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HomeMy WebLinkAbout4/21/2004 - STAFF REPORTS DATE: APRIL 21, 2004 TO: FINANCING AUTHORITY, COMMUNITY REDEVELOPMENT AGENCY, AND CITY COUNCIL FROM: DIRECTOR OF COMMUNITY & ECONOMIC DEVELOPMENT AND DIRECTOR OF FINANCE &TREASURER REFINANCE OF CITY OF PALM SPRINGS FINANCING AUTHORITY 1994 SERIES A & B LOCAL AGENCY REVENUE BONDS BY THE ISSUANCE OF BONDS BY THE COMMUNITY REDEVELOPMENT AGENCY RECOMMENDATION: Approve resolutions authorizing the execution and delivery of Merged Project No. 1 Tax Allocation Bonds, 2004 Series A in principal amount not to exceed $16,000,000 and Merged Project No. 2 Tax Allocation Bonds, 2004 Series B in principal amount not to exceed $10,000,000 for the purpose of (1) prepaying seven loans of the Agency which will be used to redeem the City of Palm Springs Financing Authority's 1994 Local Agency Revenue Bonds, Series A and Series B and (2) raising approximately $5,000,000 for new projects. SUMMARY: In the current interest rate environment, the Agency has an opportunity to prepay the loans and refinance the Financing Authority's 1994 Bonds at a savings. The outstanding principal amount of the 1994 Bonds is $17,160,000 and the 1994 Bonds bear interest at an average rate of 6.5%. The remaining term of the 1994 Bonds is 18 years. The Agency can refinance the 1994 Bonds over 30 years at an interest rate of approximately 5.0%, and raise approximately $2,300,000 for redevelopment activities in Merged Project No. 1 and $3,000,000 for redevelopment activities in Merged Project No. 2. The principal amount of the Merged Project No. 1 Bonds is expected to be $14,800,000 and the principal amount of the Merged Project No. 2 Bonds is expected to be $9,000,000, including all costs of issuance. BACKGROUND: In 1994, the Authority issued $21,110,000 aggregate original principal amount of Local Agency Revenue Bonds, Series A and Series B for the purpose making seven loans to the Agency. The loans were used to advance refund the Agency's Central Business Redevelopment Project 1987 Tax Allocation Bonds, prepay six project loans securing the Authority's Revenue (Tax Allocation) Bonds, Series 1991 and raise $4.5 million for redevelopment activities of the Agency. The seven loans relating to the 1994 Bonds are secured by tax increment revenues of the Central Business District Project, the North Palm Canyon Project, the South Palm Canyon Project, the Tahquitz-Andreas Project, the Baristo-Farrell Project, the Ramon-Bogie Project and Project No. 9 (Citywide) excluding amounts required to be deposited in the Low and Moderate Income Housing Fund. The 1994 Bonds are eligible for refinancing beginning June 1, 2004. On January 21, 2004 City staff recommended to the Agency that it consider refinancing the Agency's 1994 Series A & B bonds to take advantage of the historic low interest rates and the ability under SB 211 and AB 1045 to extend the time period during which the Agency can incur debt. The current bonds have approximately Community Redevelopment Agency Bond Refinance April 21,2004 $17,160,000 in principal remaining and run through the year 2022. They carry an average interest rate of 6.5%. The options presented at the January meeting included: 1. Keeping the term the same (2022) and refinancing the bonds at a lower rate (estimated at under 5%)to yield an annual average cash flow savings in across the two merged areas of approximately$109,000. This option would not yield any up-front cash to the Agency, but yields the highest net-present value savings to the Agency of$1,352,000, 2. Extending the term to the maximum allowed under the law (2033) and refinancing at an estimated 5% rate to yield a higher average annual savings of approximately$221,000. This was the option recommended in the January meeting; even though it yielded less present value savings, it created more cash flow for capital projects over the near term. The year 2033 was selected as the term of the bonds for the second and third scenario since it is the year, or close to the year, that many of the redevelopment projects reach their limit on time to collect tax increment. 3. The third scenario extended the term to 2033 but kept the annual debt service payments to approximately what they are today ($1,700,000). With an estimated lower rate (5%) and the longer term, the Agency would be able to receive in up-front cash approximately $5,300,000. Staff did not recommend the third option in January because it did not have a list of projects on which it could encumber the funds relatively quickly. Given the State's repeated attempt to balance its budget on the backs of cities and redevelopment agencies, staff was concerned that the legislature could enact a measure over the next few years that grabs unencumbered redevelopment funds from agencies, as it proposed unsuccessfully in December 2002. However, over the past 60 days several capital projects have developed to the point where a fund balance in the Agency would facilitate significant redevelopment activities. These projects are: Description Cost Reimbursement Constructing a "four lane" road on $1,000,000 To be repaid from Bridge South Palm Canyon Drive to (to be and Road Fund established facilitate a federal "Bridge Grant" reimbursed) as part of Developer