The URL can be used to link to this page

Home My WebLink About2006-12-12 - AGENDA REPORTS - PFA BOND SERIES 2007 GVR (2)Agenda Item: �— CITY OF SANTA CLARITA AGENDA REPORT PUBLIC FINANCING AUTHORITY City Manager Approval: / —V�,Vv ewoe�� PUBLIC HEARING Item to be presented by: Darren HernAndez DATE: December 12, 2006 SUBJECT: APPROVAL OF DOCUMENTS RELATED TO THE ISSUANCE OF THE NOT TO EXCEED $15,000,000 SANTA CLARITA PUBLIC FINANCING AUTHORITY LEASE REVENUE BONDS, SERIES 2007 (GOLDEN VALLEY ROAD) DEPARTMENT: Administrative Services RECOMMENDED ACTION City Council and Public Financing Authority conduct public hearing and: City Council: Adopt a resolution entitled: "RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA APPROVING THE ISSUANCE OF LEASE REVENUE BONDS, SERIES 2007 (GOLDEN VALLEY ROAD), TO BE ISSUED BY THE SANTA CLARITA PUBLIC FINANCING AUTHORITY, AUTHORIZING AND APPROVING A SITE AND FACILITIES LEASE, A LEASE AGREEMENT, A PRELIMINARY OFFICIAL STATEMENT, A FINAL OFFICIAL STATEMENT, AND A CONTINUING DISCLOSURE AGREEMENT; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH". Public Financing Authority: Adopt a resolution entitled: "RESOLUTION OF THE SANTA CLARITA PUBLIC FINANCING AUTHORITY AUTHORIZING AND APPROVING THE ISSUANCE OF LEASE REVENUE BONDS, SERIES 2007 (GOLDEN VALLEY ROAD), IN AN AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED $15,000,000, APPROVING SALE DOCUMENTS, A SITE AND FACILITIES LEASE, A LEASE AGREEMENT, AN ASSIGNMENT AGREEMENT, AN INDENTURE, A PRELIMINARY OFFICIAL k?06-pry A(iopfed: Mesa P vo—/ STATEMENT, AND A FINAL OFFICIAL STATEMENT; APPROVING THE RETENTION OF CERTAIN PROFESSIONAL FIRMS; AND AUTHORIZING THE TAKING OF CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH". BACKGROUND In connection with the construction of Golden Valley Road, the City acquired 13.2 acres of the Portabella property for right-of-way for Golden Valley Road. hi October 2001, the City filed Santa Clarita vs. Santa Clarita LLC to determine valuation of such right-of-way and taking. In December 2005, a jury verdict was handed down in the amount of approximately $13.3 million. The City has decided to appeal the amount of the award. An order to deposit the award is due on January 13, 2007. In order to finance such deposit for the costs of Golden Valley Road, it is now proposed that the PFA issue bonds using a lease/leaseback of the City Hall. The proposed financing structure is for the PFA to issue lease revenue bonds (the "Bonds") in an amount not to exceed $15,000,000. The Bonds will be payable from lease payments made by the City under a lease agreement utilizing the City Hall as the asset to be leased. Pursuant to a Site and Facilities Lease, the City will lease the City Hall to the Authority. Pursuant to a Lease Agreement, the Authority will lease the City Hall back to the City. The payments made by the City under the Lease Agreement constitute the revenue to make debt service on the Bonds. In the event the City's appeal is successful and the judgment is reduced, the City will, at any time, have the option of defeasing all or a portion of the Bonds to the first call date, thereby eliminating the debt or, in lieu thereof, use any reduction for alternative capital improvements which have been identified for which such moneys may be used. The Bonds will be an obligation of the City General Fund, and the lease payments to be made to the Public Financing Authority must be budgeted each year. Bond insurance has been applied for, and it is expected that the Bonds will be rated Aaa/AAA by Moodys Investor Service and Standard and Poors Corporation. The underlying rating on the Bonds without insurance is expected to be "A" or better by Standard and Poors. The Bonds are proposed to be sold at Competitive Sale in mid December or early January. The City's last bond sale occurred in June of 2005. Multiple bids are expected. A public hearing is required to be conducted by the City prior to the issuance of lease revenue bonds by the Authority for this purpose. Following the public hearing, the City and the Authority shall each consider a resolution approving the issuance of the Bonds and the legal documents to which they are a party. General Summary of Security: These Bonds are payable from the lease payments to be made by the City. The City covenants to annually budget and appropriate for the lease payments from its general fund and maintain insurance on the Leased Property, the City Hall. There is also a reserve fund for the Bonds. Indenture: A key legal document that lays out the legal structure and terms of the Bonds. It specifies payment dates, maturity dates; revenues and accounts specifically pledged to the repayment of the Bonds; flow of funds, additional debt requirements; default and remedy provisions; and defeasance provisions in the event the Bonds are redeemed. It is drafted by Bond Counsel and executed by the Authority and Trustee. Site and Facilities Lease: Document in which the City leases the Leased Property to the Authority. It is drafted by Bond Counsel and executed by the City and Authority. Lease Agreement: Another key legal document in which the Authority leases back the Leased Property to the City for lease payments. Also contains the City's covenants to appropriate and maintain insurance and prepayment provisions. It is drafted by Bond Counsel and executed by the City and Authority. Assignment Agreement: Document in which the lease payment to the Authority are assigned to the Trustee. It is drafted by Bond Counsel and executed by the Trustee and Authority. Official Statement: This document describes the security and discloses potential risks to prospective investors. It will generally describe the sources of payment for the Bonds, the City's financial state, particularly its general fund, economic and demographic characteristics of the City, and inherent known risk factors associated with the security. It's important that this document not contain any material misstatements or omissions. The Preliminary Official Statement (often referred to as the "POS") is distributed to prospective investors prior to the sale so that they can make informed purchase decisions. The POS should be as close to final as possible with the actual terms of the pricing (interest rates and principal amounts) left necessarily blank. The Final Official Statement will be prepared shortly after the sale and must be available in time for closing. The POS and FOS are drafted by Bond Counsel, acting as disclosure counsel and is executed by the Authority. Continuing Disclosure Agreement: This agreement outlines the updated information related to the security that the City will agree to provide to the bond markets. Disclosure is required annually, and on an exceptional basis for any major "material" event. This document is drafted by Bond Counsel and executed by City. Notice of Sale and Bid Form: The Bonds have a term ending on February 1, 2037 and will be sold on a competitive basis at a net interest cost of not to exceed 5.0%, with an underwriter's discount of not to exceed 1%. The sale of the Bonds is scheduled for late December at the offices of C.M. de Crinis & Co. at which time the City Manager or Director of Administrative Services will award the Bonds to the best bidder. Bids are submitted by potential underwriters, on the internet based Parity Bidding System, on the day of the bond sale, and specifies the actual principal amounts, interest rates and prices at which the Bonds will be purchased. In it, the underwriter commits to purchase the Bonds at closing at the agreed upon prices and amounts subject to certain closing conditions. A good faith deposit is also required. The Authority resolution also appoints various consultants including C.M. de Crinis & Co., as financial advisor, Fulbright & Jaworski L.L.P., as bond counsel and disclosure counsel and The Bank of New York Trust Company, N.A., as trustee. ALTERNATIVE ACTIONS 1. The City Council/Public Financing Authority may choose not to approve the issuance of the Bonds. 2. Other action as determined by the City Council/Public Financing Authority. FISCAL HAPACT Estimated annual lease payments (debt service) of approximately $825,000 payable from the City's general fund. Financing the judgment is expected to be a superior choice since the City's investment portfolio currently earns above the expected interest rate on the Bonds. If the City paid the judgment with cash, investment earnings would decline as would City liquidity, ATTACHMENTS City Council Resolution Public Financing Authority Resolution Indenture available in the City Clerk's Reading File Lease Agreement available in the City Clerk's Reading File Site and Facilities Lease available in the City Clerk's Reading File Assignment Agreement available in the City Clerk's Reading File Continuing Disclosure Agreement available in the City Clerk's Reading File Preliminary Official Statement available in the City Clerk's Reading File Notice of Sale and Notice of Intention to Sell available in the City Clerk's Reading File 12/5/06 NOTICE OF INTENTION TO SELL BONDS $13,845,000 (Approximate) Santa Clarita Public Financing Authority Lease Revenue Bonds, Series 2007 (Golden Valley Road) NOTICE IS HEREBY GIVEN that sealed proposals will be received by representatives of the Santa Clarita Public Financing Authority (the "Authority"), at the offices of C.M. de Crinis & Co., Inc., 15300 Ventura Boulevard, Suite 404, Sherman Oaks, California 91403, on Thursday, January 4, 2007 at 10:00 A.M. (Pacific time), for the purchase of $13,845,000 (approximate) aggregate principal amount of Santa Clarita Public Financing Authority, Lease Revenue Bonds, Series 2007 (Golden Valley Road) (the "Bonds"). Bids for less than all of the Bonds will not be accepted. The Bonds will be dated as of date of closing, and shall be payable as to interest from their date at the rate or rates to be fixed upon the sale thereof. The Authority has caused to be prepared an Official Notice of Sale and a Preliminary Official Statement for the Bonds, copies of which will be furnished on request made to the financial advisor to the Authority, C.M. de Crinis & Co., Inc., 15300 Ventura Boulevard, Suite 404, Sherman Oaks, California 91403, Telephone: (818) 385- 4900, fax: (818) 385-4904, email: cm@cmdecrinis.com. The Authority may postpone the date or change the time of sale to any subsequent date or any other time by providing notification through Thomson's News Service, not later than 1:30 P.M., California time, on the business day prior to any announced date for receipt of bids. /s/ Darren P. Hernandez Treasurer Santa Clarita Public Financing Authority Dated: December_, 2006