HomeMy WebLinkAbout09/21/1999, 2 - 1999 LEASE REVENUE BONDS council MdmD.
j acEnaa RepoRt
C I TY O F SAN LU I S O B I S P O
FROM: Bill Statler, Director of Finance
Prepared By: Linda Asprion, Revenue Manage
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SUBJECT: 1999 LEASE REVENUE BONDS
CAO RECOMMENDATION
Approve the 1999 lease revenue bond program by introducing an ordinance approving the sale
and leaseback of property between the City and the San Luis Obispo Capital Improvement Board
(Board). These agreements will serve as collateral for the bonds that will be issued by the Board.
REPORT-IN-BRIEF
The purpose of the 1999 lease revenue bonds is to implement the funding strategies previously
approved by the Council in the 1999-01 Financial Plan and to fund the development cost of the
athletic fields. The bond financing accomplishes the following:
■ Series A. Refunding the 1988 Water Fund Certificates of Participation (COPS) will save
approximately $386,500 (about $41,000 annually) during the remaining 9 years of the bonds.
■ Series B. Refunding the 1990_General Fund Certificates of Participation (COPS) will save
approximately $534,000 (about $44,000 annually) during the remaining 12 years of the
bonds.
■ Series C. This will fund property purchases in the amount of$3.1 million, consisting of the
athletic fields,police station expansion, historical museum (Old Carnegie Library) expansion,
and the pocket park on Marsh Street, all previously approved in the 1999-01 Financial Plan.
An additional $3.0 million for the development of the athletic fields is also recommended at
this time. This portion of the bond sale will be a net total of$6.1 million, and will have a 30
year term.
These three series will be combined into one bond issue which will be known as the 1999 Lease .
Revenue Bonds. The lease revenue bonds will be issued by the San Luis Obispo Capital
Improvement Board, who will receive annual lease payments from the City equal to the annual
debt service amounts of the bonds. The refunding of the 1988 and 1990 COPS will not extend
the remaining years of the bonds. The term of the Series C bonds is 30 years. This bond issue is
not a"general' obligation of the City; however, the City will be pledging to annually budget the
lease payments necessary for the Board to meet its annual debt service requirements.
In summary, the refunding of the 1988 and 1990 COPS and all of the projects proposed to be
included in the 1999 lease revenue bonds have been previously approved by the Council for
funding through debt financing. However, debt service costs for developing the athletic fields
were not programmed for the 1999-01 timeframe. Based on the current project schedule, we do
Council Agenda Report-1999 Lease Revenue Bonds
Page 2
not plan on starting construction on the fields until April of 2001. Based on this timeframe, we
did not include debt service costs for developing the fields in the 1999-01 Financial Plan. In
finalizing plans for bond issue, we re-considered this approach for the following reasons:
■ We do not have any debt financings planned for this timeframe. Issuing.only $3.1 million in
bonds on a stand alone basis would be inefficient. It is more cost effective to include this
amount with a larger financing.
■ This will fully fund completion of the project, rather than leaving some doubt about future
funding sources. This will be a clear signal that we are committed to completing this project.
■ It will help set a budget and construction cost ceiling for the project.
■ While the 1999-01 Financial Plan does not include funding for debt service cost for this in
2000-01, we would incur this cost in the subsequent year. This only accelerates costs by one
year.
There are two potential downsides to including development costs with the 1999 leave revenue
bonds:
® Costs not budgeted in 2000-01. As noted above, this cost is not included in the second year
of the 1999-01 Financial Plan. However, assuming we are committed to pursuing this
project, we are only accelerating this cost by one year. Based on our unaudited results for
1998-99, we believe adequate resources are available to fund this additional cost (about
$225,000 annually) in 2000-01 and retain fund balance at minimal policy levels.
■ Improvement costs could be higher. The recommended proceeds from the 1999 bond
program for developing the fields is based on an engineer's cost estimate. While we are
confident that this is a reasonable budget based on what we know now, obviously the
potential exists for costs to go higher as we further analyze site conditions, receive
community input, complete environmental review and prepare final plans and specifications.
On the other hand, there are cost containment advantages to going forward in designing this
project with a clear budget ceiling.
As previously discussed with the Council, acquiring and developing these fields represents an
advance by the City. As the Margarita area develops, we will be reimbursed for most of these
costs. This will result in lower"net" annual debt service costs to the General Fund.
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Council Agenda Report-1999 Lease Revenue Bonds
Page 3
DISCUSSION
Background
Refunding of the 1988 COPS: Series A
The 1988 Certificates of Participation were originally issued in the amount of $5.0 million to
fund the improvements to the City's water system. All principal and interest payments have
been and will continue to be made from the Water Fund. The principal amount currently
outstanding is $3,115,000. Refunding of the 1988 COPS, which is much like refinancing a
home, will reduce total payments made by the Water Fund by approximately $386,500, or
$41,000 annually for the remaining 9 years or term of the bonds. The refunding will not increase
the term of the COPS -the bonds will continue to mature in 2008.