fee in application; includes right of way Canyon as $2,704 per unit acquisition Purchase of Laurich Property at $2,300,000 To be repaid by VIP when Tahquitz and Sunrise as part of VIP (to be land exchange is final and Motors-Indian owner land swap, to recouped Agency sells parcel to be exchanged with Indian parcel upon sale) dealer, or lot can be resold to Laurich 1 �� Community Redevelopment Agency Bond Refinance April 21,2004 El Portal Drainage Improvements in $2,033,750 Developer would offset a Canyon Area. Agency could fund (to be portion of the cost the entire $2,033,750 which would reimbursed) ($567,975) over the short- be partially offset by Developer's term in drainage fees; other payment of$567,975 in Local reimbursements would Benefit and Area Benefit Fees on come from other both El Portal and Monte Sereno development in the Canyon ($1,465,275) by City's Drainage Fund. The resolution presented for each series of bonds authorizes the Executive Director and the Treasurer to approve and/or execute the following documents, the forms of which are on file with the Agency Secretary: 1. Two Indentures of Trust, by and between the Agency and BNY Western Trust Company, as Trustee; 2. Two Escrow Deposit and Trust Agreements, by and between the Agency and BNY Western Trust Company, as Escrow Bank; 3. Continuing Disclosure Certificate; 4. Two Purchase Contracts or two Bond Purchase Agreements, among the Agency, the Authority, and Stone & Youngberg, to purchase the Bonds at negotiated sale in an amount not to exceed $16 million in the case of the Merged Project No. 1 Bonds and in an amount not to exceed $10 million in the case of the Merged Project No. 2 Bonds, at true interest cost not to exceed 6% with an underwriter's discount not to exceed 1.00% of the principal amount of the Bonds; and 5. Preliminary Official Statement. By separate action, the City Council is being asked to approve the SB 211 and AB 1045 Plan Amendments, which allow for an extension of the time allowed to collect tax increment. The bonds MI not be issued prior to the effectiveness of these a en me JO N S AYMO THOMAS M. KANARR Direc or of Community & Economic Development Director of Finance & Treasurer Approved b�c City Manager Attachments: 1. City Council Resolution 2. Agency Resolution 3. Authority Resolution RESOLUTION NO. OF THE CITY OF PALM SPRINGS FINANCING AUTHORITY AUTHORIZING THE PURCHASE AND SALE OF COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS MERGED PROJECT NO. 1 TAX ALLOCATION REFUNDING BONDS, 2004 SERIES A AND THE COMMUNITY REDEVELOPMENT AGENCY OF THE CITY OF PALM SPRINGS MERGED PROJECT NO. 2 TAX ALLOCATION REFUNDING BONDS, 2004 SERIES B UPON CERTAIN TERMS AND CONDITIONS, APPROVING DISTRIBUTION OF THE OFFICIAL STATEMENT RELATING THERETO AND PROVIDING OTHER MATTERS PROPERLY RELATING THERETO WHEREAS the City of Palm Springs (the "City") and the Community Redevelopment Agency of the City of Palm Springs ("the Agency") entered into a Joint Exercise of Powers Agreement (the "Agreement"), creating the City of Palm Springs Financing Authority (the "Authority"); and WHEREAS pursuant to Article 4 of Chapter 5 of Division 7 of Title 1 of the Government Code of the State of California (the "Act") and the Agreement, the Authority is authorized to purchase bonds issued by the Agency for financing and refinancing public capital improvements; and WHEREAS pursuant to the Act and the Agreement the Authority is further authorized to sell bonds so purchased to public or private purchasers at public or negotiated sale; and WHEREAS the Authority desires to purchase from the Agency its not to exceed $16,000,000 aggregate principal amount of Community Redevelopment Agency of the City of Palm Springs Merged Project No. 1 Tax Allocation Refunding Bonds, 2004 Series A (the "Series 2004A Bonds") solely from the proceeds of the Authority's concurrent sale of the Series 2004A Bonds to Stone & Youngberg LLC (the "Underwriter") pursuant to a Purchase Contract (the "2004A Purchase Contract"), among the Authority, the Agency and the Underwriter; and WHEREAS the Authority desires to purchase from the Agency its not to exceed $10,000,000 aggregate principal amount of Community Redevelopment Agency of the City of Palm Springs Merged Project No. 1 Tax Allocation Refunding Bonds, 2004 Series B (the "Series 2004E Bonds" and together with the Series 2004A Bonds, the "Series 2004 Bonds") solely from the proceeds of the Authority's concurrent sale of the Series 2004E Bonds to the Underwriter pursuant to a Purchase Contract (the "2004B Purchase Contract"), among the Authority, the Agency and the Underwriter; and WHEREAS the proceeds of the Series 2004 Bonds will be used to refund the Authority's outstanding City of Palm Springs Financing Authority Local Agency Revenue Bonds, 1994 Series A, and City of Palm Springs Financing Authority Local Agency Subordinate Revenue Bonds, 1994 Series B (collectively, the "Series 1994 Bonds")pursuant to one or more escrow deposit and trust agreements between the Authority, the Agency and BNY Western Trust Company, as escrow agent (collectively, the "Escrow Agreements"); and WHEREAS the Agency has caused an Official Statement, in preliminary form, relating to the Series 2004 Bonds (the "Official Statement") to be submitted to