HomeMy WebLinkAbout10-01-2013 amended agenda packet b5 & b6
Amended Agenda
Tuesday, October 1, 2013
6:00 p.m.
JOINT CITY COUNCIL
AND CAPITAL
IMPROVEMENT BOARD
MEETING
Council Chamber
990 Palm Street
CALL TO ORDER: Mayor/President of Capital Improvement Bd. Jan Marx
ROLL CALL: Council Members/Board Members John Ashbaugh, Dan
Carpenter, Carlyn Christianson, Vice Mayor/Vice President
Kathy Smith, and Mayor/President Jan Marx
PLEDGE OF ALLEGIANCE: Council Member Christianson
INTRODUCTIONS
NEW HIRE – LEE JOHNSON, ECONOMIC DEVELOPMENT MANAGER. – (CODRON
– 5 MINUTES)
PRESENTATIONS
PROCLAMATION – FIRE PREVENTION WEEK. – (MARX – 5 MINUTES)
PROCLAMATION – COMMUNITY PLANNING MONTH. – (MARX – 5 MINUTES)
APPOINTMENT
A1. RECOMMENDATION FOR APPOINTMENT TO THE HUMAN RELATIONS
COMMISSION. – (CARPENTER/ASHBAUGH/SCHROEDER – 5 MINUTES)
Council Agenda Tuesday, October 1, 2013
2
RECOMMENDATION: Confirm the appointment of Michelle Tasseff to the Human
Relations Commission to complete an unexpired term to March 31, 2014.
PUBLIC COMMENT PERIOD FOR ITEMS NOT ON THE AGENDA (not to exceed 15
minutes total)
The Council welcomes your input. You may address the Council by completing a
speaker slip and giving it to the City Clerk prior to the meeting. At this time, you may
address the Council on items that are not on the agenda. Time limit is three minutes.
State law does not allow the Council to discuss or take action on issues not on the
agenda, except that members of the Council or staff may briefly respond to statements
made or questions posed by persons exercising their public testimony rights (Gov.
Code Sec. 54954.2). Staff may be asked to follow up on such items. Staff reports and
other written documentation relating to each item referred to on this agenda are on file
in the City Clerk’s Office in Room 4 of City Hall.
CONSENT AGENDA
A member of the public may request the Council to pull an item for discussion. Pulled
items shall be heard at the close of the Consent Agenda unless a majority of the Council
chooses another time. The public may comment on any and all items on the Consent
Agenda within the three minute time limit.
C1. MINUTES OF TUESDAY, SEPTEMBER 17, 2013. - (CODRON/SCHROEDER)
RECOMMENDATION: Waive oral reading and approve as presented.
C2. UNREINFORCED MASONRY HAZARD MITIGATION PROGRAM STATUS
REPORT. – (JOHNSON/LEASE)
RECOMMENDATION: Receive and file report regarding status of Unreinforced
Masonry Hazard Mitigation (URM) Program.
C3. ADOPTION OF AN ORDINANCE AMENDING TITLE 17 (ZONING
REGULATIONS) OF THE MUNICIPAL CODE FOR SAFE PARKING. –
(JOHNSON/COREY)
Council Agenda Tuesday, October 1, 2013
3
RECOMMENDATION: Adopt Ordinance No. 1592 (2013 Series) amending Title 17
(Zoning Regulations) of the City of San Luis Obispo Municipal Code to permit and
provide standards for the operation of safe parking facilities on private properties within
the City.
C4. AFFORDABLE CARE ACT EMPLOYER SHARED RESPONSIBILITY
PROVISION COMPLIANCE. – (IRONS/ZOCHER)
RECOMMENDATION: Adopt a Resolution establishing that the City of San Luis Obispo
will comply with the Affordable Care Act, Employer Shared Responsibility Provision and
establishing policy guidelines to provide consistent application of that provision.
PUBLIC HEARINGS AND BUSINESS ITEMS
PH1. VESTING TENTATIVE MAP (TRACT 3044) TO CREATE 80 LOTS, A MINOR
SUBDIVISION TO CREATE THREE UNDERLYING P ARCELS, AND AN
INITIAL STUDY OF ENVIRONMENTAL IMPACT AT 3725 ORCUTT ROAD
(CITY FILE NOS. MS/TR/ER 137-11). – (JOHNSON/RICCI – 60 MINUTES)
RECOMMENDATION: 1) Adopt a Resolution, which approves the Vesting Tentative
map, based on findings, and subject to conditions; and 2) Consistent with Public
Resources Code §21080.7, determine that no additional environm ental review is
required as the tentative map is in a urbanized area, and the project involves the
construction of housing or neighborhood commercial facilities that is consistent with a
specific plan that has a certified EIR and that has been adopted not more than five
years prior and the initial study prepared for the project identified no new impacts.
B2. ANNUAL REPORT FOR THE TOURISM BUSINESS IMPROVEMENT
DISTRICT. – (CODRON/CANO – 45 MINUTES)
RECOMMENDATION: 1) Receive and approve the Tourism Business Improvement
District (TBID) Board’s annual report. 2) Adopt a Resolution of intention to levy and
collect assessments within the TBID area in fiscal year 2013 -14 at the same rate as in
fiscal year 2012-13.
PH3. CONSIDERATION OF THE HUMAN RELATION COMMISSION’S
RECOMMENDED PRIORITIES FOR THE 2014 COMMUNITY DEVELOPMENT
BLOCK GRANT (CDBG) AND GRANTS-IN-AID (GIA) PROGRAMS. –
(JOHNSON/COREY – 15 MINUTES)
Council Agenda Tuesday, October 1, 2013
4
RECOMMENDATION: 1) As recommended by the Human Relations Commission,
approve Community Development Block Grant and Grants-In-Aid funding priorities for
2014; 2) Make a determination pursuant to Section 15061 (b)(3) that the project is
exempt by the general rule that developing priorities for funding will not possibly have a
significant effect on the environment.
B4. APPOINTMENTS TO THE CITY INVESTMENT OVERSIGHT COMMITTEE,
INCLUDING ONE COUNCIL MEMBER AND ONE MEMBER OF THE PUBLIC.
– (CODRON/SCHROEDER – 20 MINUTES)
RECOMMENDATION: Discuss and select one Council Member and one member of
the public to serve on the City’s Investment Oversight Committee.
ADDED ITEM
B5. WATER RECLAMATION FACILITY ENERGY EFFICIENCY PROJECT –
FINANCING. – (PADILLA/MATTINGLY – 5 MINUTES)
RECOMMENDATION: Adopt a resolution approving the placement agent agreement
and financing proposal for financing of improvements to the Water Reclamation Facility,
and approving final form of financing documents and official actions.
ADDED ITEM
B6. MEETING OF THE CAPITAL IMPROVEMENT BOARD TO ADOPT A
RESOLUTION APPROVING DOCUMENTS AND ACTIONS RELATING TO
THE FINANCING OF THE WATER RECLAMATION FACILITY ENERGY
EFFICIENCY PROJECT. – (PADILLA/MATTINGLY – 20 MINUTES)
RECOMMENDATION: 1) Adopt a resolution approving documents and actions related
to the private placement financing of the construction costs related to the energy
efficiency improvements project at the Water Reclamation Facility. 2) Adjourn to the
next regular meeting.
Council Agenda Tuesday, October 1, 2013
5
COUNCIL LIAISON REPORTS (not to exceed 15 minutes)
Council Members report on conferences or other City activities. Time limit—3 minutes.
COMMUNICATIONS (not to exceed 15 minutes)
At this time, any Council Member or the City Manager may ask a question f or
clarification, make an announcement, or report briefly on his or her activities. In
addition, subject to Council Policies and Procedures, they may provide a reference to
staff or other resources for factual information, request staff to report back to the
Council at a subsequent meeting concerning any matter, or take action to direct staff to
place a matter of business on a future agenda. (Gov. Code Sec. 54954.2)
ADJOURN.
City Council regular meetings are televised live on Charter Channel 20. The City of San Luis Obispo is committed to
including the disabled in all of its services, programs, and activities. Telecommunications Device for the Deaf (805) 781 -7107.
Please speak to the City Clerk prior to the meeting if you require a hearing amplification device. For more agenda information, call
781-7100.
Any writings or documents provided to a majority of the City Council regarding any item on this agenda will be made avai lable for
public inspection in the City Clerk’s office located at 990 Palm Street, San Luis Obispo, during normal business hours.
POSTING STATEMENT: I, Sheryll Schroeder, Interim City Clerk, do hereby
certify that on September 24, 2013, by 5:00 p.m., a true and correct copy of
this agenda was posted on the bulletin board outside City Hall, 990 Palm
Street, San Luis Obispo, CA. Reposted September 26, 2013 by 5:00 p.m.
Internet access to agendas and related material is available prior to Council
Meetings at www.slocity.org.
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FROM: Wayne Padilla, Finance and Information Technology Director
Carrie Mattingly, Utilities Director
Prepared By: Wayne Padilla, Finance and Information Technology Director
SUBJECT: WATER RECLAMATION FACILITY ENERGY EFFICIENCY PROJECT -
FINANCING
RECOMMENDATION
Adopt a resolution approving the placement agent agreement and financing proposal for financing
of improvements to the Water Reclamation Facility, and approving final form of financing
documents and official actions.
DISCUSSION
Background
At the May 7, 2013 City Council Meeting, the City Council took the following actions:
• Approved the Water Reclamation Facility (WRF) Energy Efficiency Project, a
public/private partnership with PG&E, for a total project construction cost of $9,478,948.
Annual savings from the project will be approximately $325,000 through energy efficiency
savings and the reduction of operations and maintenance costs with an annual carbon offset
exceeding one million pounds of carbon dioxide per year.
• Council authorized staff to pursue $7,186,258 in project financing and directed staff to
return for approval of the appropriate financing documents.
• Approved a resolution allowing the Sewer Enterprise Fund to be reimbursed from financing
proceeds for the cost of eligible expenses incurred on this project before the financing
transaction is closed.
Since that time, staff and the city’s Financial Advisor, Fieldman, Rolapp and Associates (FRA)
have reviewed financing options (private placement vs. I-Bank) for this project and is
recommending the use of private placement financing for the cost savings shown below. FRA
solicited interest quotes from nine different lenders and initially obtained the lowest quote from
Green Campus Partners (GCP). GCP’s financing offer, which included a term of 15 years and an
interest rate of 2.63% provided $220,000 in savings over the I-Bank funding offer. At the
September 3, 2013 City Council meeting the City Council accepted GCP’s financing offer and
directed staff to return on September 17, 2013 with the completed loan documents for review and
approval. After Fieldman, Rolapp submitted the city’s signed acceptance of the financing offer to
Green Campus Partners, GCP responded that they were unable to honor their commitment. The
stated reason was that there had been a misunderstanding about the relationship between the loan
term and the interest rate. U.S. Bank’s offer had been to provide a 10 year term with a 2.63% rate
while GCP represented that the loan term was for 15 years.
Meeting Date
Item Number October 1, 2013
B5 - 1
WRF Energy Efficiency Project – Financing Page 2
________________________________________________________________
In response to this situation, the Director of Finance & I.T., along with Jim Fabian from FRA and
Charles Adams, bond counsel with Jones Hall held a phone conference with both U.S. Bank and
Green Campus Partners to renegotiate the transaction. As a result, a new financing offer has been
received for a 15 year term with interest set at 2.90%. This has been confirmed in writing by U.S.
Bancorp Government Leasing and Financing, Inc. (U.S. Bank) (Attachment 1). In conjunction with
this negotiation, staff contacted the I-Bank to verify the status of their interest rate for the same term
and found that it has also changed from 2.66% to 2.91% since September 3rd. Finally, staff also
contacted Umpqa Bank, which had offered the 2nd lowest interest rate and found that they are now
indicating that the interest rate would be approximately 2.93%.
In spite of the interest rate increase, when all costs for the financing are compared, the new proposal
from Green Campus Partners remains the best financing option and will generate a savings of
approximately $222,000 compared to the I-Bank financing proposal. Compared to the original
GCP proposal, in spite of the change in the interest rate, the City will continue to save $50,313
annually compared to the original I-Bank financing proposal. The annual payments required under
the new loan terms are still $5,000 less than projected in the sewer fund.
FRA and U.S. Bank have compared payment calculations for the new lender financing proposal to
ensure that the debt service schedules agree.
Below is a comparison between the current lender financing proposal from Green Campus Partners
and the I-Bank loan terms.
Interest Locked
Initial
On-
going
Financing Provider Rate Now? Term Costs Fees?
Green Campus
Partners 2.90% Yes 15 yrs. $40,000 No
I-Bank 2.91% No 15 yrs. $63,571 Yes
The following table compares the payment streams for both financing alternatives:
B5 - 2
WRF Energy Efficiency Project – Financing Page 3
________________________________________________________________
The request being made this evening is for Council’s approval of the new lender financing proposal
from Green Campus Partners dated September 13, 2013 (Attachment 2), and the documents and
transactions related to the issuance of this debt.
It also should be noted that during the presentation of the financing proposal on September 3, staff
indicated that a partial pre-payment could be made at any time on the private placement debt based
on information received from the Financial Advisor and Bond Counsel. Staff has now been
informed that this was not possible under the original loan terms and was unable to negotiate a
change in terms allowing a partial pre-payment for the new lender financing proposal.
FISCAL IMPACT
The WRF Energy Efficiency project will cost $9,519,000. The majority of the funding for the
Energy Efficiency Project is proposed to come from two sources; $7,479,000 from debt financing
and $2,040,000 from the sewer fund working capital. When the Council reviewed the financing plan
in May, the forecast reflected the assumption that $293,000 in rebates would be paid by PG&E and
used to finance a portion of the project costs. Due to the fact that the rebates will not be available
until after construction is complete, the amount to be financed has now been set at $7,479,000.
