HomeMy WebLinkAboutStaff Report 5.A 02/07/2005CITY OF PETALUMA, CALIFORNIA 5.A
AGENDA BILL nA�rgr��5
Aeenda Title: Resolution Approving the form of and authorizing the Meeting a e: a ru v 2 a
execution and delivery of a purchase and sale agreement and related
documents with respect to the sale of Petaluma's Vehicle License Fee Meeting Time: ® 3:00 PM
Receivable from the State; and directing and authorizing certain other ❑ 7.00 PM
actions in connection therewith.
Cateeory (check one): ❑ Consent Calendar ❑ Public Hearing ® New Business
❑ Unfinished Business ❑ Presentation
Department: Dire or: Contact Person: Phone Number:
Admin Services JosepN}er Joseph D. Netter 778-4352
Cost of Proposal:. Not to Exceed: $94,945.60 Account Number: 44260
Net to City — Not Less Than: 90.02% of $951,083.48
($951,083.48 represents VLF Receivable to City)
Amount Budeeted: N/A
Attachments to Agenda Packet Item:
or $856,137.88 Name of Fund:
1. Resolution Approving Form and Authorizing the Execution....
2. Staff Report
3. Other Back —up material from League of California Cities, etc.
Summary Statement:
State Motor Vehicle License Fee
In June, 2003, the State suspended the VLF "backfill" due to insufficient State General Fund monies. The 2% rate
was restored and became effective on October 1, 2003. Local governments lost about $1.2 billion during the three
months of the suspension of the VLF "backfill" and the implementation of the higher fees. For the City of Petaluma,
this equated to a loss of approximately $951,000 in VLF revenues. The State's 2004 budget included repayment of
the $1.2 billion to local governments by August 15, 2006, as well as a permanent reduction of the VLF rate of 0.65%.
The reduction in VLF revenue will be replaced by property taxes; however for 2005 and 2006, the payment will be
reduced by a total of $700 million to assist the state in balancing its budget. Commencing in FY 2006-07, local
governments will receive their full share of replacement property taxes and those taxes will be constitutionally
protected against transfers by the State per the recent passage of Proposition 1-A.
The California Statewide Communities Development Authority ("CSCDA"), which is a joint powers authority
sponsored by the League of California Cities and the California State Association of Counties instituted the VLF
Loan Program to enable cities and counties to sell their respective VLF Receivables to CSCDA for an up -front fixed
purchase price estimated to be between 89% to 91 % of the VLF Gap Repayment. CSCDA is planning to issue notes
and to use the note proceeds to purchase the VLF receivables and pay the financing costs. The balance of the
proceeds will be used to cover any capitalized interest and issuance costs.
By Selling the VLF Receivable, the City will avoid the potential risk that the State postpones or reneges on the
payment. The City will also receive the funds eighteen (18) months earlier, which will help with cash flow needs
and budget challenges. However, the City will not receive 100% of the receivable amount of $951,000. The total
cost to the City to enter into this agreement would range from a high of $95,000 to a low of $79,000 --- depending on
the interest rates at the time of the sale of the notes. The City of Petaluma would net from a high of $$871,653 to a
low of $856,138. The total VLF Receivable amount due the City of Petaluma is $951,083.48.
Recommended Citv Council Action/Suegested Motion:
Revi„FF)vedll�y Fhrce Director: Reviewed by City Attornev: Approved t6v ManagEr:
— i ` / ��i:q.�- D s '�1i1q Date: �I�/ Date:
T av"stDate: `Revision # and Date Revised: File Cole:
#
CITY OF PETALUMA, CALIFORNIA
FEBRUARY 7, 2005
AGENDA REPORT
FOR
Vehicle License Fee (VLF) Gap Loan Program
With the California Statewide Communities Development Authority (CSCDA)
EXECUTIVE SUMMARY:
In June, 2003, the State suspended the VLF "backfill" due to insufficient State General Fund monies. The 2%
rate was restored and became effective on October 1, 2003. Local governments lost about $1.2 billion during
the three months of the suspension of the VLF "backfill" and the implementation of the higher fees. For the
City of Petaluma, this equated to a loss of approximately $951,000 in VLF revenues. The State's 2004 budget
included repayment of the $1.2 billion to local governments by August 12, 2006, as well as a permanent
reduction of the VLF rate of 0.65%. The reduction in VLF revenue will be replaced by property taxes; however
for 2005 and 2006, the payment will be reduced by a total of $700 million to assist the state in balancing its
budget. Commencing in FY 2006-07, local governments will receive their full share of replacement property
taxes and those taxes will be constitutionally protected against transfers by the State per the recent passage of
Proposition 1-A.
The California Statewide Communities Development Authority ("CSCDA"), which is a joint powers authority
sponsored by the League of California Cities and the California State Association of Counties instituted the
VLF Loan Program to enable cities and counties to sell their respective VLF Receivables to CSCDA for an up-
front fixed purchase price estimated to be between 89% to 91% of the VLF Gap Repayment. CSCDA is
planning to issue notes and to use the note proceeds to purchase the VLF receivables and pay the financing
costs. The balance of the proceeds will be used to cover any capitalized interest and issuance costs.
By Selling the VLF Receivable, the City will avoid the potential risk that the State postpones or reneges on the
payment. The City will also receive the funds eighteen (18) months earlier, which will help with cash flow
needs and budget challenges. However, the City will not receive 100% of the receivable amount of $951,000.
The total cost to the City to enter into this agreement would range from a high of $95,000 to a low of $79,000 --
- depending on the interest rates at the time of the sale of the notes. The City of Petaluma would net from a
high of $$871,653 to a low of $856,138. The total VLF Receivable amount due the City of Petaluma is
$951,083.48.
2. BACKGROUND:
Background
Vehicle License Fees and VLF Gao Reoavment: Vehicle license fees ("VLF") were historically
assessed in the amount of 2% of a vehicle's depreciated market value for the privilege of operating a vehicle on
California's public highways. Beginning in 1999, the VLF paid by vehicle owners was offset (or reduced) to
the effective rate of 0.65%. In connection with the offset of the VLF, the Legislature authorized appropriations
from the State General Fund to "backfill" the offset so that local governments, which receive all of the vehicle
license fee revenues, would not experience any loss of revenues. The legislation that established the VLF offset
program also provided that if there were insufficient State General Fund moneys to fully "backfill" the VLF
offset, the percentage offset would be reduced proportionately (i.e., the license fee payable by drivers would be
increased) to assure that local governments would not be disadvantaged.
