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HomeMy WebLinkAbout11/17/2009, PH 1 - CONDUIT FINANCING REQUEST FROM THE UNIVERSITY MINISTRY BOARD OF THE SANTA BARBARA PRESBYTERY FOR AN counat MmW D� 11-17-09 j apenaa REpoRt 1�N..b. CITY OF SAN LUIS OBI SPO FROM: Bill Statler, Director of Finance &Information Technology SUBJECT: CONDUIT FINANCING REQUEST FROM THE UNIVERSITY MINISTRY BOARD OF THE SANTA BARBARA PRESBYTERY FOR AN EIGHT-UNIT HOUSING PROJECT AT 1468 EAST FOOTHILL BOULEVARD RECOMMENDATION Adopt a resolution allowing the University Ministry Board of the Santa Barbara Presbytery to issue tax-exempt bonds to assist in financing its eight-unit housing project at 1468 East Foothill Boulevard and authorizing the Mayor to execute the Joint Exercise of Powers Agreement for the City to become a member of the California Municipal Finance Authority. DISCUSSION Overview As set forth in Attachment 1, the University Ministry Board of the Santa Barbara Presbytery (UMBSBP) is requesting that the City approve its borrowing up to $5 million in tax-exempt bonds to assist in financing its eight-unit housing project at 1468 East Foothill Boulevard. Even though there is no financial participation (or liability, direct or indirect) by the City in approving this "conduit" financing, Council approval of the borrowing is required under federal regulations for tax-exempt bond financing. Project Summary 1. The UMBSBP project is "group housing:" seven apartments, caretaker's residence and recreation room located at East Foothill Boulevard, adjacent to the Cal Poly campus. Maximum occupancy is 48 persons. 2. The Planning Commission approved the use permit on March 12, 2008 and the Architectural Review Commission granted final project approval on May 19, 2008. The building permits have been issued and the project is now under construction. 3. The Community Development Department is supportive of the request because it locates high density student housing in the Cal Poly neighborhood. The Council also approved a zone change on September 16, 2008 to increase the density from R-3 to R-4 in this vicinity to encourage projects like this one. No City Liability for the Financing There is no City liability in approving this "conduit" financing. The bonds will be issued by the California Municipal Finance Authority (CMFA) and annual debt service payments will 7b�e the i Conduit Financing Request: University Ministry Board, Santa Barbara Presbytery Page 2 sole responsibility of the UMBSBP. The City will have no financial, legal, moral obligation, liability or responsibility for the project or for the repayment of the bonds. All financing documents with respect to the issuance of the bonds will contain clear disclaimers that they are not obligations of the City or the State of California, but are to be repaid for solely from funds provided by UMBSBP. There are no costs associated with membership in the CMFA and the City will in no way become exposed to any financial liability by reason of its membership in the CMFA. In addition, participation by the City in the CMFA will not impact the City's appropriations limits and will not constitute any type of indebtedness by the City. Outside of holding this hearing, adopting the required resolution and executing the joint powers agreement with CMFA, no other participation or activity of the City with respect to the bonds will be required. City's Conduit Financing Policy While the Council is not obligated to approve this request, it would be consistent with past City actions regarding this project. Under the City's debt financing and management policies (Attachment 2), consideration of a request for conduit financing is generally a two-step process: 1. First asking the Council if they are interested in considering the request, and establishing the ground rules for evaluating it. 2. And then returning with the results of this evaluation, and recommending approval of appropriate financing documents if warranted. This two-step approach ensures that the issues are clear for both the City and applicant, and that key policy questions are answered. In this case, however, given the discretionary approvals that the project has already received from the City and the non-profit nature of the applicant(which is a California nonprofit religious organization as set forth in Section 5010 of the Internal Revenue Code and will own and operate the housing units), we believe that a "one-step" process will adequately address the City's criteria for assisting with conduit financings, summarized as follows: 1. The City's bond counsel will review the terms of the financing, and render an opinion that there will be no liability to the City in issuing the bonds on behalf of the applicant (or in this case, allowing the applicant—the UMBSBP—to issue bonds on its own behalf). 2. There is a clearly articulated public purpose in providing the conduit financing. 3. The applicant is capable of achieving this public purpose. The City's bond counsel (Jones Hall) opinion providing assurance that there will be no liability to the City in allowing the UMBSBP to issue these bonds is provided in Attachment 3. As discussed above, we believe there is a clearly articulated public purpose in providing the Conduit Financing Request: University Ministry Board, Santa Barbara Presbytery Page 3 requested conduit financing to the UMBSBP and that it is capable of achieving this public purpose. City's Past Experience with Conduit Housing Bonds The City has approved five "conduit" housing bond issues in the past. As reflected in the following summary, all were on behalf of the Housing Authority: 1. 1985. 168-unit apartment development on Southwood Drive (refinanced in 1993). 2. 1998. 30-unit development (all "affordable" for seniors and persons with disabilities) on Brizzolara Street. 3. 1999. 122-unit apartment development by the De Vaul Ranch Company, of which 26 units will be affordable-24 for"very-low" and 2 for"moderate" income households. In this case, the Housing Authority is not developer, but will loan the funds to the De Vaul Ranch Company. This funding has not yet occurred. 4. 2002. 19-unit seniors apartment development at 433 Pacific Street(Pacific and Carmel). 5. 2005. 