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HomeMy WebLinkAbout02-20-2018 Item 12 - General Fund Lease Bonds 2005, 2006, and 2009 refinancing - Joint CC Mtg w/ Public Financing Authority Meeting Date: 2/20/2018 FROM: Xenia Bradford, Finance Director Prepared by: PFM Consulting Xenia Bradford, Finance Director CITY COUNCIL SUBJECT: CITY APPROVING THE SALE OF THE LEASE REVENUE REFUNDING BONDS, SERIES 2018, EXECUTION OF BOND DOCUMENTS AND RELATED ACTIONS RECOMMENDATION Adopt a Resolution entitled “A Resolution of the City Council of the City of San Luis Obispo, California, authorizing the issuance, sale and delivery of San Luis Obispo Public Financing Authority Lease Revenue Refunding Bonds; the execution and delivery of a Continuing Disclosure Certificate, a Site Lease, a Facility Lease, and a Bond Purchase Agreement; the preparation and distribution of a preliminary and a final Official Statement relating to the aforesaid bonds; and certain other actions in connection with such transactions.” (Attachment A) PUBLIC FINANCING AUTHORITY SUBJECT: PUBLIC FINANCING AUTHORITY APPROVING THE SALE OF THE LEASE REVENUE REFUNDING BONDS, SERIES 2018, EXECUTION OF BOND DOCUMENTS AND RELATED ACTIONS. 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 Refunding Bonds; the execution and delivery of a Trust Agreement, a Site Lease, a Facility Lease, and a Bond Purchase Agreement; the preparation and distribution of a preliminary and a final Official Statement relating to the aforesaid bonds; and certain other actions in connection with such transactions.” (Attachment B) DISCUSSION The City of San Luis Obispo previously issued a series of bonds in 2005, 2006 and 2009 in order to fund various City infrastructure (the “Prior Bonds”). The amounts and purpose of each bond issuance is summarized in the table below: Packet Pg 195 12 Series Outstanding Par Call Date Purpose 2005 $3,510,000 Callable Refund Series 1996 bonds, which funded the fire station headquarters building 2006 $12,455,000 Callable 919 Palm Street Public Street Parking and City Office Project 2009 $6,280,000 6/1/2018 Public Safety Communications and Emergency Operations Center Project Total $22,245,000 In order to take advantage of favorable debt service rates, City staff is recommending that new bonds be issued (2018 Bonds) to refund the Prior Bonds. Total savings is estimated to be approximately $3,380,000 over the term of the new bonds based on current market conditions. The 2018 Bonds will be lease revenue bonds issued by the San Luis Obispo Public Financing Authority (the “PFA”). As required by law, the City will lease to the PFA the City administrative offices and parking facility at 919 Palm Street, which currently secure the 2006 Bonds. The PFA will then lease the property back to the City in exchange for rental payments which are estimated in the fiscal section below. The City’s rental payments will be assigned to the trustee of the 2018 Bonds and will be used to make the bond payments. This legal structure is the same as that of the Prior Bonds, but with the PFA serving in the role held by the Capital Improvement Board on the Prior Bonds. The proposed Resolution will authorize staff to proceed with the transaction provided it meets certain parameters. The paramount (or price of the lease revenue bond at the time of sale) will not exceed $22,000,000, aggregate net present value (NPV) savings will be at least 3% of the refunded principal, consistent with a common industry benchmark, and underwriter’s discount (otherwise may be described as fee) will not exceed 0.4% of the par amount of the bonds. All other cost of issuance are dependent on the scope of work whereas the underwriter’s discount payable to underwriter is based on actual paramount at time of sale. If staff in unable to meet these parameters, then further authorization by the Council will be required. The Resolution also approves the following transaction documents which are substantially in final forms: • Continuing Disclosure Certificate (Attachment C & F): Designates the City’s obligations to disclose financial information to bond investors • Site Lease (Attachment I & L): Leases certain property from the City to the PFA • Facility Lease (Attachment D & G): Leases the properties from the PFA back to the City • Preliminary Official Statement (Attachment E & H): Primary disclosure document used to market the 2018 Bonds to investors • Bond Purchase Agreement (Attachment K) – Details terms of the transaction between the City, PFA, and underwriter The financing team will be composed of City staff and several consulting firms and banking institutions whose specialize in this type of finance. PFM Financial Advisors LLC (PFM) will