In June 2003, the Director of Finance under the Davis Administration ordered the suspension of VLF
offsets due to a determination that insufficient State General Fund moneys would be available for this purpose,
and, beginning in October 2003, the VLF paid by vehicle owners were restored to the 2% level. However, the
offset suspension was rescinded by Governor Schwarzenegger on November 17, 2003, and State offset
payments to local governments resumed. Local governments received "backfill" payments totaling $3.80
billion in FY 2002-03. `Backfill" payments totaling $2.65 billion were paid to local governments in FY 2003-
04. However, approximately $1.2 billion was not received by local governments during the time period
between the suspension of the VLF offsets and the implementation of higher fees and is still owed them by the
State (the "VLF Gap Repayments"). The City of Petaluma's share of the VLF Gap Repayment is $951,083.48.
This amount is identified as Petaluma's VLF Receivable.
As part of the 2004 Budget Act negotiations, an agreement was made between the State and local
government officials (the "State -local agreement") under which the VLF rate will be permanently reduced from
2% to 0.65%. The State -local agreement also provides for the repayment by August 15, 2006 of the
approximately $1.2 billion VLF Gap Repayment. In order to protect local governments, the reduction in VLF
revenue to cities and counties from this rate change will be replaced by an increase in the amount of property
tax they receive. Under the State -local agreement, for FY 2004-05 and 2005-06 only, the replacement property
taxes that cities and counties receive has been reduced by $700 million. Commencing in FY 2006-07, local
governments will receive their full share of replacement property taxes and those replacement property taxes
will now enjoy constitutional protection against transfers by the State due to the approval of Proposition IA at
the November 2004 election.
VLF Proeram: Authorized under SB 1096, the VLF Program was instituted by the California Statewide
Communities Development Authority ("CSCDA") in 2004 to enable the [City/County] and other cities and
counties to sell their respective VLF Receivables to CSCDA for an upfront fixed purchase price estimated to be
90.02% of the VLF Gap Repayments. CSCDA is planning to issue bonds ("VLF Bonds") and to use the bond
proceeds to purchase the VLF Receivables and pay financing costs. The actual purchase price of the VLF
Receivables will depend on the total amount of VLF Receivables that cities and counties sell to CSCDA and on
bond market conditions at the time the VLF Bonds are priced. If the City of Petaluma sells its VLF Receivable
under the VLF Program, CSCDA will pledge the City's VLF Receivable to secure the repayment of a
corresponding portion of the VLF Bonds. The City's sale of its VLF Receivable will be irrevocable.
Bondholders will have no recourse to the City if the State does not make the VLF Gap Repayment.
VLF Proeram Sponsor: CSCDA is a joint powers authority sponsored by the League of California
Cities and the California State Association of Counties. The member agencies of CSCDA include
approximately 230 cities and 54 counties throughout California, including the City of Petaluma.
Benefits of Participation in the VLF Prop -ram:
The benefits to the City of Petaluma of participation in the VLF Program include:
• Immediate cash relief— the sale of the City's VLF Receivable is estimated to provide the City with
approximately 90.02% of its VLF Receivable in early 2005 which can be used to pay for immediate
funding needs.
• Level cash flow from the State over next two vears — as explained above, in each of FY 2004-05 and
2005-06, cities and counties across the State will lose a total of $700 million annually in property tax
payments to the Educational Revenue Augmentation Fund ("ERAF"), which benefits the State.
Accordingly, the City of Petaluma is projected to lose approximately $693,456 in each such fiscal
year. This loss in property tax revenue in FY 2004-05 and 2005-06 will be followed by an increase
in revenues in FY 2006-07 due to the payment by the State of the VLF Gap Repayment and due to
the cessation of ERAF payments in that year. If the City sells its VLF Receivable through the VLF
Program, it can use the sale proceeds to offset the loss of revenues due to its property tax
contributions over the next two years and eliminate the spike in revenues in the third year, thereby
creating a more level cash flow in each of the next three fiscal years.
Rlitieates impact of nronerty tax in -lieu of VLF swan over next two vears_ — beginning in FY 2004-05, the
State will permanently eliminate the VLF backfill paid to the City of Petaluma and will replace it with
an equal amount of property tax. While these actions are intended to cancel each other out, the City is
now receiving these payments semi-annually as property taxes, rather than monthly as VLF backfill
payments. This situation creates potential cash flow problems for the City which could be temporarily
alleviated by selling the City's VLF Receivable.
Budsetary flexibility in FY 2004-05 and 2005-06 — the sale of the City's VLF Receivable would provide
additional revenues in FY 2004-05 which can be applied to resolve budgetary challenges in FY 2004-05
and 2005-06.
Estimated Proceeds of the Sale of the (City/Countvl's VLF Receivable:
Upon delivery of the VLF Bonds, CSCDA will make available to the City of Petaluma its fixed purchase
price. This payment will equal the City's VLF Receivable amount less capitalized interest costs (to pay interest
on the VLF Bonds until maturity), credit enhancement fees and bond issuance costs. As discussed above, the
[City/County]'s VLF Receivable is $951,083.48. The purchase price to be paid by CSCDA is estimated to be
$94,945 but cannot be determined with specificity until the total number of participants in the VLF Program is
known and bond market conditions are taken into account at the time the VLF Bonds are priced.
Proposed VLF Receivables Sale Resolution:
The proposed VLF Receivables Sale Resolution:
(1) authorizes the sale of the City of Petaluma's VLF Receivable to CSCDA for a sale price at least equal to
$951,083.48 (the "Target Amount"), or such lesser amount as determined by an Authorized Officer to be
in the best interest of the City based on market conditions at the time of the sale of the VLF Bonds,
provided that such lesser amount shall in no case be less than 90% of the Target Amount;
(2) approves the form, and directs the execution and delivery, of the Purchase and Sale Agreement with
CSCDA and related documents;
(3) authorizes and directs any Authorized Officer to send, or to cause to be sent, an irrevocable written
instruction required by statute to the State Controller notifying the State of the sale of the VLF
Receivable and instructing the disbursement of the VLF Receivable to the VLF Bond Trustee;
[(4) approves the use of the VLF Receivables proceeds for General Operating Expenses
(5) appoints certain City officers and officials as Authorized Officers for purposes of signing documents
and approving the final sale price of the VLF Receivable; and
(6) authorizes miscellaneous related actions and makes certain ratifications, findings and determinations
required by law.
After the Petaluma City Council's discussion and questions, if the Council wishes to participate in the
VLF Program, it should adopt the proposed VLF Receivables Sale Resolution which requires only a simple
majority vote.
3. ALTERNATIVES:
Do not accept the VLF Loan offer and wait until August 15, 2006 to receive the monies due from the State for
the VLF Receivable backfill. This amount would be 100% of the receivable or $951,083.48.
