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HomeMy WebLinkAbout75D - WATERT REVENUE BONDSREQUEST FOR COUNCIL / FINANClNG AUTHORITY ACTION CITY COUNCIL MEETING DATE: JANUARY 20, 2004 TITLE: PUBLIC HEARING - REFUNDING OF WATER REVENUE BONDS, SERIES 1994 CITY MANAGER CLERK OF COUNCIL USE ONLY: APPROVED [] As Recommended [] As Amended [] Ordinance on 1s~ Reading [] Ordinance on 2"~ Reading [] Implementing Resolution [] Set Public Hearing For CONTINUED TO FILE NUMBER RECOMMENDED ACTION CITY COUNCIL ACTION Adopt a resolution authorizing the execution of documents and related actions necessary for the issuance of Santa A_na Financing Authority Water Revenue Refunding Bonds, Series 2004 in an aggregate amount not to exceed $22 million. Approve a financing team composed of underwriter Kinsell, Newcomb & DeDios Inc., financial advisor Northcross, Hill & Ach, and bond counsel Orrick, Herrington & Sutcliffe LLP. FINANCING AUTHORITY ACTION Adopt a resolution authorizing the execution of documents and related actions necessary for the issuance of Santa Ana Financing Authority Water Revenue Refunding Bonds, Series 2004 in an aggregate amount not to exceed $22 million. 2 o Approve a financing team composed of underwriter Kinsell, Newcomb & DeDios, financial advisor Northcross, Hill- & Ach, and bond counsel Orrick, Herrington & Sutcliffe LLP. DISCUSSION On August 24, 1994, the Santa Aha Financing Authority (the "Authority") issued Water Revenue Bonds, Series 1994 in the amount of $21,090,000 to finance capital improvements relating to the City's water system. The financing mechanism proposed for the debt issuance of the bonds required that the Authority issue bonds, with the City covenanting to make annual installment payments, secured by water system net revenues, equal to the Refunding Water Revenue Bonds Series 1994 January 20, 2004 debt service on the bonds.. On August 1, 1994, the City and the Authority entered into the Master Installment Purchase Agreement and other agreements in connection with the issuance of the bonds. The interest rates on these bonds range from 5.25 to 6.125 percent. Periodically, due to the interest rate fluctuations in the bond market, it becomes advantages to refinance outstanding bonds to the benefit of the City. At this time staff recommends refinancing the outstandin9 Water Revenue Bonds, Series 1994 if interest rates are favorable at the time of sale. This refinancing will allow the City to realize one-time advance savings of $2.5 to $2.8 million with average interest rates not exceeding 4.15 percent. The existing terms will remain the same. Staff further recommends that Kinsell, Newcomb & DeDios, Inc. be retained to underwrite the bond issue. Kinsell, Newc~mb & DeDios, Inc. has extensive experience in structuring complex bond issues and an excellent ability to market the bonds. Staff also recommends that Northcross, Hill, & Ach be retained as financial advisor and Orrick Herrington & Sutcliffe LLP be retained as bond counsel. The financial advisor and bond counsel both served on the original financing team for the Water Revenue Bond issue in 1994. Underwriter fees will not exceed $115,000 and financial advisor fees will not exceed $25,000. Bond counsel fees will not exceed $80,000. The documents also appoint BNY Western Trust Company as Trustee. These fees are contingent upon the sale of the bonds. The closing will occur when interest rates reach the level needed to achieve the projected savings mentioned above. If interest rates rise to the detriment of the City prior to the bond sale date, the City will have the option to terminate the proposed transaction. FISCAL IMPACT It is projected that the City will realize a minimum one-time savings of $2.5 million as a result of reduced interest rates. ~~ctor Finance & Management Services Agency advance 7.5D FA RESOLUTION NO. 2004-002 (JWF 1/12/04) RESOLUTION OF THE GOVERNING BOARD OF THE SANTA ANA FINANCING AUTHORITY AUTHORIZING THE EXECUTION AND DELIVERY BY THE AUTHORITY OF A MASTER INSTALLMENT PURCHASE AGREEMENT, A FIRST SUPPLEMENT TO MASTER INSTALLMENT PURCHASE AGREEMENT, AN INDENTURE, AN ESCROW AGREEMENT AND A PURCHASE CONTRACT IN CONNECTION WITH THE ISSUANCE OF SANTA ANA FINANCING AUTHORITY WATER REFUNDING REVENUE BONDS, SERIES 2004 (PAYABLE SOLELY FROM INSTALLMENT PAYMENTS SECURED BY WATER SYSTEM NET REVENUES), AUTHORIZING THE ISSUANCE OF SUCH BONDS IN AN AGGREGATE PRINCIPAL AMOUNT OF NOT TO EXCEED $22,000,000 AUTHORIZING THE DISTRIBUTION OF AN OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF SUCH BONDS AND AUTHORIZING THE EXECUTION OF NECESSARY DOCUMENTS AND CERTIFICATES AND RELATED ACTIONS BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SANTA ANA AS FOLLOWS: Section 1. The City Council of the City of Santa Ana hereby finds, determines and declares as follows: The City of Santa Ana (the "City") previously financed the costs of the acquisition, construction and installation of certain water system capital improvements (the "Project") pertaining to the City's water system (the "Water System"); In order to