serve as municipal advisor. Raymond James & Associates, Inc. will serve as underwriter. Orrick, Herrington & Sutcliffe LLP will serve as bond and disclosure counsel. U.S. Bank is the trustee on the Prior Bonds and will continue to serve as trustee. Standard & Poor’s (S&P) will provide a Packet Pg 196 12 bond rating. The City may also engage a financial printer, escrow agent, escrow verification agent, escrow bidding agent, title insurance provider, and other providers as needed. Upon Council’s approval, staff and the financing team will proceed to execute a bond transaction that meets the parameters defined in the Resolution. The savings parameter is set conservatively in order to allow for flexibility but also require NPV savings to meet industry best practice standards of a minimum of 3% of refunded principal. All savings figures take into account underwriting fees and other costs of issuance. The table below shows good faith estimates provided by PFM of key statistics related to the 2018 Bonds based on current market conditions, though it is important to note that conditions could change prior to bond pricing. Value Estimate Notes Par Amount $18,145,000 - True Interest Cost 3.20% Measure of overall interest rate NPV Savings $2,570,000 (11.54%) - Finance Charges (transaction costs) $323,000 Underwriter’s discount plus costs of issuance Total Proceeds $22,900,000 Price paid for bonds less underwriter’s discount Total Payments $24,450,000 Total debt service The financing process is expected to be completed in April. The City and finance team will meet with S&P in late February or early March. Pricing will then occur in mid -March and closing will occur in early April. In addition to achieving debt service savings, the transaction will enable the City to unencumber certain leased assets that are currently pledged to the Prior Bonds, since the paramount (or price) of the 2018 Bonds will be significantly lower than that of the Prior Bonds. In particular, the City will seek to release the police facilities at 1042 Walnut Street and the fire department headquarters from the pledge associated with the refunding. This will provide the City greater flexibility for future financings related to its long-term capital plans. CONCURRENCES The City Administration department concurs with the recommendation. ENVIRONMENTAL REVIEW The California Environmental Quality Act does not apply to the recommended action in this report, because the action does not constitute a “Project” under CEQA Guidelines sec. 15278. FISCAL IMPACT The 2018 Bonds will result in annual debt service savings for the City. Cash flow savings are estimated to be approximately $3,380,000 over the term of the 2018 Bonds based on current market conditions. The table below shows annual cash flow savings. NPV savings are estimated Packet Pg 197 12 at $2,570,000, which is 11.54% of the refunded principal. The refunding will not alter the overall structure of debt repayment. The annual budgetary savings for the General Fund by fiscal year are shown in the “Net Difference” column, which reflects the difference between currently budgeted and projected payments to repay the debt and the estimated payments due based on expected savings of 11.54%. If the market conditions change between now and the estimated time of transaction in April, the net difference could increase or decrease. Existing Debt Service Projected Debt Service1 Difference Less Current Reserve Releases/Interest Earnings2 Net Difference 6/30/2018 2,443,410 2,419,036 (24,374) 24,374 0 6/30/2019 2,435,138 2,014,656 (420,481) 356,670 (63,811) 6/30/2020 1,892,888 1,475,656 (417,231) 76,116 (341,115) 6/30/2021 1,891,483 1,466,056 (425,426) 76,116 (349,310) 6/30/2022 1,887,260 1,465,456 (421,804) 76,116 (345,687) 6/30/2023 1,886,258 1,463,456 (422,801) 76,116 (346,685) 6/30/2024 1,887,863 1,470,056 (417,806) 76,116 (341,690) 6/30/2025 1,886,169 1,464,856 (421,312) 76,116 (345,196) 6/30/2026 2,006,749 1,468,256 (538,492) 664,116 125,624 6/30/2027 1,418,861 1,124,856 (294,005) 51,583 (242,422) 6/30/2028 1,414,268 1,118,456 (295,811) 51,583 (244,228) 6/30/2029 1,417,083 1,126,056 (291,026) 51,583 (239,443) 6/30/2030 1,417,564 1,122,056 (295,507) 51,583 (243,925) 6/30/2031 1,415,833 1,121,856 (293,976) 51,583 (242,393) 6/30/2032 1,416,433 1,119,406 (297,026) 51,583 (245,443) 6/30/2033 1,413,830 1,121,206 (292,624) 51,583 (241,041) 6/30/2034 1,473,720 1,112,106 (361,614) 114,820 (246,793) 6/30/2035 1,407,418 1,111,169 (296,249) 50,839 (245,410) 6/30/2036 1,411,823 1,114,294 (297,529) 1,055,397 757,868 6/30/2037 407,963 286,325 (121,638) 4,799 (116,839) 6/30/2038 408,125 287,875 (120,250) 5,787 (114,464) 6/30/2039 407,138 289,100 (118,038) 411,925 293,887 