4. FINANCIAL IMPACTS:
The cost to the City of Petaluma would be a low of approximately $79,000 or 8.3% to a high of approximately
$95,000 or 10%. The costs are to be used for issuance costs and capitalized interest on the bonds. However,
the City would receive the balance, approximately $856,137 eighteen (18) months early.
CONCLUSION:
The real question is a TRUST issue. Does the City of Petaluma trust the State that they will keep their promise
and repay all the City's VLF receivable in a timely manner? If not, then the VLF Loan is a good idea. If we do
trust the State to meet its obligation, then it would be foolish to spend approximately $95,000 just to receive
90% of the monies due eighteen months earlier.
6. OUTCOMES OR PERFORMANCE MEASUREMENTS THAT WILL IDENTIFY SUCCESS OR COMPLETION:
Receipt of the VLF Loan (Net Amount) in February or March 2005 to be used in the City's General
Government Operations.
RECOMMENDATION:
After the Petaluma City Council's discussion and questions, if the Council wishes to participate
in the VLF Program, it should adopt the proposed VLF Receivables Sale Resolution which requires only a
simple majority vote.
RESOLUTION NO.
CITY COUNCIL
OF THE
CITY OF PETALUMA
A RESOLUTION APPROVING THE FORM OF AND AUTHORIZING THE
EXECUTION AND DELIVERY OF A PURCHASE AND SALE AGREEMENT
AND RELATED DOCUMENTS WITH RESPECT TO THE SALE OF THE
SELLER'S VEHICLE LICENSE FEE RECEIVABLE FROM THE STATE;
AND DIRECTING AND AUTHORIZING CERTAIN OTHER ACTIONS IN
CONNECTION THEREWITH
WHEREAS, certain public agencies within the State of California (the "State") are
entitled to receive certain payments payable by the State to each such local agency on or before
August 15, 2006, in connection with vehicle license fees pursuant to Section 10754.11 of the
California Revenue and Taxation Code ("VLF Gap Repayments");
WHEREAS, the City of Petaluma (the "Seller") is entitled to and has determined to sell
all right, title and interest of the Seller in and to the "VLF Receivable", as defined in Section
6585(i) of the California Government Code (the "VLF Receivable"), namely, the right to
payment of moneys due or to become due to the Seller out of funds payable in connection with
vehicle license fees to a local agency pursuant to Section 10754.11 of the California Revenue
and Taxation Code;
WHEREAS, the California Statewide Communities Development Authority, a joint
exercise of powers authority organized and existing under the laws of the State (the "Authority"),
has been authorized pursuant to Section 6588(w) of the California Government Code to purchase
the VLF Receivable;
WHEREAS, the Authority desires to purchase the VLF Receivable and the Seller desires
to sell the VLF Receivable pursuant to a purchase and sale agreement by and between the Seller
and the Authority in the form presented to this City Council (the "Sale Agreement") for the
purposes set forth herein;
WHEREAS, in order to finance the purchase price of the VLF Receivable from the Seller
and the purchase price of other VLF Receivables from other local agencies, the Authority will
issue its taxable and tax-exempt notes (the "Notes") pursuant to Section 6590 of the California
Government Code and an Indenture (tile "Indenture"), by and between the Authority and Wells
Fargo Bank, National Association, as trustee (the "Trustee"), which Notes will be payable solely
from the proceeds of the VLF Receivable and such other VLF Receivables;
WHEREAS, the Seller acla3owledges that the Authority will grant a security interest in
the VLF Receivable to the Trustee and any credit enhancer to secure payment of the Notes; and
WHEREAS, a portion of the proceeds of the Notes will be used by the Authority to,
among other things, pay the purchase price of the VLF Receivable;
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DOCSSF1:795390.1
WHEREAS, the Seller will use the proceeds received from the sale of the VLF
Receivable for any lawfiil purpose as permitted under the applicable laws of the State;
NOW THEREFORE, the City Council of the City of Petaluma hereby resolves as
follows:
Section 1. All of the recitals set forth above are true and correct, and this City
Council hereby so finds and determines.
Section 2. The Seller hereby authorizes the sale of the VLF Receivable to the
Authority for a price no less than the Minimum Purchase Price set forth in ADDendix A. The
form of Sale Agreement presented to the City Council is hereby approved. An Authorized
Officer (as set forth in Annendix A) is hereby authorized and directed to execute and deliver the
Sale Agreement on behalf of the Seller, which shall be in substantially the form presented to this
meeting, with such changes therein, deletions therefrom and additions thereto, as such
Authorized Officer shall approve, which approval shall be conclusively evidenced by the
execution and delivery of the Sale Agreement.
Section 3. Any Authorized Officer is hereby authorized and directed to send, or
to cause to be sent, an irrevocable written instruction to the State Controller notifying the State of
the sale of the VLF Receivable and instructing the disbursement pursuant to Section 6588.5(c) of
California Government Code of the VLF Receivable to the Trustee, on behalf of the Authority.
Section 4. The Authorized Officers and such other Seller officers, as appropriate,
are hereby authorized and directed, jointly and severally, to do any and all things and to execute
and deliver any and all documents, including but not limited to one or more tax certificates, if
required, appropriate escrow instructions relating to the delivery into escrow of executed
documents prior to the closing of the Notes, and such other documents mentioned in the Sale
Agreement or the Indenture, which any of them may deem necessary or desirable in order to
implement the Sale Agreement and otherwise to carry out, give effect to and comply with the
terms and intent of this Resolution; and all such actions heretofore taken by such officers are
hereby ratified, confirmed and approved.
Section 5. All consents, approvals, notices, orders, requests and other actions
permitted or required by any of the documents authorized by this Resolution, whether before or
after the sale of the VLF Receivable or the issuance of the Notes, including without limitation
any of the foregoing that may be necessary or desirable in connection with any default under or
amendment of such documents, may be given or taken by an Authorized Officer without further
authorization by this City Council, and each Authorized Officer is hereby authorized and
directed to give any such consent, approval, notice, order or request, to execute any necessary or
appropriate documents or amendments, and to take any such action that such Authorized Officer
may deem necessary or desirable to further the purposes of this Resolution.
Section 6. The City Council acknowledges that, upon execution and delivery of
the Sale Agreement, the Seller is contractually obligated to sell the VLF Receivable to the
Authority pursuant to the Sale Agreement and the Seller shall not have any option to revoke its
approval of the Sale Agreement or to determine not to perform its obligations thereunder.
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DOCSSF1:795390.1 2
Section 7. This Resolution shall take effect from and after its adoption and
approval.
PASSED AND ADOPTED by the City Council of the City of Petaluma, State of
California, this day of , 2005, by the following vote:
AYES:
NOES:
ABSENT:
Mayor
Attest:
City Clerk
Approved as to farm :
SELLER'S COUNSEL
10
Dated:
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uocssrI:795390.1 3
Minimum Purchase
Price:
Authorized Officers:
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UOCSSF1:795390.1
MQW0
CITY OF PETALUMA
An amount equal to or greater than $855,934.63 (the "Minimum
Purchase Price").
City Manager
Interim Finance Director
Accounting Manager
any designee of any of them, as appointed in a written certificate of
such Authorized Officer delivered to the Trustee.
CITY OF PETALUMA, CALIFORNIA,
as Seller
and
CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY,
as Purchaser
PURCHASE AND SALE AGREEMENT
Dated March 2, 2005
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DOCSSF1:795397A
TABLE OF CONTENTS
Page
1.
DEFINITIONS AND INTERPRETATION......................................................................1
2.
AGREEMENT TO SELL AND PURCHASE; CONDITIONS PRECEDENT ................
2
3.
CONVEYANCE OF VLF RECEIVABLE AND PAYMENT OF FINAL
PURCHASEPRICE..........................................................................................................
3
4.
REPRESENTATIONS AND WARRANTIES OF THE PURCHASER ..........................
3
5.
REPRESENTATIONS AND WARRANTIES OF THE SELLER ...................................
3
6.
COVENANTS OF THE SELLER.....................................................................................
5
7.
NOTICES OF BREACH...................................................................................................
7
8,
LIABILITY OF SELLER; INDEMNIFICATION............................................................
7
9.
LIMITATION ON LIABILITY........................................................................................
7
10.
THE SELLER'S ACKNOWLEDGMENT........................................................................7
11.
NOTICES...........................................................................................................................8
12.
AMENDMENTS...............................................................................................................
8
13.
SUCCESSORS AND ASSIGNS.......................................................................................
8
14.
THIRD PARTY RIGHTS..................................................................................................
8
15.
PARTIAL INVALIDITY..................................................................................................
8
16.
COUNTERPARTS............................................................................................................
8
17.
ENTIRE AGREEMENT....................................................................................................
9
18.
GOVERNING LAW........................................................................................................
10
EXHIBITA — DEFINITIONS................................................................................................... A -i
EXHIBIT BI —OPINION OF SELLER'S COUNSEL...........................................................Bl-1
EXHIBIT B2 — BRINGDOWN OPINION OF SELLER'S COUNSEL ................................. B2-1
EXHIBIT CI —CLERK'S CERTIFICATE... ...................................... ................................... cl-I
EXHIBIT C2 — SELLER CERTIFICATE............................................................................... C2-1
EXHIBIT C3 — BILL OF SALE AND BRINGDOWN CERTIFICATE ................................ C3-1
EXHIBIT D — IRREVOCABLE INSTRUCTIONS TO CONTROLLER ................................ D-1
EXHIBITE — RESERVED....................................................................................................... E -I
EXHIBIT F — ESCROW INSTRUCTION LETTER ............... ...... ........ ................ .............. ...... F -I
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DOCSSF1:795397.1 1
PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT, dated March 2, 2005 (this
"Agreement'), is entered into by and between:
(1) CITY OF PETALUMA, a municipal corporation of the State of California
(the "Seller"); and
(2) CALIFORNIA STATEWIDE COMMUNITIES DEVELOPMENT
AUTHORITY, a joint exercise of powers authority organized and existing under the laws of the
State of California (the "Purchaser").
RECITALS
A. The Seller is the owner of the VLF Receivable (as defined below).
B. The Seller is willing to sell, and the Purchaser is willing to purchase, the
VLF Receivable upon the terms specified in this Agreement.
C. The Purchaser will issue its taxable and tax-exempt notes (the "Notes")
pursuant to an Indenture (the "Indenture"), between the Purchaser and Wells Fargo Bank,
National Association, as trustee (the "Trustee"), and will use a portion of the proceeds thereof to
purchase the VLF Receivable from the Seller.
D. The Purchaser will grant a security interest in such VLF Receivable to the
Trustee and each Credit Enhancer to secure the Notes.
AGREEMENT
NOW, THEREFORE, in consideration of the above Recitals and the mutual
covenants herein contained, the parties hereto hereby agree as follows:
1. Definitions and Intororetation.
(a) For all purposes of this Agreement, except as otherwise expressly provided
herein or unless the context otherwise requires, capitalized terms not otherwise defined herein
shall have the meanings ascribed to such terms in Exhibit A attached hereto and which is
incorporated by reference herein.
(b) The words "hereof," "herein," "hereunder" and words of similar import when
used in this Agreement shall refer to this Agreement as a whole and not to any particular
provision of this Agreement; section and exhibits references contained in this Agreement are
references to sections and exhibits in or to this Agreement unless otherwise specified; and the
term "including" shall mean "including without limitation."
(c) Any agreement, instrument or statute defined or referred to herein or in any
instrument or certificate delivered in connection herewith means such agreement, instrument or
statute as from time to time may be amended, modified or supplemented and includes (in the
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nOCSSF1:795397.1
case of agreements or instruments) references to all attachments and exhibits thereto and
instruments incorporated therein; and any references to a Person are also to its permitted
successors and assigns.
2. Aereement to Sell and Purchase: Conditions Precedent.
(a) The Seller agrees to sell, and the Purchaser agrees to purchase, on the Closing
Date, for cash paid by the Purchaser in an amount equal to the amount determined pursuant to
Section 3(a) (the "Final Purchase Price"), which shall be not less than $855,934.63 (the
"Minimum Purchase Price"), all future right, title and interest of the Seller in and to the "VLF
Receivable" as defined in Section 6585(i) of the California Government Code (the "VLF
Receivable"), namely, the right to payment of moneys due or to become due to the Seller out of
funds payable in connection with vehicle license fees to a local agency pursuant to Section
10754.11 of the California Revenue and Taxation Code. The Purchaser shall pay the Final
Purchase Price by transferring such Final Purchase Price directly to the Seller.
(b) The performance by the Purchaser of its obligations hereunder shall be
conditioned upon:
(i) Transaction Counsel receiving on or before the date the Notes are sold (the
"Pricine Date"), to be held in escrow until the Closing Date and then
delivered to the Purchaser on the Closing Date, the following documents
duly executed by the Seller or its counsel, as applicable: (1) an opinion of
counsel to the Seller dated the Pricing Date in substantially the form
attached hereto as Exhibit B1, (2) certificates dated the Pricing Date in
substantially the forms attached hereto as Exhibit Cl and Exhibit C2.