40 affordable one-bedroom units for seniors as well as one manager's unit in an existing historic single-family residence at 2005 Johnson Avenue("Del Rio Terrace"). There have been no financial difficulties with any of these bond issues. City's Role in this Process Why are we involved? Under federal laws allowing for the issuance of tax-exempt housing bonds, an elected legislative body must approve these types of bonds (the "applicable elected representative"). For the UMBSBP, this means the City of San Luis Obispo. The City's approval of the attached resolution does not immediately result in the issuance of bonds; this will be subject to subsequent approval of formal bond documents by the UMBSBP However, the City's approval is required before this next step can take place. Role of the CMFA in this Process The CMFA will be the issuer of the bonds. The CMFA was created on January 1, 2004 pursuant to a joint exercise of powers agreement to protnote economic, cultural and community development, through the financing of economic development and charitable activities throughout California. To date; over 95 municipalities have become members, including the agencies listed in Attachment 4. In order for the CMFA to have the authority to serve as the issuer of the bonds for this project, the City must become a member of the CMFA. The proposed resolution (Attachment 5) authorizes the Mayor to execute the joint powers agreement with the CMFA (Attachment 6). Conduit Financing Request: University Ministry Board, Santa Barbara Presbytery Page 4 There are no costs associated with membership in the CMFA and the City will not be exposed to any financial liability due to its membership in the CMFA. In addition, participation by the City in the CMFA will not impact the City's appropriations limits nor will it constitute any type of indebtedness by the City with respect to the issuance of the bonds for this project. The joint powers agreement expressly provides that any member may withdraw from such agreement upon written notice to the Board of Directors of the CMFA. In the case of the proposed bond financing for the UMBSBP, the City could withdraw from the CMFA at any time following the issuance of the bonds. However, we do not recommend doing so. There may be similar conduit financings issued through the CMFA in the future that the City may want to support. CONCURRENCES The Community Development Department concurs with this request. FISCAL IMPACT There are no adverse fiscal impacts associated with this financing. As noted above, the City has no liability—directly or indirectly—for this financing. Assuming bond issuance of$5 million, the City will be reimbursed $12=500 from the bond proceeds (0.25%) to cover our administrative costs, which include the cost of the Jones Hall opinion($500). ALTERNATIVES 1. Do not approve the requested financing. Given the discretionary approvals that this project has already received from the City and the lack of any liability for repayment of the bonds by the City, this option is not recommended. 2. Defer consideration of the request. Due to the time requirements for this financing, this option is not recommended. ATTACHMENTS 1. Request from the UMBSBP for conduit financing 2. City's conduit financing policy(excerpt from the 2009-11 Financial Plan) 3. Opinion from the City's bond counsel on our liability for this project 4. Listing of CMFA members 5. Resolution allowing the UMBSBP to issue tax-exempt bonds 6. Joint powers agreement with CMFA 7., GAFinance Division\General Financc\Conduit Bonds Issues\Univesity Ministry Board\Council Agenda Report\University Ministry Conduit Financing Request,CAR I I-I7-09.doc ?u -� Attachment 1 From: John P Stoecker [mailto:jstoecker@cmfa-ca.com] Sent: Friday,.August 28, 2009 4:14 PM To: Statler,Bill Cc: 'James Stueck; Stephen.Taber@hklaw.com; James.S.Young2@wellsfargo.com; coewel@gmail.com; 'Dave Romero; Laura.Voinea@hklaw.com; Chick Adams; 'John P Stoecker; Ben Barker' Subject: University Ministry Board of the Santa Barbara Presbytery TEFRA Hearing Request Mr. Statler: Thank you so much with your help in regards to the proposed University Ministry Board of the Santa Barbara Presbytery financing! As we discussed, the University Ministry Board of the Santa Barbara Presbytery submitted an application to the CMFA to be its Issuer of tax-exempt financing for the 5010 Student Housing project located in the City of San Louis Obispo.The project is expected to be financed in amount not to exceed $5,000,000 of tax-exempt revenue bonds, (the `Bonds') to finance a campus ministry and student housing development at California Polytechnic State University located at 1468 E. Foothill Blvd., San Luis Obispo,California. To satisfy the Federal and State tax code, we are requesting that the City of San Luis Obispo: 1. Conduct the public hearing under the requirements of TEFRA and the Internal Revenue Code of 1986, as amended(the"Code"). 2. Adopt the resolution approving the issuance of the Bonds by the CMFA for the benefit of University Ministry Board of the Santa Barbara Presbytery to provide for the financing of the Project, such adoption is solely for the purposes of satisfying the requirements of TEFRA,the Code and the California Government Code Section 6500(and following). The resolution will further authorize the Mayor or designee to execute the Joint Exercise of Powers Agreement with the CMFA. Please find the attached sample staff report that can be used or modified at your discretion and the JPA Agreement. Stephen Taber of Holland&Knight will be Bond Counsel and the draft notice for publication and the resolution are attached with some blanks that still need to be confirmed. Stephen would be happy to notice the hearing or will work with your City Clerk to ensure that it is published 14 days prior to the hearing. In addition, I have included a current list of members and non-profits who have received donations thanks to CMFA financings. Feel free to call me if you have any questions or concerns, or if I may be of any assistance in the process. Thank you again for your help!!! 7: Best Regards, John California Municipal Finance Authority John P. Stoecker Financial Advisor 2111 Palomar Airport Rd, Suite 320 Carlsbad, CA 92011 Phone: (760)930-1221 Fax: (760) 683-3390 Cell: (760) 889-2121 E-Mail: jstoecker(a)cmfa-ca.com Web: www.cmfa-ca.com PA 1 -5 Budget and Fiscal Policies - Attachment 2 5. Reserve Fund A reserve fund should be 10. Benefit Apportionment. Assessments and established in the lesser amount of: the special taxes will be apportioned according maximum annual debt service; 125% of the to a formula that is clear, understandable, annual average debt service; or 10% of the equitable and reasonably related to the bond proceeds. benefit received by—or burden attributed to—each parcel with respect to its financed 6. Value-to-Debt Ratio& The minimum value- improvement. Any annual escalation factor to-date ratio should generally be 4:1. This should generally not exceed 2%. means the value of the property in the district, with the public improvements, It. Special Tax District Administration. In the should be at least four times the amount of case of Mello-Roos or similar special tax the assessment or special tax debt. In districts, the total maximum annual tax special circumstances, after conferring and should not exceed 110% of annual debt receiving the concurrence of the City's service. The rate and method of financial advisor and bond counsel that a apportionment should include a back-up tax lower value-to-debt ratio is financially in the event of significant changes from the prudent under the circumstances, the City initial development plan, and should include may consider allowing a value-to-debt ratio procedures for prepayments. of 3:1. The Council should make special findings in this case. 12. Foreclosure Covenants. In managing administrative costs, the City will establish 7. Appraisal Methodology. Determination