HomeMy WebLinkAbout7/18/2001 - STAFF REPORTS (28) Date: July 18, 2001
To: City Council
From: Director of Finance &Treasurer
Subject: Convention Center Bond Refinancing
RECOMMENDATION:
It is recommended that the City Council rescind the Ordinance adopted June 20, 2001
which provided for the refinancing of the 1991 Convention Center bonds, and adopt a
new Ordinance which would allow for the refinancing of the bands over the current term
(year 2022) to produce annual debt service savings, or extend the term 4 years to 2026.
SUMMARY:
This action would change the Convention Center bonds' refinancing structure from a
structure to create additional cash for capital projects to a structure that produces annual
savings. It would lock in existing interest rates for the major portion of the bonds. It
would eliminate the $25,000 cost (if held in December) of a special election challenging
the existing ordinance. An election held in March would cost $20,000.
BACKGROUND:
On June 20, 2001, the City Council approved the refinancing of the 1991 Convention
Center bonds, extending the term for four years to June, 2026, and taking out the
additional proceeds for use on capital projects. Council direction was very clear that the
first priority was a solution to the downtown parking problem. The Council ordinance
which authorized the execution of the related bond documents had its second reading
and approval on June 27, 2001. Pursuant to the City Charter and State law, there is a
30 day period in which the ordinance can be challenged and made subject to a general
vote of the people.
A petition has been circulating that would challenge the ordinance. It appears likely that
the required number of signatures will be obtained. However, it is unlikely that the
County Registrar of Voters will be able to verify the signatures on the petition in time to
make the November 6, 2001 general election. A special election would be required at a
cost of about $20,000 if held in March, or $25,000 if held in December, which would be
recommended.
The Council is faced with the following scenarios:
A. await the results of the petition drive. If the petition is not turned in to the City
Clerk by July 27, 2001, the refinancing could proceed as originally planned. If
the petition is turned in, we would have to await the Registrar's verification of the
signatures. If there weren't enough valid signatures, the refinancing could be
done in September. If the petition is valid, the Council could rescind the
ordinance, which would stop the refinancing entirely, or schedule a special
election on the question. It appears the earliest an election could be scheduled
is mid-December.
B. rescind the existing ordinance now, and pass a new ordinance allowing a �Of
refinancing over the current term of the bonds to produce annual savings.
Page 2
C. rescind the existing ordinance, pass a new ordinance allowing a refinancing over
a 25 year period (4 years longer than the current term), and put a measure on
the November ballot that would allow the annual savings to be pledged to a new
financing that would raise funds for capital projects.
D. rescind the existing ordinance, and put the refinancing question on the November
ballot. If the vote is affirmative, the refinancing (including extending the term and
borrowing new money) as originally approved would be issued. If the vote is
negative, the bonds could be refinanced up to the current term (2022) to produce
annual savings.
The City's Financial Advisor, Suzanne Harrell, has prepared an analysis of the results of
the various scenarios at existing interest rates and with a 25 basis point (1/4%) rise in
interest rates. Since the June 20th action, rates have risen 10 basis points. With the
State's energy financing still looming, a further rise in interest rates seems likely.
Attached is a table which shows the expected results from the various financing
alternatives. It assumes that any delayed financing would be done in February, 2002
and that interest rates will rise 25 basis points by then.
The scenarios A and D described above could delay a refinancing long enough to erode
much of the potential savings. Every 25 basis point move upward in interest rates
reduces the present value of the potential savings by $800,000. Scenario B locks in the
rates that will be available in late August or early September for about a $31,000,000
issue.
Scenario C would also lock in current interest rates, and would extend the term of the
bonds for four years, to 2026. A separate ballot measure would ask whether the savings
from the refinancings should be used for capital projects.
There is no question that the refinancing of the Convention Center bonds is a good idea.
Interest rates are low right now, although the trend appears to be upward. The
disagreement is over whether to take the savings generated by a refinancing in a lump
sum and use it for capital projects (primarily downtown parking solutions) or to take the
savings as an annual reduction in debt service. Council voted for the former, and the
referendum petition apparently would opt for the latter.
Regardless of the merits of either position, a validated and certified petition would
require either a rescission of the existing ordinance or the scheduling of an election.
This would delay any refinancing, and almost certainly reduce and perhaps even
eliminate the savings.
Scenario B would produce about $5.2 million in savings (present value of $3.3 million)
over the remaining 21 years of the bond issue, an average savings of about $250,000
per year. If rates rise 25 basis points, the total savings are reduced to $3.6 million
(present value of$2.5 million), reducing the average annual savings to $171,000.