Refunding of the 1990 COPS: Series B
The 1990 Certificates of Participation were originally issued in the amount of $4.5 million to
fund improvements to the recreation center and purchase the Emerson Park site and open space.
All principal and interest payments are made from the General Fund. The principal amount
currently outstanding is $3.2 million. Refunding of the 1990 COPS will reduce total payments
by approximately$534,000, or$44,000 annually for the remaining 12 years or term of the bonds.
The refunding will not increase the term of the COPS - the bonds will continue to mature in
2010.
Projects to be Included in the New Money Bonds: Series C
Four property purchases and the development of the athletic fields are included in the 1999
Series C Bonds. Specifically, these properties are as follows:
■ 1016 Walnut Street. This property was purchased for approximately $315,000 in July 1999
with the intent of expanding the police station facility. The structure is currently being used
as additional office space.
■ Athletic Fields. This property was purchased for $2 million in August 1999 and is to be
developed into athletic fields during the next two years. Detailed cost estimates are provided
in Exhibit A. Including projected cost increases and contingencies, the anticipated
development cost for this property is $3 million.
■ Historical Museum (Old Carnegie Library) Expansion. During the next few years we
anticipate purchasing property that will facilitate the expansion of the old Carnegie Library.
■ Pocket Park on Marsh Street. We are currently in negotiations to purchase a small piece of
property along the creek which will be designed as a small pocket park in the downtown area.
On July 6, 1999, the Council adopted a resolution declaring the City's intent to reimburse
expenditures relating to property purchases and athletic fields from the proceeds of tax-exempt
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Council Agenda Report-1999 Lease Revenue Bonds
Page 4
bonds. This resolution allows the City to be reimbursed for the two.properties (1016 Walnut
Street and the athletic fields) which were purchased in advance of completing the debt financing.
The property purchases, both completed and future, are anticipated to total approximately $3.1
million with the development of the athletic fields budgeted for about $3 million, which will
make the new money bond issue $6.1 million summarized as follows:
Property Purchases
Athletic Field Purchase $2,000,000
Police Station Expansion Purchase 315,000
Marsh Street Pocket Park 450,000
Historical Museum Expansion 300,000
$3,065,000
Athletic Field Development
Architect& engineering 177,000
Site preparation and grading 1,054,200
Athletic fields construction 1,140,000
Environmental review and mitigation 333,000
Construction management 126,400
Construction cost index/contingencies 204,400
$3,035,000
Total 16100,000
Capital Financing and Debt Management Policy Links
As discussed above, the use of debt financing in refunding and funding each of these projects has
been previously approved by the Council. Accordingly, this financing is consistent with adopted
budget plans, goals and objectives. Additionally, the proposed financing for these projects is
consistent with the City's adopted capital financing and debt management policies as provided in
the 1999-01 Financial Plan (Exhibit B). Most notably, the proposed financing meets the
following key criteria outlined in this policy:
■ The projects useful lives are equal to or greater than the proposed term of the financing. It is
useful to note that the refunding of the 1990 and 1988 COPS are not extending the original
time period of the bonds. Series A Bonds will continue to mature in 9 years and the Series B
Bonds will mature in 12 years.
■ The proposed financing will support an investment grade rating and will be conducted on a
competitive basis.
■ Current market conditions present favorable interest rates and demand for municipal
financings.
■ Completion of these projects should not be deferred, and pay-as-you-go resources are not
sufficient to fully fund them.
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Council Agenda Report-1999 Lease Revenue Bonds
Page 5
■ Adequate resources are available to meet annual debt service requirements.
Proposed Financing Structure
The 1999 lease revenue bonds will be issued by the San Luis Capital Improvement Board.
Proceeds from the bond sale will be used by the Board to refund and defease the 1990 and 1988
COPS, and acquire two properties from the City: 1016 Walnut Street for police station
expansion, athletic fields. The City will, in turn, use the proceeds received from the sale of these
properties to reimburse itself for past project expenditures and pay for future project expenditures
consisting of: property for expansion of the historical museum (Old Carnegie Library), property
for a pocket park on Marsh Street, and pay for the cost of developing the athletic fields. In order
to secure the bonds, the Board will lease the two acquired properties back to the City, with the
City paying semi-annual rental payments which will be sufficient to enable the Board to pay
principal and interest on the bonds.
As discussed in greater detail below, the net proceeds for the refunding portion of the bond issue
need to be $6.5 million; and the net proceeds from the "new money" bond issue need to be $6.1
million. However, the costs associated with selling the bonds (such as bond counsel, financial
advisor, trustee, rating agency, underwriting costs, and possible bond insurance if elected by the
winning bidder) and the debt service reserve (which is required to be set aside from the proceeds
as a payment surety to bond holders in an amount equal to at least one year's debt service
payment) must also be funded from the debt financing. Accordingly, the bond issue is sized at
an amount not to exceed $13.3 million to cover these costs.