accomplish such financing, the City entered into the Master Installment Purchase Agreement, dated as of August 1, 1994 (the "Prior Master Installment Purchase Agreement"), between the City and the Authority, and the First Supplement to Master Installment Purchase Agreement, dated as of August 1, 1994, between the City and the Authority (the "Prior Supplement" and together with the Prior Master Installment Purchase Agreement, the "Prior Installment Purchase Agreement") and pertaining to the Water System; In order to provide the funds necessary to finance the Project, the Authority issued its Water Revenue Bonds, Series 1994 (Payable Solely FA Resolution No. 2004-002 Page 1 of 7 from Installment Payments Secured by Water System Net Revenues) (the "Prior Bonds"), secured by the Prior Installment Purchase Agreement; In order to achieve certain savings, the City desires to refinance the Project by exercising its option to prepay the component installment payments (the "Prior Installment Payments") payable by the City under the Prior Installment Purchase Agreement and cause the redemption of the Prior Bonds; In order to accomplish such refinancing, the Authority and the City desire to enter into a Master Installment Purchase Agreement (the "Master Installment Purchase Agreement"), by and between the City and the Authority, and a First Supplement to Master Installment Purchase Agreement (the "First Supplement" and together with the Master Installment Purchase Agreement, the "Installment Purchase Agreement"), between the City and the Authority; The City and the Authority have determined that it would be in the best interests of the City and the Authority to provide the funds necessary to refinance the Project through the offering and sale of bonds of the Authority, designated "Santa Ana Financing Authority Water Refunding Revenue Bonds, Series 2004 (Payable Solely from Installment Payments Secured by Water System Net Revenues)" (the "Bonds"), secured by the Installment Purchase Agreement; The Authority and the City desire that BNY Western Trust Company, as trustee (the "Trustee") and the Authority enter into an Indenture (the "Indenture") in order to provide for the issuance of the Bonds; The Bonds will be issued pursuant to the Marks-Roes Local Bond Pooling Act of 1985, commencing with Section 6584 of the California Government Code; The Governing Board of the Authority (the "Governing Board") has determined that it would be in the best interest of the Authority to secure the timely payment of the principal of and interest on the Bonds by obtaining an insurance policy [and a reserve surety bond] with respect thereto; The funds representing the prepayment of the Prior Installment Payments payable by the City under the Prior Installment Purchase Agreement will be applied to the payment and redemption of the Prior Bonds pursuant to an Escrow Agreement (the "Escrow Agreement") by and among the City, the Authority and BNY Western Trust Company, as escrow agent; FA Resolution No. 2004-002 Page 2 of 7 Kinsell, Newcomb & DeDios, Inc., as underwriter (the "Underwriter"), has submitted to the City and the Authority a proposed form of an agreement to purchase the Bonds in the form of a Bond Purchase Agreement (the "Purchase Contract"); A form of the Preliminary Official Statement (the "Preliminary Official Statement") to be distributed in connection with the public offering of the Bonds has been prepared; The City is a member of the Authority and the Project is to be located within the boundaries of the City; The Governing Board has been presented with the form of each document referred to herein relating to the refinancing Contemplated hereby, and the Governing Board has examined and approved each document and desires to authorize and direct the execution of such documents and the consummation of such refinancing; and All acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of such refinancing authorized hereby do exist, have happened' and have been performed in regular and due time, form and manner as required by law, and the Authority is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such refinancing for the purpose, in the manner and upon the terms herein provided; Section 2. All of the recitals herein contained are true and correct and the Governing Board so finds. Section 3. The form of the Master Installment Purchase Agreement, on file with the Secretary of the Authority, is hereby approved, and the Chair or Vice-Chair of the Authority, or such other member of the Governing Board as the Chair may designate, the Executive Director of the Authority, the Treasurer of the Authority and the Controller of the Authority (the "Authorized Officers"), are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Master Installment Purchase Agreement in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; Section 4. The form of First Supplement, on file with the Secretary of the Authority, is hereby approved, and the Authorized OffiCers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the First Supplement in