Scenario C would produce about $13.2 million in cash flow savings over the first 21
years, an average annual savings of about$626,000. Because the term is extended for
4 years, the overall cash flow savings would be about $600,000, The present value of
as/¢ 2
Page 3
the savings is $3.4 million. If the savings were used to finance a new borrowing for
capital project needs, about$6.4 million could be raised.
Neither Scenario B nor C are the optimal financial solution, and do not create an
immediate pool of money to fund capital projects. However, given the election
requirements demanded by a successful petition and the risk of a rise in interest rates
during the ensuing delay, these appear to be the best remaining choices. Also
eliminated is the need for a special election at a cost of$20,000 to $25,000.
A public hearing has been scheduled for July 25, 2001 on this matter. If Council
chooses to act on the recommendation, the City Attorney has prepared the actions
necessary to rescind the existing ordinance and to adopt a new ordinance authorizing
Scenario B (same term, reduction in annual debt service) or Scenario C (term extended
4 years, reduction in annual debt service, possible use of savings for capital projects
pending voter approval).
Submitted by: Approved:
Thomas M. Kanarr David H. Ready
Director of Finance & Treasurer City Manager
Attachments: Ordinance
400?rh3
refiplans COMPARISON OF REFINANCING PLANS
7/18/01
Cumulative Lump Sum Present
Plan Description Annual Savings Proceeds Value
in millions of dollars
Option 3 , adopted 6/20101 Extends term 4 years, takes out cash (14.1) 6.7 3.5
Option 3, estimated 7/15/01 Extends term 4 years, takes out cash (14.1) 6.4 3.4
Option 1, estimated 6120/01 Same term, take annual savings 6.2 - 3.7
Option 1, estimated 7/15/01 Same term, take annual savings 5.3 3.3
Assumes petition is certified and an election is called
Scenario A, after"no"vote election Same term, take annual savings 3.6 - 2.5
Scenario A, after"yes"vote election Extends term 4 years, takes out cash (13.6) 5.0 3.3
Scenario B (same as Option 1, 7/15/01) Same term, take annual savings 5.3 - 3.3
Scenario C Extend 4 years, take annual savings (first 21 years) 13.1 7.1
Extend 4 years, take annual savings (full 25 years) 0.6 - 3.4
Scenario C, after"yes"vote election Uses savings from refi to fund Capital Projects (13.5) 6.4 3.4
Scenario D, after"no"vote election Same term, take annual savings 3.6 - 2.5
Scenario D, after"yes"vote election Extends term 4 years, takes out cash (13.6) 5.0 3.3
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, APPROVING AND
AUTHORIZING THE EXECUTION OF A SUPPLEMENTAL
LEASE AGREEMENT NO. 3 RELATING TO THE CITY OF
PALM SPRINGS FINANCING AUTHORITY LEASE REVENUE
REFUNDING BONDS, 2001 SERIES A (CONVENTION CENTER
PROJECT)
THE CITY COUNCIL OF THE CITY OF PALM SPRINGS ORDAINS AS FOLLOWS:
SECTION 1. The form of the Supplemental Lease Agreement No. 3 Relating to
Convention Center Facilities, dated as of August 1, 2001, by and between Authority, as Lessor,
and the City of Palm Springs (the"City"), as Lessee (the "Lease Agreement"), a copy of which is
on file with the City Clerk, be and is hereby approved and the Mayor or City Manager or Finance
Director and other appropriate officials of City are hereby authorized and directed to execute,
acknowledge and deliver, in the name and on behalf of the City, the Lease Agreement, with
such changes therein not inconsistent with this ordinance and not substantially adverse to the
City as may be permitted under the laws of the State and approved by the Mayor or City
Manager or Finance Director of any other officers executing the same on behalf of the City. The
approval of such changes by said Mayor or City Manager or Finance Director or other officers
shall be conclusively evidenced by their execution of such Lease Agreement.
SECTION 2. The City Council acknowledges and approves of the final maturity date of
the City of Palm Springs Financing Authority Lease Revenue Refunding Bonds, 2001 Series A
(Convention Center Project) extending four(4)years beyond the final maturity date of the City of
Palm Springs Financing Authority Lease Revenue Bonds, 1991 Series A (Convention Center
Project).
SECTION 3. Ordinance No.IS97 is hereby repealed in its entirety and upon the
effective date of this Ordinance shall be of no further force and effect.
SECTION 4. This Ordinance is subject to the referendum provisions contained in the
Charter of the City and state law otherwise applicable to the City.
SECTION 5. The City Clerk is hereby authorized and directed to certify to the passage
of this Ordinance, and to cause the same or a summary thereof to be published at least once in
a newspaper of general circulation in the City, within fifteen days after Its adoption.
rRV 813232 v1
Ordinance No.
Page 2
ADOPTED THIS day of July 2001.