Once the rebates are received, the full amount may be applied to a future debt service payment.
There are fees associated with the financing plan that are proposed to be paid from working capital.
These fees include: Jones Hall (city bond counsel) $22,500; FRA $17,500.
Compared to the loan offer from the I-Bank, the city will save at least $222,700 over the life of this
financing.
Payment
Date I-Bank Loan Private
Placement
Savings
Using PP
Savings
Using I-Bank
9/30/201363,571.50 40,000.00 23,571.50 (23,571.50)
12/1/2014647,691.64 624,791.63 22,900.01 (22,900.01)
12/1/2015646,573.97 624,791.63 21,782.34 (21,782.34)
12/1/2016645,318.59 624,791.62 20,526.97 (20,526.97)
12/1/2017644,026.71 624,791.64 19,235.07 (19,235.07)
12/1/2018642,697.21 624,791.62 17,905.59 (17,905.59)
12/1/2019641,329.02 624,791.63 16,537.39 (16,537.39)
12/1/2020639,921.03 624,791.64 15,129.39 (15,129.39)
12/1/2021638,472.05 624,791.64 13,680.41 (13,680.41)
12/1/2022636,980.92 624,791.63 12,189.29 (12,189.29)
12/1/2023635,446.38 624,791.63 10,654.75 (10,654.75)
12/1/2024633,867.20 624,791.63 9,075.57 (9,075.57)
12/1/2025632,242.06 624,791.64 7,450.42 (7,450.42)
12/1/2026630,569.64 624,791.63 5,778.01 (5,778.01)
12/1/2027628,848.52 624,791.63 4,056.89 (4,056.89)
12/1/2028627,077.34 624,791.63 2,285.71 (2,285.71)
Total 9,634,633.80 9,411,874.47 222,759.33 (222,759.33)
B5 - 3
WRF Energy Efficiency Project – Financing Page 4
________________________________________________________________
Project costs and their sources of payment are shown below:
Project Costs and Funding Sources
Working Capital Green Campus
Partners
Total
Design $517,000 $517,000
Construction $1,483,000 $7,479,000 $8,962,000
Loan Origination Fee $40,000 $40,000
Total $2,040,000 $7,479,000 $9,519,000
Funding for this project is included in the 2013-14 Sewer Fund budget and adequate funding for the
City’s $2,055,000 is available in working capital. Current adopted sewer rates have incorporated
this project’s costs.
ATTACHMENTS
1. U.S. Bank Financing Proposal
2. GCP Revised Financing Proposal
3. Resolution
4. Assignment Agreement
5. Installment Agreement
B5 - 4
U.S. Bancorp Government Leasing and Finance Confidential
Government Leasing and Finance, Inc.
City of San Luis Obispo, CA
$7,479,000.00
Proposed Tax-Exempt Direct Placement Financing
Summary of Proposed Terms and Conditions
Dated 09-11-2013
U.S. Bancorp Government Leasing and Finance, Inc. (“Lender”) is providing for your consideration the following proposal for a tax-
exempt private placement financing structure that will be available to City of San Luis Obispo, CA (“Borrower”) for the financing of
assets. This proposal is subject to the terms and conditions outlined herein, due diligence, final credit review, and the absence of
material adverse change in the Borrower’s financial condition. The proposed financing may include additional Terms, Covenants
and Conditions not discussed herein. This proposal is provided solely to the Borrower and may not be disclosed to outside third
parties without the Lender’s consent.
Lender: U.S. Bancorp Government Leasing and Finance
Borrower: City of San Luis Obispo, CA (“Borrower”).
Structure: Tax-exempt Financing Agreement by and between the Lender and Borrower. It is the
intent of the Lender to fund the obligation into Lender’s portfolio and hold to maturity.
Principal: $7,479,000.00
Use of Proceeds: Water Reclamation Facility Energy Efficiency Project
Term: 183 Months
Finance Rate: 2.90%
Payment Mode:
Prepayment:
Annual Principal and semiannual interest.
The obligation may be prepaid in whole, but not in part, on any payment date at 103%
of the outstanding principal amount after payment due.
Security: The City’s obligation to make Installment Payments under the Agreement will be
secured by a pledge of net sewer system revenues (consisting primarily of net income
and receipts derived by the City from the ownership and operation of the sewer system
or otherwise arising from the sewer system), at parity to existing sewer system revenue
obligations and any future parity obligations authorized to be issued under the
Agreement.
The City will not be required to advance any moneys derived from any source of
income other than the net sewer system revenues for the payments of the Agreement
or performance of any other agreements or covenants required to be performed. The
City may, however, advance moneys for any such purpose so long as such moneys
are derived from a source legally available for such purpose and may be legally used
by the City for such purpose.
B5 - 5
U.S. Bancorp Government Leasing and Finance 2 Confidential
Financial Reporting: To be determined during the formal underwriting phase of this transaction.
Costs of Issuance: Any and all costs of Issuance, with the exception of Lenders Bond Counsel, shall be
the responsibility of the Borrower, including, but not limited to, Financial Advisor, and
Bond Counsel for the Borrower.
Documents: All documents relating to the transaction shall be attorney prepared and in a form and
substance acceptable to the Lender and its legal counsel, including legal opinions
customary for transactions of this nature including an opinion of tax-exemption
provided by nationally recognized bond counsel and an opinion of Borrower’s counsel
confirming that the documents to which the Borrower is a party (a) have been duly
authorized by all requisite corporate action on the part of the Borrower, and have been
duly executed and delivered by Borrower, and (b) constitute the legal, valid and
binding obligations of the Borrower, enforceable against the Borrower in accordance
with their respective terms.
Representations and
Warranties: Standard representations and warranties for transactions of this nature.
Other: 1. Lender is in final stages of its underwriting as of this date. Lender anticipates that
subject to receipt of Essential Use form and contract between PG&E (Vendor for
energy efficiency project) that underwriting will be complete within 3-5 business
days.
2. Bond Counsel for Lender is reviewing the proposed Installment Purchase
Agreement provided by Borrowers Counsel.
3. Estimated closing date is September 30, 2013
Conditions Precedent
to Closing:
Closing of the transaction will be subject to such terms and conditions that Lender may
require with respect to this transaction, or as are customarily required with respect to
similar credits and as set forth in the loan documents. Without limitation, such terms
and conditions shall include:
1. Absence of default;
2. Accuracy of Borrower’s representations and warranties;
3. Negotiation and execution of satisfactory closing documents.
4. Absence of material adverse change in financial condition of Borrower during the
period from the date hereof to the Closing Date
.
Expiration: This proposal and the associated finance rate are valid through October 4, 2013. By
accepting this proposal, Borrower acknowledges that this proposal represents a firm
commitment to provide financing subject to final credit approval and
documentation.
Thank you for the opportunity to present this proposal for your consideration. Please contact me with any
questions.
Best regards,
Thomas E. Seybold
Thomas Seybold
Vice President
U.S. Bancorp Government Leasing and Finance
Phone: 303-585-4052
Email: thomas.seybold@usbank.com
B5 - 6
U.S. Bancorp Government Leasing and Finance 3 Confidential
ACCEPTANCE AND APPLICATION:
The undersigned Borrower hereby accepts the above terms and applies for the financing described above.
By:
Title:
Dated: , 2013
B5 - 7
September 13, 2013
Anna Sarabian
Vice President
Fieldman Rolapp & Associates, Inc.
19900 MacArthur Boulevard
Suite 1000
Irvine, CA 92612
Re: Revised Financing Proposal from Green Campus Partners for City of San Luis Obispo
Dear Anna:
The purpose of this letter is to inform Fieldman Rolapp & Associates, Inc. and City of San Luis Obispo that
Green Campus Partners, LLC (“GCP”) and its designated investor, U.S. Bancorp Governmental Leasing and
Finance, Inc. (“U.S. Bancorp”), are unable to finance the contemplated $7,479,000 transaction under the
terms and conditions described in the Financing Proposal dated August 23, 2013 (the “Original Financing
Proposal”). As such, the Original Financing Proposal, which was executed by City of San Luis Obispo on
September 4, 2013, is no longer valid or effective.
GCP, after consultation with U.S. Bancorp, has issued a Revised Financing Proposal dated September 13,
2013 (attached hereto) for consideration by all parties. While the Revised Financing Proposal remains
subject to final credit approval and documentation approval by U.S. Bancorp, the terms and conditions
contained therein, including the fixed interest rate for the contemplated transaction, accurately reflects
the financing arrangement contemplated by GCP and U.S. Bancorp.
On behalf of GCP and U.S. Bancorp, I sincerely apologize for the human error that led to the necessity of
revising the terms and conditions of the contemplated financing. As you are aware, GCP has completely
waived any and all placement fees in connection with the transaction, in an effort to deliver a Revised
Financing Proposal to City of San Luis Obispo that is as economically attractive as possible.
If there are any questions or comments regarding the Revised Financing Proposal, please let me know.
Thank you for your consideration.
Sincerely,
Neal E. Skiver
Senior Vice President
Neal Skiver
Senior Vice President
Green Campus Partners, LLC
215 Lincoln Avenue
Santa Fe, NM 87501
(732) 917-2311 office
(505) 690-3335 mobile
neal.skiver@greencampuspartners.com
B5 - 8
September 13, 2013
Anna Sarabian
Vice President
Fieldman Rolapp & Associates, Inc.
19900 MacArthur Boulevard
Suite 1000
Irvine, CA 92612
Dear Anna:
Green Campus Partners, LLC is pleased to present the following Summary of Terms and Conditions dated
September 13, 2013 (collectively, the “Revised Financing Proposal”), to the City of San Luis Obispo.
SUMMARY OF TERMS AND CONDITIONS
DATE: September 13, 2013
CITY: San Luis Obispo
BOARD: City of San Luis Obispo Capital Improvement Board
FINANCIAL ADVISOR: Fieldman Rolapp & Associates, Inc.
BOND COUNSEL: Jones Hall, A Professional Law Corporation
ASSIGNEE: U.S. Bancorp Governmental Leasing and Finance, Inc.
ASSIGNEE’S
PLACEMENT AGENT: Green Campus Partners, LLC
ASSIGNEE’S COUNSEL: Davis Wright Tremaine LLP
CONTRACTOR: Pacific Gas & Electric
PURPOSE: The purpose of this transaction is to provide tax-exempt financing for the
acquisition and installation of a water reclamation facility energy efficiency
project (the “Project”) to be installed by the Contractor. The Project consists of
various components, including: cogeneration, solids management, optimization
of existing infrastructure, lighting improvements and process system controls.
Neal Skiver
Senior Vice President
Green Campus Partners, LLC
215 Lincoln Avenue
Santa Fe, NM 87501
(732) 917-2311 office
(505) 690-3335 mobile
neal.skiver@greencampuspartners.com
B5 - 9
STRUCTURE: This transaction will be structured as a tax-exempt Installment Sale Agreement
(the “Agreement”) between the City and the Board. Under a separate and
concurrent Assignment Agreement (the “Assignment”), the Board will assign to
the Assignee all of the Board’s right to receive the Installment Payments due
under the Agreement.
The transaction will be a direct private placement to a single institutional
investor (arranged by the Assignee), which will be clearly identified to the City.
The initial investor and any subsequent investors will be required to provide
certifications that it is not investing with the intention to resell its interest in the
Agreement, as well as other sophisticated investor certifications typical of private
placements. No official statement or other disclosure document will be
prepared. There will be no initial rating, no debt service reserve, no DTC
registration and no CUSIPs.
At closing, proceeds from the transaction will be deposited into a project fund
and a cost of issuance fund established and maintained by the City. The City will
invest the proceeds in investments authorized by California law and the City’s
investment policy. Any unexpended proceeds upon completion of the Project
will be applied by the City to pay a portion of the interest components of the
Installment Payments next coming due and payable.
SECURITY: The City’s obligation to make Installment Payments under the Agreement will be
secured by a pledge of net sewer system revenues (consisting primarily of net
income and receipts derived by the City from the ownership and operation of the
sewer system or otherwise arising from the sewer system), at parity to existing
sewer system revenue obligations and any future parity obligations authorized to
be issued under the Agreement.
The City will not be required to advance any moneys derived from any source of
income other than the net sewer system revenues for the payments of the
Agreement or performance of any other agreements or covenants required to be
performed. The City may, however, advance moneys for any such purpose so
long as such moneys are derived from a source legally available for such purpose
and may be legally used by the City for such purpose.
RATE COVENANT: The City will covenant to fix, prescribe, revise and collect rates, fees and charges
for the services and facilities furnished by the sewer system during each fiscal
year which, taking into account allowances for contingencies and including
existing unreserved, unrestricted working capital balances in the sewer fund, are
sufficient to yield estimated net sewer system revenues at least equal to 110% of
the aggregate amount of principal and interest on the Agreement and any parity
obligations coming due and payable during such fiscal year.
ADDITIONAL PARITY
OBLIGATIONS: In addition to the existing parity obligations and the Agreement, the City will be
allowed to issue additional parity obligations provided that no Event of Default
has occurred and is continuing and the amount of net sewer system revenues are
at least equal to 110% of the amount of maximum annual debt service coming
due and payable in the current or any future fiscal year.
B5 - 10
CITY
RESPONSIBILITIES: All responsibilities imposed by the ownership or possession of the sewer system
including, but not limited to, taxes, insurance and maintenance, shall be borne by
the City.