Professional Assistance
In accordance with service agreements previously approved by the Council with these funis in
November of 1997, bond counsel services will be provided by the law firm of Jones Hall and
financial advisor services will be provided by Fieldman Rolapp. For trustee services the City
contracted with U. S. Bank in 1994 after an extensive proposal process.
Description of Financing Documents
The attached ordinance approves a variety of financing documents which are required in order to
proceed with the project financing. Prepared by the City's bond counsel (Jones Hall) and
financial advisor (Fieldman Rolapp), the following is a brief description of these documents
which are on file in the Council's offices:
■ Indenture of trust This document contains all of the terms and provisions relating to the
lease revenue bonds, including prepayment provisions, maturity schedules, rights, and
remedies of the bond owners and the trustee in the event of a default.
■ Official statement Prepared by the financial advisor, the Official Statement (OS) describes
the financing for prospective purchasers of the lease revenue bonds, and constitutes the
primary marketing document for the financing.
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Council Agenda Report-1999 Lease Revenue Bonds
Page 6
■ Acquisition agreement Prepared by bond counsel, the acquisition agreement provides for
the City to sell the two properties (1016 Walnut street and the athletic fields) to the Capital
Improvement Board.
■ Assignment agreement Prepared by bond Counsel, the assignment agreement is between
the Capital Improvement Board and the trustee. The assignment consists of the Board
transferring certain rights to the trustee, such as collecting of the lease payments from the
City and protecting the interests of the bond owners.
■ Lease agreement Prepared by bond counsel, the lease agreement is between the City and
the Capital Improvement Board. In order to secure the bonds, the Board will lease the two
properties back to the City under this agreement. Semiannual rental payments from the City
will be sufficient to pay principal and interest on the bonds.
■ Trust agreement. Prepared by bond counsel, the trust agreement governs the mechanics of
refunding the 1988 and 1990 COPS.
As reflected in the attached ordinance approving these financing documents, the Director of
Finance is authorized to make minor amendments to these documents as recommended by bond
counsel and the financial advisor, and to execute the final documents.
Competitive Sale of Bonds
In accordance with our Financial Plan policies, the sale of these bonds will be a competitive
process, with the award made to the lowest proposer. The attached ordinance authorizes the
Director of Finance to make this award abased on the recommendation of our financial advisor.
Project Financing Schedule
The following outlines key dates in completing the 1999 lease revenue bond financing program:
Rating agency presentation in San Luis Obispo(Fitch IBCA) 9/9/99&9/10/99
Council approval of bond financing program 9/21/99
Rating agency presentation in San Luis Obispo(Moody's Investor Services) 9/30/99& 10/1/99
Second reading of Ordinance 10/5/99
Bid Opening 10/27/99
Bond closing;receipt of funds 11/18/99
FISCAL IMPACT
The 1999-01 Financial Plan reflects the revised debt service costs resulting from this bond issue
(reductions in the case of the refinancings and increases in the case of the "new money")with the
exception of development costs for the athletic fields. As discussed above, including these costs
at this time only accelerates debt service by one year, assuming we plan to go forward with
developing this site. This will result in increased debt service costs of about $225,000 in 2000-
01. Based on unaudited results for 1998-99, there are adequate General Fund resources to fund
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Council Agenda Report-1999 Lease Revenue Bonds
Page 7
this additional cost and retain minimum fund balances. Further, the City will be reimbursed for
most(but not all) of these costs as the Margarita area develops.
The detail regarding the sources and use of funds of the proposed lease revenue bond issuance
are provided in Exhibit C.
ALTERNATIVES
■ Do not proceed with the issue. The recommended financing is in accordance with adopted
Council policies and objectives. Refund the 1988 and 1990 COPS will save the Water Fund
approximately $386,500 and the General Fund approximately $534,000 over the remaining
life of the bonds, and was approved by the Council in the 1999-01 Financial Plan. The City
has already expended approximately $2.3 million in purchasing two properties (10 16 Walnut
Street and the athletic fields), which will be reimbursed through this bond issue, with the
additional funding providing the City an opportunity to complete the development of the
athletic fields and purchase properties approved in the 1999-01 Financial Plan. Accordingly,
the proposed financing will achieve the Council's approved project objectives in a timely
manner that is consistent with the sound and prudent financial management policies currently
in effect.
Based on the actions and the commitments made to date, this option is not recommended.
■ Do not include athletic fields development costs. The Council could chose to go forward
with just the specific projects approved in the 1999-01 Financial Plan. This would reduce the
size of the issue by about $3.0 million, and reduce debt service costs by about $225,000 in
2000-01. For the reasons discussed above,we do not recommend this option.