AYES: Members
NOES: Members
ABSENT: Members
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By:
City Clerk Mayor
REVIEWED &APPROVED
IRV 413232 v1
07/18/01 10:29 FAX 949 863 3350 BURKEAILLIAffiS&SORENSEN r@ 002
ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF
PALM SPRINGS, CALIFORNIA, APPROVING AND
AUTHORIZING THE EXECUTION OF A SUPPLEMENTAL
LEASE AGREEMENT NO. 3 RELATING TO THE CITY OF
PALM SPRINGS FINANCING AUTHORITY LEASE REVENUE
REFUNDING BONDS, 2001 SERIES A (CONVENTION CENTER
PROJECT)
THE CITY COUNCIL OF THE CITY OF PALM SPRINGS ORDAINS AS FOLLOWS:
SECTION 1. The form of the Supplemental Lease Agreement No. 3 Relating to
Convention Center Facilities, dated as of August 1, 2001, by and between Authority, as Lessor,
and the City of Palm Springs (the "City"), as Lessee (the "Lease Agreement'), a copy of which is
on file with the City Clerk, be and is hereby approved and the Mayor or City Manager or Finance
Director and other appropriate officials of City are hereby authorized and directed to execute,
acknowledge and deliver, in the name and on behalf of the City, the Lease Agreement, with
such changes therein not inconsistent with this ordinance and not substantially adverse to the
City as may be permitted under the laws of the State and approved by the Mayor or City
Manager or Finance Director of any other officers executing the same on behalf of the City. The
approval of such changes by said Mayor or City Manager or Finance Director or other officers
shall be conclusively evidenced by their execution of such Lease Agreement.
SECTION 2. The approval of the Lease Agreement hereunder is subject to the
condition that the final maturity date of the City of Palm Springs Financing Authority Lease
Revenue Refunding Bonds, 2001 Series A (Convention Center Project) not extend beyond the
final maturity date of the City of Palm Springs Financing Authority Lease Revenue Bonds, 1991
Series A(Convention Center Project).
SECTION 3. Ordinance No. 1597is hereby repealed in its entirety and upon the
effective date of this Ordinance shall be of no further force and effect.
SECTION 4. This Ordinance is subject to the referendum provisions contained in the
Charter of the City and state law otherwise applicable to the City.
SECTION 5. The City Clerk is hereby authorized and directed to certify to the passage
of this Ordinance, and to cause the same or a summary thereof to be published at least once in
a newspaper of general circulation in the City,within fifteen days after its adoption.
IRV#12155 v2
07/18/01 10:30 FAX 949 863 3350 BURKE,IVILLIANS&SORENSEN 0 003
Ordinance No.
Page 2
ADOPTED THIS day of July 2001.
AYES: Members
NOES: Members
ABSENT: Members
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By:
City Clerk Mayor
REVIEWED&APPROVED
IRV#12155 A
'ILL 9200i
PROOF OF PUBLICATION This is space fer County Clerk's Filing Stamp
(2015.5.C.C.P)
STATE OF CALIFORNIA `
County of Riverside
---------------------------------------------
I am a citizen of the United States and a resident of Proof of Publication of
the County aforesaid;I am over the age of eighteen Nc.a654
years,and not a party to or interested in the CITY OF PALM ORD ORDINANCE SPRINGS
above-entitled matter.I am the principal clerk Of a AN ORDINANCE OF THE CITY COUNCIL OF
printer of the,DESERT SUN PUBLISHING THE CITY OF PALM SPRINGS, CALIFORNIA,
COMPANY a newspaper Of general CIrCUIatIOn, 'APPROVING AND TION OF A SUPPLEMENTAL LEASE NG ASSESS-
printedand published in the CI of Palm Springs, MENT NO. 3 RELATING TO THE CITY OF
P P cityPALM SPRINGS FINANCING AUTHORITY
Court of Riverside,and which newspaper has been LEASE REVENUE REFUNDING BONDS, 2001
CountySERIES A (CONVENTION CENTER PROJECT)
adjudged a newspaper of general circulation by the
THE CITY COUNCIL OF THE CITY OF PALM
Superior Court of the County of Riverside,State of SPRINGS ORDAINS AS FOLLOWS:
California under the date of March 24,1988.Case SECTION 1.The form of the Supplemental Lease
Number 191236;that the notice,of Which the Agreement No. 3 Relating to Convention Center
Facilities, dated as of August 1,2001, by and be-
annexed is a printed copy(set in type not smaller twee" Authority, as Lessor, and the City of Palm
Sp'
s(the " Ry"),as Lessee(the "Lease Agree-
than non pariel,has been published in each regular menr� a copy of which is on file with the City
Clerk,Abe and is hereby approved and the Mayor
and entire issue of said newspaper and not in any or City Manager or Finance Director and other
supplement YhCFCOf on the f0110w111 dates,k0 wit: appropriate officials of City are hereby authorized
pp g and directed to execute, acknowledge and deliv-
er, in the name and on behalf of City, the Lease
Agreement, with such changes therein not incon-
JUIy 2nd satent with this resolution and not substantially
adverse to the City as may be permitted under
---—---------------------------------------—---------—----— the laws of the State and a pproved b the Mayor
or City Manager or Finance erector of any other
officers executing the same on behalf of City.The
ar-„ changes of such changes by said Mayor or City
-----------------------------------------------------"'—"" Manager or Finance rector or other officers'
shall be conclusively evidenced by their execution
of such Lease Agreement.
