the initial purchaser thereof upon payment of the purchase price thereof. Section 10. The Authority hereby designates the firm of Orrick, Herrington & Sutcliffe LLP to serve as bond counsel and disclosure counsel in connection with the issuance, sale and delivery of the Bonds. Section 11. The officers of the Authority are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents, including all things and documents that may be necessary to provide insurance or other credit enhancement with respect to the Bonds, which they may deem necessary or advisable in order to consummate the issuance, sale and delivery of the Bonds or related documents and otherwise to effectuate the purposes of this resolution. PFA B1-7 4 OHSUSA:758876383.5 Section 12. This resolution shall take effect immediately. ******************** PFA B1-8 5 OHSUSA:758876383.5 PASSED AND ADOPTED this 16th day of September, 2014, by the following vote: AYES: Directors: NOES: Directors: ABSENT: Directors: APPROVED: Chair [SEAL] ATTEST: Secretary APPROVED AS TO FORM: Authority Counsel PFA B1-9 OHSUSA:758876383.5 SECRETARY’S CERTIFICATE I, the undersigned, duly appointed and qualified Secretary of the San Luis Obispo Public Financing Authority (the “Authority”), certify that attached is a full, true and correct copy of Authority Resolution No. _____, adopted September 16, 2014, during a meeting of the governing board of the Authority. Such meeting was duly and legally held at the regular meeting place of the Authority. All of the members of said governing board had due notice of such meeting and a majority thereof was present at such meeting. I have carefully compared the same with the original minutes of said meeting on file and of record in my office, and the foregoing is a full, true and correct copy of such resolution adopted at said meeting and entered in said minutes. Said resolution has not been amended, modified or rescinded since the date of its adoption, and the same is now in full force and effect. Dated: Secretary PFA B1-10