(3) irrevocable instructions to the Controller dated as of the Closing Date
in substantially the form attached hereto as Exhibit D, (4) this Agreement,
(5) a certified copy of the resolution of the Seller's City Council approving
this Agreement, the transactions contemplated hereby and the documents
attached hereto as exhibits, and (6) an escrow instruction letter in
substantially the form attached hereto as Exhibit F;
(ii) Transaction Counsel receiving on or before the Closing Date, (1) a
bringdown opinion of counsel to the Seller dated as of the Closing Date in
substantially the form attached hereto as Exhibit B2. and (2) a bill of sale
and bringdown certificate of the Seller (the "Bill of Sale") in substantially
the form attached hereto as Exhibit C3: provided that the Purchaser may
waive in its sole discretion the requirements of Section 2(b)(ii)(1); and
(iii) the Purchaser issuing notes in an amount which will be sufficient to pay
the Final Purchase Price.
(c) The performance by the Seller of its obligations hereunder shall be
conditioned solely upon the Purchaser's payment of the Final Purchase Price as set forth in this
Agreement and no other act or omission on the part of the Purchaser or any other party shall
excuse the Seller from performing its obligations hereunder.
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(d) The Final Purchase Price shall be an amount that satisfies the conditions of
Section 2 of the Resolution referred to in Section 2(b)(i)(5) above.
3. Convevance of VLF Receivable and Payment of Final Purchase Price.
(a) Upon pricing of the Notes by the Purchaser, the Purchaser will inform the
Seller of the Final Purchase Price, which shall be an amount at least equal to the Minimum
Purchase Price, and which shall be determined by the Purchaser based on the final interest rates,
costs of credit enhancement and issuance and terms of the Notes. Upon pricing of the Notes, the
Purchaser shall deliver a certificate to the Seller indicating the Final Purchase Price to be paid to
the Seller on the Closing Date.
(b) In consideration of the payment and delivery by the Purchaser to the Seller of
the Final Purchase Price, the Seller agrees to (a) transfer, grant, bargain, sell, assign, convey, set
over and deliver to the Purchaser, absolutely and not as collateral security, without recourse
except as expressly provided herein, and the Purchaser agrees to purchase, accept and receive,
the VLF Receivable, and (b) assign to the Purchaser, to the extent permitted by law (as to which
no representation is made), all present or future rights, if any, of the Seller to enforce or cause the
enforcement of payment of the VLF Receivable pursuant to the Act and other applicable taw.
4. Representations and Warranties of the Purchaser. The Purchaser represents
and warrants to the Seller that, as of the date hereof, (a) it is duly organized, validly existing and
in good standing under the laws of the State of California, (b) it has full power and authority to
enter into this Agreement and to perform its obligations hereunder, (c) neither the execution and
delivery by the Purchaser of this Agreement, nor the performance by the Purchaser of its
obligations hereunder, shall conflict with or result in a breach or default under any of its
organizational documents, any law, rule, regulation, judgment, order or decree to which it is
subject or any agreement or instrument to which it is a party, and (d) this Agreement, and its
execution, delivery and performance hereof have been duly authorized by it, and this Agreement
has been duly executed and delivered by it and constitutes its valid and binding obligation
enforceable against it in accordance with the terms hereof, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to
or affecting creditors' rights generally or the application of equitable principles in any
proceeding, whether at law or in equity.
5. Reuresentations and Warranties of the Seller. The Seller hereby represents
and warrants to the Purchaser, as of the date hereof, as follows;
(a) The Seller is a municipal corporation validly existing under the city charter
and Constitution of the State of California, with full power and authority to execute and deliver
this Agreement and to carry out its terms.
(b) The Seller has full power, authority and legal right to sell and assign the VLF
Receivable to the Purchaser and has duly authorized such sale and assignment to the Purchaser
by all necessary action; and the execution, delivery and performance by the Seller of this
Agreement has been duly authorized by the Seller by all necessary action.
Taxable
DOCSSFI :797397.1 3
(c) This Agreement has been, and as of the Closing Date the Bill of Sale will have
been, duly executed and delivered by the Seller and, assuming the due authorization, execution
and delivery of this Agreement by the Purchaser, constitutes a legal, valid and binding obligation
of the Seller enforceable in accordance with its terms, subject to the effect of bankruptcy,
insolvency, reorganization, moratorium, fraudulent conveyance and other similar laws relating to
or affecting creditors' rights generally or the application of equitable principles in any
proceeding, whether at law or in equity.
(d) All approvals, consents, authorizations, elections and orders of or filings or
registrations with any governmental authority, board, agency or commission having jurisdiction
which would constitute a condition precedent to, or the absence of which would adversely affect,
the sale by the Seller of the VLF Receivable or the performance by the Seller of its obligations
under the Resolution and the Transaction Documents and any other applicable agreements, have
been obtained and are in full force and effect.
(e) Insofar as it would materially adversely affect the Seller's ability to enter into,
carry out and perform its obligations under any or all of the Transaction Documents to which it is
a party, or consummate the transactions contemplated by the same, the Seller is not in breach of
or default under any applicable constitutional provision, law or administrative regulation of the
State of California or the United States or any applicable judgment or decree or any loan
agreement, indenture, bond, note, resolution, agreement or other instrument to which it is a party
or to which it or any of its property or assets is otherwise subject, and, to the best of the
knowledge of the Seller, no event has occurred and is continuing which with the passage of time
or the giving of notice, or both, would constitute a default or an event of default under any such
instrument, and the adoption of the Resolution and the execution and delivery by the Seller of the
Transaction Documents to which it is a party, and compliance by the Seller with the provisions
thereof, under the circumstances contemplated thereby, do not and will not in any material
respect conflict with or constitute on the part of the Seller a breach of or default under any
agreement or other instrument to which the Seller is a party or by which it is bound or any
existing law, regulation, court order or consent decree to which the Seller is subject.
(f) To the best of the knowledge of the Seller, no action, suit, proceeding, inquiry
or investigation, at law or in equity, before or by any court, public board or body, is pending or
threatened in any way against the Seller affecting the existence of the Seller or the titles of its
City Council members or officers to their respective offices, or seeking to restrain or to enjoin
the sale of the VLF Receivable or to direct the application of the proceeds of the sale thereof, or
in any way contesting or affecting the validity or enforceability of any of the Transaction
Documents or any other applicable agreements or any action of the Seller contemplated by any
of said documents, or in any way contesting the powers of the Seller or its authority with respect
to the Resolution or the Transaction Documents to which the Seller is a party or any other
applicable agreement, or any action on the part of the Seller contemplated by the Transaction
Documents, or in any way seeking to enjoin or restrain the Seller from selling the VLF
Receivable or which if determined adversely to the Seller would have an adverse effect upon the
Seller's ability to sell the VLF Receivable, nor to the knowledge of the Seller is there any basis
therefor.
Taxable
nOCSSFi:795397.1 4
(g) Prior to the sale of the VLF Receivable to the Purchaser, the Seller was the
sole owner of the VLF Receivable, and has such right, title and interest as provided in the Act.
From and after the conveyance of the VLF Receivable by the Seller to Purchaser on the CIosing
Date, the Seller shall have no interest in the VLF Receivable. Except as provided in this
Agreement, the Seller has not sold, transferred, assigned, set over or otherwise conveyed any
right, title or interest of any kind whatsoever in all or any portion of the VLF Receivable, nor has
the Seller created, or to the knowledge of the Seller permitted the creation of, any lien, pledge,
security interest or any other encumbrance (a "Lien") thereon. Prior to the sale of the VLF
Receivable to the Purchaser, the Seller held title to the VLF Receivable free and clear of any
Liens. As of the Closing Date, this Agreement, together with the Bill of Sale, constitutes a valid
sale to the Buyer of the Seller's right, title and interest in and to the VLF Receivable.
(h) The Seller acts solely through its authorized officers or agents.
(i) The Seller maintains records and books of account separate from those of the
Purchaser.
0) The Seller maintains its respective assets separately from the assets of the
Purchaser (including through the maintenance of separate bank accounts); the Seller's funds and
assets, and records relating thereto, have not been and are not commingled with those of the
Purchaser.
(k) The Seller's principal place of business and chief executive office is located at
11 English Street, Petaluma, CA 94952.
(1) The Seller has received reasonably equivalent value for the VLF Receivable.
- (m)The Seller does not act as an agent of the Purchaser in any capacity, but
instead presents itself to the public as an entity separate from the Purchaser.
(n) The Seller has not guaranteed and shall not guarantee the obligations of the
Purchaser, nor shall it hold itself out or permit itself to be held out as having agreed to pay or as
being liable for the debts of the Purchaser; and the Seller has not received nor shall the Seller
accept any credit or financing from any Person who is relying upon the availability of the assets
of the Purchaser to satisfy the claims of such creditor.
(o) All transactions between or among the Seller, on the one hand, and the
Purchaser on the other hand (including, without limitation, transactions governed by contracts for
services and facilities, such as payroll, purchasing, accounting, legal and personnel services and
office space), whether existing on the date hereof or entered into after the date hereof, shall be on
terms and conditions (including, without limitation, terms relating to amounts to be paid
thereunder) which are believed by each such party thereto to be both fair and reasonable and
comparable to those available on an arms -length basis from Persons who are not affiliates.
6. Covenants of the Seller.
(a) The Seller shall not take any action or omit to take any action which adversely
affect the interests of the Purchaser in the VLF Receivable and in the proceeds thereof. The
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DOCSSFl:795397.1 5
Seller shall not take any action or omit to take any action that shall adversely affect the ability of
the Purchaser, and any assignee of the Purchaser, to receive payments made under the Act.
(b) The Seller shall not take any action or omit to take any action that would
impair the validity or effectiveness of the Act, nor, without the prior written consent of the
Purchaser or its assignee, amend, modify, terminate, waive or surrender, or agree to any
amendment, modification, termination, waiver or surrender of, the terms of the Act, or waive
timely performance or observance under the Act, in each case if the effect thereof would be
materially adverse to the Purchaser or to the Noteholders or any Credit Enhancer as assignees of
the Purchaser. Nothing in this agreement shall impose a duty on the Seller to seek to enforce the
Act or to seek enforcement thereof by others, or to prevent others from modifying, terminating,
discharging or impairing the validity or effectiveness of the Act.
(c) Upon request of the Purchaser or its assignee, (i) the Seller shall execute and
deliver such further instruments and do such further acts (including being named as a plaintiff in
an appropriate proceeding) as may be reasonably necessary or proper to carry out more
effectively the purposes and intent of this Agreement, and (ii) the Seller shall take all actions
necessary to preserve, maintain and protect the title of the Purchaser to the VLF Receivable,
provided that such acts shall not impose any additional cost on the Seller that is not reimbursed.
(d) On or before the Closing Date, the Seller shall send (or cause to be sent) an
irrevocable instruction to the Controller pursuant to Section 6588.5(c) of California Government
Code to cause the Controller to disburse all payments of the VLF Receivable to the Trustee,
together with notice of the sale of the VLF Receivable to the Purchaser and the assignment of all
or a portion of such assets by the Purchaser to the Trustee. Such notice and instructions shall be
in the form of Exhibit D hereto. The Seller shall not take any action to revoke or which would
have the effect of revoking, in whole or in part, such instructions to the Controller. The Seller
hereby relinquishes and waives any control over the VLF Receivable, any authority to collect the
VLF Receivable, and any power to revoke or amend the instructions to the Controller
contemplated by this paragraph. The Seller shall not rescind, amend or modify the instruction
described in the first sentence of this paragraph. The Seller shall cooperate with the Purchaser or
its assignee in giving instructions to the Controller if the Purchaser or its assignee transfers the
VLF Receivable. In the event that the Seller receives any proceeds of the VLF Receivable, the
Seller shall hold the same in trust for the benefit of the Purchaser and the Trustee and each Credit
Enhancer, as assignees of the Purchaser, and shall promptly remit the same to the Trustee.
(e) The Seller hereby covenants and agrees that it will not at any time institute
against the Purchaser, or join in instituting against the Purchaser, any bankruptcy, reorganization,
arrangement, insolvency, liquidation, or similar proceeding under any United States or state
bankruptcy or similar law.
(f) The financial statements and books and records of the Seller prepared after the
Closing Date shall reflect the separate existence of the Purchaser.
(g) The Seller shall treat the sale of the VLF Receivable as a sale for regulatory
and accounting purposes.
Taxable
DOCSSFI :795397.1 6
(h) From and after the date of this Agreement, the Seller shall not sell, transfer,
assign, set over or otherwise convey any right, title or interest of any kind whatsoever in all or
any portion of the VLF Receivable, nor shall the Seller create, or to the knowledge of the Seller
permit the creation of, any Lien thereon.
7. Notices of Breach,
(a) Upon discovery by the Seller or the Purchaser that the Seller has breached any
of its covenants or that any of the representations or warranties of the Seller or the Purchaser are
materially false or misleading, in a manner that materially and adversely affects the value of the
VLF Receivable, the discovering party shall give prompt written notice thereof to the other party
and to the Trustee, as assignee of the Purchaser, who shall, pursuant to the Indenture, promptly
thereafter notify each Credit Enhancer and the Rating Agencies.