CLOSING DATE: September 30, 2013 (estimated)
BANK QUALIFIED: The City will designate the Agreement as a Qualified Tax Exempt Obligation
pursuant to Section 265(b)(3) of the IRS Code.
TERM: 15.17 years
FINANCED AMOUNT: $7,479,000 (estimated)
INTEREST RATE: 2.90%
The interest rate above is rate-locked for a closing through October 4, 2013.
Should closing after October 4, 2013, the final interest rate may be subject to
adjustment by the Assignee.
PAYMENTS: The City will make semi-annual interest payments on June 1st and December 1st,
beginning June 1, 2014 through December 1, 2028 and annual principal
payments on December 1st, beginning December 1, 2014 through December 1,
2028. Please see the attached Sample Payment Schedule.
PREPAYMENT: The City will have the option to prepay the Agreement, in whole, on any interest
payment date, by paying a prepayment price in an amount equal to 103% of the
principal amount to be prepaid, plus accrued interest to the date of prepayment.
DOCUMENTATION: Documentation will be provided by Bond Counsel and will include all documents,
certificates and opinions as are reasonably necessary to evidence and carry out
the transaction. All documents must be acceptable to all parties.
CLOSING COSTS: The City will be responsible for paying the financing costs of issuance, including
costs related for Financial Advisor, Bond Counsel, and other direct transaction
costs or fees. The cost of Assignee’s Counsel will be paid directly by Assignee.
TRANSFERS: The Assignee will agree that the Agreement will not be re-offered publicly. The
Assignee reserves the right to assign, sell or otherwise transfer the Agreement
only to an institution that the Assignee reasonably believes is either a “Qualified
Institutional Buyer” or an “Institutional Accredited Investor” and is purchasing
the Agreement for its own account.
CREDIT APPROVAL: The transaction is subject to final credit approval by the Assignee, subject to
additional due diligence and the negotiation of mutually acceptable documentation,
and the absence of material adverse change in the City’s financial position.
Assignee is in the final stages of its underwriting process as of this date. Assignee
anticipates that, subject to receipt of an executed Credit Application/Essential Use
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form and the executed contract between the City and the Contractor, that under-
writing will be complete within 3-5 business days.
FUTURE RATING: The Assignee reserves the right (at its sole expense), after closing, to obtain a
credit rating on the transaction. Such rating shall be for the use of the Assignee
and not for the purpose of undertaking a public offering of the Agreement. The
City agrees to cooperate with the Assignee in connection with its application for
such a rating, if any.
FINANCING PROPOSAL
EXPIRATION: Unless accepted by the City or extended in writing by the Assignee (at its sole
discretion), this Revised Financing Proposal will expire on October 4, 2013. Once
accepted, this Revised Financing Proposal will expire if the transaction has not
funded by October 31, 2013.
Capitalized terms used but not defined herein will have the meaning given such terms in the transaction
documents (i.e. Agreement, Escrow, etc.). Upon the full execution of this Revised Financing Proposal, the
City and the Assignee acknowledge that this Revised Financing Proposal shall represent a firm
commitment to finance the contemplated transaction subject to final credit approval by the Assignee and
mutually-acceptable documentation. It is a pleasure to offer this Revised Financing Proposal to the City
of San Luis Obispo and we look forward to your review and response.
Very truly yours,
Neal E. Skiver
Senior Vice President
Agreed to and Accepted by:
City of San Luis Obispo
(Name)
(Title)
(Date)
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RESOLUTION NO.
RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN
LUIS OBISPO APPROVING PLACEMENT AGENT AGREEMENT
AND FINANCING PROPOSAL FOR THE FINANCING OF
IMPROVEMENTS TO THE WATER RECLAMATION FACILITY,
AND APPROVING FINAL FORM OF FINANCING DOCUMENTS
AND OFFICIAL ACTIONS
WHEREAS, the City of San Luis Obispo (the “City”) owns and operates facilities
and property for the collection, treatment and disposal of wastewater within the service
area of the City (the “Wastewater Enterprise”), and is proceeding to finance the
acquisition and installation of improvements to its water reclamation facility, consisting
generally of the onsite cogeneration of energy, solids management, upgrading and
optimizing aging infrastructure, efficient lighting, and process system controls (the
“Project”); and
WHEREAS, the City Council has previously adopted its Resolution on
September 3, 2013, approving a financing plan for the installment sale financing of the
Project on a private placement basis with Green Campus Partners LLC (the “Placement
Agent”), through the use of an installment sale agreement between the City and the City
of San Luis Obispo Capital Improvement Board (the “Board”); and
WHEREAS, pursuant to such authorization the City has previously executed an
agreement with the Placement Agent, and the Placement Agent has notified the City that
it is unable to provide financing in accordance with such agreement; and
WHEREAS, the Placement Agent has proposed to provide financing for the
Project on terms and conditions as set forth in a new agreement which has been
submitted to the City (the “Placement Agent Agreement”), and in accordance with such
new agreement the City has received a financing proposal for the Project (the “Lender
Financing Proposal”) from U.S. Bancorp Government Leasing and Finance, Inc. (the
“”Lender”); and
WHEREAS, the final form of the legal documentation relating to the financing has
been prepared by bond counsel, and the City Council wishes at this time to approve the
final financing plan and the final form of such legal documentation;
NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of San
Luis Obispo as follows:
SECTION 1. Approval of Financing Proposals. The City Council hereby
approves the financing plan for the Project as set forth in the Placement Agent
Agreement in the form on file with the City Clerk, and in accordance with the Lender
Financing Proposal in the form on file with the City Clerk. The City Manager or the
Director of Finance and Information Technology (each, an “Authorized Officer”) are each
hereby authorized and directed for and in the name and on behalf of the City to execute
the Placement Agent Agreement and the Lender Financing Proposal, in the name and
on behalf of the City.
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Approval by the City Council of the Placement Agent Agreement is not intended
to constitute an acceptance by the City of the failure by the Placement Agent to perform
its obligations under the original agreement between the Placement Agent and the City,
nor does such approval constitute a release of the Placement Agent or a waiver of any
rights which the City may have under such original agreement.
SECTION 2. Installment Sale Agreement. The City Council hereby approves the
Installment Sale Agreement relating to the financing of the Project, between the City and
the City of San Luis Obispo Capital Improvement Board (the “Board”), in the form thereof
on file with the City Clerk together with any changes therein or additions thereto deemed
advisable by an Authorized Officer; provided that the execution thereof by an Authorized
Officer shall be conclusive evidence of the approval of any such changes or additions.
An Authorized Officer is hereby authorized and directed for and in the name and on
behalf of the City to execute, and the City Clerk is hereby authorized and directed to
attest, the final form of the Installment Sale Agreement.
SECTION 3. Assignment by Board. The City Council hereby approves the
assignment by the Board of its rights under the Installment Sale Agreement, including
the right to receive the Installment Payments, to the Lender. Such assignment shall be
made pursuant to an Assignment Agreement between the Board and the Lender in
substantially the form on file with the City Clerk, which the City Council hereby approves.
SECTION 4. Official Actions. The Mayor, the City Manager, 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
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.
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On motion of ____________________, seconded by ___________________,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 1st day of October, 2013.
Mayor
ATTEST:
City Clerk
APPROVED:
City Manager
City Attorney
Director of Finance and Information Technology
APPROVED AS TO FORM:
____________________________________
City Attorney
B5 - 15
Jones Hall, A Professional Law Corporation September 24, 2013
ASSIGNMENT AGREEMENT
This ASSIGNMENT AGREEMENT (this “Agreement”), dated to be effective October
3, 2013, is between the CITY OF SAN LUIS OBISPO CAPITAL IMPROVEMENT BOARD, a public
body corporate and politic duly organized and existing under Ordinance No. 1059 (1986
Series) adopted by the City Council of the City of San Luis Obispo on April 15, 1986 (the
“Ordinance”), and under the Constitution and laws of the State of California, as assignor
(the “Board”), and U.S. BANCORP GOVERNMENT LEASING AND FINANCE, INC., a corporation
organized and existing under the laws of the State of Colorado, as assignee (the
“Assignee”).
BACKGROUND:
1. The City of San Luis Obispo (the “City”) owns and operates facilities and
property for the collection, treatment and disposal of wastewater within the service area
of the City, and the City wishes to finance the acquisition and installation of
improvements to its water reclamation facility, consisting generally of the onsite
cogeneration of energy, solids management, upgrading and optimizing aging
infrastructure, efficient lighting, and process system controls (the “Project”).
2. In order to provide funds to finance the Project, the City and the Board have
entered into an Installment Sale Agreement dated as of October 3, 2013 (the
“Installment Sale Agreement”), under which the City has agreed to purchase the Project
from the Board and to pay semiannual installment payments (the “Installment
Payments”) as the purchase price thereof, and the Board wishes to assign its rights, title
and interest under the Installment Sale Agreement, including the right to receive the
Installment Payments, to the Assignee as provided herein.
AGREEMENT:
In consideration of the material covenants contained in this Agreement, the
parties hereto hereby formally covenant, agree and bind themselves as follows:
SECTION 1. Defined Terms. All capitalized terms not otherwise defined herein
have the respective meanings given those terms in the Installment Sale Agreement.
SECTION 2. Assignment. The Board hereby assigns to the Assignee all of the
Board’s rights, title and interest under the Installment Sale Agreement (excepting only
the Board’s duties, obligations, responsibilities and covenants under Section 5.2 of the
Installment Sale Agreement), including but not limited to:
(a) the right to receive and collect all of the Installment Payments from
the City under the Installment Sale Agreement,
(b) the right to receive and collect any proceeds of any insurance
maintained thereunder with respect to the Project, or any eminent
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2
domain award (or proceeds of sale under threat of eminent domain)
paid with respect to the Project, and
(c) the right to exercise such rights and remedies conferred on the
Board under the Installment Sale Agreement as may be necessary
or convenient (i) to enforce payment of the Installment Payments
and any amounts required to be credited to the payment or
prepayment thereof, or (ii) otherwise to protect the interests of the
Board in the event of a default by the City under the Installment
Sale Agreement.
SECTION 3. Board Representations, Warranties and Covenants. The Board
hereby represents, warrants and covenants to and with the Assignee that:
(a) The Installment Sale Agreement is free and clear of all claims, liens,
security interests, encumbrances of any kind or character created
by, through or under the Board, except the rights of the City
thereunder, and except as contemplated in the Installment Sale
Agreement. The Installment Sale Agreement is and shall remain
free of all claims, liens, security interests and encumbrances arising
through any act or omission of the Board.
(b) The Board has complied with and performed all of its obligations
under the Installment Sale Agreement and all related documents
and instruments.
(c) The Installment Sale Agreement delivered to the Assignee herewith
is an original and constitutes the entire writing, obligation and
agreement between the Board and City respecting the Installment
Payments due thereunder.
SECTION 4. Acceptance. The Assignee hereby accepts the assignments made
herein.
SECTION 5. Further Assurances. The Board shall, from time to time at the
request of the Assignee, execute and deliver such further acknowledgments,
agreements and instruments of assignment, transfer and assurance, and do all such
further acts and things as may be necessary or appropriate in the reasonable opinion of
the Assignee to give effect to the provisions hereof and to more perfectly confirm the
rights, titles and interests hereby assigned and transferred to the Assignee.
SECTION 6. Execution in Counterparts. This Agreement may be executed in any
number of counterparts, each of which is an original and all together constitute one and
the same agreement. Separate counterparts of this Agreement may be separately
executed by the Assignee and the Board, both with the same force and effect as though
the same counterpart had been executed by the Assignee and the Board.
SECTION 7. Binding Effect. This Agreement inures to the benefit of and binds the
Board and the Assignee, and their respective successors and assigns, subject, however,
to the limitations contained herein.
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3
SECTION 8. Governing Law. This Agreement is governed by the Constitution
and laws of the State of California.
IN WITNESS WHEREOF, the parties have executed this Agreement by their duly
authorized officers as of the day and year first written above.
CITY OF SAN LUIS OBISPO CAPITAL
IMPROVEMENT BOARD, as Assignor
By
Executive Director
Attest:
Secretary
U.S. BANCORP GOVERNMENT LEASING AND
FINANCE, INC., as Assignee
By
Name
Title
B5 - 18
Jones Hall, A Professional Law Corporation September 25, 2013
INSTALLMENT SALE AGREEMENT
This Agreement (this “Agreement”), dated as of October 3, 2013, is between the
CITY OF SAN LUIS OBISPO CAPITAL IMPROVEMENT BOARD, a public body corporate and
politic duly organized and existing under Ordinance No. 1059 (1986 Series) adopted by
the City Council of the City of San Luis Obispo on April 15, 1986 (the “Ordinance”), and
under the Constitution and laws of the State of California, as seller (the “Board”), and the
CITY OF SAN LUIS OBISPO, a charter city and municipal corporation duly organized and
existing under the Constitution and laws of the State of California, as purchaser (the
“City”).
BACKGROUND:
1. The City owns and operates facilities and property for the collection,
treatment and disposal of wastewater within the service area of the City (the
“Wastewater Enterprise”).
2. The City wishes to finance the acquisition and installation of improvements
to its water reclamation facility, consisting generally of the onsite cogeneration of energy,
solids management, upgrading and optimizing aging infrastructure, efficient lighting, and
process system controls (the “Project”), which is further described in Appendix B hereto.
3. The City has determined that to accomplish such financing it is necessary
and desirable to purchase the Project from the Board on an installment basis as
provided in this Agreement, and the Board has agreed to provide the funds required for
construction of the Project in consideration of the agreement by the City to enter into this
Agreement.
