Loading...
HomeMy WebLinkAbout03/21/2006, BUS 1 - 919 PALM PARKING/OFFICES BOND ISSUE council W,h,Dam 3-21-06 j acjcnOA aEpoRt Im.N.�1 i CITY OF SAN LUIS OBISPO FROM: Bill Statler, Director of Finance & Information Technology Carolyn Dominguez, Finance Manager SUBJECT: 919 PALM PARKING/OFFICES BOND ISSUE CAO RECOMMENDATION Adopt a resolution approving the issuance of lease-revenue bonds to assist in financing the 919 Palm parking/offices project. DISCUSSION Overview The attached resolution implements the financing previously approved by the Council for the 919 Palm parking/offices project. The following summarizes the approved project funding for this project: Project Funding Sources Parking.Fund General Fund Total Parking In-Lieu Fees, Court Street Project 512,000 512,000 Parking Space Acquisition, General Fund. 145,000 145,000 Proceeds from Sale of Court Street Property 1,510,000 452,000 1,962,000 Pay-As-You Go Appropriations 75,300 157,100 232;400 Proceeds from Sale of Bonds 1 7,907;500 1 6,755,100 14,662,600 Total _ $10,149;800 1 $7,364,200 $17,514,000 As reflected above, $14.6 million of the project cost will be funded by the bond issue, of which the Parking Fund will be responsible for 54% ($1.9 million) and the General Fund for 46% ($6.8 million) based on their proportional benefit from the project. Background The Council finalized the budget and funding sources for this project on August 16, 2005; and adopted a resolution of intention to issue tax-exempt bonds to assist in financing this project on October 4, 2005 Construction of the 919 Palm parking-offices project is nearing completion, and under the terms of the acquisition agreement with the Copelands, payment for the building will soon be due. Accordingly, it is now time to finalize implementation of the financing plan. r 919 Palm Parking/Offices_Bond Issue Page 2 Debt Management Policy Links The proposed issuance of these bonds is consistent with the City's adopted capital financing and debt management policies as provided in the 2005-07 Financial Plan. The use of debt financing is appropriate for one-time capital improvement projects when the project's useful life exceeds the term of the financing. In addition, the proposed financing meets the following key criteria: 1. Revenues available for debt service are sufficient and reliable so that financing can be marketed with an investment grade credit rating. 2. The project securing the financing will support an investment grade rating. 3. Current market conditions present favorable interest rates. 4. The life of the project to be financed is longer than 10 years. Proposed Financing Structure As noted above, the net proceeds from the financing will be $14.6 million. Including the reserve fund (which will be used to pay the final year debt service payment) and other costs associated with issuing the bonds (such as bond counsel, financial advisor, trustee, rating agency and bond insurance) that will be funded from the financing, the maximum amount of the new bond issue is not to exceed $17 million. Debt service obligations on the bonds will be the same as the proportionate share of the proceeds realized by the Parking and General Funds. The San Luis Obispo Capital Improvement Board (Board) will issue the bonds. To secure the bond repayments, the Board will lease the 919 Palm structure to the City for the same annual amount as the Board's debt service payments. In turn, the City commits that it will annually budget for the lease payments. Professional Assistance In accordance with service agreements previously approved by the Council, bond counsel services will be provided by the law firm of Jones Hall and financial advisor services will be provided by Fieldman Rolapp. For trustee services, the City contracts with U.S. Bank. Description of Financing Documents The attached resolution approves a variety of documents that are required in order to proceed with the refinancing. Prepared by the City's bond counsel (Jones Hall), the following is a brief description of these five documents, which are on file in the Council office: 1. Indenture of Trust This document contains all of the terms and provisions relating to the bond issue, including prepayment provisions, maturity schedules, rights and remedies of the bond owners and the trustee in the event of a default. 2. Lease Agreement The lease agreement is between the City and the Board. In order to secure the bonds, the Board will lease the 919 Palm parking/office structure to the City. 919 Palm Parking/Offices Bond Issue Page 3 Semiannual rental payments from the City will be sufficient to pay principal and interest on the bonds. 3. Site Lease. A companion document to the lease agreement, the site lease is also between the City and the Board, under which the City leases the project site to the Board. 