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HomeMy WebLinkAbout2011-05-24 Public Finance Authorty Item No. 2CITY OF LADE OLSINONE DREAM EXTREME, JOINT REPORT TO CITY COUNCIL AND PUBLIC FINANCING AUTHORITY TO: HONORABLE MAYOR AND MEMBERS OF THE CITY COUNCIL HONORABLE CHAIRMAN AND MEMBERS OF THE PUBLIC FINANCING AUTHORITY FROM: ROBERT A. BRADY CITY MANAGER/EXECUTIVE DIRECTOR DATE: MAY 24, 2011 SUBJECT: 1. PUBLIC HEARING - A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, MAKING CERTAIN FINDINGS IN CONNECTION WITH THE ISSUANCE OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE BONDS (SUMMERLY PROJECT) 2011 SERIES A 2. A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY APPROVING THE ISSUANCE OF LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE BONDS (SUMMERLY PROJECT) 2011 SERIES A IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $6,000,000 PURSUANT TO AN INDENTURE OF TRUST, AUTHORIZING THE SALE OF SUCH BONDS UPON CERTAIN TERMS AND CONDITIONS, APPROVING AN OFFICIAL STATEMENT, APPROVING THE EXECUTION OF A PURCHASE CONTRACT AND A CONTINUING DISCLOSURE AGREEMENT, AND TAKING OTHER ACTIONS RELATED THERETO Background On March 8, 2011, the Redevelopment Agency approved the Amended and Restated Disposition and Development Agreement (DDA) with McMillin Summerly LLP (developer) concerning development of the Summerly residential project within the Eastlake Specific Plan. AGENDA ITEM NO. 2 Page 1 Public Hearing Re Revenue Bonds (Summerly Project) May 24, 2011 Page 2 The DDA provides that the developer is entitled to reimbursement for extraordinary infrastructure cost within the Eastlake Specific Plan related to the project of up to $19 million. The DDA contemplates that "from time to time, and upon Developer's written request, Agency shall consult and cooperate with Developer periodically with respect to the issuance and sale of bonds to pay for, among other things, the cost incurred by the developer for extraordinary infrastructure. On April 12, 2011, the Redevelopment Agency authorized the issuance of tax allocation bonds in an aggregate amount not to exceed $4,610,000. The Agency tax allocation bonds are secured by a pledge of tax increment from Project Areas II and III. The Agency tax allocation bonds were subsequently issued by the Redevelopment Agency and "privately placed" with the developer as an interim step. This interim step (that is, the private placement of the Agency bonds with the developer) was taken so that the Agency could act quickly and thereby avoid the risk that the State of California would act to limit the Agency's ability to issue bonds. As discussed in the April 12th staff report, the Finance Team anticipated a second step to this financing. Within 60 days, the Public Financing Authority (PFA) would be requested to consider issuing long-term, publicly offered bonds for the purpose of purchasing the Agency tax allocation bonds from the developer. That second step is before the City Council and PFA Board for consideration this evening. Discussion Following approval of the Agency tax allocation bonds on April 12th, the Finance Team commenced the process of developing a PFA bond issuance. The proposed PFA bonds are a public offering that would provide bond proceeds from third party investors necessary to purchase the Agency tax allocation bonds from the developer. Accordingly, the developer would receive bond proceeds (instead of principal and interest on the privately placed Agency tax allocation bonds). The Agency's commitment by way of a pledge of tax increment would remain unchanged. Upon the purchase of the Agency tax allocation bonds from the developer with the PFA bond proceeds, the parties have agreed that the reimbursement obligation for extraordinary infrastructure will be reduced by cash amount of bond proceeds received by the developer. City Resolution Prior to the issuance of the PFA bonds, State law requires that the City Council find that the extraordinary infrastructure facilities are to be located within the boundaries of the City and there are significant public benefits arising from the PFA's issuance of the PFA bonds. As noted above, the extraordinary infrastructure is located with the Eastlake Specific Plan and comprises significant public improvements of benefit to the Page 2 Public Hearing Re Revenue Bonds (Summerly Project) May 24, 2011 Page 3 community. A City resolution is attached for the City Council's consideration containing the necessary finding. PFA Resolution and Documents to be Approved Approval of the attached PFA Resolution will authorize the execution of the following documents: 1. Indenture of Trust 2. Bond Purchase Contract 3. Preliminary Official Statement 4. Continuing Disclosure Because of the uncertainty of interest rates, it is recommended that the PFA authorize the issuance of the PFA bonds in an amount not to exceed $6,000,000. This higher par amount allows for some flexibility in the final pricing of the bonds. Public Notice Process The item has been noticed by way of a published notice of public hearing and through the regular Agenda notification process. Legal Review Bond Counsel has reviewed the related financing documents and approved them as to form. Fiscal Impact The authorization will result in additional bonded indebtedness to the PFA in an amount not to exceed $6,000,000. However, the bonds are secured by the same pledge of Redevelopment Agency tax increment applicable to the previously issued Agency tax allocation bonds. Accordingly, the issuance of the PFA bonds will not increase the Agency's annual debt service obligations. Recommendation 1. It is recommended that the City Council: (a) Open a joint public hearing with the Lake Elsinore