4. The City will agree to make installment payments under this Agreement in
order to purchase the Project from the Board.
5. The obligations of the City under this Agreement will be secured by a
pledge of, lien on and security interest in the net revenues of the Wastewater Enterprise
on a parity with the outstanding obligations of the City under (a) that certain Installment
Sale Agreement dated as of June 6, 2008, between the City and the Board, and (b) that
certain Enterprise Installment Sale Agreement dated as of October 1, 2008, between the
City and the California Infrastructure and Economic Development Bank (collectively, the
“2008 Installment Sale Agreements”).
6. The rights, title and interest of the Board hereunder, including the right to
receive the installment payments which are payable by the City hereunder, have been
assigned to U.S. Bancorp Government Leasing and Finance, Inc. (the “Assignee”) under
an Assignment Agreement dated the date hereof, between the Board and the Assignee.
7. The City Council of the City has previously adopted its resolution on May 7,
2013, expressing its intention to reimburse certain costs of the Project from the proceeds
of tax-exempt obligations of the City, and such resolution permits the City to apply a
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2
portion of the proceeds of this Agreement to reimburse any such costs which were
originally paid on or after March 8, 2013.
AGREEMENT:
In consideration of the foregoing and the material covenants hereinafter
contained, the City and the Board formally covenant, agree and bind themselves as
follows:
ARTICLE I
DEFINITIONS AND APPENDICES
SECTION 1.1. Definitions. All terms defined in this Section shall for all purposes
of this Agreement have the meanings herein specified.
“Additional Revenues” means, with respect to the issuance of any Parity Debt,
any or all of the following amounts:
(i) An allowance for Net Revenues from any additions or improvements
to or extensions of the Wastewater Enterprise to be made by the
City during the 36-month period following the issuance of such
Parity Debt, in an amount equal to 100% of the estimated additional
average annual Net Revenues to be derived from all properties
which are improved with a structure the construction of which has
been completed prior to the date of issuance of such Parity Debt
and to which service will be provided by such additions,
improvements and extensions, all as shown by the certificate or
opinion of a Fiscal Consultant.
(ii) An allowance for Net Revenues arising from any increase in the
charges made for service from the Wastewater Enterprise which
has become effective prior to the incurring of such Parity Debt but
which, during all or any part of the most recent completed Fiscal
Year for which audited financial statements of the City are available,
or for any more recent consecutive 12-month period selected by the
City under Section 5.8(b), was not in effect, in an amount equal to
the total amount by which the Net Revenues would have been
increased if such increase in charges had been in effect during the
whole of such Fiscal Year or 12-month period, all as shown by the
certificate or opinion of a Fiscal Consultant.
“Arbitrage Rebate Fund” means the fund (if any) which is established and held by
the City under Section 5.11(e).
“Assignee” means U.S. Bancorp Government Leasing and Finance, Inc., as
assignee of certain rights of the Board hereunder, its successors and assigns.
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“Assignment Agreement” means the Assignment Agreement dated as of October
3, 2013, between the Board and the Assignee, including any authorized amendments
thereto.
“Authorized Representative” means: (a) with respect to the Board, its Executive
Director, Chief Financial Officer or any other person designated as an Authorized
Representative of the Board by a Written Certificate of the Board signed by its Executive
Director and filed with the City; and (b) with respect to the City, its City Manager, Director
of Finance and Information Technology or any other person designated as an Authorized
Representative of the City by a Written Certificate of the City signed by its City Manager
and filed with the Board.
“Board” means the City of San Luis Obispo Capital Improvement Board, a public
body corporate and politic duly organized and existing under the Ordinance and under
the Constitution and laws of the State of California.
“Bond Counsel” means (a) Jones Hall, A Professional Law Corporation, or (b)
any other attorney or firm of attorneys of nationally recognized expertise with respect to
legal matters relating to obligations the interest on which is excludable from gross
income for purposes of federal income taxation under Section 103 of the Tax Code.
“Business Day” means a day which is not a Saturday, Sunday or legal holiday on
which banking institutions in the State of California are closed.
“City” means the City of San Luis Obispo, a charter city and municipal
corporation duly organized and existing under the Constitution and laws of the State of
California.
“Closing Date” means October 3, 2013, being the date of execution and delivery
of this Agreement.
“Default Rate” means the interest rate set forth in 4.04(a), plus 300 basis points.
“Excess Investment Earnings” means an amount required to be rebated to the
United States of America under Section 148(f) of the Tax Code due to investment of
gross proceeds of the Installment Payments at a yield in excess of the yield on the
Installment Payments.
“Event of Default” means an event of default as described in Section 6.1.
“Federal Securities” means: (a) any direct general obligations of the United
States of America (including obligations issued or held in book entry form on the books
of the Department of the Treasury of the United States of America), for which the full
faith and credit of the United States of America are pledged; and (b) obligations of any
agency, department or instrumentality of the United States of America, the timely
payment of principal and interest on which are directly or indirectly secured or
guaranteed by the full faith and credit of the United States of America.
“Fiscal Consultant” means any consultant or firm of such consultants appointed
by the City and who, or each of whom:
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(a) is judged by the City to have experience in matters relating to the
financing of wastewater systems;
(b) is in fact independent and not under domination of the City;
(c) does not have any substantial interest, direct or indirect, with the
City other than as purchaser of any Parity Debt; and
(d) is not connected with the City as an officer or employee of the City,
but who may be regularly retained to make reports to the City.
“Fiscal Year” means the twelve-month period beginning on July 1 of any year and
ending on June 30 of the next succeeding year, or any other twelve-month period
selected by the City as its fiscal year.
“Gross Revenues” means all gross charges received for, and all other gross
income and receipts derived by the City from, the ownership and operation of the
Wastewater Enterprise or otherwise arising from the Wastewater Enterprise, including
but not limited to (a) connection, capacity, service, impact and extension charges and
fees, (b) any amounts transferred to the Wastewater Fund from a Rate Stabilization
Fund in accordance with Section 4.6, (c) investment earnings on the foregoing, and (d)
any other legally available and appropriated revenues which are deposited in the
Wastewater Fund.
Gross Revenues do not include (i) the proceeds of any ad valorem property
taxes levied for the purpose of paying general obligation bonds of the City relating to the
Wastewater Enterprise, and (ii) the proceeds of any special assessments or special
taxes levied upon real property within any improvement district for the purpose of paying
special assessment bonds or special tax obligations of the City relating to the
Wastewater Enterprise.
“Independent Accountant” means any independent certified public accountant or
firm of independent certified public accountants appointed and paid by the City, and
who, or each of whom: (a) is in fact independent and not under domination of the City;
(b) does not have any substantial interest, direct or indirect, with the City; and (c) is not
connected with the City as an officer or employee of the City, but who may be regularly
retained to make annual or other audits of the books of or reports to the City.
“Installment Payment Date” means June 1 and December 1 in each year,
commencing June 1, 2014.
“Installment Payments” means all payments required to be paid by the City on
any date under Section 4.4, including any amounts payable upon delinquent installments
and including any prepayment thereof under Sections 7.2 or 7.3.
“Maximum Annual Debt Service” means, as of the date of any calculation, the
maximum sum obtained for the current or any future Fiscal Year during the Term of this
Agreement by totaling the following amounts for such Fiscal Year:
(a) The aggregate amount of the Installment Payments coming due and
payable in such Fiscal Year.
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(b) The 2008 Installment Payments and the principal amount of all
outstanding Parity Debt, if any, coming due and payable by their
terms in such Fiscal Year.
(c) The amount of interest which would be due during such Fiscal Year
on the aggregate principal amount of all outstanding Parity Debt, if
any, which would be outstanding in such Fiscal Year if such Parity
Debt are retired as scheduled. With respect to any Parity Debt the
interest on which is computed at a variable rate, such Parity Debt
shall be assumed to bear interest at the highest of: (i) the actual rate
on the date of calculation, or if the indebtedness is not yet
outstanding, the initial rate (if established and binding), (ii) if the
indebtedness has been outstanding for at least 12 months, the
average rate over the 12 months immediately preceding the date of
calculation, or if no debt is outstanding for the 12 months under the
authorizing document, the average rate borne by reference to an
index comparable to that to be utilized in determining the interest
rate for the debt to be issued, and (iii) (A) if interest on the
indebtedness is excludable from gross income under the applicable
provisions of the Tax Code, the most recently published Bond Buyer
“Revenue Bond Index” (or comparable index if no longer published),
or (B) if interest is not so excludable, the interest rate on direct U.S.
Treasury obligations having comparable maturities.
“Net Revenues” means, for any period, an amount equal to all of the Gross
Revenues received during such period minus the amount required to pay all Operation
and Maintenance Costs becoming payable during such period.
“Operation and Maintenance Costs” means the reasonable and necessary costs
and expenses paid by the City for maintaining and operating the Wastewater Enterprise,
including but not limited to (a) costs of electricity and other utility services supplied to the
Wastewater Enterprise, (b) the reasonable expenses of management and repair and
other costs and expenses necessary to maintain and preserve the Wastewater
Enterprise in good repair and working order, and (c) the reasonable administrative costs
of the City attributable to the operation and maintenance of the Wastewater Enterprise.
Operation and Maintenance Costs do not include (i) debt service payable on
obligations incurred by the City with respect to the Wastewater Enterprise, including but
not limited to the Installment Payments and debt service payments on any other
Wastewater Enterprise Obligations, (ii) fees charged to the Wastewater Enterprise by
the City which are not for services essential to the operation of the Wastewater
Enterprise, (iii) depreciation, replacement and obsolescence charges or reserves
therefor, and (iv) amortization of intangibles or other bookkeeping entries of a similar
nature.
“Parity Debt” means any bonds, notes, loans, leases, installment sale
agreements or other obligations of the City payable from and secured by a pledge of and
lien upon any of the Net Revenues on a parity with the 2008 Installment Payments and
the Installment Payments, entered into or issued under and in accordance with Section
5.8.
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“Parity Debt Documents” means, collectively, the indenture of trust, trust
agreement or other document authorizing the issuance of any Parity Debt or any
securities which evidence Parity Debt.
“Project” means, collectively, the facilities, improvements and other property
constituting part of the Wastewater Enterprise, the acquisition and construction of which
are financed in accordance with this Agreement, as described more fully in Appendix B
attached hereto, as that Appendix may be amended from time to time.
“Project Costs” means all costs of the acquisition, construction and installation of
the Project which are paid from moneys on deposit in the Project Fund, including but not
limited to:
(a) all costs required to be paid to any person under the terms of any
agreement for or relating to the acquisition, construction and
installation of the Project;
(b) obligations incurred for labor and materials in connection with the
acquisition, construction and installation of the Project;
(c) the cost of performance or other bonds and any and all types of
insurance that may be necessary or appropriate to have in effect in
connection with the acquisition, construction and installation of the
Project;
(d) all preliminary costs of the Project, including but not limited to
design, environmental, engineering and architectural services, costs
for testing, surveys, estimates, plans and specifications and
preliminary investigations therefor, development fees and costs for
supervising construction, as well as for the performance of all other
duties required by or consequent to the proper acquisition,
construction and installation of the Project;
(e) any sums required to reimburse the City for advances made for any
of the above items or for any other costs incurred and for work done
which are properly chargeable to the acquisition, construction and
installation of the Project;
(f) all financing costs incurred in connection with the acquisition,
construction and installation of the Project; and
(g) the interest components of the Installment Payments during the
period of acquisition, construction and installation of the Project.
“Project Fund” means the fund by that name established and held by the City
under Section 3.4.
“Rate Stabilization Fund” means any fund established and held by the City as a
fund for the stabilization of rates and charges imposed by the City with respect to the
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Wastewater Enterprise, which fund is established, held and maintained in accordance
with Section 4.6.
“Tax Code” means the Internal Revenue Code of 1986 as in effect on the Closing
Date or (except as otherwise referenced herein) as it may be amended to apply to
obligations issued on the Closing Date, together with applicable proposed, temporary
and final regulations promulgated, and applicable official guidance published, under the
Tax Code.
“Term” means the time during which this Agreement is in effect, as provided in
Section 4.3.
“2008 i-Bank Installment Sale Agreement” means the Enterprise Fund
Installment Sale Agreement dated as of October 1, 2008, between the City and the
California Infrastructure and Economic Development Bank, including all duly authorized
and executed amendments thereto and supplements thereof.
“2008 Installment Payments” means, collectively, (a) all payments required to be
paid by the City on any date under Section 4.4 of the 2008 SunTrust Installment Sale
Agreement, including any amounts payable upon delinquent installments and including
any prepayment thereof under Sections 7.2 or 7.3 of the 2008 SunTrust Installment Sale
Agreement, and (b) all payments required to be paid by the City on any date under
Section 2.03 of the 2008 i-Bank Installment Sale Agreement, including any amounts
payable upon delinquent installments and including any prepayment thereof under
Section 2.05(b) of the 2008 i-Bank Installment Sale Agreement.
“2008 Installment Sale Agreements” means, collectively, the 2008 SunTrust
Installment Sale Agreement and the 2008 i-Bank Installment Sale Agreement.
“2008 SunTrust Installment Sale Agreement” means the Installment Sale
Agreement dated as of June 6, 2008, between the Board and the City, the Board’s rights
under which have previously been assigned to SunTrust Equipment Finance & Leasing
Corp., including all duly authorized and executed amendments thereto and supplements
thereof.
