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HomeMy WebLinkAbout2010-02-23 PFA Item No. 2CITY OF LADE LSINORE ` DREAM EXTREME, TO: FROM: DATE: CITY OF LAKE ELSINORE JOINT REPORT TO CITY COUNCIL, REDEVELOPMENT AGENCY AND PUBLIC FINANCING AUTHORITY HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL HONORABLE CHAIRMAN AND MEMBERS OF THE REDEVELOPMENT AGENCY HONORABLE CHAIRMAN AND MEMBERS OF THE PUBLIC FINANCE AUTHORITY ROBERT A. BRADY CITY MANAGER/EXECUTIVE DIRECTOR FEBRUARY 23, 2010 SUBJECT: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING A HOUSING LOAN AGREEMENT TO BE ENTERED INTO BY THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE IN CONNECTION WITH THE ISSUANCE OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (1995 SERIES A REFUNDING), 2010 SERIES B, IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $11,000,000; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE APPROVING THE ISSUANCE OF LAKE ELSINORE PUBLIC FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (1995 SERIES A REFUNDING), 2010 SERIES B, IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $11,000,000; APPROVING A BOND PURCHASE CONTRACT, A HOUSING LOAN AGREEMENT, A CONTINUING DISCLOSURE AGREEMENT AND A PRELIMINARY OFFICIAL STATEMENT; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO AGENDA ITEM NO.2 Page 1 of 4 2010 Refunding Bonds February 23, 2010 Page 2 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY APPROVING THE ISSUANCE OF LAKE ELSINORE PUBLIC FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (1995 SERIES A REFUNDING), 2010 SERIES B IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $11,000,000; APPROVING AN INDENTURE OF TRUST, A BOND PURCHASE CONTRACT, A HOUSING LOAN AGREEMENT, AN ESCROW AGREEMENT AND A PRELIMINARY OFFICIAL STATEMENT; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO Background Pursuant to Resolution adopted by the Lake Elsinore Public Financing Authority (the "Authority") on September 26, 1995, the Authority issued its 1995 Series A Tax Allocation Revenue Bonds (Lake Elsinore Redevelopment Projects) (the "Authority's 1995 Bonds") in the principal amount of $13,345,000 of which $10,065,000 remains outstanding. Proceeds of the Authority 1995 Bonds were loaned to the Redevelopment Agency and primarily utilized to refinance then existing debt incurred by the Agency. An opportunity exists to refund the Authority's 1995 Bonds that will substantially reduce the Agency's annual debt service obligation. Accordingly, staff requests that the City, Redevelopment Agency and the Authority cooperate to refinance the outstanding Authority 1995 Bonds and the related loan. Discussion The City's Finance Team has determined currently it is feasible to refinance the Authority's 1995 Bonds and related loan to the Agency at an annual savings in excess of $40,000. The 1995 Bonds have an interest rate of 5.8% and it is expected the new "2010 Bonds" will have an average interest rate less than 4.03% (assuming bond insurance). The estimated percentage savings of the refunded bonds is expected to be in excess of 7%. The "rule of thumb" in the finance industry to proceed with refunding is 3% percentage savings of the refunded bonds. The exact interest rate will not be known until the proposed 2010 Bonds are price and sold to the Underwriter. This is expected to occur around the third week of March. The 2010 Bonds have been structured to have a level debt service payments when aggregated with the Agency's other outstanding bonds. The final maturity date has not been extended. The Financing Team has requested a rating from Standard & Poor's and has applied for bond insurance. Both are expected prior to the sale of the 2010 Bonds. The final rating on the 2010 Bonds is expected to range from "A" to "AAA" depending if bond insurance Page 2 of 4 2010 Refunding Bonds February 23, 2010 Page 3 is purchased or not. If the Agency qualifies for bond insurance, the decision to purchase it will be based upon what provides the most savings to the Agency. The 2010 Bonds will be sized in an amount necessary to refinance the Authority's 1995 Bonds and no new money is included. Like the Authority's 1995 Bonds, the 2010 Bonds would be issued by the Authority and the repayment of the 2010 Bonds would be secured by loan payments made by the Housing Fund pursuant to a Housing Loan Agreement. Because of the uncertainty of interest rates, it is recommended to authorize