Public Finance Authority and take testimony (b) Waive further reading and a adopt Resolution No. 2011-035 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, making certain findings in connection with the Page 3 Public Hearing Re Revenue Bonds (Summerly Project) May 24, 2011 Page 4 Issuance of Lake Elsinore Public Financing Authority Local Agency Revenue Bonds (Summerly Project) 2011 Series A in the Aggregate Principal Amount not to Exceed $6,000,000 2. It is recommended that the Board of Directors of the Public Finance Authority: (a) Open a joint public hearing with the City of Lake Elsinore and take testimony (b) Waive further reading and adopt PFA Resolution No. 2011-002 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY Approving the Issuance of Lake Elsinore Public Financing Authority Local Agency Revenue Bonds (Summerly Project) 2011 Series A in the Aggregate Principal Amount not to Exceed $6,000,000 Prepared by: James R. Riley Director of Administrative Services Barbara Leibold City Attorney/Authority Counsel Approved by: Robert A. Brady City Manager/Executive Director Attachments: City Resolution No. 2011-035 PFA Resolution No. 2011-002 Indenture of Trust Bond Purchase Contract Preliminary Official Statement Continuing Disclosure Page 4 RESOLUTION NO. 2011-002 A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY APPROVING THE ISSUANCE OF LAKE ELSINORE PUBLIC FINANCING AUTHORITY LOCAL AGENCY REVENUE BONDS (SUMMERLY PROJECT) 2011 SERIES A IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $6,000,000 PURSUANT TO AN INDENTURE OF TRUST, AUTHORIZING THE SALE OF SUCH BONDS UPON CERTAIN TERMS AND CONDITIONS, APPROVING AN OFFICIAL STATEMENT, APPROVING THE EXECUTION OF A PURCHASE CONTRACT AND A CONTINUING DISCLOSURE AGREEMENT, AND TAKING 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 (the "City") 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 Agency has entered into that certain Disposition and Development Agreement (as amended and restated pursuant to the Amended and Restated Disposition and Development Agreement dated March 8, 2011, the "DDA") pursuant to which the Agency is required to reimburse the developer (the "Developer") for certain infrastructure costs incurred by the Developer; and WHEREAS, the Agency previously issued and delivered to the Developer its Subordinate Tax Allocation Bonds (Project Area No. II) Series 2011 and Subordinate Tax Allocation Bonds (Project Area No. III) Series 2011 (the "PA II Bonds," the "PA III Bonds," and collectively, the "Agency Bonds") for the purpose of partially satisfying the obligations of the Agency under the DDA; and WHEREAS, for the purpose of acquiring the Agency Bonds from the Developer and treating the payment as acquisition of certain public infrastructure (the "Facilities") pursuant to the DDA, the Authority has determined to issue its Local Agency Revenue Bonds (Summerly Project) 2011 Series A (the "Bonds"); and WHEREAS, the City, as one of the members of the Authority, has heretofore held a public hearing pursuant to Section 6586.5 of the Act and in connection therewith has approved the Authority's acquisition of the Facilities pursuant to the DDA and has found and determined that (i) the Facilities are to be located within the boundaries of the City and (ii) there are significant public benefits arising from the Authority's issuance of the Bonds to finance the Facilities, including, but not limited to, employment benefits 1 Page 5 from undertaking the acquisition of the Facilities in a timely fashion, as contemplated by Section 6586 of the Act; 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 $6,000,000, pursuant to the Indenture of Trust (the "Indenture"), in substantially the form on file with the Secretary of the Authority and presented to the Board at this meeting. Any one of the Chairman, the Executive Director and the Secretary of the Authority, and each of them, and any designee of any of them (collectively, the "Authorized Officers"), is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Indenture, 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 3. The Authority hereby authorizes the sale of the Bonds to the Underwriter pursuant to and in accordance with the 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 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 Purchase Contract shall not exceed 2.0%, exclusive of original issue discount. The Bonds shall bear interest at a rate or rates not to exceed 8.0% per annum. The maturity date of the Bonds shall not extend beyond 40 years from their issuance date. Section 4. The Authority hereby approves the form of the Preliminary Official Statement (the "Preliminary Official Statement"), in substantially the form on file with the Authority Secretary, 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 (the "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 2 Page 6 changes in or additions to the final form of the Official Statement to conform to the requirements of the Purchase Contract and the Indenture, as applicable. Section 5. The Authority hereby approves the Continuing Disclosure Agreement 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 Continuing Disclosure 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 6. 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 7. 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. 3 Page 7 Section 8. This Resolution shall become effective immediately upon adoption. PASSED, APPROVED AND ADOPTED at a regular meeting of the Board of Directors of the Lake Elsinore Public Financing Authority this 24th day of May, 2011. DARYL HICKMAN CHAIRMAN ATTEST: VIRGINIA BLOOM SECRETARY APPROVED AS TO FORM: BARBARA LEIBOLD AUTHORITY COUNSEL 4 Page 8