“Wastewater Enterprise” means the entire wastewater collection, treatment and
disposal system of the City, including but not limited to all facilities, properties and
improvements at any time owned or operated by the City for the collection, treatment
and disposal of wastewater within the service area of the City, together with any
necessary lands, rights, entitlements and other property useful in connection therewith,
together with all extensions thereof and improvements thereto hereafter acquired,
constructed or installed by the City.
“Wastewater Enterprise Obligations” means all debt obligations of the City which
are payable from Gross Revenues or Net Revenues, including but not limited to the
2008 Installment Payments, the Installment Payments, Parity Debt and subordinate
obligations.
“Wastewater Fund” means the fund or funds established and held by the City
with respect to the Wastewater Enterprise for the receipt and deposit of Gross
Revenues.
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SECTION 1.2. Appendices. The following Appendices are attached to, and by
this reference are made a part of, this Agreement:
Appendix A: Schedule of Installment Payments
Appendix B: Description of Project
ARTICLE II
REPRESENTATIONS, COVENANTS AND WARRANTIES
SECTION 2.1. Representations, Covenants and Warranties of the City. The City
represents, covenants and warrants to the Board and the Assignee as follows:
(a) The City is a charter city and municipal corporation duly organized
and existing under the Constitution and laws of the State of
California, and is empowered, among other things, to maintain and
operate the Wastewater Enterprise and to acquire in the name of
the City any interest in real or personal property necessary or
convenient for the operation of the Wastewater Enterprise.
(b) The laws of the State authorize the City to enter into this
Agreement, and to enter into the transactions contemplated hereby
and to carry out its obligations hereunder.
(c) Neither the execution and delivery of this Agreement, nor the
fulfillment of or compliance with the terms and conditions hereof, nor
the consummation of the transactions contemplated hereby,
conflicts with or results in a material breach of the terms, conditions
or provisions of any restriction or any agreement or instrument to
which the City is now a party or by which the City is bound or
constitutes a default under any of the foregoing.
(d) The City has duly authorized, executed and delivered this
Agreement in accordance with the laws of the State of California.
This Agreement is legal, valid and binding obligation of the City,
enforceable in accordance with its terms, subject only to laws
related to insolvency or bankruptcy and general equitable principles.
(e) There is no action, suit, proceeding, inquiry or investigation, at law
or in equity, before or by any court, public board or body pending or,
to the knowledge of the City, threatened against or affecting the City
or affecting the corporate existence of the City or the titles of its
officers to their respective offices or seeking to prohibit, restrain or
enjoin the entering into of this Agreement or in any way contesting
or affecting the transactions contemplated hereby or the validity or
enforceability of this Agreement, or contesting the powers of the City
or any authority for the execution and delivery of this Agreement.
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(f) No lease, rental agreement, installment sale agreement, lease-
purchase agreement, loan, note, payment agreement or contract for
purchase to which the City has been a party at any time during the
past ten years has been terminated by the City as a result of either
insufficient funds available in any Fiscal Year, or due to the non-
payment of required payments. No event has occurred which would
constitute a payment-related event of default under any debt, note,
revenue bond or obligation which the City has issued during the
past ten years.
(g) The financial information concerning the City heretofore delivered to
the Assignee is complete and correct and fairly presents the
financial condition of the City for the period(s) referred to and has
been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the period(s)
involved. There are no liabilities (of the type required to be reflected
on balance sheets prepared in accordance with generally accepted
accounting principles), direct or indirect, fixed or contingent, of the
City as of the date of such financial information which are not
reflected therein. There has been no material adverse change in
the financial condition or operations of the City since the date of
such information (and to the City’s knowledge no such material
adverse change is pending or threatened), and the City has not
guaranteed the obligations of, or made any investment in or loans
to, any person except as disclosed in such information. The City
has good and marketable title to all of its properties and assets
related to the Project, and all of such properties and assets are free
and clear of encumbrances, except as reflected in such financial
information.
(h) The City has structured fees, estimated revenues and/or taken other
lawful actions necessary to ensure that the pledge of and lien on Net
Revenues are sufficient to pay all 2008 Installment Payments and
Installment Payments when due and payable, and such moneys have
been and will continue to be applied in the funds and accounts as
required herein and towards payment of all 2008 Installment
Payments and Installment Payments when due and payable.
(i) The City has an immediate need for, and expects to make
immediate use of, the Project, which need is not temporary or
expected to diminish during the Term of this Agreement. To the
extent the City is or may be required to use additional revenues or
spend additional money to complete the Project or make the Project
useable, the City represents, warrants and covenants to take all
required actions to complete the Project and make the Project
useable. The City presently intends to continue this Agreement and
make all Installment Payments required hereunder for the entire
Term of this Agreement.
SECTION 2.2. Representations, Covenants and Warranties of the Board. The
Board represents, covenants and warrants to the City and the Assignee as follows:
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(a) The Board is a public body corporate and politic duly organized and
existing under the Ordinance and under the Constitution and laws of
the State of California; has all requisite powers and authority to
enter into this Agreement and the Assignment Agreement; is
possessed of full corporate power and authority to own and hold
real and personal property, and to sell the same; and has duly
authorized the execution and delivery of this Agreement and the
Assignment Agreement.
(b) Neither the execution and delivery of this Agreement and the
Assignment Agreement nor the fulfillment of or compliance with the
terms and conditions hereof or thereof, nor the consummation of the
transactions contemplated hereby or thereby, conflicts with or
results in a material breach of the terms, conditions or provisions of
any restriction or any agreement, instrument, regulation or law to
which the Board is now a party or by which the Board is bound, or
constitutes a default under any of the foregoing.
(c) The Board has good and marketable title to the Project, which is
otherwise free and clear of encumbrances, except as previously
disclosed to the Assignee and the City.
(d) The Board has duly authorized, executed and delivered this
Agreement in accordance with the laws of the State of California.
This Agreement is legal, valid and binding obligation of the Board,
enforceable in accordance with its terms, subject only to laws
related to insolvency or bankruptcy and general equitable principles.
ARTICLE III
SALE OF PROJECT TO BOARD; DEPOSIT AND
APPLICATION OF SALE PROCEEDS; ACQUISITION AND
CONSTRUCTION OF THE PROJECT
SECTION 3.1. Sale of Project to Board; Deposit of Moneys. The City hereby sells
and conveys the Project to the Board, and the Board hereby purchases the Project from
the City, for a purchase price equal to $7,479,000, which amount shall be paid by the
Board on the Closing Date. On the Closing Date, the Board shall transfer such amount
to the City for deposit in the Project Fund.
SECTION 3.2. Payment of Financing Costs. The City shall pay all costs of the
financing which are provided by this Agreement from funds which are lawfully available
for that purpose in the Wastewater Fund. To the extent not payable from such sources,
such financing costs shall be paid by the City from amounts held by it in the Project
Fund.
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SECTION 3.3. Project Fund. The City shall establish and maintain a special fund
or account designated as the “Project Fund” to be held by the City and which shall be
accounted for as a separate fund or account. Except as otherwise provided herein,
moneys in the Project Fund shall be used solely for the payment of the Project Costs.
The City shall disburse moneys in the Project Fund from time to time to pay Project
Costs (or to reimburse the City for payment of Project Costs). The City shall maintain
accurate records showing all disbursements from the Project Fund. The City shall invest
proceeds in the Project Fund in investments authorized by California law and the City's
investment policy.
SECTION 3.4. Construction of the Project. The Board hereby appoints the City as
its agent to carry out all phases of the acquisition, construction and installation of the
Project under and in accordance with the provisions hereof. The City hereby accepts
such appointment and assumes all rights, liabilities, duties and responsibilities of the
Board regarding the acquisition, construction and installation of the Project. As agent of
the Board hereunder, the City shall enter into, administer and enforce all purchase
orders or other contracts relating to the Project.
Payment of Project Costs shall be made by the City from amounts held in the
Project Fund in accordance with the provisions of this Agreement. If and to the extent
the amounts on deposit in the Project Fund are insufficient to enable the City to
complete the Project in full, the City has the sole responsibility for completing the Project
and the City will finance such completion from any source of legally available funds of
the City.
The City hereby agrees with due diligence to supervise and provide for, or cause
to be supervised and provided for, the acquisition, construction and installation of the
Project in accordance with the plans and specifications, purchase orders, construction
contracts and other documents relating thereto and approved by the City under all
applicable requirements of law. All contracts for, and all work relating to, the acquisition,
construction and installation of the Project are subject to all applicable provisions of law
relating to the acquisition and construction of public works by the City. The City has the
right to specify the exact scope, nature and identification of the Project and the
respective components thereof, and to modify the description of the Project or any
component thereof.
The failure to complete the Project by its estimated completion date does not
constitute an Event of Default hereunder or a grounds for termination hereof, nor will any
such failure result in the diminution, abatement or extinguishment of the obligations of
the City hereunder to pay the Installment Payments when due. Nothing contained
herein shall be deemed to be waiver of the Board’s or the Assignee’s rights and
remedies should the City fail to complete the Project and to complete other improvement
and modification of the Project as represented, warranted and covenanted herein.
Upon the completion of the Project, but in any event not later than 30 days
following such completion, the City shall execute and deliver to the Assignee a written
certificate which states that the acquisition, construction and installation of the Project
has been completed. All amounts in the Project Fund not required for payment of future
Project Costs will be applied by the City to pay the Installment Payments next coming
due and payable.
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ARTICLE IV
INSTALLMENT SALE OF PROJECT BACK TO CITY;
INSTALLMENT PAYMENTS
SECTION 4.1. Sale of Project to City. The Board hereby sells and conveys the
Project back to the City, and the City hereby purchases the Project from the Board upon
the terms and conditions set forth in this Agreement.
SECTION 4.2. Title; Taxes. Title to the Project shall be vested in the City on the
Closing Date. The Board shall take all actions necessary to vest in the City all of the
Board’s rights in and title to the Project. Such title shall be held by the City in trust
pending the satisfaction of the payment obligations under this Agreement.
The parties to this Installment Purchase Agreement contemplate that the Project
will be used for a governmental or proprietary purpose of the City and, therefore, that the
Project will be exempt from all property taxes, including any licensing fees. The
Installment Payments payable by the City under this Installment Purchase Agreement
have been established to reflect the savings resulting from this exemption from taxation.
The City will take such actions necessary under applicable law to obtain said exemption.
Nevertheless, if the use, possession or acquisition of the Project is determined to be
subject to taxation, or licensing fees, or later becomes subject to such taxes, or licensing
fees, the City shall pay when due all taxes and governmental charges lawfully assessed
or levied against or with respect to the Project
SECTION 4.3. Term of this Agreement. The Term of this Agreement commences
on the Closing Date and ends on December 1, 2028 (provided the City has paid all
Installment Payments and other amounts due hereunder through such date), unless
such term is extended or sooner terminated as hereinafter provided.
SECTION 4.4. Installment Payments.
(a) Obligation to Pay. The City agrees to pay to the Board, its successors and
assigns, as the purchase price of the Project, the Installment Payments, consisting of
components of principal and interest, on the Installment Payment Dates and in the
amounts specified in Appendix A hereto. The Installment Payments shall be secured by
and payable from Net Revenues as hereinafter provided. The interest components of
the Installment Payments have been calculated based on the unpaid principal
components of the Installment Payments at an interest rate of 2.90% per annum, on the
basis of a 360-day year of twelve 30-day months. Any Installment Payment which is not
paid in full on the applicable Installment Payment Date shall continue to accrue interest
at the rate of 2.90% per annum until paid, subject to the provisions of Article VI.
(b) Reduction Upon Partial Prepayment. If the City prepays less than all of the
remaining principal components of the Installment Payments under Article VII, the
amount of such prepayment shall be applied to the Installment Payments such that
approximately level Installment Payments prevail following such prepayment, as set forth
in a revised schedule of Installment Payments which is provided to the City by the
Assignee.
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(c) Rate on Overdue Payments. If the City fails to make any of the payments
required in this Section on or before the due date therefor, the Installment Payment in
default shall continue as an obligation of the City until the amount in default shall have
been fully paid and the City agrees to pay the same with interest thereon, to the extent
permitted by law, from the date thereof at the rate of 10% per annum, or, if lower, the
maximum rate then permitted by law.
(d) Assignment. The City understands and agrees that all Installment
Payments have been assigned by the Board to the Assignee under the Assignment
Agreement, and the City hereby assents to such assignment. The Board hereby directs
the City, and the City hereby agrees, to pay to the Assignee all payments payable by the
City under this Section and all amounts payable by the City under Article VII.
SECTION 4.5. Pledge and Application of Net Revenues.
(a) Pledge. All of the Net Revenues are hereby irrevocably pledged, charged
and assigned to the punctual payment of the Installment Payments. Such pledge,
charge and assignment constitutes a lien on the Net Revenues for the payment of the
Installment Payments in accordance with the terms hereof, which lien shall be on a
parity with the pledge and lien which secures the 2008 Installment Payments and any
Parity Debt.
(b) Deposit of Net Revenues Into Wastewater Fund; Transfers to Make
Payments. The City has previously established the Wastewater Fund, which the City
shall continue to hold and maintain for the purposes and uses set forth herein. The City
shall deposit all Gross Revenues in the Wastewater Fund immediately on receipt. The
City shall apply amounts in the Wastewater Fund as set forth in this Agreement, the
2008 Installment Sale Agreements and any Parity Debt Documents. Amounts on
deposit in the Wastewater Fund shall be applied by the City to pay when due the
following amounts in the following order of priority:
(i) all Operation and Maintenance Costs;
(ii) the Installment Payments, the 2008 Installment Payments and all
payments of principal of and interest on any Parity Debt;
(iii) the amount of any deficiency in any reserve fund established for
Parity Debt, the notice of which deficiency has been given to the
City in accordance with the related documents;
(iv) any other payments required to comply with the provisions of this
Agreement, the 2008 Installment Sale Agreements and any Parity
Debt Documents; and
(v) any other purposes authorized under subsection (d) of this Section.