Savings 3,506,505 (3,378,516) NPV Savings (2,565,963) 1. Includes debt service already paid in FY2018 and cash contributions for budgeted debt service 2. Shows existing debt service reserves that would be released over time if no refunding takes place and interest earnings from existing reserves; years with reserve releases are highlighted in gray ALTERNATIVES The City could choose not to proceed with the refunding at this time. It is not possible to predict whether market conditions would be more or less favorable in the future. However, it is important to note that available savings will diminish over time unless interest rates decline because all of the Prior Bonds are currently callable. Packet Pg 198 12 Attachments: a - City Resolution b - Authority Resolution c - Council Reading File - Continuing Disclosure Certificate d - Council Reading File - Facility Lease e - Council Reading File - Preliminary Official Statement f - Council Reading File - Redline Continuing Disclosure Certificate g - Council Reading File - Redline Facility Lease h - Council Reading File - Redline Preliminary Official Statement i - Council Reading File - Redline Site Lease j - Council Reading File - Redline Trust Agreement k - Council Reading File - San Luis Obispo 2018 LRRBs BPA l - Council Reading File - Site Lease City of San Luis Obispo 2018 LRRB m - Council Reading File - Trust Agreement City of San Luis Obispo 2018 LRRB Packet Pg 199 12 R ______ RESOLUTION NO. ___ (2018 SERIES) A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN LUIS OBISPO, CALIFORNIA, AUTHORIZING THE ISSUANCE, SALE AND DELIVERY OF SAN LUIS OBISPO PUBLIC FINANCING AUTHORITY LEASE REVENUE REFUNDING BONDS; THE EXECUTION AND DELIVERY OF A CONTINUING DISCLOSURE CERTIFICATE, A SITE LEASE, A FACILITY LEASE, AND A BOND PURCHASE AGREEMENT; THE PREPARATION AND DISTRIBUTION OF A PRELIMINARY AND A FINAL 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”) previously entered into a lease agreement (the “1996 Lease”) with the City of San Luis Obispo Capital Improvement Board (the “Board”) for the purpose of financing the acquisition and construction of various properties to be used for municipal purposes of the City; WHEREAS, the Board previously issued its 1996 Lease Revenue Bonds (County of San Luis Obispo, California) in the aggregate principal amount of $7,100,000 (the “1996 Bonds”) pursuant to an Indenture of Trust dated as of June 1, 1996, by and between the Board and First Trust of California, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2005 Lease”) with the Board for the purpose of refinancing the 1996 Lease and to allow for the defeasance and refunding of the outstanding 1996 Bonds; WHEREAS, the Board previously further issued its 2005 Refunding Lease Revenue Bonds in the aggregate principal amount of $6,550,000 (the “2005 Bonds”) pursuant to an Indenture of Trust dated as of May 1, 2005, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2006 Lease”) with the Board for the purpose of financing the acquisition and construction of facilities located in the City to be used for public parking and City administrative office purposes; WHEREAS, the Board previously further issued its 2006 Lease Revenue Bonds (919 Palm Street Public Parking and City Office Project) in the aggregate principal amount of $16,160,000 (the “2006 Bonds”) pursuant to an Indenture of Trust dated as of April 1, 2006, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2009 Lease” and, collectively with the 2005 Lease and the 2006 Lease, the “Prior Leases”) with the Board for the purpose of financing the acquisition and construction of facilities located in the Packet Pg 200 12 Resolution No. _____ (2018 Series) Page 2 R ______ City to be used for a public safety dispatch center and Fire Department storage facility, and improvements to the City’s radio system for public safety communications purposes; WHEREAS, the Board previously further issued its 2009 Lease Revenue Bonds (Public Safety Communications and Emergency Operations Center Project) (Bank Qualified) in the aggregate principal amount of $10,705,000 (the “2009 Bonds” and, collectively with the 2005 Bonds and the 2006 Bonds, the “Prior Bonds”) pursuant to an Indenture of Trust dated as of March 1, 2009, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City proposes to refinance the Prior Leases to allow for the defeasance and refunding of the Prior Bonds; 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 refinancing any outstanding obligations; WHEREAS, in order to assist in refinancing the Prior Leases to defease and refund the Prior Bonds, it is proposed that the City lease certain of its real property, selected from a list including Fire Station No. 