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HomeMy WebLinkAbout03/03/2009, B2 - PUBLIC SAFETY COMMUNICATIONS AND EMERGENCY OPERATIONS CENTER FINANCING council MmungDam 3-3-09 j acEnba RepoRt lwn,NumL�. B� C I TY O F SAN LUIS O B IS PO FROM: Bill Statler, Director of Finance & Information Technology Debbie Malicoat, Finance Manager SUBJECT: PUBLIC SAFETY COMMUNICATIONS AND EMERGENCY OPERATIONS CENTER FINANCING RECOMMENDATION 1. Adopt a resolution approving the issuance of lease-revenue bonds to assist in financing the Public Safety Communications and Emergency Operations Center project. 2. Revise the project budget and funding sources downward based on favorable bid results. DISCUSSION Overview The attached resolution implements the financing previously approved by the Council for the project. This project has two components: 1. dispatch center/fire storage building and 2. radio system improvements. As reflected in the revised budgets below, there will be savings in the project costs due to the recent bid results. The really good news is that this will result in a significant project that will cost the City about $1.1 million less than budgeted. Background The Council finalized the budget and funding sources for this project on March 15, 2007; and adopted a resolution of intention to issue tax-exempt bonds to assist in financing this project on July 17, 2007. Construction of the building is underway and proposals have been received for the radio system components. As such, it is now time to proceed with the debt financing for this project. Construction bids were opened for the dispatch center/fire storage building in October 2008 and the contract was awarded to Carroll Building Company on November 5, 2008. Three proposals were received by the February 11, 2009 due date for the radio system component. While there is still analysis to be done, initial reviews of the proposals indicate that this technology has not gotten cheaper since the original budget was approved. It appears that we have two proposals that will fall within our current budget. However, to ensure adequate funding from the bond proceeds, we recommend adding $250,000 to the radio system project budget as reflected below. �a- Public Safety Communication and Emergency Operations Center Financing Page 2 Project Budget and Funding Sources Proposed'bispatch Center/Fire Storage Budget Approved Design and Engineering $524,000 528,000 4,000 Construction Management& Inspection 512,000 542,060 30,000 Construction 5,219,000 3,781,700 (1,437,300) Equipment Acquisition 529,000 628,500 99,500 Sub Total 6,784,000 5,480,200 (1,303,800) Contingency 425,000 425,000 __ 0 Total $7;209,000 5,905;200 (1,303,800) Improvements • Proposed Study and Design 142,700 142,700 Infrastructure and Equipment 3,280,000 3,530,000 250,000 Site Improvements 249,000 249,000 - Generators`. Fire Stations 2 &3 67,700 67,700 - FCC License Fee 9,000 9,000 - Project Management and Testing 100,100 100,100 - Contin enc 7% 269,400 269,400 _ - Total 4,117,900 1 4,367,9001 250,000 Total Project Budget 1 $11,326,900 1 10,273,10011,053,800 • . . Dispatch, Radio Center System Total Pay-As-You-Go and Other City Funding 375,000 262,000 637,000 Debt Financing 6,834,000 3,855,900 10,689,900 Total $7,209,000 $4;117,900 $11,326,900 Project . ..sed budget) Dispatch . . - Dispatch Radio Center System Total Pay-As-You-Go and Other City Funding 375,000 262,000 637,000 Debt Financing 5,530,200 4;105,900 9;636,100 Total $5,905,200 $4,367,900 $10,273,100 As reflected above, $9.6 million of the project cost will be funded by the bond issue. 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 2007-09 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. 3C - i Public Safety Communication and Emergency Operations Center Financing Page 3 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 $9.6 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 underwriter's discount) that will be funded from the financing, the maximum amount of the new bond issue is not to exceed $10.8 million (although it will likely be less). Debt service obligations on the bonds will be the split between the General Fund and Enterprise Funds based on benefit from the improvements. The San Luis Obispo Capital Improvement Board (Board) will issue the bonds. To secure the bond repayments, the Board will lease City Hall and the Police Station 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. Proposed Financing Term Based on the anticipated life cycle for the improvements, the radio system will be financed for a term of 10 years and is referred to as "Series A" of the debt issuance. The dispatch center/fire storage building will be financed for a term of 30 years and is referred to as "Series B" of the debt issuance. 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 City Hall and the Police Station to the City. 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 City Hall and the Police Station to the Board. Pa-3 J Public Safety Communication and Emergency Operations Center Financing Page 4 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. Official 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. However, given uncertainties in the recent financial market, if this does not result in favorable bids, the Director of Finance & Information Technology is authorized to pursue a negotiated sale. Credit Rating Agency Presentations There are.three major municipal credit rating agencies: Fitch, Moody's and Standard & Poor's. 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. Based on our past experience, we plan to use Fitch and Standard &Poor's for this bond issue. As we have in the past on all new issues, the 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. 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 financial challenges. 2. Answer any questions that they may have about the nature and structure of this particular financing. 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. Public Safety Communication and Emergency.Operations Center Financing Page 5 Project Financing Schedule The following outlines key dates in refinancing these bonds: Task Dalt-e-1 Rating . - Rating agency/bond insurer presentations February 9 Council and Capital Improvement Board approval of refinancing March 3 Bid opening March 17 Bond closing and receipt of funds March 31 FISCAL IMPACT The average annual debt service for the first ten years of the bonds will be approximately .$981,000. This will drop to approximately $451,000 after the tenth year, when the radio system improvement portion will be paid off: Payments will commence on December 1, 2010 and will be allocated between the General Fund and Enterprise Funds as follows: D• . Fire Percent Dispatch Storage Radio Benefit Center Buildin System Total General 84% $ 353,600 30,000 445,200 828,800 Water 7% 29,500 37,100 66,600 Sewer 8% 33,700 42,400 76,100 Parking 1%1 4,200 5,300. - _ - ___. 9,500. Total 1 100% $ 42-1,000 30,000 1 530;000 981,000 Both recent five-year fiscal forecast and the 2008-09 Financial Plan Supplement anticipated this financing and the estimated debt service is consistent with these projections.. The 2009-11 Financial Plan will include 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 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 Public Safety Communications and Emergency Operations Center project. AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE 1. hidenture of Trust Public Safety Communication and Emergency Operations Center Financing Page 6 2. Lease Agreement 3. Site Lease 4. Assignment Agreement 5. Official Statement 6. Financing Analysis Prepared by Fieldman Rolapp G:\Finance Division\Revenue Division\Debt Financings\2009 Dispatch Center and Radio System Financing\Counciland Board Agenda Reports\Council Agenda Report-Approve 2009 lease Revenue Bonds 3-3-09.doc - ATTACHMEi 4 � RESOLUTION NO. (2000 Series) RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO APPROVING DOCUMENTS AND ACTIONS RELATING TO THE FINANCING OF PUBLIC SAFETY COMMUNICATIONS AND EMERGENCY OPERATIONS CENTER FACILITY WHEREAS, the City of San Luis Obispo (the"City") is proceeding to acquire, construct, famish and equip a new public safety dispatch center and Fire Department storage facility located in the City, and improvements to the City's radio system for public safety communications (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 existing City Hall and Police Station (collectively, the "Leased Property") to the City of San Luis Obispo Capital Improvement Board (the "Board") under a Site Lease dated as of March 1, 2009 (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.2009 Lease Revenue Bonds (Public Safety Communications and Emergency Operations Center Project) in the aggregate principal amount of not to exceed $10,800,000 (the "Bonds") under an Indenture of Trust dated as of March 1, 2009 (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 Leased Property back to the City under a Lease Agreement dated as of March 1, 2009 (the "Lease Agreement"), under which the City is obligated to pay semiannual lease payments as rental for the Leased Property; and WHEREAS, under Section 906 of the City Charter, the City is authorized to lease real property by resolution of the City Council passed by the affirmative vote of at least 3/5 of all the members of the City Council; and WHEREAS, the City 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 City Council of.the City of San Luis Obispo as follows: SECTION 1. ApRroval of Financing Plan and Related.Leases. The City Council hereby approves the financing plan for the Project as set forth in this Resolution. To that end, the City 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 and Information Technology, whose execution thereof shall be conclusive evidence of the approval of any such changes or additions. The Director of Finance and Information Technology is hereby authorized and directed for and in the bc� r :7- Resolution No. (2009 Series) Page 2 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 City Council hereby finds and determines that it is authorized to enter into the Site Lease and the 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 City Council hereby approves the issuance of the Bonds by the Board in the aggregate principal amount of not to exceed $10,800,000 for the purpose of providing funds to finance the Project. The City Council hereby approves the sale of the Bonds by the Board on a competitive public sale basis or on a negotiated basis, 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 6.25% per annum, and the Bonds shall be sold for a purchase price which is at least equal to 98.75% of the par amount of the Bonds. SECTION 3. Official Statement. The City 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 and 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 City 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 City 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 and 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. (2009 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 3, 2009. David F. Romero, Mayor ATTEST: Audrey Hooper, Secretary APPROVED AS TO FORM: Jo th . Lowell, City Attorney