(c) No Preference or Priority. Payment of the Installment Payments, the 2008
Installment Payments and the principal of and interest on any Parity Debt shall be made
without preference or priority. If the amount of Net Revenues on deposit in the
Wastewater Fund are at any time insufficient to enable the City to pay when due the
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Installment Payments, the 2008 Installment Payments and the principal of and interest
on any Parity Debt, such payments will be made on a pro rata basis.
(d) Other Uses of Net Revenues Permitted. The City shall manage, conserve
and apply the Net Revenues on deposit in the Wastewater Fund in such a manner that
all deposits required to be made under the preceding subsection (b) will be made at the
times and in the amounts so required. Subject to the foregoing sentence and the terms,
conditions and covenants contained herein, so long as no Event of Default has occurred
and is continuing, the City may use and apply moneys in the Wastewater Fund for (i) the
payment of any subordinate obligations or any unsecured obligations, (ii) the acquisition
and construction of improvements to the Wastewater Enterprise, (iii) the prepayment of
any other obligations of the City relating to the Wastewater Enterprise, or (iv) any other
lawful purposes of the City.
(e) Budget and Appropriation of Installment Payments. During the Term of this
Agreement, the City shall adopt all necessary budgets and make all necessary
appropriations of the Installment Payments from the Net Revenues. If any Installment
Payment requires the adoption by the City of a supplemental budget or appropriation,
the City shall promptly adopt the same. The covenants on the part of the City contained
in this subsection (e) are non-cancellable obligations and duties imposed by law and it is
the duty of each and every public official of the City to take such actions and do such
things as are required by law in the performance of the official duty of such officials to
enable the City to carry out and perform the covenants and agreements in this
subsection (e).
SECTION 4.6. Establishment of Rate Stabilization Fund. The City has the right at
any time to establish a fund to be held by it and administered in accordance with this
Section, for the purpose of stabilizing the rates and charges imposed by the City with
respect to the Wastewater Enterprise. From time to time the City may deposit amounts
in the Rate Stabilization Fund, from any source of legally available funds, including but
not limited to Net Revenues which are released from the pledge and lien which secures
the Installment Payments, the 2008 Installment Payments and any Parity Debt, as the
City may determine.
The City may, but is not required to, withdraw from any amounts on deposit in the
Rate Stabilization Fund and deposit such amounts in the Wastewater Fund in any Fiscal
Year for the purpose of paying the Installment Payments, the 2008 Installment Payments
or the principal of and interest on any Parity Debt coming due and payable in that Fiscal
Year. Amounts so transferred from the Rate Stabilization Fund to the Wastewater Fund
constitute Gross Revenues for the Fiscal Year (except as otherwise provided herein),
and shall be applied for the purposes of the Wastewater Fund. Amounts on deposit in
the Rate Stabilization Fund may not be pledged to or otherwise secure the Installment
Payments, the 2008 Installment Payments or any Parity Debt. All interest or other
earnings on amounts in the Rate Stabilization Fund shall be retained therein or, at the
option of the City, be applied for any other lawful purposes. The City has the right at any
time to withdraw any or all amounts on deposit in the Rate Stabilization Fund and apply
such amounts for any other lawful purposes of the City.
SECTION 4.7. Special Obligation of the City; Obligations Absolute. The City’s
obligation to pay the Installment Payments and any other amounts coming due and
payable hereunder shall be a special obligation of the City limited solely to the Net
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Revenues. Under no circumstances is the City required to advance moneys derived
from any source of income other than the Net Revenues and other sources specifically
identified herein for the payment of the Installment Payments and such other amounts,
and no other funds or property of the City are liable for the payment of the Installment
Payments.
The obligation of the City to pay the Installment Payments, and the obligation of
the City to perform and observe the other agreements contained herein, are absolute
and unconditional and are not subject to any defense or any right of setoff, counterclaim
or recoupment arising out of any breach of the Board or the Assignee of any obligation
to the City or otherwise with respect to the Wastewater Enterprise, whether hereunder or
otherwise, or out of indebtedness or liability at any time owing to the City by the Board or
the Assignee. Until such time as all of the Installment Payments have been fully paid or
prepaid, the City:
(i) will not suspend or discontinue payment of any Installment
Payments,
(ii) will perform and observe all other agreements contained in this
Agreement, and
(iii) will not terminate this Agreement for any cause, including, without
limiting the generality of the foregoing, the occurrence of any acts or
circumstances that may constitute failure of consideration, eviction
or constructive eviction, destruction of or damage to the Wastewater
Enterprise, the sale of the Wastewater Enterprise, the taking by
eminent domain of title to or temporary use of any component of the
Wastewater Enterprise, commercial frustration of purpose, any
change in the tax or other laws of the United States of America or
the State of California or any political subdivision of either thereof or
any failure of the Board to perform and observe any agreement,
whether express or implied, or any duty, liability or obligation arising
out of or connected with this Agreement.
ARTICLE V
COVENANTS OF THE CITY
SECTION 5.1. Disclaimer of Warranties. Neither the Board nor the Assignee
makes any warranty or representation, either express or implied, as to the value, design,
condition, merchantability or fitness for any particular purpose or fitness for the use
contemplated by the City of the Project or any component thereof, or any other
representation or warranty with respect to any of the Project or any component thereof.
In no event is the Board or the Assignee liable for incidental, indirect, special or
consequential damages, in connection with or arising out of this Agreement for the
existence, furnishing, functioning or use of the Project.
SECTION 5.2. Release and Indemnification Covenants. The City agrees to
indemnify the Board and the Assignee, and their respective officers, agents, successors
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and assigns, against all claims, losses and damages, including legal fees and expenses,
arising out of:
(a) the use, maintenance, condition or management of, or from any
work or thing done on or about the Wastewater Enterprise or the
selection, construction or sale of the Project by or to the City, its
employees, agents, contractors, vendors, and subcontractors;
(b) any breach or default on the part of the City in the performance of
any of its representation, warranties, covenants, and obligations
under this Agreement,
(c) any act or omission of the City or of any of its agents, contractors,
servants, employees or licensees with respect to the Wastewater
Enterprise or the Project,
(d) any act or omission of any lessee of the City with respect to the
Wastewater Enterprise or Project;
(e) Any loss, claim, damage to the environment relating to the Project
or the Wastewater Enterprise, including but not limited to any
investigation, cleanup, remedial, or other costs; and
(f) any strict liability under the laws or judicial decisions of any state or
the United States.
No indemnification is made under this Section or elsewhere in this Agreement for
willful misconduct or gross negligence under this Agreement by the Board or the
Assignee, or their respective officers, agents, employees, successors or assigns. The
provisions of this Section survive the expiration of the Term of this Agreement.
SECTION 5.3. Sale or Eminent Domain of Wastewater Enterprise. Except as
provided herein, the City covenants that the Wastewater Enterprise will not be
encumbered, sold, leased, pledged, any charge placed thereon, or otherwise disposed
of, as a whole or substantially as a whole if such encumbrance, sale, lease, pledge,
charge or other disposition would materially impair the ability of the City to pay any
Wastewater Enterprise Obligations, or would materially adversely affect its ability to
comply with the terms of this Agreement or any Parity Debt Documents. The City may
not enter into any agreement which impairs the operation of the Wastewater Enterprise
or any part of it necessary to secure adequate Net Revenues to pay the Installment
Payments, the 2008 Installment Payments or any Parity Debt, or which otherwise would
impair the rights of the Board with respect to the Net Revenues.
If any substantial part of the Wastewater Enterprise is sold, the payment therefor
shall, with the prior written consent of the Assignee, either (a) be used for the acquisition
or construction of improvements and extensions or replacement facilities or (b) be
applied on a pro rata basis to prepay the Installment Payments, the 2008 Installment
Payments and any Parity Debt on the next available prepayment date.
Any amounts received as awards as a result of the taking of all or any part of the
Wastewater Enterprise by the lawful exercise of eminent domain, if and to the extent that
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such right can be exercised against such property of the City shall, with the prior written
consent of the Assignee, either (a) be used for the acquisition or construction of
improvements and extension of the Wastewater Enterprise, or (b) be applied on a pro
rata basis to prepay the Installment Payments, the 2008 Installment Payments and any
Parity Debt on the next available prepayment date.
SECTION 5.4. Insurance. The City shall at all times maintain with responsible
insurers all such insurance on the Wastewater Enterprise as is customarily maintained
with respect to works and properties of like character against accident to, loss of or
damage to the Wastewater Enterprise. Such insurance shall include coverage for
casualty losses to the facilities constituting part of the Wastewater Enterprise. All
amounts collected from insurance against accident to or destruction of any portion of the
Wastewater Enterprise shall, with the prior written consent of the Assignee, either (a) be
used to repair or rebuild such damaged or destroyed portion of the Wastewater
Enterprise, or (b) be applied on a pro rata basis to prepay the Installment Payments, the
2008 Installment Payments and any Parity Debt on the next available prepayment date.
The City shall also maintain, with responsible insurers, worker's compensation
insurance and insurance against public liability and property damage to the extent
reasonably necessary to protect the interests of the City and the Board.
Any policy of insurance required under this Section may be maintained as part of
or in conjunction with any other insurance coverage carried by the City, and may be
maintained in whole or in part in the form of self-insurance by the City or in the form of
the participation by the City in a joint powers agency or other program providing pooled
insurance. The City shall file evidence of all insurance policies maintained under this
Section at least annually with the Board and the Assignee.
SECTION 5.5. Records and Accounts. The City shall keep proper books of record
and accounts of the Wastewater Enterprise in which complete and correct entries shall
be made of all transactions relating to the Wastewater Enterprise. Said books shall,
upon prior request, be subject to the reasonable inspection of the Board upon not less
than two Business Days’ prior notice to the City.
The City shall cause the books and accounts of the Wastewater Enterprise to be
audited annually by an Independent Accountant not more than 270 days after the close
of each Fiscal Year, and shall file a copy of such report with the Board. Such report may
be part of a combined financial audit or report covering all or part of the City’s finances.
The City shall provide the Assignee copies of such certified annual financial statements
within a reasonably prompt period following the preparation of such statements.
SECTION 5.6. Rates and Charges. The City shall fix, prescribe, revise and collect
rates, fees and charges for the services and facilities furnished by the Wastewater
Enterprise during each Fiscal Year, which are at least sufficient, after making allowances
for contingencies and error in the estimates, to yield Gross Revenues sufficient to pay
the following amounts in the following order of priority:
(a) All Operation and Maintenance Costs estimated by the City to
become due and payable in the Fiscal Year.
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(b) All Installment Payments, all 2008 Installment Payments and all
payments of principal of and interest on any Parity Debt as they
become due and payable during the Fiscal Year, without preference
or priority. If interest with respect to any Parity Debt is computed at
a variable rate, the amount required to be taken into account for any
Fiscal Year under this Section shall be the actual rate borne by such
Parity Debt during such Fiscal Year.
(c) All payments required to meet any other obligations of the City
which are charges, liens, encumbrances upon, or which are
otherwise payable from, the Gross Revenues or the Net Revenues
during such Fiscal Year.
In addition, the City shall fix, prescribe, revise and collect rates, fees and charges
for the services and facilities furnished by the Wastewater Enterprise during each Fiscal
Year which (together with existing unreserved, unrestricted working capital balances in
the Wastewater Fund, and taking into account allowances for contingencies), are
sufficient to yield Net Revenues which are at least equal to 110% of the aggregate
amount of the Installment Payments, 2008 Installment Payments and payments on
Parity Debt coming due in the Fiscal Year.
SECTION 5.7. Superior and Subordinate Obligations. The City may not issue or
incur any additional bonds or other obligations during the Term of this Agreement having
any preference or priority in payment of principal or interest out of the Gross Revenues
or the Net Revenues over the Installment Payments. Nothing herein limits or affects the
ability of the City to issue or incur (a) Parity Debt under Section 5.8, or (b) obligations
which are either unsecured or which are secured by an interest in the Net Revenues
which is junior and subordinate to the pledge of and lien upon the Net Revenues
established hereunder.
SECTION 5.8. Issuance of Parity Debt. Except for obligations incurred to prepay
or discharge the Installment Payments, the 2008 Installment Payments or any Parity
Debt, the City may not issue or incur any Parity Debt during the Term hereof unless:
(a) no Event of Default has occurred and is continuing; and
(b) the Net Revenues (excluding any amounts derived from a Rate
Stabilization Fund), calculated in accordance with generally
accepted accounting principles, as shown by the books of the City
for the most recent completed Fiscal Year for which audited
financial statements of the City are available, or for any more recent
consecutive 12-month period selected by the City, in either case
verified by an Independent Accountant or a Fiscal Consultant or
shown in the audited financial statements of the City, plus (at the
option of the City) any Additional Revenues, are at least equal to
110% of Maximum Annual Debt Service (taking into account the
Parity Debt then proposed to be issued).
SECTION 5.9. Operation of Wastewater Enterprise in Efficient and Economical
Manner. The City shall operate the Wastewater Enterprise in an efficient and
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economical manner and maintain and preserve the Wastewater Enterprise in good
repair and working order.
SECTION 5.10. Compliance with 2008 Installment Sale Agreements. The City
shall observe and perform all of the terms and provisions which are required to be
observed and performed by it under the 2008 Installment Sale Agreements and shall not
take any action which either (a) constitutes an event of default thereunder or (b) would, if
not cured, eventually constitute an event of default thereunder.
