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HomeMy WebLinkAbout2004-04-27 - AGENDA REPORTS - APPROVE TAX EXEMPT FIN WASTE M (2)Agenda Item: CITY OF SANTA CLARITA AGENDA REPORT PUBLIC HEARING City Manager Approval: Item to be presented by: Darren Hernandez DATE: April 27, 2004 SUBJECT: RESOLUTIONS APPROVING TAX-EXEMPT FINANCING FOR WASTE MANAGEMENT, INC. AND ITS SUBSIDIARIES, USA WASTE OF CALIFORNIA, WASTE MANAGEMENT COLLECTION, AND RECYCLING, INC. AND WASTE MANAGEMENT OF CALIFORNIA DEPARTMENT: Administrative Services RECOMMENDED ACTION 1. Adopt a Resolution approving, authorizing, and directing execution of a Joint Exercise of Powers Agreement relating to the California Municipal Finance Authority. Adopt a Resolution approving the tax-exempt financing and the issuance of the revenue bonds by the CMFA for Waste Management, Inc. and its subsidiaries, USA Waste of California, Waste Management Collection and Recycling, Inc., and Waste Management of California, hic. (collectively, "Waste Management, Inc.") solely for the purposes of satisfying the requirements of the Internal Revenue Code and the Joint Exercise of Powers Agreement. BACKGROUND Waste Management, hic. provides integrated waste management services throughout California consisting of collection, transfer disposal, and recycling and resource recovery services for residential, commercial, industrial, and government customers that require the collection of solid waste and recyclable items from their respective locations. hi addition to California, Waste Management, Inc. operates throughout the United States and North America, providing customers with similar solid waste collection services. Waste Management, Inc., through its subsidiary, Waste Management of California, Inc., is seeking to finance the acquisition of thirty (30) compressed/liquid natural gas -fueled collection vehicles and related equipment for the maintenance of such vehicles (the "Equipment") through the issuance of up to $6.0 million of tax-exempt revenue bonds (the "Bonds") by the California Municipal Finance Authority ("CMFA"). The equipment will be located in the City of Santa Clarita and used by Waste Management of California, Inc. throughout the City in its collection service territories. The issuance of these bonds is part of a larger state-wide effort on the part of CMFA to issue $100,000,000 in tax-exempt revenue bonds to finance the acquisition of these alternative -fueled vehicles for Waste Management, Inc. It is staffs understanding that the cities of Oakland and Long Beach, and the County of San Diego, are currently in the process of becoming members of this authority through the execution of similar resolutions. The compressed and liquid natural gas -fueled vehicles to be purchased through this financing will assist Waste Management, Inc. to comply with both the requirements of the City's Residential Refuse Franchise Agreement and the South Coast Air Quality Management District Rule 1193, which requires that all vehicles purchased after July 2001 be designed for alternative fuel. As compared with the collection vehicles currently in service, it is estimated that the new vehicles will reduce vehicle emissions by at least 50%. Additionally, the new vehicles will provide improved efficiency of curbside collection and sorting of waste for delivery to landfills and material for recycled uses. This improved efficiency will assist the cities served by Waste Management, Inc. to comply with the provisions of Assembly Bill 939. Typically, tax-exempt financings that benefit private companies like Waste Management, Inc. require approval of a bond allocation from the California Debt Limit Allocation Committee. Since these allocations are subject to a federal volume cap, and the allocations are primarily granted for affordable housing projects, there is insufficient allocation for solid waste financings. Therefore, the CMFA, with the assistance of Orrick, Herrington & Sutcliffe LLP, structured this proposed tax-exempt financing pursuant to Section 146 (h)(2) of the Code, which established an exception to the volume cap requirement, specifically for solid waste equipment financings. Federal tax law requires that in order for this financing to maintain its tax-exempt status, the CMFA must purchase and own the collection vehicles and equipment financed with bond proceeds. hi addition, the CMFA must provide the following rights to the City of Santa Clarita: 1) the