the Authority for approval for distribution to purchasers of the Series 2004 Bonds; and f m 6 WHEREAS the Board of Directors, with the aid of its staff, has reviewed the 2004A Purchase Contract, the 2004B Purchase Contract and the preliminary Official Statement and wishes to approve and confirm the foregoing, as well as the other matters set forth below, in the public interests of, and for significant public benefits to, the Agency and the City of Palm Springs; NOW THEREFORE BE IT RESOLVED by the Board of Directors of the City of Palm Springs Financing Authority as follows: Section 1. The Authority hereby authorizes the purchase of the Series 2004A Bonds by the Authority from the Agency for concurrent resale by the Authority to the Underwriter pursuant to and in accordance with the 2004A Purchase Contract in substantially the form on file with the Secretary together with any additions thereto or changes therein approved by the Treasurer of the Authority (the "Treasurer"), including any modifications necessary to implement the private placement of all or a portion of the Series 2004A Bonds, and the execution thereof shall be conclusive evidence of such approval. The Authority hereby delegates to the Executive Director or the Treasurer (or his written designee) the authority to accept an offer from the Underwriter to purchase the Series 2004A Bonds from the Authority and to execute the 2004A Purchase Contract for and in the name and on behalf of the Authority; provided, however, that the stated average annual interest rate payable with respect to the Series 2004A Bonds shall not exceed six percent (6%) per annum and the purchase price paid by the Underwriter for the purchase of the Series 2004A Bonds shall be not less than ninety-nine percent (99%) of the par amount thereof, excluding any original issue discount on the Series 2004A Bonds. Section 2. The Authority hereby authorizes the purchase of the Series 2004B Bonds by the Authority from the Agency for concurrent resale by the Authority to the Underwriter pursuant to and in accordance with the 2004E Purchase Contract in substantially the form on file with the Secretary together with any additions thereto or changes therein approved by the Treasurer of the Authority (the "Treasurer"), including any modifications necessary to implement the private placement of all or a portion of the Series 2004B Bonds, and the execution thereof shall be conclusive evidence of such approval. The Authority hereby delegates to the Executive Director or Treasurer (or his written designee) the authority to accept an offer from the Underwriter to purchase the Series 2004B Bonds from the Authority and to execute the 2004B Purchase Contract for and in the name and on behalf of the Authority; provided, however, that the stated average annual interest rate payable with respect to the Series 2004B Bonds shall not exceed six percent (6%) per annum and the purchase price paid by the Underwriter for the purchase of the Series 2004B Bonds shall be not less than ninety-nine percent (99%) of the par amount thereof, excluding any original issue discount on the Series 2004B Bonds. Section 3. The Escrow Agreements relating to the refunding of the Series 1994 Bonds, substantially in the form on file with the Secretary of the Authority, together with any additions or changes thereto approved by the Executive Director or Treasurer of the Agency, are hereby approved. The Executive Director or the Treasurer of the Authority are hereby authorized and directed to execute the Escrow Agreements for and in the name and on behalf of the Authority, the execution thereof to be deemed conclusive evidence of such officer's approval thereof. W Section 4. The Official Statement relating to the Series 2004 Bonds, together with such amendments and supplements as shall be necessary or convenient to accurately describe the Series 2004 Bonds in accordance with the 2004A Purchase Contract, the 2004B Purchase Contract, this Resolution and the other related proceedings and documents, is hereby approved for distribution to the purchasers of the Series 2004 Bonds. Section 5. The Chairman, the Executive Director, the Treasurer, the Secretary and the General Counsel of the Authority and any and all other officers of the Authority are hereby authorized and directed, for and in the name and on behalf of the Authority, to do any and all things and take any and all actions, including execution and delivery of any and all assignments, certificates, requisitions, agreements notices, consents, and other documents, which they, or any of them, may deem necessary or advisable in order to consummate the sale, issuance and delivery of the Series 2004 Bonds to the Underwriter pursuant to the 2004A Purchase Contract and the 2004B Purchase Contract. Any officer of the Authority herein authorized or directed to take any action may designate another officer of the Authority to take such action on his or her behalf, such designation to be approved or ratified in writing with respect to the taking of the applicable action. Section 6. This resolution shall take effect from and after its adoption. ADOPTED this_day of , 2004. AYES: NOES: ABSENT: ATTEST: CITY OF PALM SPRINGS FINANCING AUTHORITY By Secretary Chairman REVIEWED AND APPROVED AS TO FORM: