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HomeMy WebLinkAboutFin SRJPFA Second Amendment to Facility LeaseAgenda Item No: _ 3 h. Meeting Date: June 18, 2012 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: Finance Prepared by: Mark Moses City Manager Approval. , Interim Finance Director SUBJECT: RESOLUTION APPROVING, AUTHORIZING AND DIRECTING EXECUTION OF A SECOND AMENDMENT TO PROPERTY LEASE, A SECOND AMENDMENT TO SITE AND FACILITY LEASE AND A CONTINUING DISCLOSURE CERTIFICATE, AUTHORIZING THE NEGOTIATION FOR THE SALE OF BONDS PURSUANT TO A BOND PURCHASE AGREEMENT, APPROVING AN OFFICIAL STATEMENT, AND DIRECTING CERTAIN RELATED ACTIONS IN CONNECTION WITH REFUNDING CERTAIN BONDS OF THE SAN RAFAEL JOINT POWERS FINANCING AUTHORITY AND REFINANCING CERTAIN PUBLIC CAPITAL IMPROVEMENTS RECOMMENDATION: Adopt Resolution authorizing the execution of documents and other actions required to refinance the outstanding 2003 lease revenue bonds (the "2003 Bonds") issued by the San Rafael Joint Powers Financing Authority (the "Authority"). BACKGROUND: The City financed the construction of the parking structure (between 3rd and C Street) in 2003 through the issuance of the 2003 Bonds in the original principal amount of $7,605,000 through the Authority. The 2003 Bonds are structured as a general fund lease transaction, but the City first uses the net revenues of the parking fund to make required lease payments, and only then uses the City's general fund moneys in the event of a shortfall in annual net revenues. This financing structure improved the credit quality of the 2003 Bonds and secured the lowest possible interest rates in 2003. To date, all prior debt service payments have been made from the parking fund and there has been no financial impact to the general fund from the 2003 Bonds. The 2003 Bonds were originally issued for 30 years and have an average coupon of 4.77% and annual debt service of approximately $500,000. The 2003 Bonds were structured as lease revenue bonds sold through the Authority. As part of the financing structure, the City and Authority executed a site and facility lease, property lease, memorandum of assignment, and trust agreement. Union Bank currently serves as the trustee for the 2003 Bonds and collects the semi-annual debt service payment prior to the October I and April I payment dates. Fife No.: `r ~ - , 1, - f Council Meeting: t � 1i. 1 Disposition: SAN RAFAEL CITY COUNCIL AGENDA REPORT / Page: 2 The 2003 Bonds were subject to optional redemption starting on April 1, 2010, and therefore can now be redeemed on any date without any redemption premium (i.e., only outstanding principal plus accrued interest would be paid). The City's financial advisor has worked with staff to analyze and quantify the economic benefits of refinancing the 2003 Bonds. There is a related item on the San Rafael Joint Powers Financing Authority agenda of June 18, 2012 to authorize actions that support the refinancing of the 2003 bonds. ANALYSIS: City staff has worked with Jones Hall, as bond and disclosure counsel and NHA Advisors, as financial advisor (the City's bond and disclosure counsel and financial advisor on the original 2003 Bonds) to evaluate financial and structural options for the City to maximize the economic benefit of a refinancing of the 2003 Bonds. Based on these discussions and analysis, the proposed financing structure includes the amendment of the existing financing documents (dated April 1, 2003) to provide the legal framework for lease revenue refunding bonds, series 2012 (the "2012 Bonds"). City staff recommends retaining Union Bank as the trustee on the 2012 Bonds. The percentage savings estimated from this refinancing is approximately 10%, and will generate $40,000 - $45,000 per year in savings. Bond refinancings of this size that have the potential to generate savings in excess of 5% are good candidates for refinancing. This savings is net of all costs, including the underwriter's discount of $55,350, and costs of issuance that total $155,000. In order to meet the requirements of the 2003 Bonds, the 2012 Bonds will refinance all but $5,000 of the outstanding 2003 Bonds. Proceeds of the 2012 Bonds will be used to redeem $6,440,000 (of $6,445,000 outstanding) on July 15, 2012. It is anticipated that the City will call the remaining $5,000 bond on October 1, 2012 from City's parking revenue fund. Additional proceeds from the 2012 Bonds will be used to fund a debt service reserve fund (anticipated to be applied to the April 1, 2033 final maturity) and to pay related financing costs. The 2012 Bonds are proposed to be sold through an underwriting firm to be selected by staff based on a proposal process. Final pricing of the 2012 Bonds and funding of the escrow is anticipated to occur in early -to -mid July. The attached Preliminary Official Statement was prepared by City staff and its financing team. The Preliminary Official Statement must include all facts that would be material to an investor in the 2012 Bonds. Material information is information that there is a substantial likelihood would have actual significance in the deliberations of the reasonable investor when deciding whether to buy or sell the 2012 Bonds. FISCAL IMPACT: Based on current market conditions, the City has the opportunity to refinance the 2003 Bonds and achieve lower interest rates which can produce lower annual debt service payments. Current estimates indicate an annual savings of $40,000-$45,000 per year for a total $720,000-- in savings over the remaining 21 years. This represents approximately 10% in present value savings. Annual debt service savings would begin to be realized in fiscal year 2012-2013 in the Parking Services Fund. OPTIONS: The City Council can accept, deny, or seek additional information from staff related to the Resolution or any attachments. SAN RAFAEL CITY COUNCIL AGENDA REPORT / Pale: 3 RECOMMENDED ACTION: Adopt the resolution authorizing execution of documents and other actions required to refinance the outstanding 2003 lease revenue bonds (the "2003 Bonds") issued by the San Rafael Joint Powers Financing Authority (the "Authority"). ATTACHMENTS: • Council Resolution • Second Amendment to Site and Facility Lease • Second Amendment to Property Lease • Draft Preliminary Official Statement • Bond Purchase Agreement RESOLUTION NO. 13359 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL APPROVING, AUTHORIZING AND DIRECTING EXECUTION OFA SECOND AMENDMENT TO PROPERTY LEASE, A SECOND AMENDMENT TOSITE AND FACILITY LEASE AND A CONTINUING DISCLOSURE CERTIFICATE, AUTHORIZING THE NEGOTIATION FOR THE SALE OF BONDS PURSUANT TO A BOND PURCHASE AGREEMENT, APPROVING AN OFFICIAL STATEMENT, AND DIRECTING CERTAIN RELATED ACTIONS IN CONNECTION WITH REFUNDING CERTAIN BONDS OF THE SAN RAFAEL JOINT POWERS FINANCING AUTHORITY AND REFINANCING CERTAIN PUBLIC CAPITAL IMPROVEMENTS CONSISTING OF A PARKING GARAGE THEREBY WHEREAS, the City of San Rafael (the "City") and the San Rafael Redevelopment Agency (the "Agency") have entered into a Joint Exercise of Powers Agreement establishing the San Rafael Joint Powers Financing Authority (the "Authority") for the purpose, among others, of having the Authority issue its bonds to be used to finance the acquisition, construction and improvement of certain public capital improvements; and WHEREAS, for the purpose of raising funds necessary to finance public capital improvements (consisting of a public parking garage) for the City, the Authority has heretofore issued its San Rafael Joint Powers Financing Authority Lease Revenue Bonds, Series 2003 (Public Parking Project) (the "2003 Bonds") in the original aggregate principal amount of $7,605,000; and WHEREAS, the Authority has determined to issue, pursuant to Article 10 (commencing with Section 53570) and Article 11 (commencing with Section 53580) of Chapter 3 of Part 1 of Division 2 of title 5 of the California Government Code (collectively, the "Refunding Law") and this First Supplemental Trust Agreement, its Lease Revenue Refunding Bonds, Series 2012 (Public Parking Project) (the "2012 Bonds") in order to refund a portion of its 2003 Bonds to achieve debt service savings; and WHEREAS, in order to assist the underwriters of the Bonds in complying with Rule 15c2-12 of the Securities and Exchange Commission, the City will undertake certain continuing disclosure obligations pursuant to a continuing disclosure agreement to be executed by the City (the "Continuing Disclosure Agreement"); and WHEREAS, there has been prepared an Official Statement containing information to be used in connection with the sale of the Bonds; and WHEREAS, the City has duly considered such transactions and wishes at this time to approve certain matters relating to said transactions in the public interest of the City; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of San Rafael, as follows:: Section 1. The City Council hereby approves the preparation of, and hereby authorizes the Mayor, the City Manager or the Assistant City Manager of the City (each, a "Designated Officer"), each acting alone, to deem final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934 (except for permitted omissions), the preliminary form of the Official Statement describing the Bonds on file with the City Clerk together with such changes or additions to such preliminary forms of Official Statement as the Designated Officer may deem necessary, desirable or appropriate upon consultation with bond counsel. Distribution of a preliminary Official Statement is hereby approved. The City Council hereby authorizes the execution of a final Official Statement by the Designated Officers. Section 2. The City Council hereby approves the forms of the Second Amendment to Property Lease and the Second Amendment to Site and Facility Lease on file with the City Clerk, with such additions thereto and changes therein as the City Manager of the City or his designee shall deem necessary, desirable or appropriate upon consultation with the bond counsel, the execution of which by the City shall be conclusive evidence of the approval of any such additions and changes. The Designated Officers and all other appropriate officials of the City are hereby authorized and directed to execute, and the City Clerk is hereby authorized to attest, as appropriate, the Second Amendment to Property Lease and the Second Amendment to Site and Facility Lease and such other agreements, documents and certificates as may be necessary or desirable to effectuate the purposes of this resolution and the financing herein authorized, including, without limitation, such other agreements, documents and certificates as may be required by the Second Amendment to Property Lease and the Second Amendment to Site and Facility Lease. The City hereby authorizes the performance by the Authority of its obligations under the Second Amendment to Property Lease and Second Amendment to Site Facility Lease. Section 3. The City Council hereby approves the Continuing Disclosure Certificate attached to the Official Statement in the form on file with the City Clerk, together with such changes thereto as the City Manager or Assistant City Manager of the City or his designee deems necessary, desirable or appropriate upon consultation with bond and disclosure counsel, the execution of which by the City shall be conclusive proof of the approval thereof. The Designated Officers, each acting alone, are hereby authorized and directed to execute the Continuing Disclosure Certificate, with such changes, insertions and omissions as may be approved by such official executing said documents. Section 4. The City Council hereby approves the form of the Bond Purchase Agreement on file with the City Clerk, with such additions thereto and changes therein as the City Manager of the City or Assistant City Manager or his designee shall deem necessary, desirable or appropriate upon consultation with bond counsel, the execution of which by the City shall be conclusive evidence of the approval of any such additions or changes; provided that no such addition or change shall increase the amount of Bonds to be in excess of $7,500,000, or shall provide for a true interest cost in excess of 4.00% or an underwriter's discount (exclusive of any original issue discount) of greater than 1.25%. Additionally, the 2012 Bonds shall not be sold if such sale results in net present value savings below 3% of the principal amount of 2003 Bonds refunded. When determining the net present value savings, the 2012 Bond proceeds deposited into a reserve account for the 2012 Bonds shall be considered as an offset to the payment of principal on the 2012 Bonds maturing on April 1, 2033. The Designated Officers, each acting alone, are hereby authorized and directed to execute the Bond Purchase Agreement and to take all actions necessary to fulfill the City's obligations thereunder. Section 5. The Designated Officers, the City Clerk and any and all other officers of the City are hereby authorized and directed, for and in the name of and on behalf of the City, to do any and all things and take any and all actions, including execution and delivery of any and all documents, assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and documents, which they, or any of them, may deem necessary, advisable or appropriate upon consultation with bond and disclosure counsel, in order to consummate the lawful issuance and sale of the Bonds and the consummation of the transactions as described herein, including, without limitation, a continuing disclosure agreement or certificate and such documents, assignments, certificates and agreements as may be required by any of the documents approved herein. 1, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing resolution was duly and regularly introduced and adopted at a regular meeting of the Council of the City of San Rafael held on the 18th day of June, 2012, by the following vote, to wit: AYES: COUNCILMEMBERS: Connolly, Heller, Levine, McCullough & Mayor Phillips NOES: COUNCILMEMBERS: None ABSENT: COUNCILMEMBERS: None ESTHER C. BEIRNE, City Clerk