All in the year 2001
SECTION 2 This Ordinance a subject to the ref-
erendum and
state la contained m the Charter of
the City and state law otherwise applicable to the
I certify(or declare)under penalty of perjury that the city
foregoing is true and correct. SECTION 3. The Crty clerk is hereby authorized
Sth and directed to certify to the passage of this Or-
dinance, and to cause the same or summary
Dated at Palm Springs,California this-------------day thereof to be published at lease once in a news-
paper of general circulation in the City, within fit-
July teen days after Its adoption.
of-------------------------------------,2001 ADOPTED THIS 27th day of June 2001.
AYES. Members Hodges, Reller-Spurgm and
Mayor Jones
pro [em
Orion
NOES Member Janes
ABSENT Member Klerndrenst
Signature r'ATTEST: CITY OF PALM SPRING CALIFORNIA
By /s/Patricia A.Sanders Is/William G.Klemdienst
REVIEWED &APPROVED
PUB. July 2, 2001
RESOLUTION NO. S}
OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS,
CALIFORNIA, PROVIDING FOR AND GIVING NOTICE OF A
SPECIAL MUNICIPAL ELECTION TO BE CONSOLIDATED
WITH THE GENERAL MUNICIPAL ELECTION TO BE HELD
ON NOVEMBER 6, 2001 FOR THE PURPOSE OF
SUBMITTING TO THE QUALIFIED VOTERS OF SAID CITY,
AN ADVISORY VOTE MEASURES RELATING TO THE
CONVENTION CENTER FINANCING AND USE OF THE
MONIES GENERATED FOR DOWNTOWN PARKING AND
OTHER PURPOSES.
WHEREAS the City Council of the City of Palm Springs desires to place before the qualified
voters of the City of Palm Springs an advisory vote relating to refinancing the Convention Center
Bonds, and
WHEREAS a General Municipal election will be held in said City, on November 6, 2001,
NOW THEREFORE BE IT RESOLVED by the City Council of the City of Palm Springs, as
follows:
Section 1. That there shall be and there is hereby ordered a special municipal election, to be
consolidated with the general municipal election to be held November 6, 2001, for
the purpose of submitting to the qualified electors of said City, the following
measure, to wit:
Advisory Vote Only
MEASURE (OPTION A)
the City refinance the debt on the Palm Springs Convention Center so annual debt
service payments are not increase and use monies generated for various capital
improvements including downtown parking and downtown economic development
(convention center improvements, improvements to animal shelter and other improvements)?
or
MEASURE (OPTION B)
L
the City issue debt on the Palm Springs Convention Center and use monies
generated for various capital improvements including downtown parking and downtown
economic development (convention center improvements, improvements to animal shelter
and other improvements)?
...etections\resolutions\adv-vote.res �,
�a
Section 2. That such measures shall be designated on the ballot by a letter printed on the left
margin of the square containing a description of the measure, as provided by Section
13116 of the California Elections Code.
In the event a measure receives a greater number of YES votes than NO votes, such
measure shall be deemed supported by the voters.
In the event a measure receives a greater number of NO votes than YES votes, such
measure shall be deemed unsupported by the voters.
Section 3. That the City Clerk is hereby directed to transmit a copy of the measure set forth in
Section 1 above to the City Attorney, who shall prepare an impartial analysis of the
measure in accordance with Section 9280 of the California Elections Code.
Section 4. That in all particulars not recited in this Resolution, said election shall be held and
conducted as provided by law for holding special municipal elections in said City.
Section 5. Notice of time and place of holding said election is hereby given and the City Clerk is
hereby authorized, instructed and directed to give such further or a additional notice
of said election, in time, form and manner as required by law.
Section 6. That the City Clerk shall transmit a copy of each measure referenced in Section 1 to
the City Attorney and the City Attorney shall prepare an impartial analysis thereof
showing the effect of measure on existing law and the operation of the measure.
ADOPTED this_day of 12001.
AYES:
NOES:
ABSENT:
ATTEST: CITY OF PALM SPRINGS, CALIFORNIA
By
City Clerk City Manager
REVISED &APPROVED: