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HomeMy WebLinkAbout2009-11-10 CC Item No. 13 CITY OF �� LAKE 5LSINOR DREAM EXTREME. CITY OF LAKE ELSINORE JOINT REPORT TO CITY COUNCIL, REDEVELOPMENT AGENCY. AND PUBLIC FINANCING AUTHORITY TO: 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 FROM: ROBERT A. BRADY CITY MANAGER AND EXECUTIVE DIRECTOR DATE: NOVEMBER 10, 2009 SUBJECT: 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 (1999 SERIES C REFUNDING), 2009 SERIES A, IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $16,000,000; APPROVING A BOND PURCHASE CONTRACT, LOAN AGREEMENTS, A CONTINUING DISCLOSURE AGREEMENT AND A PRELIMINARY OFFICIAL STATEMENT; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING LOAN AGREEMENTS 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 (1999 SERIES C REFUNDING), 2009 SERIES A, IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $16,000,000; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO A RESOLUTION OF THE BOARD OF DIRECTORS OF THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY APPROVING THE ISSUANCE OF LAKE ELSINORE PUBLIC FINANCING AUTHORITY CC November 10, 2009 Item No. 13 Page 1 of 9 Redevelopment Agency Refunding Bonds November 10, 2009 Page 2 TAX ALLOCATION REVENUE BONDS (1999 SERIES C REFUNDING), 2009 SERIES A IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $16,000,000; APPROVING AN INDENTURE OF TRUST, A BOND PURCHASE CONTRACT, LOAN AGREEMENTS AND A PRELIMINARY OFFICIAL STATEMENT; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS RELATED THERETO Background Pursuant to Resolution No. PFA 99 -3, adopted by the Lake Elsinore Public Financing Authority (the "Authority ") on September 14, 1999, the Authority issued its Tax Allocation Revenue Bonds, 1999 Series C (the "Authority 1999C Bonds ") in the principal amount of $14,180,000 of which $13,170,000 remains outstanding. Proceeds of the Authority 1999C Bonds were loaned to the Agency pursuant to a Housing Fund Loan Agreement, a Project Area No. I Loan Agreement, a Project Area No. II Loan Agreement, and a Project Area No. III Loan Agreement. The Redevelopment Agency of the City of Lake Elsinore (the "Agency ") desires to cooperate with the Authority to refinance the outstanding Authority 1999C Bonds and the related loans. Discussion Bonds would be issued by the Authority and the repayment of the Bonds would be secured by loan payments made by the 3 Redevelopment Projects and the Housing Fund. The reason for the use of the Authority is that it is more efficient and cost effective over the alternative of having the Agency issue 4 separate bond issues. The savings from the refinancing of the 1999C Bonds would be apportioned equally to the original 4 loans. The City's Finance Team has been studying for several months the refinancing of the Agency's outstanding bonds in order to achieve interest savings and lower annual debt service. However, until recently interest rates were not favorable. Currently, the Finance Team has determined it is feasible to refinance the Authority's 1999C Bonds and related loans to the Agency at an annual savings in excess of $100,000. The 1999C Bonds have an interest rate of 6.7% and it is expected the new bonds will have an average interest rate less than 5.25% (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 a refinancing is 3% percentage savings of the refunded bonds. The exact interest rate will not be known until the proposed bonds are price and sold to the Underwriter. This is expected to occur around the first week of December. The bonds have been structured to have 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 Bonds. The final rating on the Bonds is expected to range from A to AAA depending if Bond Insurance is purchased or not. If the CC November 10, 2009 Item No. 13 Page 2 of 9 Redevelopment Agency Refunding Bonds November 10, 2009 Page 3 Agency qualifies for Bond Insurance, the decision to purchase it will be based upon what provides the most savings to the Agency. The Bonds will be sized in an amount necessary to refinance the Authority 1999C Bonds and no new money is included. Currently, the principal amount of the bond issue is estimated at $14.9 million. Because of the uncertainty of interest rates, it is recommended to authorize the issuance of the Bonds in an amount not to exceed $16 million. The higher par amount allows for some flexibility in the final pricing of the bonds and in the event the Agency is not successful in obtaining bond insurance in lieu of funding 50% of the required reserve fund. The pledge of Redevelopment Project No. I Tax Revenues is on a subordinate basis with any payments required under the Agency's Loan Agreement, dated as of January 1, 1999, with respect to Redevelopment Project No. I relating to the Lake Elsinore Public Financing Authority Tax Allocation Revenue Bonds, 1999 Series A (the "1999A Authority Bonds "). The pledge of Redevelopment Project No. II Tax Revenues is on a parity basis with any payments required under the Agency's Loan Agreement, dated as of January 1, 1999, with respect to Redevelopment Project No. II relating to the Authority 1999A Bonds. Redevelopment Project No. III will not have any other Bonded indebtedness. The pledge of housing set -aside revenues is on a parity basis with any payments required under the Agency's Housing Fund Loan Agreement, dated as of December 1, 1995. 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 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. • Loan Agreements. The Loan Agreements with Redevelopment Project I, Redevelopment Project II, Redevelopment Project III and the Housing Fund contain the terms of the Loans, including payment and redemption provisions, definition and pledge of fax Revenues to repay the Loans, remedies upon a default in the payment of the Loans, and final discharge of the Loans and other related matters. • Preliminary Official Statement. This is the Authority's and Agency's document pursuant to which the Bonds will be offered for purchase by the public. This document must contain all facts material to the Bonds and the Agency (with certain permitted CC November 10, 2009 Item No. 13 Page 3 of 9 Redevelopment Agency Refunding Bonds November 10, 2009 Page 4 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. • Bond Purchase Contract. This document contains the obligation of the underwriter to accept and pay for the 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. Fiscal Impact Issuance of the Bonds will have a beneficial impact on the Agency because interest costs will be lowered. All costs associated with the issuance of the 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. Legal Review Bond Counsel has reviewed the related financing documents and approved them as to form. Recommendation Staff recommends that the Authority /City /Agency approve the attached Resolutions and execute the necessary documents to issue Bonds in an amount not to exceed a $16 million to refinance the Authority's 1999C Bonds. Prepared by: James R. Rile 4111/4 Acting Director IV dministrative Services Approved by: Robert A. Brady City Manager and Executive Directo CC November 10, 2009 Item No. 13 Page 4 of 9 Page 1 of 4 RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE, CALIFORNIA, APPROVING LOAN AGREEMENTS 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 (1999 SERIES C REFUNDING), 2009 SERIES A, IN THE AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $16,000,000; 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 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 Authority has previously issued its Tax Allocation Revenue Bonds, 1999 Series C (the "19990 Bonds ") and used the proceeds thereof to make loans (the "1999 Loans ") to the Agency; and WHEREAS, for the purpose of refunding the 1999C Bonds, the Authority has determined to issue its Tax Allocation Revenue Bonds (1999 Series C Refunding), 2009 Series A (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, a Project Area No. I Loan Agreement (the "PA No. I Loan Agreement ") to be repaid from certain tax increment revenues of the Agency derived from Project Area No. I, a Project Area No. II Loan Agreement (the "PA No. II Loan Agreement ") to be repaid from certain tax increment revenues of the Agency derived from Project Area No. II, and a Project Area No. III Loan Agreement (the "PA No. III Loan Agreement," and together with the Housing Loan Agreement, the PA No. I Loan Agreement, and the PA No. II Loan Agreement, the "Loan Agreements ") to be repaid from certain tax increment revenues of the Agency derived from Project Area No. III; and WHEREAS, to that end, each of the Agency and the Authority have adopted a resolution on the date hereof, approving said financing; 1 CC November 10, 2009 Item No. 13 Page 5 of 9 CC Resolution No. 2009 - Page 2 of 4 NOW, THEREFORE, the City Council of the City of Lake Elsinore, California, does hereby resolve as follows: Section 1. The City Council hereby approves the refunding of the 1999 Loans and approves the Agency entering into the Loan Agreements. Section 2. Any one of the Authorized Officers, Bond Counsel, Disclosure Counsel and the other consultants to and agents of the City, 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 City in connection with the issuance of the Bonds are hereby ratified, approved and confirmed in every respect. An Authorized Officer shall include the Mayor, the City Manager, the Director of Administrative Service, and any designee of any of them. Section 3. This Resolution shall become effective immediately upon adoption. 2 CC November 10, 2009 Item No. 13 Page 6 of 9 CC Resolution No. 2009 - Page 3 of 4 PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of the City of Lake Elsinore, California, this day of 2009. ROBERT E. MAGEE, MAYOR CITY OF LAKE ELSINORE ATTEST: DEBORA THOMSEN, CMC CITY CLERK APPROVED AS TO FORM: BARBARA ZEID LEIBOLD CITY ATTORNEY 3 CC November 10, 2009 Item No. 13 Page 7 of 9 CC Resolution No. 2009 - Page 4 of 4 STATE OF CALIFORNIA COUNTY OF RIVERSIDE SS CITY OF LAKE ELSINORE I, DEBORA THOMSEN, City Clerk of the City of Lake Elsinore, California, hereby certify that Resolution No. was adopted by the City Council of the City of Lake Elsinore, California, at a regular meeting held on the day of 2009, and that the same was adopted by the following vote: AYES: NOES: ABSENT: ABSTAIN: DEBORA THOMSEN, CMC CITY CLERK 4 CC November 10, 2009 Item No. 13 Page 8 of 9 JOINT ITEM WITH THE CITY OF LAKE ELSINORE AND REDEVELOPMENT AGENCY OF THE CITY OF LAKE ELSINORE AND LAKE ELSINORE PUBLIC FINANCING AUTHORITY SEE THE AGENDA ITEM FOR THE LAKE ELSINORE PUBLIC FINANCING AUTHORITY FOR THE BALANCE OF THE DOCUMENTATION CC November 10, 2009 Item No. 13 Page 9 of 9