1, located at 2160 Santa Barbara, San Luis Obispo, and improvements thereon; the City Administrative Offices and Parking Structure, located at 919 Palm Street, San Luis Obispo; and improvements thereon; City Hall, located at 990 Palm Street, San Luis Obispo, and improvements thereon; and the Police Main Building, Storage Building and Vehicle Storage Garage, located at 1042 Walnut Street, San Luis Obispo, and improvements thereon (the properties so selected, collectively, 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 Refunding Bonds, Series 2018 in the aggregate principal amount of not to exceed $22,000,000 (the “Bonds”), pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the California Government Code (the “Government Code”), for the purpose of making a payment to the City pursuant to the Site Lease t o refinance the Prior Leases and defease and refund the Prior Bonds, fund a debt service reserve account, if deemed necessary, and pay costs of issuance associated with the Bonds; WHEREAS, it is further proposed that the Authority issue the Bonds pursuant to a trust agreement dated as of April 1, 2018 (the “Trust Agreement”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”); WHEREAS, the City, the Authority and Raymond James & Associates, Inc. (the “Underwriter”), as purchaser of the Bonds, will enter into a Bond Purchase Agreement (the “Bond Purchase Agreement”); WHEREAS, the City has prepared an official statement relating to the Bonds (the “Official Statement”) in preliminary form for use in connection with the marketing of the Bonds to potential purchasers and for use in final form for distribution to the actual purchasers thereof; Packet Pg 201 12 Resolution No. _____ (2018 Series) Page 3 R ______ WHEREAS, the City Council now wishes to further authorize the execution and delivery of a continuing disclosure certificate (the “Continuing Disclosure Certificate”) by the City to assist the Underwriter in satisfying their obligations under Rule 15c2-12 of the Securities Exchange Act of 1934; WHEREAS, in compliance with Government Code Section 5852.1, the City Council has obtained from PFM Financial Advisors LLC, as municipal advisor, the certain required good faith estimates, and such estimates have been disclosed at this meeting; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of San Luis Obispo as follows: SECTION 1. The foregoing recitals are true and correct and the City Council hereby so finds and determines. SECTION 2. In accordance with Section 6586 of the Government Code, the City Council hereby finds and determines that the proposed financing of said proposed public capital improvements will have one or more of the following public benefits to the citizens of the City, and that such benefits will be significant: (a) demonstrable savings in effective interest rate, bond preparation, bond underwriting or bond issuance costs; and (b) significant reductions in effective user charges levied by the City. Accordingly, the City Council hereby approves the refinancing of the Prior Leases to allow for the defeasance and refunding of the Prior Bonds proposed to be accomplished with the proceeds of the Bonds. SECTION 3. The City Council hereby approves the issuance of the Bonds by the Authority in an aggregate principal amount not to exceed $22,000,000 to refinance the Prior Leases and defease and refund the Prior Bonds, including funding a debt service reserve account if deemed necessary and paying costs of issuance and related fees and expenses; provided, however that such Bonds shall be sold on or before May 31, 2018, and shall mature no later than June 1, 2039. The Finance Director of the City is hereby directed to perform the duties imposed upon her by the provisions of the financing documents, including the Trust Agreement, the Site Lease and the Facility Lease, and is hereby authorized to act as treasurer of the Authority and to hold the funds and accounts in trust as a fiduciary for the owners of the Bonds as set forth in said documents. SECTION 4. The Site Lease, in substantially the form submitted to this meeting, is hereby approved. The City Manager or Finance Director of the City, or the designee of such officer (each, an “Authorized Officer”), each acting alone, is hereby authorized and directed, for and on behalf of the City, to execute and deliver the Site Lease in substantially said form, with such changes therein as any Authorized Officer, with the advice of the City Attorney and the City’s bond counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Packet Pg 202 12 Resolution No. _____ (2018 Series) Page 4 R ______ SECTION 5. 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 City, to execute and deliver the Facility Lease in substantially said form, with such changes therein as any Authorized Officer, with the advice of the City Attorney and the City’s bond counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 6. The Continuing Disclosure Certificate presented at this meeting is hereby approved. Any Authorized Officer, each acting alone, is hereby authorized and directed, for and on behalf of the City to execute and deliver the Continuing Disclosure Certificate in substantially the form presented at this meeting, with such changes therein as the officer executing the same may, with the advice of the City Attorney and the City’s bond counsel, require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 7. The Bond Purchase Agreement, 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 City, to execute and deliver the Bond Purchase Agreement in substantially said form, with such changes therein as any Authorized Officer, with t he advice of the City Attorney and the City’s bond counsel, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, that the net present value of the debt service savings with respect to the Bonds shall be at least 3.00% of the aggregate principal amount of the Prior Bonds being redeemed and the Underwriter’s discount shall not exceed 0.4% of the aggregate principal amount of the Bonds (exclusive of original issue discount). SECTION 8. 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 City Attorney, may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. SECTION 9. The officers of the City are hereby authorized and directed, jointly and severally, to do any and all things and to execute and deliver any and all documents, written requests, certificates, and representations, including, without limitation, redemption or defeasance notices, escrow agreements, credit documents, signature certificates, no-litigation certificates, tax certificates, letters of representation relating to book-entry registration and certificates concerning the contents of the Official Statement distributed in connection with the sale of 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. Packet Pg 203 12 Resolution No. _____ (2018 Series) Page 5 R ______ SECTION 10. This resolution shall take effect immediately. Upon motion of Council Member _______________, seconded by Council Member ______________ and on the following roll call vote: AYES: Council Members NOES: Council Members ABSENT: Council Members The foregoing resolution was adopted this 20th day of February, 2018: Mayor Heidi Harmon ATTEST: Carrie Gallagher City Clerk APPROVED AS TO FORM: J. Christine Dietrick City Attorney IN WITNESS WHEREOF, I have hereunto set my hand and affixed the official seal of the City of San Luis Obispo, California, this ______ day of ______________, _________. ____________________________________ Carrie Gallagher City Clerk Packet Pg 204 12 R ______ RESOLUTION NO. _____ 2018 SERIES 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 REFUNDING BONDS; THE EXECUTION AND DELIVERY OF A TRUST AGREEMENT, A SITE LEASE, A FACILITY LEASE, AND A BOND PURCHASE AGREEMENT; THE PREPARATION AND DISTRIBUTION OF A PRELIMINARY AND A FINAL 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”) previously entered into a lease agreement (the “1996 Lease”) with the City of San Luis Obispo Capital Improvement Board (the “Board”) for the purpose of financing the acquisition and construction of various properties to be used for municipal purposes of the City; WHEREAS, the Board previously issued its 1996 Lease Revenue Bonds (County of San Luis Obispo, California) in the aggregate principal amount of $7,100,000 (the “1996 Bonds”) pursuant to an Indenture of Trust dated as of June 1, 1996, by and between the Board and First Trust of California, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2005 Lease”) with the Board for the purpose of refinancing the 1996 Lease and to allow for the defeasance and refunding of the outstanding 1996 Bonds; WHEREAS, the Board previously further issued its 2005 Refunding Lease Revenue Bonds in the aggregate principal amount of $6,550,000 (the “2005 Bonds”) pursuant to an Indenture of Trust dated as of May 1, 2005, by and between the Board and U.S. Bank Na tional Association, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2006 Lease”) with the Board for the purpose of financing the acquisition and construction of facilities located in the City to be used for public parking and City administrative office purposes; WHEREAS, the Board previously further issued its 2006 Lease Revenue Bonds (919 Palm Street Public Parking and City Office Project) in the aggregate principal amount of $16,160,000 (the “2006 Bonds”) pursuant to an Indenture of Trust dated as of