of minimum delinquency amounts per owner, value of property in the district shall be and for the district as a whole, on a case-by- based upon the full cash value as shown on case basis before initiating foreclosure the ad valorem assessment roll or upon an proceedings. appraisal by an independent Member Appraisal Institute (MAI). The definitions, 13. Disclosure to Bondholders In general, standards and assumptions to be used for each property owner who accounts for more appraisals shall be determined by the City than 10% of the annual debt service or on a case-by-case basis, with input from bonded indebtedness must provide ongoing City consultants and district applicants, and disclosure information annually as described by reference to relevant materials and under SEC Rule 15(c)-12. information promulgated by the State of California, including the Appraisal 14. Disclosure to Prospective Purchasers. Full Standards for Land-Secured Financings disclosure about outstanding balances and t prepared by the California Debt and annual payments should be made by the Investment Advisory Commission. seller to prospective buyers at the time that the buyer bids on the property. It should not 8. Capitalized Interest During Construction. be deferred to after the buyer has made the Decisions to capitalize interest will be made decision to purchase. When appropriate, on case-by-case basis, with the intent that if applicants or property owners may be allowed, it should improve the credit quality required to provide the Ci with a of the bonds and reduce borrowing costs, d• e benefiting both current and future property owners. F. Conduit Financings 9. Maximum Burden. Annual assessments (or 1. The City will consider requests for conduit special taxes in the case of Mello-Roos or financing on a case-by-case basis using the similar districts) should generally not exceed following criteria: 1% of the sales price of the property; and total property taxes, special assessments and a. The City's bond counsel will review the special taxes payments collected on the tax terms of the financing, and render an roll should generally not exceed 2%. opinion that there will be no liability to -15- -PP I-L Budget and Fiscal Policies - - Attachment 2 the City in issuing the bonds on behalf debt service savings, and it has available of the applicant. working capital to do so from other b. There is a clearly articulated public sources. purpose in providing the conduit financing. 2. Standards for Economic Savings. In general, refinancings for economic savings c. The applicant is capable of achieving will be undertaken whenever net present this public purpose. value savings of at least five percent(5%) of the refunded debt can be achieved. 2. This means that the review of requests for conduit financing will generally be a two- a. Refinancings that produce net present step process: value savings of less than five percent will be considered on a case-by-case a. First asking the Council if they are basis, provided that the present value interested in considering the request, savings are at least three percent(3%) of and establishing the ground rules for the refunded debt. evaluating it b. Refinancings with savings of less than b. And then returning with the results of three percent (3%), or with negative this evaluation, and recommending savings, will not be considered unless approval of appropriate financing there is a compelling public policy documents if warranted. objective. This two-step approach ensures that the HUMAN RESOURCE MANAGEMENT issues are clear for both the City and ° applicant, and that key policy questions are answered. A. Regular Staffing 3. The workscope necessary to address these 1. The budget will fully appropriate the issues will vary from request to request, and resources needed for authorized regular will have to be determined on a case-by-case staffing and will limit programs to the basis. Additionally, the City should regular staffing authorized. generally be fully reimbursed for our costs in evaluating the request; however, this 2. Regular employees will be the core work should also be determined on a case-by-case force and the preferred means of staffing S. ongoing, year-round program activities that should be performed by full-time City G. Refinancings employees rather than independent contractors. The City will strive to provide 1. General Guidelines. Periodic reviews of all competitive compensation and benefit outstanding debt will be undertaken to schedules for its authorized regular work determine refinancing opportunities. force. Each regular employee will: Refinancings will be considered (within federal tax law constraints) under the a. Fill an authorized regular position. following conditions: b. Be assigned to an appropriate bargaining a. There is a net economic benefit. unit. b. It is needed to modernize covenants that c. Receive salary and benefits consistent are adversely affecting the City's with labor agreements or other financial position or operations. compensation plans. c. The City wants to reduce the principal outstanding in order to achieve future 16 JONES HALL Attachment 3 650 California Street November 6, 2009 18th Floor San Francisco,CA 94108 t.415.391.5780 f.415.391.5784 William C. Statler Director of Finance City of San Luis Obispo 990 Palm Street San Luis Obispo, California 93401 Re: City Council Approval of Housing Project for University Ministry Board of the Santa Barbara Presbytery Dear Bill: You have asked us to review the request made to the City Council on behalf of the California Municipal Finance Authority (the "Authority") to adopt a resolution which approves the financing of a campus ministry and student housing development located at 1468 E. Foothill Blvd. in the San Luis Obispo, California (the "Project"). The Project will be constructed by the University Ministry Board of the Santa Barbara Presbytery, a California nonprofit religious corporation. Financing for the Project will be provided from the proceeds of revenue bonds issued by the Authority (the "Bonds"). The firm of Holland & Knight LLP will act as bond counsel to the Authority in connection with the issuance of the Bonds. In connection with the financing, the Authority has requested the City to become a member of the Authority pursuant to and in accordance with a Joint Exercise of Powers Agreement dated as of January 1, 2004 (the "Joint Powers Agreement"), which the City has been requested to execute. We understand that the City will not be asked to enter into any of the legal agreements relating to the financing of the Project, other than the Joint Powers Agreement. We have reviewed the proposed Resolution and the Joint Powers Agreement, together with pertinent laws of the State of California and federal tax law relating to the Bonds. Based on our review, we can advise you that (1) the approval by the City Council is required under applicable federal tax law in order for the Project to be financed on a tax-exempt basis, and (2) neither the adoption of the Resolution by the City Council, nor the entering