ATTACHMENT
Ordinance approving sale and leaseback of property between the City and the San Luis Obispo
Capital Improvement Board
EXHIBITS
A. Youth Athletic Field Development Costs
B. Capital Financing and Debt Management Policy (Excerpt from 1999-01 Financial Plan)
C. Source and use of funds
AVAILABLE FOR REVIEW IN THE COUNCIL OFFICE
■ Indenture of Trust
■ Preliminary Official Statement
■ Acquisition Agreement
• Assignment Agreement
■ Lease Agreement
■ Trust Agreement
2-7
ORDINANCE NO. (1999 Series)
AN ORDINANCE OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
APPROVING SALE AND LEASEBACK OF PROPERTY WITH THE CITY OF
SAN LUIS OBISPO CAPITAL IMPROVEMENT BOARD IN CONNECTION
WITH THE ISSUANCE OF LEASE REVENUE BONDS BY THE BOARD IN
THE MAMMUM PRINCIPAL AMOUNT OF $13,300,000, AND APPROVING
RELATED DOCUMENTS AND OFFICIAL ACTIONS
WHEREAS, the City has previously financed the acquisition and construction of
improvements to the water treatment and distribution enterprise of the City(the"Water System")
from the proceeds of the Certificates of Participation dated as of December 1, 1988, delivered in
the aggregate original principal amount of$5,000,000 (the "1988 Certificates"), evidencing the
direct, undivided fractional interests of the owners thereof in lease payments made by the City
under that certain Lease Agreement dated as of December 1, 1988, by and between the Board as
lessor and the City as lessee (the "1988 Lease"), which lease payments are payable solely from
the net revenues derived by the City from the Water System; and
WHEREAS, the City has previously financed the acquisition and construction of the
certain open space property, public park property and the rehabilitation of a recreation center
from the proceeds of the 1990 Certificates of Participation dated as of December 1, 1990,
delivered in the aggregate original principal amount of $4,500,000 (the "1990 Certificates'),
evidencing the direct undivided fractional interests of the owners thereof in lease payments made
by the City under that certain Lease Agreement dated as of December 1, 1990, by and between
the Board as lessor and the City as lessee (the "1990 Lease"), which lease payments are payable
from any source of legally available funds of the City; and
WHEREAS, in order to realize interest rate savings, the City has proposed to refinance its
obligations under the 1988 Lease and the 1990 Lease, and the City has further determined to
finance the acquisition and construction of various properties and improvements to be used for
the municipal purposes of the City, including but not limited to athletic fields, police station
expansion, public park property and historical museum expansion (collectively, the "Project');
and
WHEREAS, to that end the City has agreed to sell to the Board certain land which
contains a portion of the Project pursuant to an Acquisition Agreement by and between the City
as seller and the Board as purchaser, and the City and the Board have agreed to amend and
restate the 1988 Lease and the 1990 Lease pursuant to a First Amended and Restated Lease
Agreement whereby the Board leases to the City the properties which are currently subject to the
1988 Lease and the 1990 Lease, together with the existing properties sold to the Board by the
City under the Acquisition Agreement; and
WHEREAS, lease payments made by the City under the Lease are proposed to be
assigned by the Board to the Trustee for the security of 1999 Lease Revenue Bonds to be issued
by the Board under an Indenture. of Trust by and between the Board and U. S. Bank Trust
National Association, as trustee, the proceeds of which will be applied to provide funds to
refinance the City's obligations under the 1988 Lease and the 1990'Lease and to finance the
acquisition and construction of the Project; and
2-8
Ordinance No. (199s Series)
Page 2
WHEREAS, the firm of Fieldman, Rolapp & Associates, as financial adviser to the City
and the Board (the "Financial Adviser"), has recommended that the Board sell the Bonds on a
competitive basis and has prepared a preliminary form of an Official Statement describing the
Bonds; and
WHEREAS, the City is required by Article 9 of Chapter 5 of part 1 of Division 2 of the
California Government Code (commencing with Section 54240 of said Code) to approve the
Lease Agreement by ordinance which is subject to referendum;
NOW THEREFORE BE IT ORDAINED by the Council of the City of San Luis Obispo
as follows:
SECTION 1. Approval of Financing Plan and Related Documents. The Council hereby
approves the refinancing of the 1988 Certificates and the 1990 Certificates, and the financing of
the Project,pursuant to the financing plan outlined in the recitals of this Resolution. To that end,
the Council hereby approves each of the following agreements in substantially the respective
forms on file with the City Clerk together with any changes therein or additions thereto deemed
advisable by the Director of Finance, whose execution thereof shall be conclusive evidence of the
approval of any such changes or additions:
(a) Acquisition Agreement, by and between the City and the Board, whereby
the City sells to the Board certain land constituting a part of the Project, consisting
generally of the site of the athletic field improvements and the police station expansion
facilities;
(b) First amended and Restated Lease Agreement,between the Board as lessor
and the City as lessee, whereby the Board leases the property which is subject to the
1988 Lease and the 1990 Lease, and the property sold to the Board by the City under the
foregoing Acquisition Agreement, to the City in consideration of the City's agreement to
pay semiannual lease payments as the rental for such properties; and
(c) Escrow Deposit and Trust Agreement, between the City and U. S. Bank
Trust National Association, as escrow bank and as trustee for the 1988 Certificates and
the 1990 Certificates, relating to the refunding of the 1988 Certificates and the 1990
Certificates.
The Director of Finance is hereby authorized and directed for and in the name and on
behalf of the City to execute, and the City Clerk is hereby authorized and directed to attest and
affix the seal of the City to, the final form of each of the foregoing agreements.
SECTION 2. Issuance and Sale of Bonds by Board. The Council hereby approves the
issuance of the Bonds by the Board in the aggregate principal amount of not to exceed
$13,300,000, for the purpose of providing funds to refund the 1988 Certificates and the 1990
Certificates, and to finance the acquisition and construction of the Project. The Council hereby
approves the competitive sale of the Bonds by the Board in accordance with the resolution of the
governing body of the Board relating thereto.
2-9
Ordinance No. (199x Series)
Page 3
SECTION 3. Official Statement. The Council hereby approves and deems nearly final
within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934, the preliminary
Official Statement describing the Bonds of the form on file with the City Clerk. The Director of
Finance (an "Authorized Officer") is individually authorized, at the request of the purchaser of
the Bonds, to execute an appropriate certificate affirming the Council's determination that the
preliminary Official Statement has been deemed nearly final within the meaning of such Rule.
Distribution of the preliminary Official Statement by the purchaser of the Bonds is hereby
approved. An Authorized Officer is hereby authorized and directed to approve any changes in or
additions to a final form of said Official Statement, and the execution thereof by an Authorized
Officer shall be conclusive evidence of approval of any such changes and additions. The Council
hereby authorizes the distribution of the final Official Statement by the purchaser of the Bonds.
The final Official Statement shall be executed in the name and on behalf of the City by an
Authorized Officer.
SECTION 4. Official Actions. The Director of Finance, 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 site leases, assignments, certificates, requisitions, agreements, notices,
consents, instruments of conveyance, wan-ants and other documents, which they or any of them
might deem necessary or appropriate in order to consummate any of the transactions
contemplated by the agreements and documents approved pursuant to this Ordinance. Whenever
in this ordinance 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 o his or her behalf in the case such officer shall
be absent or unavailable.
SECTION 5. Effective Date. This Ordinance shall become effective thirty (30) days
from and after the date of its final passage. This Ordinance shall be subject to referendum
pursuant to and as provided in Section 54241 of the Government Code of the State of California
and the laws of the State of California. The City Clerk shall certify to the adoption of this
Ordinance, and shall cause this Ordinance to be published as required by Section 602 of the City
Charter.
SECTION 6. A summary of this ordinance, approved by the City Attorney, together
with the names of the Council members voting for and against it, shall be published at least five
days prior to its final passage, in the Tribune, a newspaper published and circulated in this City.
This ordinance will go into effect at the expiration of thirty(30) days after its final passage.
2-10
Ordinance No. (199a Series-
Page.4
INTRODUCED on the 21st day of September 1999 AND FINALLY ADOPTED by.the
Council of . the City -of San Luis Obispo on the day of
199x, on the following roll call vote:
AYES:
NOES:
ABSENT:
Mayor Allen Settle - -
ATTEST:
Lee Price, City Clerk
APPROVED AS TO FORM:
Jo genie City homey
2-11
firma Exhibit-Z2.