SECTION 5.11. Tax Covenants.
(a) Generally. The City shall not take any action or permit to be taken any
action or omission which would cause or which, with the passage of time if not cured
would cause, the interest components of the Installment Payments to become includable
in gross income of the Board or its Assignee for federal income tax purposes.
(b) Private Activity Bond Limitation. The City shall assure that the proceeds of
the Installment Payments are not so used as to cause the Installment Payments to
satisfy the private business tests of Section 141(b) of the Tax Code or the private loan
financing test of section 141(c) of the Tax Code.
(c) Federal Guarantee Prohibition. The City shall not take any action or permit
or suffer any action to be taken if the result of the same would be to cause the
Installment Payments to be “federally guaranteed” within the meaning of Section 149(b)
of the Tax Code.
(d) No Arbitrage. The City shall not take, or permit or suffer to be taken, any
action with respect to the proceeds of the Installment Payments which, if such action had
been reasonably expected to have been taken, or had been deliberately and
intentionally taken, on the Closing Date would have caused the Installment Payments to
constitute “arbitrage bonds” within the meaning of Section 148(a) of the Tax Code.
(e) Arbitrage Rebate; Arbitrage Rebate Fund. The City shall take any and all
actions necessary to assure compliance with section 148(f) of the Tax Code, relating to
the rebate of excess investment earnings, if any, to the federal government, to the extent
that such section is applicable to this Agreement.
The City may in its discretion establish and maintain a special fund designated as
the “Arbitrage Rebate Fund”. The City shall deposit into the Arbitrage Rebate Fund any
amounts provided by the City for that purpose. Amounts on deposit in the Arbitrage
Rebate Fund shall be disbursed by the City for the purpose of making payments of
Excess Investment Earnings in accordance with this subsection (e). If the City
determines that any amounts held by it in the Arbitrage Rebate Fund are not required to
make payments of Excess Investment Earnings, the City may apply amounts in the
Arbitrage Rebate Fund for any other lawful purposes of the City.
(f) Small Issuer Exemption from Bank Nondeductibility Restriction. The City
hereby designates this Agreement for purposes of paragraph (3) of Section 265(b) of the
Tax Code and represents that not more than $10,000,000 aggregate principal amount of
obligations the interest on which is excludable (under Section 103(a) of the Tax Code)
from gross income for federal income tax purposes (excluding (i) private activity bonds,
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as defined in Section 141 of the Tax Code, except qualified 501(c)(3) bonds as defined
in Section 145 of the Tax Code and (ii) current refunding obligations to the extent the
amount of the refunding obligation does not exceed the outstanding amount of the
refunded obligation), including this Agreement, has been or will be issued by the City,
including all subordinate entities of the City, during the calendar year 2013.
(g) Record Retention. The City will retain its records of all accounting and
monitoring it carries out with respect to this Agreement for at least three years after the
payment or prepayment in full of the Installment Payments, whichever is earlier, or for
such lesser period of time as may be permitted under the Tax Code.
(h) Acquisition, Disposition and Valuation of Investments. Except as otherwise
provided in the following sentence, the City covenants that all investments of amounts
deposited in any fund or account created by or under this Agreement, or otherwise
containing gross proceeds of this Agreement (within the meaning of Section 148 of the
Tax Code) shall be acquired, disposed of, and valued (as of the date that valuation is
required by this Agreement or the Tax Code) at Fair Market Value. Investments in
funds or accounts (or portions thereof) that are subject to a yield restriction under
applicable provisions of the Tax Code shall be valued at their present value (within the
meaning of section 148 of the Tax Code).
For purposes of this subsection (f), the term “Fair Market Value” means the price
at which a willing buyer would purchase the investment from a willing seller in a bona
fide, arm's length transaction (determined as of the date the contract to purchase or sell
the investment becomes binding) if the investment is traded on an established securities
market (within the meaning of section 1273 of the Tax Code) and, otherwise, the term
“Fair Market Value” means the acquisition price in a bona fide arm's length transaction
(as referenced above) if (i) the investment is a certificate of deposit that is acquired in
accordance with applicable regulations under the Tax Code, (ii) the investment is an
agreement with specifically negotiated withdrawal or reinvestment provisions and a
specifically negotiated interest rate (for example, a guaranteed investment contract, a
forward supply contract or other investment agreement) that is acquired in accordance
with applicable regulations under the Tax Code, (iii) the investment is a United States
Treasury Security – State and Local Government Series that is acquired in accordance
with applicable regulations of the United States Bureau of Public Debt, or (iv) any
commingled investment fund in which the City and related parties do not own more than
a 10% beneficial interest therein if the return paid by the fund is without regard to the
source of the investment.
SECTION 5.12. Disclaimer of Warranties. THE BOARD MAKES NO WARRANTY
OR REPRESENTATION, EITHER EXPRESS OR IMPLIED, AS TO THE VALUE,
DESIGN, CONDITION, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE OR FITNESS FOR THE USE CONTEMPLATED BY THE CITY FOR THE
PROJECT, THE WASTEWATER ENTERPRISE OR ANY ITEM THEREOF, OR ANY
OTHER REPRESENTATION OR WARRANTY WITH RESPECT TO THE PROJECT,
THE WASTEWATER ENTERPRISE OR ANY ITEM THEREOF. IN NO EVENT SHALL
THE BOARD BE LIABLE FOR INCIDENTAL, INDIRECT, SPECIAL OR
CONSEQUENTIAL DAMAGES IN CONNECTION WITH OR ARISING OUT OF THIS
AGREEMENT FOR THE EXISTENCE, FURNISHING, FUNCTIONING OR CITY'S USE
OF THE PROJECT OR THE WASTEWATER ENTERPRISE.
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SECTION 5.13. Access to the Wastewater Enterprise and Records. To the extent
permitted by law, the City agrees that the Board, any Authorized Representative of the
Board, and the Board’s successors or assigns, including the Assignee, shall have the
right at all reasonable times to enter upon and to examine and inspect the Wastewater
Enterprise. The City further agrees that the Board, any Authorized Representative of the
Board, and the Board’s successors or assigns, including the Assignee, shall have such
rights of access to the Wastewater Enterprise as may be reasonably necessary to cause
the proper maintenance of the Wastewater Enterprise in the event of failure by the City
to perform its obligations hereunder. In addition, the City agrees that the Board, any
Authorized Representative of the Board, and the Board’s successors or assigns,
including the Assignee, shall have the right at all reasonable times to inspect and
examine all books, papers and records of the City pertaining to the Wastewater
Enterprise, to make copies thereof and to take non-privileged memoranda therefrom or
with respect thereto as may be desired.
SECTION 5.14. Assignment by the Board. The rights and interest of the Board in
this Agreement and the Installment Payments have been assigned to the Assignee
under the Assignment Agreement, to which assignment the City hereby consents. In no
event is the City required to allocate any Installment Payment among more than one
person or entity or make a payment to more than one address or wire transfer
destination, and the person or entity to whom Installment Payments are to be made shall
be authorized to give all consents and approvals to be obtained from the Board
hereunder on behalf of and for all transferees. No further action will be required by the
Board, any other owner of an interest therein or the City to evidence any such
assignment, but the City shall acknowledge each such assignment in writing if so
requested and shall keep a complete and accurate record of all such assignments in a
manner that complies with section 149(a) of the Tax Code and the regulations
thereunder. Nothing contained herein shall be deemed to be restriction on the sale or
assignability of this Agreement or the rights of the Assignee hereunder. However, the
Assignee agrees to reasonably comply with all applicable rules, laws and regulations,
which may from time to time affect the assignability of this Agreement and the right to
receive Installment Payments made hereunder.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. Events of Default Defined. Any one or more of the following events
shall constitute Events of Default hereunder:
(a) Failure by the City to pay any Installment Payment by the
Installment Payment Date or failure to make any other payment
required to be paid hereunder at the time specified herein, and the
continuation of such failure for a period of 15 days.
(b) Failure by the City to observe and perform any covenant, condition
or agreement on its part to be observed or performed in this
Agreement other than as referred to in clause (a) of this Section, for
a period of 30 days after written notice specifying such failure and
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requesting that it be remedied has been given to the City by the
Assignee or the Board; provided, however, that if the failure stated
in the notice cannot be corrected within the applicable period, the
Board shall not unreasonably withhold its consent to an extension of
such time if corrective action is instituted by the City within the
applicable period and diligently pursued until the default is
corrected.
(c) The filing by the City of a petition or answer seeking arrangement or
reorganization under the federal bankruptcy laws or any other
applicable law of the United States of America or any state therein,
or the approval by a court of competent jurisdiction of a petition filed
with or without the consent of the City seeking arrangement or
reorganization under the federal bankruptcy laws or any other
applicable law of the United States of America or any state therein,
or, under the provisions of any other law for the relief or aid of
debtors, any court of competent jurisdiction assumes custody or
control of the City or of the whole or any substantial part of its
property.
(d) The occurrence of any event defined to be an event of default under
the 2008 SunTrust Installment Sale Agreement, under the 2008 i-
Bank Installment Sale Agreement or under any Parity Debt
Documents.
(e) Any statement, representation or warranty made by the City in or
pursuant to this Agreement or its execution, delivery or performance
shall prove to have been false, incorrect, misleading or breached in
any material respect on the date when made.
SECTION 6.2. Remedies on Default. Whenever any Event of Default has
happened and is continuing, the Board shall have the right, at its option and without any
further demand or notice, to:
(a) declare all principal components of the unpaid Installment
Payments, together with accrued interest thereon to be immediately
due and payable, whereupon the same shall become due and
payable; and
(b) apply to and obtain from any court of competent jurisdiction such
decree or order as may be necessary to require officials of the City
to charge and collect rates for services provided by the City and the
Wastewater Enterprise sufficient to meet all requirements of this
Agreement; and
(c) take whatever action at law or in equity, including specific
enforcement, mandamus, or any equitable remedies available, as
may be desirable and permitted by law to collect the Installment
Payments then due or thereafter to become due during the Term of
this Agreement, or enforce performance and observance of any
obligation, agreement or covenant of the City under this Agreement.
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In addition, the City is liable for, and hereby agrees to pay, all legal costs and
expenses, including court costs, incurred by the Board or the Assignee in the
enforcement of any of the remedies listed above or any other remedy available to the
Board.
So long as there has occurred and is continuing an Event of Default, the interest
under this Agreement shall accrue, at the option of the Assignee, at the Default Rate.
SECTION 6.3. No Remedy Exclusive. No remedy herein conferred upon or
reserved to the Board is intended to be exclusive and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this Agreement or
now or hereafter existing at law or in equity. No delay or omission to exercise any right
or power accruing upon any default shall impair any such right or power or shall be
construed to be a waiver thereof, but any such right and power may be exercised from
time to time and as often as may be deemed expedient. In order to entitle the Board to
exercise any remedy reserved to it in this Article VI it shall not be necessary to give any
notice, other than such notice as may be required in this Article VI or by law.
SECTION 6.4. Prosecution and Defense of Suits. The City shall promptly, upon
request of the Board, the Assignee, or its assignee, from time to time take or cause to be
taken such action as may be necessary or proper to remedy or cure any defect in or
cloud upon the title to the Wastewater Enterprise whether now existing or hereafter
developing and shall prosecute all such suits, actions and other proceedings as may be
appropriate for such purpose.
SECTION 6.5. No Additional Waiver Implied by One Waiver. If any agreement
contained in this Agreement is breached by either party and thereafter waived by the
other party, such waiver is limited to the particular breach so waived and will not be
deemed to waive any other breach hereunder.
SECTION 6.6. Liability Limited to Net Revenues. Notwithstanding any provision
of this Agreement, the City's liability to pay the Installment Payments and other amounts
hereunder is limited solely to Net Revenues as provided in Article IV. If the Net
Revenues are insufficient at any time to pay an Installment Payment in full, the City is
not liable to pay or prepay such Installment Payment other than from Net Revenues.
SECTION 6.7. Rights of Assignee. Such rights and remedies as are granted to
the Board under this Article VI or under this Agreement shall be exercised by the
Assignee, as assignee of the rights of the Board hereunder, in accordance with the
provisions of the Assignment Agreement.
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ARTICLE VII
PREPAYMENT OF INSTALLMENT PAYMENTS
SECTION 7.1. Prepayment. The City has the right to prepay the Installment
Payments, but only in the manner, at the times and in all respects in accordance with the
provisions of this Article VII.
SECTION 7.2. Optional Prepayment. The City has the right at its option to prepay
the Installment Payments in whole, on any Installment Payment Date, at a prepayment
price equal to 103% of the principal balance outstanding as of the date of prepayment,
plus any accrued but unpaid interest.
The principal balance outstanding of the Installment Payments as of each
Installment Payment Date (after payment of the Installment Payment due on such date)
is set forth on the Schedule of Installment Payments attached as Appendix A hereto.
Notice of prepayment shall be given by the City not less than 30 nor more than
45 days prior to the prepayment date, to the Board and the Assignee at their respective
addresses set forth in Section 8.1 or at such other address as is furnished to the City in
writing by the Board or the Assignee. Any notice mailed as provided in this Section shall
be conclusively presumed to have been duly given, whether or not the Board or the
Assignee receives such notice.
If notice of prepayment is given as aforesaid, the Installment Payments shall
become due and payable at the prepayment price and on the Installment Payment Date
therein designated and if, on the Installment Payment Date, money for the payment of
the prepayment price have been paid, then from and after the prepayment date, interest
on the principal amount of the Installment Payments, shall cease to accrue and become
payable.