right, exercisable only at the City's sole discretion, to acquire at any time the equipment from CMFA, as long as there are bonds outstanding, and 2) the right to receive, if any, the residual value relating to the equipment at the time bonds are retired. It is not anticipated that the City of Santa Clarita will exercise or benefit from these rights in the future. The City of Santa Clarita will have no financial or legal liability for this proposed financing or the equipment. However, since the City Council is the applicable elected representative of the governmental unit having jurisdiction over the area in which the equipment will be used and located, the City of Santa Clarita is required to approve the issuance of the Bonds under the Code. Representatives of the CMFA have indicated that the Bonds will be issued in a weekly variable rate mode. Based on a direct -pay letter of credit to be provided by Chase Manhattan Bank, which will guarantee all bond payments to bondholders and furnish liquidity for the bonds, it is anticipated that this bond issue will be rated AA -/A -l+ by Standard and Poor's. hi addition, the City will not incur any costs for becoming a member or for maintaining an association with the CMFA. The City may disengage its membership with the CMFA at any time, and no financing by the CMFA shall occur within Santa Clarita's jurisdiction without the prior approval of the City Council. The applicant (Waste Management, Inc.) will reimburse the City for any staff time incurred in this process, and upon issuance of the Bonds, the CMFA will return a percentage of the total cost of the bond issuance fee to the City in the form of a general fund contribution of approximately $3,750. Furthermore, with the direction of the City, the CMFA will also donate a percentage of the total cost of the bond issuance fee to a local non-profit organization, in the amount of approximately $3,750, to be used by such non-profit organization for its charitable purposes. ALTERNATIVE ACTIONS 1. Do not approve these Resolutions. 2. Other action as determined by the City Council. FISCAL IMPACT The action requested of the City Council, if approved, will have no risks or liabilities to the City of Santa Clarita. The City will not be the conduit issuer of the Bonds. Rather, the City is only satisfying the public approval requirements of the Code. Repayment of the Bonds is solely the responsibility of Waste Management, Inc. ATTACHMENTS Resolution approving, authorizing and directing execution of a Joint Exercise of Powers Agreement relating to the California Municipal Finance Authority A Resolution of the City Council of the City of Santa Clarita Approving the Issuance of Not to Exceed $6,000,000 Aggregate Principal Amount of Revenue Bonds Joint Exercise Powers of Agreement available in the City Clerk's Reading File NOTICE OF PUBLIC HEARING NOTICE IS HEREBY GIVEN that on Tuesday, April 27, 2004, a public hearing as required by Section 147(1) of the Internal Revenue Code of 1986 will be held with respect to the proposed issuance of one or more series of revenue bonds (the "Bonds") by the California Municipal Finance Authority in an aggregate principal amount not to exceed $6,000,000. The proceeds of the Bonds will be issued to, among other things, finance the acquisition of collection vehicles and related solid waste disposal equipment (the "Equipment") to be used in the service territories of Waste Management, Inc. and affiliates or subsidiaries thereof, including Waste Management of California, Inc. (collectively, "Waste Management'), throughout the City of Santa Clarita by Waste Management. Such Equipment will be based at the following address and site name: Blue Barrel Disposal, 25772 Springbrook Road, Santa Clarita, CA 91350. The hearing will commence at 6:00 p.m., local time, or as soon thereafter as the matter can be heard, and will be held in the City Council Chambers, City of Santa Clarita, 23920 Valencia Blvd., Santa Clarita, California. Interested persons wishing to express their views on the issuance of the Bonds or on the nature and location of the Equipment to be financed may attend the public hearing or, prior to the time of the hearing, submit written comments. Additional information concerning the above matter may be obtained from, and written comments should be addressed to, Clerk of the City Council of the City of Santa Clarita, 23920 Valencia Blvd., California, 91355. Dated: April 9, 2004