landscape architecture
planning
environmental studies
ecological restoration
Cost Model for Youth Athletic Field Development
Damon-Garcia Site
August 10, 1999
Acres of Park Land 25.0
Cost/Acre(rounded) 113,226
Item if Descrlptlon Unn Unit Cost Guantlty Extension Cost
1 Off Site Construction SF 1.65 6,000 9,900 9,900
2 Pre-Landscape Construction Preparation 76,224
Clearing, Demolition SF 0.07 1,086,920 76,224
3 General Site Work 468,236
Rough Grading SF 0.17 1,068,920 185,116
Drainage SF 0.15 1,088,920 163,338
Utilities SF 0.11 1,088,920 119,761
4 Paving 375,000
Parking Spaces-Lighted EA 2,200.00 150 330,000
PedestrianNehicular Paths SF 4.50 10,000 45,000
5 Youth Baseball/Softball 460,000
Allowance for 1 field EA 120,000.00 3 360,000
Lighting EA 100,000.00 1 100,000
6 Baseball 200,000
Allowance for i field EA 200,000.00 1 200,000
7 Soccer/Football 480,000
Allowance for 4 fields EA 120,000.00 4 480,000
8 Restroom/Storage 75,000
Allowance for 600 SF building EA 75,000.00 1 75,000
9 Landscape(excluding Athletic/Playflelds) 50,000
Planting and Irrigation 50,000.00 1 50,000
10 Contingency Items 333,000
•` CEQA Review 30,000 30,000
`•• Environmental Mitigation Ac 20,000.00 3.60 72,000
Additional Earthwork Cv 3.50 66,000 231,000
Reclaimed Water Line 0
Sub Total 2 527 360
11 Construction Management 5% . 126,368 126,368
12 A-E Cost 79/6 176,915 176,915
Temporary access road Grand Total 2,830=643
Expanded Initial Study and MGgated ND
Creek fencing and restoration
Principal: David W. Foote ASLA,AEP
Registration No.2117
849 Monterey Street Su'e 2 5
San Luis Obispo. CAjadll
805.781.9800 fax 80.5.781.9803
Exhibit
POLICIES AND OBJECTIVES
BUDGET AND FISCAL POLICIES
CAPTfAL FINANCING a. The availability of transportation impact
AND DEBT MANAGEMENT fees in funding a specific project will be
analyzed on. a case-by-case basis as
plans and specification or contract
awards are submitted for . CAO or
A- Capital Financing Council approval.
1. The City will consider the use of debt
financing only for one-time capital b. If adequate fiords are not available at
that time, the Council will make one of
improvement projects and only under the two determinations:
following circumstances:
ect's useful life will • Defer the project until funds are
a. When the prod available.
exceed the term of the financing•
ect revenues or specific Based on the high-priority of the
b• When Pr o I project,o e advance fiords from the
resources. will be sufficient to service General .Fund,rwhich will be
the long-term debt a
reimbursed as soon as funds
2. Debt financing will not be considered become available. Repayment of
se such General Fund advances will be the
appropriate for any recurring Purfirst use of transportation impact fee
as current operating and maintenance
expenditures. The issuance of short-term
funds when they become available.
instruments such as revenue, tax, or bond
anticipation notes is excluded from this S. The City will use the following criteria to
limitation. (See Investment Policy) evaluate pay-as-you-go versus long-term
financing in funding capital improvements:
3. Capital improvements will be financed
primarily through user fees, service charges, Factors Favoring Pay-As-You-Go
assessments, special taxes, or developer Financing
agreements when benefits can be a. Current revenues and adequate fiord
specifically attributed to users of the.
facility. Accordingly, development impact balances are available or project
fees should be created and implemented at phasing can be accomplished.
levels sufficient to ensure that new b. Existing debt levels adversely affect the
development pays its fair share of the cost City's credit rating.
of constructing necessary community
c. Market conditions are unstable or
facilities. present difficulties in marketing.
4. Transportation impact fees are a major
fimding source in financing transportation Factors Favoring Lung Term Financing
system improvements. However, revenues
d. Revenues available for debt service are
from these fees are subject to significant deemed to be sufficient and reliable so
fluctuation based on the rate of new that long-term financings can be
development Accordingly, the following
marketed with investment grade cre
guidelines will be followed in designing and ratings
building projects funded with transportation
impact fees: 2-13
B-16
.POLICIES AND OBJECTIVES
')GET AND FISCAL POLICIES
e The project securing the financing is of 5. The City will monitor all forms of debt
the type. which will support an annually coincident with the City's
investment grade credit rating. Financial Plan preparation and review
process and report concerns and remedies,if
f. Market conditions present favorable needed,to the Council.
interest rates and demand for City
financings. 6. The City will diligently monitor its
g. A project is mandated by state or compliance with bond covenants and ensure
federal requirements, and resources are its adherence to federal arbitrage
insufficient or unavailable. regulations.
h. The project is immediately required to y The City will maintain good
meet or relieve capacity needs and communications with bond rating agencies
current resources are insufficient or about its financial condition. The City will
unavailable. follow a policy of full disclosure on every
i. The life of the project or asset to be financial report and bond prospectus
financed is 10 years or longer. (Official Statement).
B. Debt Management C. Debt Capacity
1. The City will not obligate the General Fund 1. General purpose debt capacity. The City
to secure long-term financings except when will carefully monitor its levels of general
marketability can be significantly enhanced. purpose debt. Because our general purpose
debt capacity is limited, it is important that
2. An internal feasibility analysis will be we only use general purpose debt financing
prepared for each long-term financing for high-priority projects where we can not
which analyzes the impact on current and reasonably use other financing methods:
future budgets for debt service and fiords borrowed for a project today are not
operations. This analysis will also address available to fiord other projects tomorrow;
the reliability of revenues to•support debt and fimds committed for debt repayment
service. today are not available to fiord operations in
the future.
I The City will generally conduct financings
on a competitive basis. however, In evaluating debt capacity, general purpose
negotiated financings may be used due to annual debt service payments should
market volatility or the use of an unusual or generally not exceed 10% of General Fund
complex financing or security structure. revenues; and in no case should they exceed
15%. Further, direct debt will not exceed
4. The City will seek an investment grade 2% of assessed valuation; and no more than
rating (Baa/BBB or greater) on any direct 60% of capital improvement outlays will be
debt and will seek credit enhancements such funded from long term financings.
as letters of credit or insurance when
necessary for marketing purposes, 2. Enterprise fund debt capacity. The City
availability,and cost-effectiveness. will set enterprise find rates at levels
needed to fully cover debt service
requirements as well as operations,
maintenance, administration and capital
• 2-14
B-17
POLICIES AND OBJECTIVES
BUDGET AND FISCAL POLICIES
improvement costs. The ability to afford E. Land-Based Financings
new debt for enterprise operations will be
evaluated as an integral part of the City's 1. Public purpose. There will be a clearly
rate review and setting process. articulated public purpose in forming an
assessment or special. tax district in
D. Independent Disclosure Counsel financing public . infrastructure
improvements. This should include a
The following criteria will be used on a case-by- finding by the Council as to why this form
case basis in determining whether the City of financing is preferred over other funding
should retain the services of an independent options such as impact fees, reimbursement
disclosure counsel in conjunction with specific agreements or direct developer
project financings: responsibility for the improvements.
1. The City will generally not retain the 2. Active role. Even though land-based
services of an independent disclosure financings may be a limited obligation of
counsel when all of the following the City, we will play an active role in
circumstances are present: managing the district. This means that the
City will select and retain the financing
a. The revenue source for repayment is team, including the financial advisor, bond
under the management or control of the counsel, trustee, appraiser, disclosure
City, such as general obligation bonds, counsel, assessment engineer r
revenue bonds, lease-revenue bonds or underwriter. Any costs incurred by the Ci.,
certificates of participation. in retaining these services will generally be
the responsibility of the property owners or
b. The bonds will be rated or insured. developer, and will be advanced via a
deposit when an application is filed; or will
if 2. The City will consider retaining the services be paid on a contingency fee basis from the
of an independent disclosure counsel when proceeds from the bonds.
one or more of following circumstances are
present 3. Credit quality. When a district is requested
by a developer, the City will carefully
a. The financing will be negotiated, and evaluate the applicant's financial plan and
the underwriter has not separately ability to carry the project, including the
engaged an underwriter's counsel for payment of assessments and special taxes
disclosure purposes. dig build-out. This may include detailed
b: The revenue source for repayment is not background, credit.and lender checks, and....
under the management or control of the the preparation of independent .apprais?l f?
City, such as land-based assessment reports and market absorption studies. Foga.
districts,tax allocation bonds or conduit districts where one property owner.accbunts: .
financings. for more than 25% of the annual:;debt• .
service obligation, a letter of credit�fnuither.
c. The bonds will not be rated or insured. securing the financing may be
d. The City's financial advisor, bond
counsel or underwriter recommends that 4. Reserve fund A reserve .fiord-
the City retain an independent established in the lesser amount.£
disclosure counsel based on the maximum annual debt service; 125°
circumstances of the financing. 2-1
MOLICIES AND OBJECTIVES
BUDGET AND FISCAL POLICIES
annual average debt service; or 10% of the service. The rate and method of
bond proceeds. apportionment should include a back-up tax
in the event of significant changes from the
5. Value-to-debt ratios. The minimum value- initial development plan,and should include
to-date ratio should generally be 4:1. This procedures for prepayments.
means the value of the property in the
district, with the public improvements, 10. Foreclosure covenants. In managing
should be at least four times the amount of administrative costs, the City will establish
the assessment or special tax debt. In minimum delinquency amounts per owner,
special circumstances, after conferring and and for the district as a whole,on a case-by-
receiving the concurrence of the City's case basis before initiating foreclosure
financial advisor and bond counsel that a proceedings.
lower value-to-debt ratio is financially
prudent under the circumstances, the City 11. Disclosure to bondholders. In general,each
may consider allowing a value-to-debt ratio property owner who accounts for more than
of 3:1. Special findings should be made by 10% of the annual debt service or bonded
the Council in this case. indebtedness must provide ongoing
disclosure information annually as
6. Capitalized interest during construction. described under SEC Rule 15(c)-12.
Decisions to capitalize interest will be made
on case-by-case basis, with the intent that if 12. Disclosure to prospective purchasers. Full
allowed,it should improve the credit quality disclosure about outstanding balances and
of the bonds and reduce borrowing costs, annual payments should be made by the
benefiting both current and future property seller to prospective buyers at the time that
owners. the buyer bids on the property. It should not
be deferred to after the buyer has made the
7. Maximum burden.. Aimual assessments(or decision to purchase. When appropriate,
special taxes in the case of Mello-Roos or applicants or property owners may be
similar districts) should generally not required to provide the City with a
exceed 1%of the sales price of the property, disclosure plan.
and total property taxes, special assessments
and special taxes payments collected on the F. Conduit Financings
tax roll should generally not exceed 2%.
1. The City will consider requests for conduit
8. Benefit apportionment Assessments and financing on a case-by-case basis using the
special taxes will be apportioned according following criteria:
to a formula that is clear, understandable,
equitable and reasonably related to the a. The City's bond counsel will review the
benefit received by—or burden attributed terms of the financing, and render an
touch parcel with respect to its financed opinion that there will be no liability to
improvement. Any annual escalation factor the City in issuing the bonds on behalf
should generally not exceed 2%. of the applicant.
9. Special tax district administration. In the b. There is a clearly articulated public
case of Mello-Roos or similar special tax purpose in providing the conduit
districts, the total maximum annual tax financing.
should not exceed 110% of annual debt
2-16
13-19
POLICIES AND OBJECTIVES
BUDGET AND FISCAL POLICIES
c. The applicant is capable of achieving
a. Fill an authorized regular position.
this public purpose. b. Be assigned to an appropriate
bargaining unit.
2. This means that the review of requests for c. Receive salary and benefits consistent
conduit financing will generally be a two- with labor agreements or other
step process: first asking the Council if they compensation plans.
are interested in considering the request,and
establishing the groundrules for evaluating
with the results of this 3. To manage the growth of the regular work
it; and then returning force and overall staffing costs,the City will
evaluation, and recommending approval of follow these procedures:
appropriate financing documents if
warranted. This two-step approach ensures
that the issues are clear for both the City and a. The Council will authorize all regular
policy questions are positions.
applicant, and that key p Y q
answered- b. The Human Resources Department will
coordinate and approve the hiring of all
3. The workscope necessary to address these employees.
issues will vary
from request to request, and regular and temporary .
will have to be determined on a case-by- c All requests for additional regular
case basis. Additionally, the City should
positions will include evaluations of:
generally be fully reimbursed for our costs
in evaluating the request; however, this
The necessity, term, and expected
should also be determined on a case-by-case results of the proposed activity.
basis.
Staffing and materials costs
HUMAN RESOURCE MANAGEMENT including salary, benefits,
equipment, uniforms, clerical
support,and facilities.
A. Regular Staffing . The ability of private industry cto
provide the proposed service.
3 1. The budget will fully appropriate the . Additional revenues or cost savings
resources needed for authorized regular .
staffing and will limit programs to the which may be realized- . ; '
regular staffing authorized. for;..
4. Periodically, and Prior to any request
will be the core work additional regular positions, Progra='w�'
2. Regular employeespaz
force and the preferred means of staffing be evaluated to determine if they
ongoing, year-round program
activities that accomplished with fewer 's'
should be performed by full-time City employees. (See ProductivitY--:
employees rather than independent Policy)
will strive to provide r .
contractors. The City Pr
competitive compensation and benefit 5. Staffing and connect service
ar work will limit total expenditures :fO1
schedules for its authorized regal temporary empld9
force. Each regular employee will: employees,
independent contractors hired
operating and maintenance se�1
i
u_�n
SEP 09 1999 13:00 FR F 1F' DMHN—ROLRPF y4:�4(4o r r:, 1 u loe)Z,1 0 +vim
SOURCES AND USES OF FUNDS Exhibit G
City of San Luis Obispo
1988 & 1990 Refunding'Witb New Money
Dated Date 11/15/1999
Delivery Date 11/15/1999
Sources:
Bond Proceeds:
Par Amount 13,130.000.00
Other Sources of Funds:
Reserve Fund 837,136.00
8/1/99 Installment Payment(1990 COP) 108,752.50
945,888.50
14,075,888.50
Uses:
Project Fund Deposits:
Project Fund 6,099,130.69
Rcfundiag Escrow Deposits:
Cash Deposit 0.50
SLG Purchases 6,505,994.00
6,505,994.50
Othcr Fund Deposits:
Debt Service Reserve Fund 1,207,562.50
Delivery Date Expenses:
Underwritces Discount 1312300.00
Cost of Issuance 125,000.00
256,300.00
Other Uses of Funds:
Additional Proceeds 6,900,81
141075,888.50
Now $10 Underwriter's Discount applied to the New Money component
Sep 9.1999 100 pm Prepared by Feldman.Rolapp&Associates (4.208 San Luis Obispo.Cie Paget