April 1, 2006, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City previously further entered into a lease agreement (the “2009 Lease” and, collectively with the 2005 Lease and the 2006 Lease, the “Prior Leases”) with the Board for the purpose of financing the acquisition and construction of facilities located in the City to be used for a public safety dispatch center and Fire Department storage facility, and improvements to the City’s radio system for public safety communications purposes; Packet Pg 205 12 Resolution No. _____ (2018 Series) Page 2 R ______ WHEREAS, the Board previously further issued its 2009 Lease Revenue Bonds (Public Safety Communications and Emergency Operations Center Project) (Bank Qualified) in the aggregate principal amount of $10,705,000 (the “2009 Bonds” and, collectively with the 2005 Bonds and the 2006 Bonds, the “Prior Bonds”) pursuant to an Indenture of Trust dated as of March 1, 2009, by and between the Board and U.S. Bank National Association, as trustee; WHEREAS, the City proposes to refinance the Prior Leases to allow for the defeasance and refunding of the Prior Bonds; 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 refinancing any outstanding obligations; WHEREAS, in order to assist in refinancing the Prior Leases to defease and refund the Prior Bonds, it is proposed that the City lease certain of its real property, selected from a list including Fire Station No. 1, located at 2160 Santa Barbara, San Luis Obispo, and improvements thereon; the City Administrative Offices and Parking Structure, located at 919 Palm Street, San Luis Obispo; and improvements thereon; City Hall, located at 990 Palm Street, San Luis Obispo, and improvements thereon; and the Police Main Building, Storage Building and Vehicle Storage Garage, located at 1042 Walnut Street, San Luis Obispo, and improvements thereon (the properties so selected, collectively, the “Leased Property”) to the Authority pursuant to a Site Lease (the “Site Lease”) and lease th e 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 Refunding Bonds, Series 2018 in the aggregate principal amount of not to exceed $22,000,000 (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 refinance the Prior Leases and defease and refund the Prior Bonds, fund a debt service reserve account if deemed necessary and pay costs of issuance associated with the Bonds; WHEREAS, it is further proposed that the Authority issue the Bonds pursuant to a trust agreement dated as of April 1, 2018 (the “Trust Agreement”), by and between the Authority and U.S. Bank National Association, as trustee (the “Trustee”); WHEREAS, the City, the Authority and Raymond James & Associates, Inc. (the “Underwriter”), as purchaser of the Bonds, will enter into a Bond Purchase Agreement (the “Bond Purchase Agreement”); 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 Authori ty to refinance the Prior Leases and defease and refund the Prior Bonds; Packet Pg 206 12 Resolution No. _____ (2018 Series) Page 3 R ______ WHEREAS, the Authority has prepared an official statement relating to the Bonds (the “Official Statement”) in preliminary form for use 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 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 $22,000,000 to refinance the Prior Leases and defease and refund the Prior Bonds, including funding a debt service reserve account if deemed necessary and paying costs of issuance and related fees and expenses; provided, however, that such Bonds shall be sold on or before May 31, 2018, and shall mature no later than June 1, 2039. The Treasurer of the Authority (“Treasurer”) is hereby directed to perform the duties imposed upon her by the provisions of the financing documents, including the Trust Agreement, the Site Lease and the Facility Lease. SECTION 3. The Trust Agreement, in substantially the form submitted to this meeting, is hereby approved. The Executive Director or Treasurer 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 4. 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. SECTION 5. 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 substant ially 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 6. The Bond Purchase Agreement, 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 Bond Purchase 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; provided, that the net present value of the debt Packet Pg 207 12 Resolution No. _____ (2018 Series) Page 4 R ______ service savings with respect to the Bonds shall be at least 3.00% of the aggregate principal amount of the Prior Bonds being redeemed and the Underwriter’s discount shall not exceed 0.4% of the aggregate principal amount of the Bonds (exclusive of original issue discount). 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 cert ificate 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 Bonds shall be executed by the manual or facsimile signature of the Treasurer of the Authority 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 9. The Authority hereby designates the firm of Orrick, Herrington & Sutcliffe LLP to serve as bond counsel and disclosure counsel, and the firm of PFM Financial Advisors LLC to serve as municipal advisor, each in connection with the issuance, sale and delivery of the Bonds. SECTION 10. 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, written requests, certificates, and representations, including, without limitation, redemption or defeasance notices, escrow agreements, credit documents, signature certificates, no-litigation certificates, tax certificates, letters of representation relating to book-entry registration and certificates concerning the contents of the Official Statement distributed in connection with the sale of 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. Packet Pg 208 12 Resolution No. _____ (2018 Series) Page 5 R ______ SECTION 11. This resolution shall take effect immediately. Upon motion of Authority Member _______________, seconded by Authority Member ______________ and on the following roll call vote: AYES: Authority Members NOES: Authority Members ABSENT: Authority Members The foregoing resolution was adopted this 20th day of February, 2018: Chair Heidi Harmon [SEAL] ATTEST: Carrie Gallagher, CMC Secretary APPROVED AS TO FORM: J. Christine Dietrick Authority Counsel Packet Pg 209 12 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 February 20, 2018, 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 Packet Pg 210 12 © PFM1Lease Revenue Refunding Bonds, Series 2018City of San Luis ObispoSan Luis Obispo Public Financing AuthorityPFM Financial Advisors LLC50 California StreetSuite 2300San Francisco, CA 94111February 20, 201802-20-2018 Item 12, Presentation © PFM2Proposed TransactionRefunding of Series 2005, 2006, and 2009 lease revenue bonds to achieve debt service savingsLease-lease back structure similar to existing bonds•919 Palm Street City administration building expected to be leased asset for 2018 Bonds•Fire station and public safety building to be released from leasesSeries Outstanding Par Purpose2005 $3,510,000 Refund Series 1996 bonds, which funded the fire station headquarters and building2006 $12,455,000 919 Palm Street Parking and City administration building2009 $6,280,000 Public Safety Communications and Emergency Operations Center ProjectTotal $22,245,00002-20-2018 Item 12, Presentation © PFM3Current Municipal Market ConditionsPeriod of municipal interest rate volatility began in mid-November with introduction of tax reform legislationIntermediate and long-term municipal rates have increased approximately 40 basis points since the beginning of JanuaryHowever, interest rates continue to be very low in a historical context, with the 10-year and 20-year benchmark rates at 2.42% and 2.86%, respectively0.00%0.50%1.00%1.50%2.00%2.50%3.00%3.50%AAA MMD Yields2‐Year10‐Year20‐Year02-20-2018 Item 12, Presentation © PFM4Projected Debt Service SavingsThe proposed refunding is expected to generate approximately $3.38 million of cash flow savings over the life of the transaction•Estimated savings take into account all costs associated with the transactionStructure assumes uniform annual savings with no change to the final maturity of each underlying refunded seriesEstimatePar: $18,145,000True Interest Cost: 3.20%Cash Flow Savings: $3,378,516NPV Savings: $2,565,963 (11.54%)02-20-2018 Item 12, Presentation © PFM5Schedule and Finance TeamThe 2018 Bonds are expected to price in late March and close in early AprilFinance team•Municipal Advisor: PFM Financial Advisors LLC•Bond and Disclosure Counsel: Orrick, Herrington & Sutcliffe LLP•Underwriter: Raymond James & Associates, Inc.Action Item DateRating call with S&P March 2Receive rating March 12Pricing March 20Closing April 502-20-2018 Item 12, Presentation © PFM6Actions of the City Council and Public Financing AuthorityResolutions of City Council and Public Financing Authority authorize staff and third-party professionals to execute a transaction that meets the following parameters:•Maximum par amount: $22,000,000•Aggregate net present value savings: 3.0% of refunded principal•Underwriter’s discount: Not to exceed 0.4%The resolutions also approve the following documents in substantially final form:•Continuing Disclosure Certificate•Site Lease•Facility Lease•Preliminary Official Statement•Bond Purchase Agreement02-20-2018 Item 12, Presentation © PFM7Questions?02-20-2018 Item 12, Presentation