4. Assignment Agreement The assignment agreement is between the Board and the trustee (U.S. Bank). The assignment consists of the Board transferring certain rights to the trustee, such as collecting of the lease payments from the City and protecting the interests of the bond owners. 5. Oficial Statement The preliminary Official Statement describes the financing for prospective purchasers of the bonds, and constitutes the primary marketing document for the financing. As reflected in the attached resolution approving these financing, documents, the Director of Finance & Information Technology is authorized to make minor amendments to these documents as recommended by bond counsel and the financial advisor, and to execute the final documents. Competitive Sale of Bonds In accordance with our Financial Plan policies, the sale of these bonds will be a competitive process, with the award made to the lowest bidder. The attached resolution authorizes the Director of Finance & Information Technology to make this award based on the recommendation of our financial advisor. Credit Rating Agency Presentations There are three major municipal credit rating agencies: Fitch, Moodys and Standard & Poors. Along with market factors, credit ratings play a key role in determining interest rates and related annual debt service costs. It is standard industry practice to solicit credit ratings from at least two of these agencies on any one issue. Base on our past experience, we plan to use Fitch and Moodys for this bond issue. We currently enjoy favorable credit ratings from both of these firms: AA- from Fitch and A-I from Moodys. (Investment grade ratings range from BBB to AAA). As we have in the past on all new issues, the Financing Team (composed of the CAO, City Attorney and Director of Finance & Information Technology as well as representatives from our Financial Advisor and Bond Counsel) will make comprehensive presentations to each of these firms, as well as the three major bond insurance agencies. The purpose of these presentations is three-fold: 1. Maintain our high credit rating, in light of the State's fiscal situation and our own past financial challenges. 2. Answer any questions that they may have about the nature and structure of this particular financing. \1 tiJ II 919 Palm Parking/Offices Bond Issue Page 4 3. While already strong, make our case for an upgrade in our credit rating, which we believe may be possible given the City's management performance in light of tough fiscal times. Project Financing Schedule The following outlines key dates in refinancing these bonds: Task Date Council . - Council and Capital Improvement Board approval of refinancing March 21 Rating agency/bond insurer presentations March 27 and 28 Bid opening April 12 Bond closing and receipt of funds Apri1.26 FISCAL IMPACT The average annual debt service will be approximately$1,016,000, with payments commencing on December 1, 2006. Of this amount, $548,000 (54%) will be paid by the Parking Fund and $468,000 (46%) by the General Fund. The 2005-07 Financial Plan anticipated this financing issue and includes adequate resources for the debt service payments. A detailed analysis of key project financing assumptions and annual debt service costs prepared by our financial advisor is on file in the Council office. ALTERNATIVES Given past Council approvals of the purchase agreement with the Copelands and the adopted project budget and funding strategy, there are no viable alternatives to the recommended action. ATTACHMENT Resolution approving the issuance of lease-revenue bonds to assist in financing the 919 Palm parking/offices project. AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE 1. Indenture of Trust 2. Lease Agreement 3. Site Lease 4. Assignment Agreement 5. Official Statement 6. Bond Analysis Prepared by Fieldman Rolapp G:Debt Financing/919 Palm/Council Agenda Report,919 Palm Bond Issuance,3-21-06 �-y RESOLUTION NO. (2006 Series) RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING DOCUMENTS AND ACTIONS RELATING TO THE FINANCING OF 919 PALM STREET PUBLIC PARKING AND CITY OFFICE PROJECT WHEREAS, the City of San Luis Obispo (the "City") is proceeding to acquire and improve a building located at 919 Palm Street, to be' used for public parking and City administrative office purposes (the "Project"); and WHEREAS, in order to provide funds to finance the acquisition and improvement of the Project, the City has proposed to lease the Project to the City of San Luis Obispo Capital Improvement Board (the "Board") under a Site Lease dated as of April 1, 2006 (the "Site Lease"), in consideration of the payment by the Board of an upfront rental payment (the "Site Lease Payment") which is sufficient to provide funds for such purposes; and WHEREAS, the Board proposes to issue and sell its City of San Luis Obispo Capital Improvement Board 2006 Lease Revenue Bonds (919 Palm Street Public Parking and City Office Project) in the aggregate principal amount of not to exceed $17,000,000 (the "Bonds") under an Indenture of Trust dated as of April 1, 2006 (the "Indenture"), between the Board and U.S. Bank National Association, as trustee (the "Trustee"), for the purpose of providing the funds to enable the Board to pay the Site Lease Payment to the City in accordance with the Site Lease; and WHEREAS, in order to secure the payments of principal of and interest on the Bonds, the Board proposes to lease the Project back to the City under a Lease Agreement dated as of April 1, 2006 (the "Lease Agreement"), under which the City is obligated to pay semiannual lease payments as rental for the Project; and WHEREAS, under Section 906 of the City Charter; the City is authorized to lease real property by resolution of the Council passed by the affirmative vote of at least 3/5 of all the members of the Council; and WHEREAS, the Council wishes at this time to approve all proceedings to which it is a party relating to the issuance and sale of the Bonds and the financing of the Project; NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo'as follows: SECTION 1. Approval of Financing Plan and Related Leases. The Council hereby approves the financing plan for the Project as set forth in this Resolution. To that end, the Council hereby approves the Site Lease and the Lease Agreement in substantially the respective forms thereof on file with the City Clerk together with any changes therein or additions thereto deemed advisable by the Director of Finance & Information Technology, whose execution thereof shall be conclusive evidence of the approval of any such changes or additions. The Director of Finance & Information Technology is hereby authorized and directed for and in the name and on behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest and affix the seal of the City to, the final form of the Site Lease and the Lease Agreement. The Council hereby finds and determines that it is authorized to enter into the Site Lease and the , I Resolution No. (2006 Series) Page 2 Lease Agreement under the municipal affairs powers of the City as a charter city of the State of California, subject only to the limitations of Section 906 of the City Charter. SECTION 2.. Issuance and Sale of Bonds by Board. The Council hereby approves the issuance of the Bonds by the Board in the aggregate principal amount of not to exceed $17,000,000 for the purpose of providing funds to finance the Project. The Council hereby approves the competitive sale of the Bonds by the Board in accordance with a resolution of the governing body of the Board. As provided in said resolution, the net interest rate at which the Bonds are sold shall not exceed 5-3/4% per annum, and the Bonds shall be sold for a purchase price that is at least equal to 99.0% of the par amount of the Bonds. SECTION 3. Official Statement. The Council hereby approves and deems nearly final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, the preliminary Official Statement describing the Bonds in the form on file with the City Clerk. The City Administrative Officer or the Director of Finance & Information Technology (each, an "Authorized Officer") is individually authorized, at the request of the purchaser of the Bonds, to execute an appropriate certificate affirming the Council's determination that the preliminary Official Statement has been deemed nearly final within the meaning of such Rule. Distribution of the preliminary Official Statement by the purchaser of the Bonds is hereby approved. An Authorized Officer is hereby authorized and directed to approve any changes in or additions to a final form of said Official Statement, and the execution thereof by an Authorized Officer shall be conclusive evidence of approval of any such changes and additions. The Council hereby authorizes the distribution of the final Official Statement by the purchaser of the Bonds. The final Official Statement shall be executed in the name and on behalf of the City by an Authorized Officer. SECTION 4. Official Actions. The Mayor, the City Administrative Officer, the Director of Finance &.Information Technology, the City Clerk and all other officers of the City are each authorized and directed in the name and on behalf of the City to make any, and all leases, assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and other documents, which they or any of them deem necessary or appropriate in order to consummate any of the transactions contemplated by the agreements and documents approved under this Resolution. Whenever in this Resolution any officer of the City is authorized to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or unavailable. SECTION 5. Effective Date. This Resolution shall take effect immediately upon its passage and adoption. Resolution No. (2006 Series) Page 3 On motion of seconded by and on the following roll call vote: AYES: NOES: ABSENT: the foregoing Resolution was passed and adopted on March 21, 2006. David F. Romero, Mayor ATTEST: Audrey Hooper, City Clerk APPROVED AS TO FORM: — b Rka-t-bapof. Lowell, City Attorney