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HomeMy WebLinkAbout1/2/2003 - STAFF REPORTS (2) 71 DATE: January 2, 2003 TO: City Council FROM: Director of Finance and Treasurer REIMBURSEMENTS OF EXPENDITURES FROM AIRPORT BOND ISSUE — REFINANCING OF SERIES 1992, AIRPORT REVENUE BONDS RECOMMENDATION: It is recommended that the City Council approve a resolution declaring its intent to reimburse expenditures from the proceeds of the refinancing of the 1992 Airport Revenue Bonds. SUMMARY: The City intends to refinance the 1992 bonds in April, 2003 to take advantage of lower interest rates and to remove some of the restrictive covenants in the original issues. Any expenses incurred before the bond issue occurs would be reimbursed from the bond proceeds. BACKGROUND: The Series 1992, Airport Revenue Bonds was issued on August 1, 1992 for$16,265,000. There is $13,435,000 in remaining principal. The interest rate on the remaining term bonds is 6%. One of the conditions in the 1992 issue is that the Airport is required to maintain general airport revenues at 125% or higher of maintenance and operation expenses (the rate covenant). If the ratio falls below 125%, the Airport would be required to increase the rates and charges to the airlines. This has resulted in some problems in budgeting for the Airport Fund. The events of September 11, 2001 have resulted in increased costs and reduced revenues. Increasing the fees to the airlines would have the likely and counter-productive effect of reducing air service, and therefore revenue. One of the goals of the refinancing is to eliminate the rate covenant. Most of the expenses expected to be incurred prior to the issuance of the new bonds are related to the financial feasibility report. The City Council approved a contract with SI Partners for this work. The attached resolution and a concurring resolution for the Palm Springs Financing Authority was prepared by the City Attorney's office, and reviewed by the City's Financial Advisor, Harrell and Company. SUBMITTED BY: APPROVED: Thomas M. Kanarr David H. Ready Director of Finance and Treasurer City Manager ATTACHMENTS: Resolution IFArr RESOLUTION NO. A RESOLUTION OF THE PALM SPRINGS FINANCING AUTHORITY DECLARING ITS OFFICIAL INTENT TO REIMBURSE EXPENDITURES FROM THE PROCEEDS OF TAX EXEMPT OBLIGATIONS WHEREAS, the Palm Springs Financing Authority(the"Authority") is a Joint Powers Authority(a public body, corporate and politic) duly created, established and authorized to transact business and exercise its powers, all under and pursuant to the joint Powers Law (Articles 1 through 4 of Chapter 5, Division 7, Title 1 of the California Government Code) (the "Act") and the powers of such authority include the power to issue bonds for any of its corporate purposes; and WHEREAS, the Authority desires to refinance the construction and acquisition of the public facilities described below (collectively, the 'Project'); and WHEREAS, the Authority will be expending funds for preliminary expenditures in connection with the refinancing of the construction and acquisition of the Project; and WHEREAS, the Authority reasonably expects to reimburse such expenditures by authorizing the sale and delivery of one or more series of Bonds, as described below; NOW, THEREFORE, the Palm Springs Financing Authority hereby resolves as follows: Section 1. This Resolution is a declaration of official intent to reimburse expenditures pursuant to Treasury Regulations Section 1.150-2. Section 2. The Authority desires to refinance the construction and acquisition of the Project consisting of capital improvements to the Palm Springs Airport. Section 3. The Authority reasonably expects to incur expenditures including, but not limited to financial analysis, in an amount not to exceed $200,000 in connection with the refinancing of the construction and acquisition of the Project. Section 4. The Authority reasonably expects to reimburse such expenditures through the sale and delivery of one or more series of bonds (the 'Bonds"), the interest component on which is excludable from gross income under Section 103 of the Internal Revenue Code. The maximum principal amount of Bonds expected to be issued for the Project is $18,000,000. Section 5. The reimbursement allocation to be made with respect to the expenditures will occur not later than eighteen(I8) months after the later of(i) the date on which the expenditure is paid, or(ii) the date on which the Project is placed in service, but in no event more than 3 years after the expenditure is paid. IRV#27609 vlTrri*\ _ -1 Section 6. This Resolution expresses the Authority's expectations as of this date with respect to the financing of the construction and acquisition of the Project. Future events or extraordinary circumstances beyond the control of the Authority may result in the Project being financed in a manner other than as described in this Resolution, and nothing contained herein constitutes an irrevocable commitment by the Authority to issue the Bonds. Section 7. The Secretary shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. Notwithstanding the foregoing, such certification and any of the other duties and responsibilities assigned to the Secretary pursuant to this Resolution may be performed by an Assistant Secretary with the same force and effect as if performed by the Secretary hereunder. PASSED AND ADOPTED this day of 12003. Chairman ATTEST: Secretary APPROVED AS TO FORM: David J. Aleshire Authority Counsel IRV#27609 v1 _2_ RESOLUTION NO. _ A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PALM SPRINGS DECLARING ITS OFFICIAL INTENT TO REIMBURSE EXPENDITURES FROM THE PROCEEDS OF TAX EXEMPT OBLIGATIONS WHEREAS, the City of Palm Springs (the "City") desires to refinance the construction and acquisition of the public facilities described below (collectively, the "Project"); and WHEREAS, the City will be expending funds for preliminary expenditures in connection with the refinancing of the construction and acquisition of the Project; and WHEREAS, the City reasonably expects to reimburse such expenditures by authorizing the sale and delivery of one or more series of Bonds, as described below; NOW, THEREFORE, the City Council of the City of Palm Springs hereby resolves as follows: Section 1. This Resolution is a declaration of official intent to reimburse expenditures pursuant to Treasury Regulations Section 1.150-2. Section 2. The City desires to refinance the construction and acquisition of the Project consisting of capital improvements to the Palm Springs Airport. Section 3. The City reasonably expects to incur expenditures including, but not limited to financial analysis, in an amount not to exceed $200,000 in connection with the refinancing of the construction and acquisition of the Project. Section 4. The City reasonably expects to reimburse such expenditures through the sale and delivery of one or more series of bonds (the "Bonds"), the interest component on which is excludable from gross income under Section 103 of the Internal Revenue Code. The maximum principal amount of Bonds expected to be issued for the Project is $18,000,000. Section 5. The reimbursement allocation to be made with respect to the expenditures will occur not later than eighteen (18) months after the later of(i) the date on which the expenditure is paid, or (ii) the date on which the Project is placed in service, but in no event more than 3 years after the expenditure is paid. Section 6. This Resolution expresses the City's expectations as of this date with respect to the financing of the construction and acquisition of the Project. Future events or extraordinary circumstances beyond the control of the City may result in the Project being financed in a manner other than as described in this Resolution, and nothing contained herein constitutes an irrevocable commitment by the City to issue the Bonds. IRV 927568 vI AWA F rFAWWW1 -1- Section 7. The City Clerk shall certify to the adoption of this Resolution, and thenceforth and thereafter the same shall be in full force and effect. Notwithstanding the foregoing, such certification and any of the other duties and responsibilities assigned to the City Clerk pursuant to this Resolution may be performed by an Assistant City Clerk/Deputy City Clerk with the same force and effect as if performed by the City Clerk hereunder. PASSED AND ADOPTED this_day of 2003. Mayor ATTEST: City Clerk APPROVED AS TO FORM: David J. Aleshire City Attorney FA a2 i + 2 IRV#27568 vI _2_