into of the Joint Powers Agreement by the City, will cause the City to incur any financial obligations with respect to the financing of the Project. A PROFESSIONAL I AW r.nRPnRATInN •••••• •��-��-����T William C. Stader Attachment 3 Letter Re: University Ministry Board of the Santa Barbara Presbytery November 6,2009 Page 2 We are further of the opinion that the City will have no legal, financial or moral obligation or responsibility with respect to the issuance of the Bonds. We note that Section 2 of the Resolution includes a statement that "The City shall have no responsibility or liability whatsoever with respect to the Bonds." We also note that under Section 3 of the Joint Powers Agreement, the "debts, liabilities and obligations [of the Authority] do not constitute debts, liabilities or obligations of any Members" and that under Section 8 of the Joint Powers Agreement the bonds of the Authority do not constitute a debt of the City, and that the City is not obligated to pay the principal of, premium, if any, or interest on the Bonds or other costs incidental thereto. Please let me know if we can be of any further help in this matter. e y ours, s C arles F. Adams -2- e oonrrcQlnuei i ew nnoonoennu Attachment 4 Cal' 0II11a, Tax-Exempt Financing MunicipaC`Fioauce Authonry t Throughout California 2111 Palomar Airport Road, Suite 320 •Carlsbad, CA 92011 • (760)93071221 • Fax(760)683-3390 MEMBERSHIP LIST CITIES &TOWNS COUNTIES Alameda Rancho Santa Margarita Alameda Anaheim Red Bluff Contra Costa Bakersfield Redding Fresno Calexico Riverside Imperial Calipatria Salinas Kings Calistoga San Francisco Marin Carlsbad San Jacinto Monterey Claremont: San Joaquin Orange Clovis San Jose Riverside Colton Santa Ana Sacramento Commerce Santa Barbara San Bernardino Corona Santa Clarita San Diego Culver City Santa Paula San Francisco Daly City Santee San Joaquin EI Centro Saratoga San Mateo EI Monte Shafter Santa Barbara EI Segundo Stockton Santa Clara Fairfax Torrance Santa Cruz Fairfield Vacaville Shasta Fillmore Vallejo Solano Fresno Vernon Sonoma Grass Valley Victonrille Tulare Imperial Beach Wasco Ventura Industry Watsonville Inglewood Windsor Kerman Winters La Mirada Yountville La Quinta Los Angeles Marina Menlo Park Milpitas Montclair Napa SPECIAL DISTRICTS Oakdale Northern Inyo County Local Hospital Oakland Sierra Kings Health Care Oxnard Tulare Local Health Care Palm Springs Washington Township Healthcare Palo Alto Petaluma Pomona Poway Rancho Cordova Rancho Cucamonga FN ! - 10 8/25/2009 Attachment 5 RESOLUTION NO. (2009 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING THE ISSUANCE OF BONDS BY THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY FOR THE PURPOSE OF FINANCING OR REFINANCING A HOUSING DEVELOPMENT FOR UNIVERSITY MINISTRY BOARD OF THE SANTA BARBARA PRESBYTERY AND APPROVING, AUTHORIZING,AND DIRECTING EXECUTION OF A JOINT EXERCISE OF POWERS AGREEMENT RELATING TO THE AUTHORITY,AND CERTAIN OTHER MATTERS RELATING THERETO WHEREAS, pursuant Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California(the"Act"), certain public agencies (the "Members") have entered into a Joint Exercise of Powers Agreement, effective on January 1, 2004 (the "Agreement") in order to form the California Municipal Finance Authority (the "Authority"), for the purpose of promoting economic, cultural and community development, and in order to exercise any powers common to the Members, including the issuance of bonds, notes or other evidences of indebtedness; and WHEREAS, the City of San Luis Obispo (the "City"), has determined that it is in the public interest and for the public benefit that the City become a Member of the Authority in order to facilitate the promotion of economic, cultural and community development activities in the City, including the financing of projects therefor by the Authority; and WHEREAS, there is now before the Council the form of the Agreement; and WHEREAS, the Agreement has been filed with the City, and the members of the Council, with the assistance of its staff,have reviewed said document; and WHEREAS, the Califomia Municipal Finance Authority (the "Authority") is authorized to issue and sell revenue bonds for the purpose, among others, of financing or refinancing the construction of capital projects;and WHEREAS, the University Ministry Board of the Santa Barbara Presbytery, a California nonprofit religious corporation (the `Borrower") has requested that the Authority issue and sell revenue bonds in the maximum principal amount of$5,000,000 (the "Bonds") for the purpose of making a loan to the Borrower, to enable the Borrower to finance or refinance the costs of financing a housing development located at 1468 E. Foothill Blvd. San Luis Obispo, California (the"Project"); and WHEREAS, in order for the interest on the Bonds to be tax-exempt, Section 147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), requires that an "applicable elected representative" with respect to the Authority hold a public hearing on the issuance of the Bonds and approve the.issuance of the Bonds following such hearing; and WHEREAS, the Authority has determined that the Council is an "applicable elected representative" for purposes of holding such hearing; and WHEREAS, notice of such public hearing has been duly given as required by the Code, and the Council has heretofore held such public hearing at which all interested persons were 'PH ( - d i Resolution No. (2009 Series) A ftaChment 5 Page 2 given an opportunity to be heard on all matters relative to the financing or refinancing of the Project and the Authority's issuance of the Bonds therefor; and WHEREAS,it is in the public interest and for the public benefit that the Council approve the issuance of the Bonds by the Authority for the aforesaid purposes; NOW, THEREFORE, BE IT RESOLVED by the Council of the City of San Luis Obispo as follows; Section 1. The Agreement is hereby approved and the Mayor is hereby authorized and directed to execute said document, and the City Clerk is hereby authorized and directed to attest thereto. Section 2. The Council hereby approves the issuance of the Bonds by the Authority for the purpose of providing funds to make a loan to the Borrower to enable the Borrower to finance or refinance the Project. Section 3. The issuance of the Bonds shall be subject to the approval of the Authority of all financing documents relating thereto to which the Authority is a party. The City shall have no responsibility or liability whatsoever with respect to the Bonds. Section 4. The adoption of this Resolution shall not obligate the City or any department thereof to (i) provide any financing to acquire or construct the Project or any refinancing of the Project; (ii) approve any application or request for or take any other action in connection with any planning approval, permit or other action necessary for the acquisition, rehabilitation or operation of the Project; (iii) make any contribution or advance any funds whatsoever to the Authority; or (iv) take any further action with respect to the Authority or its membership therein. Section 5. The Mayor, the Clerk and all other proper officers and officials of the City are hereby authorized and directed to execute such other agreements, documents and certificates, and to perform such other acts and deeds, as may be necessary or convenient to effect the purposes of this Resolution and the transactions herein authorized. Section 6. The Clerk shall forward a certified copy of this Resolution and an originally executed Agreement to the Authority in care of its counsel: Harriet M. Welch, Esq.. Squire, Sanders & Dempsey LLP. 555 South Flower St., Suite 3100 Los Angeles, CA 90071-2300 Section 7. This resolution shall take effect immediately upon its passage. Resolution No. (2009 Series) Attachment 5 Page 3 Upon motion of seconded by , and on the following roll call vote: AYES: NOES: ABSENT: the foregoing resolution was adopted on November 17, 2009.. David F. Romero, Mayor ATTEST: Elaina Cano, Interim City Clerk APPROVED AS TO FO �1 nathan P. Lowell, City Attorney p t4 L3 Attachment 6 JOINT EXERCISE OF POWERS AGREEMENT RELATING TO THE CALIFORNIA MUNICIPAL FINANCE AUTHORITY THIS AGREEMENT, dated as of January 1, 2004, among the parties executing this Agreement (all such parties, except those which have withdrawn as provided herein, are referred to as the "Members" and those parties initially executing this Agreement are referred to as the "Initial Members"): WITNESSETH WHEREAS, pursuant to Title 1, Division 7, Chapter 5 of the California Government Code (in effect as of the date hereof and as the same may from time to time be amended or supplemented, the "Joint Exercise of Powers Act'), two or more public agencies may by agreement jointly exercise any power common to the contracting parties; and WHEREAS, each of the Members is a "public agency" as that term is defined in Section 6500 of the Joint Exercise of Powers Act; and WHEREAS, each of the Members is empowered by law to promote economic, cultural and community development, including, without limitation, the promotion of opportunities for the creation or retention of employment, the stimulation of economic activity, the increase of the tax base, and the promotion of opportunities for education, cultural improvement and public health, safety and general welfare; and WHEREAS, each of the Members may accomplish the purposes and objectives described in the preceding preamble by various means, including through making grants, loans or providing other financial assistance to governmental and nonprofit organizations; and WHEREAS, each Member is also empowered by law to acquire and dispose of real property for a public purpose; and WHEREAS, the Joint Exercise of Powers Act authorizes the Members to create a joint exercise of powers entity with the authority to exercise any powers common to the Members, as specified in this Agreement and to exercise the additional powers granted to it in the Joint Exercise of Powers Act and any other applicable provisions of the laws of the State of California; and WHEREAS, a public entity established pursuant to the Joint Exercise of Powers Act is empowered to issue or execute bonds, notes, commercial paper or any other evidences of indebtedness, including leases or installment sale agreements or certificates of participation therein (herein "Bonds"), and to otherwise undertake financing programs under the Joint Exercise of Powers Act or other applicable provisions of the laws of the State of California to accomplish its public purposes; and �Nl - I � -- Attachment 6 WHEREAS, the Members have determined to specifically authorize a public entity authorized pursuant to the Joint Exercise of Powers Act to issue Bonds .pursuant to the Joint Exercise of Powers Act or other applicable provisions of the laws of the State of California; and WHEREAS, it is the desire of the Members to use a public entity established pursuant to the Joint Exercise of Powers Act to undertake the financing and/or refinancing of projects of any nature, including, but not limited to, capital or working capital projects, insurance, liability or retirement programs or facilitating Members use of existing or new financial instruments and mechanisms; and WHEREAS, it is further the intention of the Members that the projects undertaken will result in significant public benefits to the inhabitants of the jurisdictions of the Members; and WHEREAS, by this Agreement, each Member desires to create and establish the "California Municipal Finance Authority" for the purposes set forth herein and to exercise the powers provided herein; NOW, THEREFORE, the Members, for and in consideration of the mutual promises and agreements herein contained, do agree as follows: Section 1. Purpose. This Agreement is made pursuant to the provisions of the Joint Exercise of Powers Act. The purpose of this Agreement is to establish a public entity for the joint exercise of powers common to the Members and for the exercise of additional powers given to a joint powers entity under the Joint Powers Act or any other applicable law, including, but not limited to, the issuance of Bonds for any purpose or activity permitted under the Joint Exercise of Powers Act or any other applicable law. Such purpose will be accomplished and said power exercised in the manner hereinafter set forth. Section 2. Term. This Agreement shall become effective in accordance with Section 17 as of the date hereof and shall continue in full force and effect until such time as it is terminated in writing by all the Members; provided, however, that this Agreement shall not terminate or be terminated until all Bonds issued or caused to be issued by the Authority (defined below) shall no longer be outstanding under the terms of the indenture, trust agreement or other instrument pursuant to which such Bonds are issued, or unless a successor to the Authority assumes all of the Authority's debts, liabilities and obligastions. Section 3. Authority. A. CREATION AND POWERS OF AUTHORITY. Pursuant to the Joint Exercise of Powers Act, there is hereby created a public entity to be known as the "California Municipal Finance Authority (the "Authority"), and said Authority shall be a public entity separate and apart from the Members. Its PR ( -(5 - Attachment 6 debts, liabilities and obligations do not constitute debts, liabilities or obligations of any Members. B. BOARD. The Authority shall be administered by the Board of Directors (the `Board," or the "Directors" and each a "Director") of the California Foundation for Stronger Communities, a nonprofit public benefit corporation organized under the laws of the State of California (the "Foundation'), with each such Director serving in his or her individual capacity as a Director of the Board. The Board shall be the administering agency of this Agreement and, as such, shall be vested with the powers set forth herein, and shall administer this Agreement in accordance with the purposes and functions provided herein. The number of Directors, the appointment of Directors, alternates and successors, their respective terms of office, and all other provisions relating to the qualification and office of the Directors shall be as provided in the Articles and Bylaws of the Foundation, or by resolution of the Board adopted in accordance with the Bylaws of the Foundation. All references in this Agreement to any Director shall be deemed to refer to and include the applicable alternate Director, if any, when so acting in place of a regularly appointed Director. Directors may receive reasonable compensation for serving as such, and shall be entitled to reimbursement for any expenses actually incurred in connection with serving as a Director, if the Board shall determine that such expenses shall be reimbursed and there are unencumbered funds available for such purpose. The Foundation may be removed as administering agent hereunder and replaced at any time by amendment of this Agreement approved as provided in Section 16; provided that a successor administering agent of this Agreement has been appointed and accepted its duties and responsibilities under this Agreement. C. OFFICERS; DUTIES; OFFICIAL BONDS. The officers of the Authority shall be the Chair, Vice-Chair, Secretary and Treasurer (defined below). The Board, in its capacity as administering agent of this Agreement, shall elect a Chair, a Vice-Chair, and a Secretary of the Authority from among Directors to serve until such officer is re-elected or a successor to such office is elected by the Board. The Board shall appoint one or more of its officers or employees to serve as treasurer, auditor, and controller of the Authority (the "Treasurer") pursuant to Section 6505.6 of the Joint Exercise of Powers Act to serve until such officer is re-elected or a successor to such office is elected by the Board. Subject to the applicable provisions of any resolution, indenture, trust agreement or other instrument or proceeding authorizing or securing Bonds (each such resolution, indenture, trust agreement, instrument and proceeding being herein referred to as an "Indenture") providing for a trustee or other fiscal agent, and except as may otherwise be :1141- l(0 - Attachment 6 specified by resolution of the Board, the Treasurer is designated as the depositary of the Authority to have custody of all money of the Authority, from whatever source derived and shall have the powers, duties and responsibilities specified in Sections 6505, 6505.5 and 6509.5 of the Joint Exercise of Powers Act. The Treasurer of the Authority is designated as the public officer or person who has charge of, handles, or has access to any property of the Authority, and such officer shall file an official bond with the Secretary of the Authority in the amount specified by resolution of the Board but in no event less than $1,000. The Board shall have the power to appoint such other officers and employees as it may deem necessary and to retain independent counsel, consultants and accountants. The Board shall have the power, by resolution, to the extent permitted by the Joint Exercise of Power Act or any other applicable law, to delegate any of its functions to one or more of the Directors or officers, employees or agents of the Authority and to cause any of said Directors, officers, employees or agents to take any actions and execute any documents or instruments for and in the name and on behalf of the Board or the Authority. D. MEETINGS OF THE BOARD. (1) Ralph M. Brown Act. All meetings of the Board, including, without limitation, regular, adjourned regular, special, and adjourned special meetings shall be called, noticed, held and conducted in accordance with the provisions of the Ralph M. Brown Act (commencing with Section 54950 of the Government Code of the State of California), or any successor legislation hereinafter enacted(the "Brown Act"). (2) Regular Meetings. The Board shall provide for its regular meetings; provided, however, it shall hold at least one regular meeting each year. The date, hour and place of the holding of the regular meetings shall be fixed by resolution of the Board. To the extent permitted by the Brown Act, such meetings may be held by telephone conference. (3) Special Meetings. Special meetings of the Board may be called in accordance with the provisions of Section 54956 of the Government Code of the State of California. To the extent permitted by the Brown Act, such meetings may be held by telephone conference. Attachment 6 (4) Minutes. The Secretary of the Authority shall cause to be kept minutes of the regular, adjourned regular, special, and adjourned special meetings of the Board and shall, as soon as possible after each meeting, cause a copy of the minutes to be forwarded to each Director. (5) Quorum. A majority of the Board shall constitute a quorum for the transaction of business. No action may be taken by the Board except upon the affirmative vote of a majority of the Directors constituting a quorum, except that less than a quorum may adjourn a meeting to another time and place. E. RULES AND REGULATIONS. The Authority may adopt, from time to time, by resolution of the Board such rules and regulations for the conduct of its meetings and affairs as may be required. Section 4. Powers. The Authority shall have the power, in its own name, to exercise the common powers of the Members and to exercise all additional powers given to a joint powers entity under any of the laws of the State of California, including, but not limited to, the Joint Exercise of Powers Act, for any purpose authorized under this Agreement. Such powers shall include the common powers specified in this Agreement and may be exercised in the manner and according to the method provided in this Agreement. The Authority is hereby authorized to do all acts necessary for the exercise of such power, including, but not limited to, any of all of the following: to make and enter into contracts; to employ agents and employees; to acquire, construct, provide for maintenance and operation of, or maintain and operate, any buildings, works or improvements; to acquire, hold or dispose of property wherever located; to incur debts, liabilities or obligations; to receive gifts, contributions and donations of property, funds, services, and other forms of assistance from person, firms, corporations and any governmental entity; to sue and be sued in its own name; to make grants, loans or provide other financial assistance to governmental and nonprofit organizations (e.g., the Members or the Foundation) to accomplish any of its purposes; and generally to do any and all things necessary or convenient to accomplish its purposes. Without limiting the generality of the foregoing, the Authority may issue or cause to be issued Bonds, and pledge any property or revenues as security to the extent permitted under the Joint Exercise of Powers Act, or any other applicable provision of law; provided, however, the Authority shall not issue Bonds with respect to any project located in the jurisdiction of one or more Members unless the governing body of any such Member, or its duly authorized representative, shall approve, conditionally or unconditionally, the project, including the issuance of Bonds therefor. Such approval may be evidenced by resolution, certificate, order, report or such other means of written approval of such project as may be selected by the Member (or its authorized representative) whose approval is required. No such approval shall be required in PAI - 16 Attachment 6 connection with Bonds that refund Bonds previously issued by the Authority and approved by the governing board of a Member. The manner in which the Authority shall exercise its powers and perform its duties is and shall be subject to the restrictions upon the manner in which a California general law city could exercise such powers and perform such duties. The manner in which the Authority shall exercise its powers and perform its duties shall not be subject to any restrictions applicable to the manner in which any other public agency could exercise such powers or perform such duties, whether such agency is a party to this Agreement or not. Section 5. Fiscal Year. For the purposes of this Agreement, the term "Fiscal Year" shall mean the fiscal year as established from time to time by resolution of the Board, being, at the date of this Agreement, the period from July I to and including the following June 30, except for the first Fiscal Year which shall be the period from the date of this Agreement to June 30, 2004. Section 6. Disposition of Assets. At the end of the term hereof or upon the earlier termination of this Agreement as set forth in Section 2, after payment of all expenses and liabilities of the Authority, all property of the Authority both real and personal shall automatically vest in the Members in the manner and amount determined by the Board in its sole discretion and shall thereafter remain the sole property of the Members; provided, however, that any surplus money on hand shall be returned in proportion to the contributions made by the Members. Section 7. Bonds. From time to time the Authority shall issue Bonds, in one or more series, for the purpose of exercising its powers and raising the funds necessary to carry out its purposes under this Agreement. The services of bond counsel, financing consultants and other consultants and advisors working on the projects and/or their financing shall be used by the Authority. The expenses of the Board shall be paid from the proceeds of the Bonds or any other unencumbered funds of the Authority available for such purpose. Section 8. Bonds Only Limited and Special Obligations of Authority. The Bonds, together with the interest and premium, if any, thereon, shall not be deemed to constitute a debt of any Member or pledge of the faith and credit of the Members or the Authority. The Bonds shall be only special obligations of the Authority, and the Authority shall under no circumstances be obligated to pay the Bonds except from revenues and other funds pledged therefor. Neither the Members nor the Authority shall be obligated to pay the principal of, premium, if any, or interest on the Bonds, or other costs incidental thereto, except from the revenues and funds pledged therefor, and neither the faith and credit nor the taxing power of the Members nor the faith and credit of the Authority shall be pledged to the payment of the -P" - iq Attachment 6 principal of, premium, if any, or interest on the Bonds nor shall the Members or the Authority in any manner be obligated to make any appropriation for such payment. No covenant or agreement contained in any Bond or related document shall be deemed to be a covenant or agreement of any Director, or any officer, employee or agent of the Authority in his or her individual capacity and neither the Board of the Authority nor any Director or officer thereof executing the Bonds shall be liable personally on any Bond or be subject to any personal liability or accountability by reason of the issuance of any Bonds. Section 9. Accounts and Reports. All funds of the Authority shall be strictly accounted for. The Authority shall establish and maintain such funds and accounts as may be required by good accounting practice and by any provision of any Indenture (to the extent such duties are not assigned to a trustee of Bonds). The books and records of the Authority shall be open to inspection at all reasonable times by each Member. The Treasurer of the Authority shall cause an independent audit to be made of the books of accounts and financial records of the Authority by a certified public accountant or public accountant in compliance with the provisions of Section 6505 of the Joint Exercise of Powers Act. In each case the minimum requirements of the audit shall be those prescribed by the State Controller for special districts under Section 26909 of the Government Code of the State of California and shall conform to generally accepted auditing standards. When such an audit of accounts and records is made by a certified public accountant or public accountant, a report thereof shall be filed as a public record with each Member and also with the county auditor of each county in which a Member is located; provided, however, that to the extent permitted by law, the Authority may, instead of filing such report with each Member and such county auditor, elect to post such report as a public record electronically on a website designated by the Authority. Such report if made shall be filed within 12 months of the end of the Fiscal Year or Years under examination. The Treasurer is hereby directed to report in writing on the first day of July, October, January, and April of each year to the Board and the Members which report shall describe the amount of money held by the Treasurer for the Authority, the amount of receipts since the last such report, and the amount paid out since the last such report (which may exclude amounts held by a trustee or other fiduciary in connection with any Bonds to the extent that such trustee or other fiduciary provided regular reports covering such amounts.) Any costs of the audit, including contracts with, or employment of, certified public accountants or public accountants in making an audit pursuant to this Section, shall be bome by the Authority and shall be a charge against any unencumbered funds of the Authority available for that purpose. In any Fiscal Year the Board may, by resolution adopted by unanimous vote, replace the annual special audit with an audit covering a two-year period. Attachment 6 Section 10. Funds. Subject to the applicable provisions of any Indenture, which may provide for a trustee or other fiduciary to receive, have custody of and disburse Authority funds, the Treasurer of the Authority shall receive, have the custody of and disburse Authority funds pursuant to the accounting procedures developed under Sections 3.0 and 9, and shall make the disbursements required by this Agreement or otherwise necessary to carry out any of the provisions of purposes of this Agreement. Section 11. Notices.. Notices and other communications hereunder to the Members shall be sufficient if delivered to the clerk of the governing body of each Member; provided, however, that to the extent permitted