the issuance of the 2010 Bonds in an amount not to exceed $11 million. The higher par amount allows for some flexibility in the final pricing of the bonds. Documents To Be Approved Approval of the attached Resolutions will authorize the execution of the following documents: Indenture of Trust. This document contains the terms of the 2010 Bonds, including payment and redemption provisions, definition and pledge of revenues to pay the bonds, rights and duties of the trustee, remedies upon a default in the payment of the bonds, and final discharge of the bonds and other related matters. Housing Loan Agreement The Housing Loan Agreement contains the terms of the Housing Loan, including payment and redemption provisions, definition and pledge of Housing Set-Aside Revenues to repay the Housing Loan, remedies upon a default in the payment of the Housing Loan, and final discharge of the Housing Loan and other related matters. Preliminary Official Statement. This is the Authority's and Agency's document pursuant to which the 2010 Bonds will be offered for purchase by the public. This document must contain all facts material to the 2010 Bonds and the Agency (with certain permitted exceptions to be completed in the final Official Statement) and must not omit any such material facts. Continuing Disclosure Agreement. Pursuant to the Continuing Disclosure Agreement, the Agency is required to file annual reports to various information depositories updating information with respect to the Agency. The Continuing Disclosure Agreement is required under Rule 15c2-12 adopted by the Securities and Exchange Commission. Page 3 of 4 2010 Refunding Bonds February 23, 2010 Page 4 Escrow Agreement. This document provides for the defeasance of the Authority's 1995 Bonds by escrowing sufficient funds to redeem the Authority's 1995 Bonds on the redemption date. • Bond Purchase Contract, This document contains the obligation of the underwriter to accept and pay for the 2010 Bonds, provided that all of the covenants and representations of the Agency and Authority are met and certain other conditions excusing performance by the underwriter do not exist. Bond Counsel has reviewed the related financing documents and approved them as to form. Fiscal Impact Issuance of the 2010 Bonds will have a beneficial impact on the Agency because interest costs will be lowered. The City's Finance Team anticipates an annual savings in excess of $40,000. All costs associated with the issuance of the 2010 Bonds including legal counsel, fiscal and financial consultant, and underwriter fees will be paid from Bond proceeds. Public Notice Process The item has been noticed through the regular agenda notification process. Recommendation 1. That City Council adopt the attached Resolution No. CC 2010-010 and approve execution of the necessary documents to issue Bonds in an amount not to exceed $11 million to refinance the Authority's 1995 Bonds. 2. That Redevelopment Agency adopt the attached Resolution No. RDA 2010-001 and approve execution of the necessary documents to issue Bonds in an amount not to exceed $11 million to refinance the Authority's 1995 Bonds. 3. That Public Finance Authority adopt the attached Resolution No. PFA 2010-001 and approve execution of the necessary documents to issue Bonds in an amount not to exceed $11 million to refinance the Authority's 1995 Bonds. Prepared by: James R. Riley Director of Administrative Services Approved by: Robert A. Brady City Manager/Executive Director Page 4 of 4 2010 Refunding Bonds February 23, 2010 Page 5 Attachment 1: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING A HOUSING LOAN AGREEMENT TO BE ENTERED INTO BY THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE IN CONNECTION WITH THE ISSUANCE OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (1995 SERIES A REFUNDING), 2010 SERIES B, IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $11,000,000; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO Attachment 2: A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE APPROVING THE ISSUANCE OF LAKE ELSINORE PUBLIC FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (1995 SERIES A REFUNDING), 2010 SERIES B, IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $11,000,000; APPROVING A BOND PURCHASE CONTRACT, A HOUSING LOAN AGREEMENT, A CONTINUING DISCLOSURE AGREEMENT AND A PRELIMINARY OFFICIAL STATEMENT; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO Attachment 3: A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY APPROVING THE ISSUANCE OF LAKE ELSINORE PUBLIC FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (1995 SERIES A REFUNDING), 2010 SERIES B IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $11,000,000; APPROVING AN INDENTURE OF TRUST, A BOND PURCHASE CONTRACT, A HOUSING LOAN AGREEMENT, AN ESCROW AGREEMENT AND A PRELIMINARY OFFICIAL STATEMENT; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO Attachment 4: PRELIMINARY OFFICIAL STATEMENT Attachment 5: SUMMARY OF REFUNDING RESULTS - CASHFLOWS Page 4a of 10 RESOLUTION NO. 2010-001 PFA A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY APPROVING THE ISSUANCE OF LAKE ELSINORE PUBLIC FINANCING AUTHORITY TAX ALLOCATION REVENUE BONDS (1995 SERIES A REFUNDING), 2010 SERIES B IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $11,000,000; APPROVING AN INDENTURE OF TRUST, A BOND PURCHASE CONTRACT, A HOUSING LOAN AGREEMENT, AN ESCROW AGREEMENT AND A PRELIMINARY OFFICIAL STATEMENT; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO WHEREAS, the Lake Elsinore Public Financing Authority (the "Authority") is a joint exercise of powers authority duly organized and existing under and pursuant to that certain Joint Exercise of Powers Agreement by and between the City of Lake Elsinore and the Redevelopment Agency of the City of Lake Elsinore (the "Agency'), under the provisions of Articles 1 through 4 (commencing with Section 6500) of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act'), and is authorized pursuant to Article 4 of the Act to borrow money for the purpose of financing the acquisition of bonds, notes and other obligations to provide financing and refinancing for capital improvements of member entities of the Authority; and WHEREAS, the Authority has previously issued its 1995 Series A Tax Allocation Revenue Bonds (Lake Elsinore Redevelopment Projects) (the "1995A Bonds"); and WHEREAS, for the purpose of refunding the 1995A Bonds, the Authority has determined to issue its Tax Allocation Revenue Bonds (1995 Series A Refunding), 2010 Series B (the 'Bonds"); and WHEREAS, the proceeds of the Bonds will be loaned to the Agency pursuant to a Housing Fund Loan Agreement (the "Housing Loan Agreement") to be repaid from certain housing set-aside revenues of the Agency; and NOW, THEREFORE, the Board of Directors of the Lake Elsinore Public Financing Authority does hereby resolve as follows: Section 1. The foregoing recitals are true and correct and the Authority hereby so finds and determines Section 2. The Authority hereby approves the issuance of the Bonds in the aggregate principal amount not to exceed $11,000,000 pursuant to the Indenture of Trust, in substantially the form on file with the Secretary of the Authority and presented to the Board at this meeting. Any one of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver 1 Page 5 of 10 PFA Resolution No. 2010-001 PFA Page 2 of 5 the Indenture of Trust, with such insertions and changes as may be approved by the Authorized Officer executing the same, subject to the provisions of this Resolution, such approval to be conclusively evidenced by such execution and delivery. An Authorized Officer shall include any member of the Board of Directors, the Chairman, the Executive Director, the Treasurer, the Secretary, or any officer of the Authority designated by the Chairman or the Executive Director as an Authorized Officer. Section 3. The Authority hereby authorizes the sale of the Bonds to the Underwriter pursuant to and in accordance with the Bond Purchase Contract, in substantially the form on file with the Secretary of the Authority and presented to the Board at this meeting. Any one of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Bond Purchase Contract, with such insertions and changes as may be approved by the Authorized Officer executing the same, subject to the provisions of this Resolution, such approval to be conclusively evidenced by such execution and delivery. The underwriter's discount for the Bonds specified in the Bond Purchase Contract shall not exceed 1.50%, exclusive of original issue discount. The Bonds shall bear interest at a rate or rates not to exceed 6.0% per annum. Section 4. The Authority hereby approves the form of the Preliminary Official Statement, in substantially the forms on file with the Secretary of the Authority, with such changes and