SECTION 7.3. Prepayment From Net Proceeds of Insurance or Eminent Domain.
The City may prepay the unpaid principal balance of the Installment Payments in whole
or in part, on any date, if and to the extent the City (with the prior written consent of the
Assignee) determines to apply any proceeds of insurance award or condemnation award
with respect to the Wastewater System for such purpose in accordance with Sections
5.3 or 5.4, at a prepayment price equal to 100% of the principal amount to be prepaid
plus accrued interest to the prepayment date, without premium.
SECTION 7.4. No Surrender of Agreement Required. No surrender of this
Agreement shall ever be required as a condition for payment or otherwise. The Board,
the City, and the Assignee agree that this Agreement shall terminate, excepting those
provisions expressly surviving termination of this Agreement, at the earliest of as
provided in Section 4.3 or as provided in Article VII.
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ARTICLE VIII
MISCELLANEOUS
SECTION 8.1. Notices. All notices, certificates or other communications
hereunder shall be in writing and shall be deemed to have been properly given on the
earlier of (i) when delivered in person, (ii) the third Business Day following deposit in the
United States Mail, with adequate postage, and sent by registered or certified mail, with
return receipt requested to the appropriate party at the address set forth below, or (iii)
the first Business Day following deposit with Federal Express, Express Mail or other
overnight delivery service for next day delivery, addressed to the appropriate party at the
address set out below.
If to the City City of San Luis Obispo
or the Board 990 Palm Street
San Luis Obispo, California 93401
Attention: Director of Finance
and Information Technology
If to the Assignee: U.S. Bancorp Government Leasing and Finance, Inc.
950 17th Street, 7th Floor
Denver, Colorado 80202
Attention: Vice President, Western Region
The Board, the City and the Assignee, by notice given hereunder, may designate
different addresses to which subsequent notices, certificates or other communications
will be sent.
SECTION 8.2. Third Party Beneficiary. The Assignee is hereby made a third party
beneficiary under this Agreement with all rights of a third party beneficiary.
SECTION 8.3. Binding Effect. This Agreement inures to the benefit of and is
binding upon the Board, the City and the Assignee, and their respective successors and
assigns.
SECTION 8.4. Severability. If any provision of this Agreement is held invalid or
unenforceable by any court of competent jurisdiction, such holding will not invalidate or
render unenforceable any other provision hereof.
SECTION 8.5. Amendments Changes and Modifications. This Agreement may be
amended or any of its terms modified with the written consent of the City and the Board.
SECTION 8.6. Net Contract. This Agreement shall be deemed and construed to
be a “net contract” and the City hereby agrees that the Installment Payments shall be an
absolute net return to the Board, free and clear of any expenses, charges or set-offs
whatsoever.
SECTION 8.7. Further Assurances and Corrective Instruments. The Board and
the City agree that they will, from time to time, execute, acknowledge and deliver, or
cause to be executed, acknowledged and delivered, such supplements hereto and such
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further instruments as may reasonably be required for correcting any inadequate or
incorrect description of the Project hereby sold or intended so to be or for carrying out
the expressed intention of this Agreement.
SECTION 8.8. Execution in Counterparts. 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.
SECTION 8.9. Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 8.10. Board and City Representatives. Whenever under the provisions
of this Agreement the approval of the Board or the City is required, or the Board or the
City is required to take some action at the request of the other, such approval or such
request shall be given for the Board by an Authorized Representative of the Board and
for the City by a City Representative, and any party hereto shall be authorized to rely
upon any such approval or request.
SECTION 8.11. Defeasance. If and when all of the Installment Payments shall be
paid in any one or more of the following ways:
(a) by paying or causing to be paid the principal of and interest and
prepayment premium (if any) with respect to the Installment
Payments as and when the same become due and payable in good
and indefeasible funds via check or wire transfer as may from time
to time be directed by the Assignee or any subsequent Assignee;
(b) with the prior written consent of the Assignee or any subsequent
Assignee, which shall not unreasonably be withheld, by depositing
with an escrow agent or other fiduciary, in trust, at or before the final
stated Installment Payment Date, money which is fully sufficient to
pay and discharge the Installment Payments, including all principal
and interest and prepayment premium, (if any) at or before their
respective Installment Payment Dates;
(c) with the prior written consent of the Assignee or any subsequent
Assignee, which shall not unreasonably be withheld, by depositing
with an escrow agent or other fiduciary, in trust, Federal Securities
in such amount as an independent certified public accountant shall
determine in writing will, together with the interest to accrue thereon
and without reinvestment, be fully sufficient to pay and discharge
the Installment Payments, including all principal and interest and
prepayment premium, (if any), at or before their respective
Installment Payment Dates; or
(d) with the prior written consent of the Assignee or any subsequent
Assignee, which shall not unreasonably be withheld, by depositing
with an escrow agent or other fiduciary, under an escrow deposit
and trust agreement, security for the payment and discharge of the
Installment Payments, including all principal and interest and
prepayment premium (if any) in form and substance acceptable to
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the Board, or its assign, in its sole discretion, said security to be
applied to pay the Installment Payments, including all principal and
interest and prepayment premium (if any) in full on the earliest
possible date;
all obligations of the City with respect to this Agreement shall cease and terminate and
this Agreement shall be discharged, except for any provision herein which expressly
states that it survives termination. The City shall provide to the Board and the Assignee
30 days prior written notice of its intent to discharge its obligations with respect to this
Agreement by satisfying the conditions of this Section, and shall provide the Board and
the Assignee with an opinion of Bond Counsel stating that (i) the deposit and application
of funds under this Section does not, of itself, cause the interest components of the
Installment Payments to be includable in gross income for federal tax purposes, and (ii)
as a result of the deposit and application of funds under this Section, all obligations of
the City with respect to this Agreement have ceased and terminated and this Agreement
has been discharged.
SECTION 8.12. Captions. The captions or headings in this Agreement are for
convenience only and in no way define, limit or describe the scope or intent of any
provision, Article or Section of this Agreement.
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IN WITNESS WHEREOF, the Board has caused this Agreement to be executed
in its name by its duly authorized officers; and the City has caused this Agreement to be
executed in its name by its duly authorized officers, as of the date first above written.
CITY OF SAN LUIS OBISPO CAPITAL
IMPROVEMENT BOARD , as Seller
By
Executive Director
CITY OF SAN LUIS OBISPO, as Purchaser
By
City Manager
ATTEST:
By
City Clerk
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A-1
APPENDIX A
SCHEDULE OF INSTALLMENT PAYMENTS
Installment Principal Interest Aggregate
Payment Date Component Component Installment Payment
6/1/14 $ 143,389.05 $ 143,389.05
12/1/14 $ 372,957.08 108,445.50 481,402.58
6/1/15 103,037.62 103,037.62
12/1/15 418,716.39 103,037.62 521,754.01
6/1/16 96,966.23 96,966.23
12/1/16 430,859.16 96,966.23 527,825.39
6/1/17 90,718.78 90,718.78
12/1/17 443,354.08 90,718.78 534,072.86
6/1/18 84,290.14 84,290.14
12/1/18 456,211.34 84,290.14 540,501.48
6/1/19 77,675.08 77,675.08
12/1/19 469,441.47 77,675.08 547,116.55
6/1/20 70,868.18 70,868.18
12/1/20 483,055.28 70,868.18 553,923.46
6/1/21 63,863.88 63,863.88
12/1/21 497,063.88 63,863.88 560,927.76
6/1/22 56,656.45 56,656.45
12/1/22 511,478.73 56,656.45 568,135.18
6/1/23 49,240.01 49,240.01
12/1/23 526,311.61 49,240.01 575,551.62
6/1/24 41,608.49 41,608.49
12/1/24 541,574.65 41,608.49 583,183.14
6/1/25 33,755.66 33,755.66
12/1/25 557,280.32 33,755.66 591,035.98
6/1/26 25,675.09 25,675.09
12/1/26 573,441.45 25,675.09 599,116.54
6/1/27 17,360.19 17,360.19
12/1/27 590,071.25 17,360.19 607,431.44
6/1/28 8,804.16 8,804.16
12/1/28 607,183.31 8,804.16 615,987.47
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B-1
APPENDIX B
DESCRIPTION OF PROJECT
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MEETING DATE: October 1, 2013
ITEM: B6
October 1, 2013
FROM: Wayne Padilla, Director of Finance & Information Technology
Carrie Mattingly, Utilities Director
SUBJECT: MEETING OF THE CAPITAL IMPROVEMENT BOARD TO ADOPT A RESOLUTION
APPROVING DOCUMENTS AND ACTIONS RELATING TO THE FINANCING OF THE
WATER RECLAMATION FACILITY ENERGY EFFICIENCY PROJECT
RECOMMENDATION
1. Adopt a resolution approving documents and actions related to the private placement financing of the
construction costs related to the energy efficiency improvements project at the Water Reclamation Facility.
2. Adjourn to the next regular meeting.
DISCUSSION
In April 1986, the City of San Luis Obispo Capital Improvement Board was established as a public authority to
implement financings for constructing and improving City facilities and infrastructure. The Council serves as the
Board of Directors for this agency. At the September 17, 2013 meeting, the Board took action to elect the Mayor as
President and the Vice Mayor as Vice President in accordance with the Board By-laws. The minutes of the May 8,
2012 meeting were also approved. At this evening’s meeting, the Board is being asked to:
1. Adopt the resolution approving documents and actions related to the private placement financing in the
amount of $7,479,000 to fund a portion of the costs associated with the construction of energy efficiency
improvements at the Water Reclamation Facility. A full discussion of the key issues related to this financing
is provided in the Council Agenda Report separately prepared for this item and included in this Agenda. It is
staff’s recommendation that the proposed financing should be approved in order to take advantage of the low,
fixed interest rate and the opportunity to secure the financing ahead of the start of construction for this project.
The Board is being asked to approve documents related to the financing which include an Installment Sale
Agreement and an Assignment Agreement, which were prepared and substantively approved by bond counsel
2. Adjournment. Adjourn the Capital Improvement Board until the Board’s next meeting is scheduled.
ATTACHMENTS
1. Capital Improvement Board Resolution
San luis Obispo capital Improvement Board
agenda report
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RESOLUTION NO.
RESOLUTION OF THE BOARD OF DIRECTORS OF THE CITY
OF SAN LUIS OBISPO CAPITAL IMPROVEMENT BOARD
APPROVING DOCUMENTS AND ACTIONS RELATING TO THE
FINANCING OF WATER RECLAMATION FACILITY ENERGY
EFFICIENCY PROJECT
WHEREAS, the City of San Luis Obispo (the “City”) owns and operates facilities
and property for the collection, treatment and disposal of wastewater within the service
area of the City (the “Wastewater Enterprise”), and is proceeding to finance the
acquisition and installation of improvements to its water reclamation facility, consisting
generally of the onsite cogeneration of energy, solids management, upgrading and
optimizing aging infrastructure, efficient lighting, and process system controls (the
“Project”); and
WHEREAS, the City Council has been presented with a financing plan for the
installment sale financing of the Project on a private placement basis with U.S. Bancorp
Government Leasing and Finance, Inc., as designee of Green Campus Partners LLC
(the “Lender”), through the use of an installment sale agreement between the City and
the City of San Luis Obispo Capital Improvement Board (the “Board”); and
WHEREAS, the final form of the legal documentation relating to the financing has
been prepared by bond counsel, and the Board of Directors wishes at this time to
approve such legal documentation;
NOW, THEREFORE, BE IT RESOLVED by the Board of Directors of the City of
San Luis Obispo Capital Improvement Board as follows:
SECTION 1. Approval of Installment Sale Agreement. The Board of Directors
hereby approves the Installment Sale Agreement relating to the financing of the Project,
between the City and the Board, in the form thereof on file with the Secretary together
with any changes therein or additions thereto deemed advisable by the Executive
Director or the Chief Financial Officer (each, an “Authorized Officer”); provided that the
execution thereof by an Authorized Officer shall be conclusive evidence of the approval
of any such changes or additions. An Authorized Officer is hereby authorized and
directed for and in the name and on behalf of the Board to execute, and the Secretary is
hereby authorized and directed to attest, the final form of the Installment Sale
Agreement.
SECTION 2. Assignment by Board. The Board of Directors hereby approves the
assignment by the Board of its rights under the Installment Sale Agreement, including
the right to receive the Installment Payments, to the Lender. Such assignment shall be
made pursuant to the terms and provisions of the Assignment Agreement in the form
thereof on file with the Secretary together with any changes therein or additions thereto
deemed advisable by an Authorized Officer; provided that the execution thereof by an
Authorized Officer shall be conclusive evidence of the approval of any such changes or
additions. An Authorized Officer is hereby authorized and directed for and in the name
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and on behalf of the Board to execute, and the Secretary is hereby authorized and
directed to attest, the final form of the Assignment Agreement.
SECTION 3. Official Actions. The President, the Executive Director, the Chief
Financial Officer, the Secretary, the Board Attorney and all other officers of the Board
are each authorized and directed in the name and on behalf of the Board to make any
and all 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 Board 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 if such officer is absent or unavailable.
SECTION 4. Effective Date. This Resolution shall take effect immediately upon
its passage and adoption.
AYES:
NOES:
ABSENT:
President
Secretary
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On motion of ___________________, seconded by ____________________,
and on the following roll call vote:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 1st day of October, 2013.
President
ATTEST:
Secretary
APPROVED:
Executive Director
Board Attorney
Chief Financial Officer
APPROVED AS TO FORM:
Board Attorney
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