by law, the Authority may, provide notices and other communications and postings electronically (including, without limitation, through email or by posting to a website). Section 12. Additional Members/Withdrawal of Members. Qualifying public agencies may be added as parties to this Agreement and become Members upon: (1) the filing by such public agency with the Authority of an executed counterpart of this Agreement, together with a copy of the resolution of the governing body of such public agency approving this Agreement and the execution and delivery hereof, and (2) adoption of a resolution of the Board approving the addition of such public agency as a Member.. Upon satisfaction of such conditions, the Board shall file such executed counterpart of this Agreement as an amendment hereto, effective upon such filing.. A Member may withdraw from this Agreement upon written notice to the Board; provided, however, that no such withdrawal shall result in the dissolution of the Authority so long as any Bonds remain outstanding. Any such withdrawal shall be effective only upon receipt of the notice of withdrawal by the Board which shall acknowledge receipt of such notice of withdrawal in writing and shall file such notice as an amendment to this Agreement effective upon such filing. Section 13. Indemnification. To the full extent permitted by law, the Board may authorize indemnification by the Authority of any person who is or was a Director or an officer, employee of other agent of the Authority, and who was or is a party or is threatened to be made a party to a proceeding by reason of the fact that such person is or was such a Director or an officer, employee or other agent of the Authority, against expenses, including attorneys fees, judgments, fines, settlements and other amounts actually and reasonably incurred in connection with such proceeding, if such person acted in good faith in a manner such person reasonably believed to be in the best interests of the Authority and, in the case of a criminal proceeding, had no reasonable cause to believe the conduct of such person was unlawful and, in the case of an action by or in the right of the Authority, acted with such care, including reasonable inquiry, as an ordinarily prudent person in a like position would use under similar circumstances. Attachment 6 Section 14. Contributions and Advances. Contributions or advances of public funds and of the use of personnel; equipment or property may be made to the Authority by the Members for any of the purposes of this Agreement. Payment of public funds may be made to defray the cost of any such contribution or advance. Any such advance may be made subject to repayment, and in such case shall be repaid, in the manner agreed upon by the Authority and the Member making such advance at the time of such advance. It is mutually understood and agreed to that no Member has any obligation to make advances or contributions to the Authority to provide for the costs and expenses of administration of the Authority, even though any Member may do so. The Members understand and agree that a portion of the funds of the Authority that otherwise may be allocated or distributed to the Members may instead be used to make grants, loans or provide other financial assistance to governmental units and nonprofit organizations (e.g., the Foundation) to accomplish any of the governmental unit's or nonprofit organization's purposes. Section 15. Immunities. All of the privileges and immunities from liabilities, exemptions from laws, ordinances and rules, and other benefits which apply to the activity of officers, agents or employees of Members when performing their respective functions within the territorial limit's of their respective public agencies, shall apply to the same degree and extent to the Directors, officers, employees, agents or other representatives of the Authority while engaged in the performance of any of their functions or duties under the provisions of this Agreement. Section 16. Amendments. Except as provided in Section 12 above, this Agreement shall not be amended, modified, or altered, unless the negative consent of each of the Members is obtained. To obtain the negative consent of each of the Members, the following negative consent procedure shall be followed: (a)the Authority shall provide each Member with a notice at least sixty (60) days prior to the date such proposed amendment is to become effective explaining the nature of such proposed amendment and this negative consent procedure; (b) the Authority shall provide each Member who did not respond a reminder notice with a notice at least thirty (30) days prior to the date such proposed amendment is to become effective; and (c) if no Member objects to the proposed amendment in writing within sixty (60) days after the initial notice, the proposed amendment shall become effective with respect to all Members. Section 17. Effectiveness. This Agreement shall become effective and be in full force and effect and a legal, valid and binding obligation of each of the Members on the date that the Board shall have received from two of the Initial Members an executed counterpart of this Agreement, together with a certified copy of a resolution of the governing body of each such Initial Member approving this Agreement and the execution and delivery hereof. PH � -aa- Attachment 6 Section 18. Partial Invaliditv. If any one or more of the terms, provisions, promises, covenants or conditions of this Agreement shall to any extent be adjudged invalid, unenforceable, void or voidable for any reason whatsoever by a court of competent jurisdiction, each and all of the remaining terms, provisions, promises, covenants and conditions of this Agreement shall not be affected thereby, and shall be valid and enforceable to the fullest extent permitted by law. Section 19. Successors. This Agreement shall be binding upon and shall inure to the benefit of the successors of the parties hereto. Except to the extent expressly provided herein, no Member may assign any right or obligation hereunder without the consent of the other Members. Section 20. Miscellaneous. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. The section headings herein are for convenience only and are not to be construed as modifying or governing the language in the section referred to. Wherever in this Agreement any consent or approval is required, the same shall not be unreasonably withheld. This Agreement shall be governed under the laws of the State of California. This Agreement is the complete and exclusive statement of the agreement among the Members, which supercedes and merges all prior proposals, understandings, and other agreements, whether oral, written, or implied in conduct, between and among the Members relating to the subject matter of this Agreement. ��-1 ( -a3 Attachment 6 IN WITNESS WHEREOF, the City of San Luis Obispo has caused this Agreement to be executed and attested by its duly authorized representatives as of the_day of 12009. Member: CITY OF SAN LUIS OBISPO By Name: Title: ATTEST: Clerk PP i -aT