modifications as shall be necessary or appropriate for completion to the satisfaction of the Executive Director of the Authority, and approval by Fulbright & Jaworski L.L.P., the Authority's Disclosure Counsel. The Executive Director is authorized and directed, on behalf of the Authority to deem the Preliminary Official Statement "final" pursuant to Rule 15c2-12 under the Securities and Exchange Act of 1934. The Authority further approves distribution of the Preliminary Official Statement by the Underwriter to persons who may be interested in purchasing the Bonds. The Board hereby approves the final Official Statement describing the Bonds. Distribution of the final Official Statement by the Underwriter is hereby approved. The Executive Director, subject to approval by the Authority's Disclosure Counsel, is hereby authorized and directed to approve any changes in or additions to the final form of the Official Statement to conform to the requirements of the Bond Purchase Contract and the Indenture of Trust, as applicable. Section 5. The Authority hereby approves the Housing Loan Agreement in . substantially the forms on file with the Secretary of the Authority and presented to the Board at this meeting. Any one of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Housing Loan Agreement, with such insertions and changes as may be approved by the Authorized Officer executing the same, subject to the provisions of this Resolution, such approval to be conclusively evidenced by such execution and delivery. Page 6 of 10 PFA Resolution No. 2010-001 PFA Page 3 of 5 Section 6. The Authority hereby approves the Escrow Agreement in substantially the forms on file with the Secretary of the Authority and presented to the Board at this meeting. Any one of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Escrow Agreement, with such insertions and changes as may be approved by the Authorized Officer executing the same, subject to the provisions of this Resolution, such approval to be conclusively evidenced by such execution and delivery. Section 7. Any one of the Authorized Officers is hereby authorized and directed, for and in the name and on behalf of the Authority, to evaluate and select one or more municipal bond insurers for all or any portion of the Bonds and to execute and deliver such contracts and agreements with such bond insurers as may be approved by the Authorized Officer executing the same, subject to the provisions of this Resolution, such approval to be conclusively evidenced by such execution and delivery. Section 8. The Authorized Officers, the other officers and employees of the Authority, the members of the Authority's Board of Directors, Bond Counsel, Disclosure Counsel and the other consultants to and agents of the Authority, are each hereby authorized and directed to do all things and take all actions necessary or desirable to effectuate the transactions contemplated by this Resolution, and to execute such other assignments, agreements, certificates, receipts, endorsements, orders, opinions and other documents in connection with such transactions, including, without limitation, closing documents in connection with the issuance of the Bonds, and all actions. heretofore taken by the officers, employees and agents of the Authority in connection with the issuance of the Bonds are hereby ratified, approved and confirmed in every respect. Section 9. This Resolution shall become effective immediately upon adoption. Page 7 of 10 PFA Resolution No. 2010-001 PFA Page 4 of 5 PASSED, APPROVED AND ADOPTED at a regular meeting of the Board of Directors of the Lake Elsinore Public Financing Authority this day of 2010. DARYL HICKMAN, CHAIRMAN LAKE ELSINORE PUBLIC FINANCING AUTHORITY ATTEST: CAROL COWLEY INTERIM SECRETARY APPROVED AS TO FORM: BARBARA ZEID LEIBOLD AUTHORITY COUNSEL Page 8 of 10 PFA Resolution No. 2010-001PFA Page 5 of 5 STATE OF CALIFORNIA COUNTY OF RIVERSIDE SS CITY OF LAKE ELSINORE I, Carol Cowley, Interim Secretary of the Lake Elsinore Public Financing Authority, hereby certify that Resolution No. was adopted by the Board of Directors of the Lake Elsinore Public Financing Authority, at a regular meeting held on the day of 2010, and that the same was adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: CAROL COWLEY INTERIM SECRETARY Page 9 of 10 ALL ATTACHMENT DOCUMENTS ARE ATTACHED TO THE CITY COUNCIL AGENDA REPORT AND ARE INCORPORATED HEREIN BY Page 10 of 10