substantially said form, with such changes therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that FA Resolution No. 2004-002 Page 3 of 7 the aggregate amount of the principal components of the installment payments shall not exceed $22,000,000 and the true interest cost applicable to the interest components of the installment payments shall not exceed 5% per annum. .Section 5. The form of Indenture, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Indenture in substantially said form, with such changes, insertions and omissions therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the aggregate amount of the Bonds shall not exceed $22,000,000, the final maturity date of the Bonds shall be no later than September 1, 2024 and the true interest cost applicable to the Bonds shall not exceed 5% per annum and, provided, further, that such changes, insertions and omissions shall be consistent with the terms of the Bonds established by the Purchase Contract as finally executed. Section 6. The issuance of not to exceed $22,000,000 aggregate principal amount of the Bonds, in the principal amounts, bearing interest at the rates and maturing on the dates as specified in the Indenture as finally executed, is hereby authorized and approved. Section 7. The form of Purchase Contract, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Purchase Contract in substantially said form, with such changes therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof; provided, however, that the underwriter's discount for the sale of the Bonds shall not exceed 0.50% of the aggregate principal amount of such Bonds. Section 8. ' The form of Escrow Agreement, on file with the Secretary of the Authority, is hereby approved, and the Authorized Officers are each hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Escrow Agreement in substantially said form, with such changes therein as the Authorized Officer executing the same may require or approve, such approval to be conclusively evidenced by the execution and delivery thereof. Section9. The form of Preliminary Official Statement, on file with the Secretary of the Authority, with such changes, insertions and omissions therein as may be approved by an Authorized Officer, is hereby approved, and the use of the Preliminary Official Statement in connection with the offering and sale of the Series 2004A Bonds is hereby authorized and approved. The Authorized Officers are each hereby authorized to certify on behalf of the Authority that the Preliminary Official Statement is deemed final as of its date, within the meaning of Rule 15c2-12 promulgated under the Securities Exchange Act of 1934 (except for the omission of certain final pricing, rating and related information as permitted by such Rule). FA Resolution No. 2004-002 Page 4 of 7 Section 10. The Authorized Officers are each hereby authorized and directed to furnish, or cause to be furnished, to prospective investors for the Bonds a reasonable number of copies of the Preliminary Official Statement. Section 11. The preparation and delivery of an Official Statement, and its use in connection with the offering and sale of the Bonds, is hereby authorized and approved. The Official Statement shall be in substantially the form of the Preliminary Official Statement with such changes, insertions and omissions, as may be approved by an Authorized Officer, such approval to be conclusively evidenced by the execution and delivery thereof. The Authorized Officers are each hereby authorized and directed, for and in the name of and on behalf of the Authority, to execute the final Official Statement and any amendment or supplement thereto for and in the name and on behalf of the Authority. .Section 12. The officers and agents of the Authority are hereby authorized and directed, jointly and severally, to do any and all things which th,ey may deem necessary or advisable in order to consummate the transactions herein authorized and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution, including, without limitation, negotiating the terms of the insurance policy [and the reserve surety bond] referred to herein. Section 13. All actions heretofore taken by the officers and agents of the Authority with respect to the transactions set forth above are hereby approved, confirmed and ratified. Section 14. This Resolution shall take effect immediately upon its adoption by the City Council, and the Clerk of the Council shall attest to and certify the vote adopting this Resolution. ADOPTED this day of 12004. Miguel A. Pulido Mayor APPROVED AS TO FORM: Joseph W. Fletcher, City Attorney FA Resolution No. 2004-002 Page 5 of 7 AYES: NOES: ABSTAIN: NOT PRESENT: Councilmembers Councilmembers Councilmembers Councilmembers CERTIFICATE OF ATTESTATION AND ORIGINALITY I, PATRICIA E. HEALY, Clerk of the Council, do hereby attest to and certify the attached FA Resolution No. 2004-002 to be the original resolution adopted by the City Council of the City of Santa Ana on Date: Clerk of the Council City of Santa Ana FA Resolution No. 2004-002 Page 6 of 7