(b) The Seller shall not be liable to the Purchaser, the Trustee, the Noteholders, or
any Credit Enhancer for any loss, cost or expense resulting solely from the failure of the Trustee,
any Credit Enhancer or the Purchaser to promptly notify the Seller upon the discovery by an
authorized officer of the Trustee, any Credit Enhancer or the Purchaser of a breach of any
covenant or any materially false or misleading representation or warranty contained herein.
8. Liabilitv of Seller: Indemnification. The Seller shall be liable in accordance
herewith only to the extent of the obligations specifically undertaken by the Seller under this
Agreement. The Seller shall indemnify, defend and hold harmless the Purchaser, the Trustee and
each Credit Enhancer, as assignees of the Purchaser, and their respective officers, directors,
employees and agents from and against any and all costs, expenses, losses, claims, damages and
liabilities to the extent that such cost, expense, loss, claim, damage or liability arose out of, or
was imposed upon any such Person by the Seller's breach of any of its covenants contained
herein or any materially false or misleading representation or warranty of the Seller contained
herein. Notwithstanding anything to the contrary herein, the Seller shall have no liability for the
payment of the principal of or interest on the Notes issued by the Purchaser.
9. Limitation on Liabilitv.
(a) The Seller and any officer or employee or agent of the Seller may rely in good
faith on the advice of counsel or on any document of any kind, prima facie properly executed and
submitted by any Person respecting any matters arising hereunder. The Seller shall not be under
any obligation to appear in, prosecute or defend any legal action regarding the Act that is
unrelated to its specific obligations under this Agreement.
(b) No officer or employee of the Seller shall have any liability for the
representations, warranties, covenants, agreements or other obligations of the Seller hereunder or
in any of the certificates, notices or agreements delivered pursuant hereto, as to all of which
recourse shall be had solely to the assets of the Seller.
10. The Seller's Acknowledsment. The Seller hereby agrees and acknowledges
that the Purchaser intends to assign and grant a security interest in all or a portion of (a) its rights
hereunder and (b) the VLF Receivable, to the Trustee and each Credit Enhancer pursuant to the
Indenture. The Seller further agrees and acknowledges that the Trustee, the Noteholders, and
Taxable
nocssFi:795397.1 7
each Credit Enhancer have relied and shall continue to rely upon each of the foregoing
representations, warranties and covenants, and further agrees that such Persons are entitled so to
rely thereon. Each of the above representations, warranties and covenants shall survive any
assignment and grant of a security interest in all or a portion of this Agreement or the VLF
Receivable to the Trustee and each Credit Enhancer and shall continue in full force and effect,
notwithstanding any subsequent termination of this Agreement and the other transaction
documents. The above representations, warranties and covenants shall inure to the benefit of the
Trustee and each Credit Enhancer.
11. Notices. All demands upon or, notices and communications to, the Seller, the
Purchaser, the Trustee or the Rating Agencies under this Agreement shall be in writing,
personally delivered or mailed by certified mail, return receipt requested, to such party at the
appropriate notice address, and shall be deemed to have been duly given upon receipt.
12. Amendments. This Agreement may be amended by the Seller and the
Purchaser, with (a) the consent of the Trustee, (b) the consent of each Credit Enhancer, and (c) a
Rating Agency Confirmation, but without the consent of any of the Noteholders, for the purpose
of adding any provisions to or changing in any manner or eliminating any of the provisions of
this Agreement.
Promptly after the execution of any such amendment, the Purchaser shall furnish
written notification of the substance of such amendment to the Trustee and to the Rating
Agencies.
13. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the Seller, the Purchaser and their respective successors and permitted assigns.
The Seller may not assign or transfer any of its rights or obligations under this Agreement
without the prior written consent of the Purchaser. Except as specified herein, the Purchaser may
not assign or transfer any of its rights or obligations under this Agreement without the prior
written consent of the Seller.
14. Third Partv Rights. The Trustee and each Credit Enhancer are express and
intended third party beneficiaries under this Agreement. Nothing expressed in or to be implied
from this Agreement is intended to give, or shall be construed to give, any Person, other than the
parties hereto, the Trustee and each Credit Enhancer, and their permitted successors and assigns
hereunder, any benefit or legal or equitable right, remedy or claim under or by virtue of this
Agreement or under or by virtue of any provision herein.
15. Partial Invaliditv. If at any time any provision of this Agreement is or
becomes illegal, invalid or unenforceable in any respect under the law of any jurisdiction, neither
the legality, validity or enforceability of the remaining provisions of this Agreement nor the
legality, validity or enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
16. Countemarts. This Agreement may be executed in any number of identical
counterparts, any set of which signed by all the parties hereto shall be deemed to constitute a
complete, executed original for all purposes.
Taxable
DOCSSFI :795397.1 8
17. Entire Aareement. This Agreement sets forth the entire understanding and
agreement of the parties with respect to the subject matter hereof and supersedes any and all oral
or written agreements or understandings between the parties as to the subject matter hereof.
Taxable
DOCSSF1:795397.1 9
18. Governine Law, This Agreement shall be governed by and construed in
accordance with the laws of the State of California.
IN WITNESS WHEREOF, the Seller and the Purchaser have caused this
Purchase and Sale Agreement to be duly executed as of the date first written above.
CITY OF PETALUMA, as Seller
Authorized Officer
CALIFORNIA STATEWIDE COMMUNITIES
DEVELOPMENT AUTHORITY, as Purchaser
Member
Taxable
DOCSS F1:795397.1 10
EXHIBIT A
DEFINITIONS
For all purposes of this Agreement, except as otherwise expressly provided herein
or unless the context otherwise requires, capitalized terms not otherwise defined herein shall
have the meanings set forth below.
"Act" means Section 10754.11 of the California Revenue and Taxation Code.
"Bill of Sale" has the meaning give to that term in Section 2(b)(ii) hereof.
"Credit Enhancer" means any municipal bond insurance company, bank or other
financial institution or organization which is performing in all material respects its obligations
under any Credit Support Instrument for some or all of the Notes.
"Credit Support Instrument" means a policy of insurance, a letter of credit, a
stand-by purchase agreement, revolving credit agreement or other credit arrangement pursuant to
which a Credit Enhancer provides credit or liquidity support with respect to the payment of
interest, principal or the purchase price of the Notes.
"Closing Date" means the date the Notes are issued.
"Controller" means the Controller of the State.
"Final Purchase Price" has the meaning ascribed thereto in Section 2.
"Minimum Purchase Price" has the meaning ascribed thereto in Section 2.
"Noteholder" means, with respect to any Note, the person in whose name such
Note is registered.
"Oustanding" has the meaning given to that term in the Indenture.
"Pricing Date" means the date the Notes are sold.
"Rating Agency" means any nationally recognized rating agency then providing
or maintaining a rating on the Notes at the request of the Purchaser.
"Rating Agency Confirmation" means written confirmation from each Rating
Agency that any proposed action will not, in and of itself, cause the Rating Agency to lower,
suspend or withdraw the rating then assigned by such Rating Agency to any Outstanding Notes.
"Resolution" means the resolution adopted by the City Council approving the sale
of the VLF Receivable.
"State" means the State of California.
"Transaction Counsel" means Orrick, Herrington & Sutcliffe LLP.
Taxable
DOCSSFI :795397. t A- I
"Transaction Documents" mean this Agreement, the Bill of Sale, the Indenture,
and the Notes.
Taxable
DOCSSF1:795397.1 A"2
EXHIBIT BI
to
CITY OF PETALUMA
March 2, 2005
California Statewide Communities Development Authority
Sacramento, California
Wells Fargo Bank, National Association
Los Angeles, California
Re: Sale of VLF Receivable
Ladies & Gentlemen:
This Office acted as counsel for the City of Petaluma (the "Seller") in connection
with the adoption of that certain resolution (the "Resolution") of the City Council of the Seller
(the "Governing Body") pursuant to which the Seller authorized the sale to the California
Statewide Communities Development Authority (the "Purchaser") of the Seller's `VLF
Receivable", as defined in and pursuant to the Purchase and Sale Agreement dated March 2,
2005 (the "Sale Agreement") between the Seller and the Purchaser. In connection with these
transactions, the Seller has issued certain Irrevocable Instructions For Disbursement of the
Seller's VLF Receivable to the Controller of the State of California (the "Disbursement
Instructions" and collectively with the Sale Agreement, the "Transaction Documents"). Unless
the context otherwise requires, capitalized terns used but not otherwise defined herein shall have
the meanings given to such terms in the Sale Agreement.
I have examined and am familiar with those documents relating to the existence,
organization, and operation of the Seller, the Resolution, the Transaction Documents and such
certified proceedings, certifications of officers of the Seller and others, and such other
agreements, instruments and documents, and have satisfied myself as to such other matters, as I
deem necessary in order to render the following opinions.
Based upon the foregoing, I am of the opinion that:
1. The Seller is a municipal corporation of the State of California, duly
organized and validly existing pursuant to the city charter and the Constitution of the State of
California.
Taxable
DOCSSF1:795397.1 BI -1
2. The Seller has full power and authority to adopt the Resolution and to execute
and deliver the Transaction Documents.
3. The Seller has duly authorized and executed the Transaction Documents and,
assuming delivery, each Transaction Document will be legal, valid, and binding against the
Seller, and enforceable against the Seller in accordance with its terms, except as enforcement
may be limited by bankruptcy, insolvency, reorganization, fraudulent conveyance, moratorium or
laws relating to or affecting creditors' rights, and the application of equitable principles and the
exercise of judicial discretion in appropriate areas.
4. The Resolution was duly adopted at a meeting of the Governing Body which
was called and held pursuant to law with all public notice required by law and at which a quorum
was present and acting when the Resolution was adopted.
5. The Resolution is in full force and effect and has not been amended, modified,
supplemented or rescinded.
6. To the best of my knowledge, no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or body, is pending or
threatened in any way against the Seller affecting the existence of the Seller or the titles of its
Governing Body members or officers to their respective offices, or seeking to restrain or to
enjoin the sale of the VLF Receivable or to direct the application of the proceeds of the sale
thereof, or in any way contesting or affecting the validity or enforceability of the Resolution, the
Transaction Documents or any other applicable agreements or any action of the Seller
contemplated by any of said documents, or in any way contesting the powers of the Seller or its
authority with respect to the Resolution or the Transaction Documents or any other applicable
agreement, or any action on the part of the Seller contemplated by any of said documents, or in
any way seeking to enjoin or restrain the Seller from selling the VLF Receivable or which if
determined adversely to the Seller would have a material and adverse effect upon the Seller's
ability to sell the VLF Receivable, nor to my knowledge is there any basis therefor.
7. Insofar as it would materially adversely affect the Seller's ability to enter into,
carry out and perform its obligations under any or all of the foregoing agreements, or
consummate the transactions contemplated by the same, the Seller is not in breach of or default
under any applicable constitutional provision, law or administrative regulation of the State or the
United States or any applicable judgment or decree or any loan agreement, indenture, bond, note,
resolution, agreement or other instrument to which it is a party or to which it or any of its
property or assets is otherwise subject, and, to the best of my knowledge, no event has occurred
and is continuing which with the passage of time or the giving of notice, or both, would
constitute a default or an event of default under any such instrument, and the adoption of the
Resolution and the execution and delivery by the Seller of the Transaction Documents, and
compliance with the provisions thereof, under the circumstances contemplated thereby, do not
and will not in any material respect conflict with or constitute on the part of the Seller a breach
of or default under any agreement or other instrument to which the Seller is a party or by which
it is bound or any existing law, regulation, court order or consent decree to which the Seller is
subject.
Taxable
DOCSSFl:795397.1 BI -2
8. Prior to the sale of the VLF Receivable to the Purchaser, the Seller was the
sole owner of the VLF Receivable, and has such right, title and interest as provided in the Act.
From and after the conveyance of the VLF Receivable by the Seller to Purchaser on the Closing
Date, the Seller shall have no interest in the VLF Receivable. Except as provided in the Sale
Agreement, the Seller has not sold, transferred, assigned, set over or otherwise conveyed any
right, title or interest of any kind whatsoever in all or any portion of the Seller's VLF Receivable,
nor has the Seller created, or to my knowledge permitted the creation of, any Lien thereon. Prior
to the sale of the VLF Receivable to the Purchaser, the Seller held title to the VLF Receivable
free and clear of any Liens.
9. To the best of my knowledge, all approvals, consents, authorizations, elections
and orders of or filings or registrations with any governmental authority, board, agency or
commission having jurisdiction which would constitute a condition precedent to, or the absence
of which would materially adversely affect, the sale by the Seller of the VLF Receivable or the
performance by the Seller of its obligations under the Resolution and the Transaction Documents
and any other applicable agreements, have been obtained and are in fill force and effect.
10. The Disbursement Instructions are irrevocable by the Seller, and comply with
the requirements of Section 6588.5{c} of the California Government Code.
Each Credit Enhancer, the underwriters of the Notes and Transaction Counsel
may rely upon this legal opinion as if it were addressed to them.
Very truly yours,
Seller's Counsel
Taxable
nOCSSF1:795397. f B 1-3
EXHIBIT B2
OPINION OF COUNSEL
to
CITY OF PETALUMA
[Closing Date]
California Statewide Communities Development Authority
Sacramento, California
Wells Fargo Bank, National Association
Los Angeles, California
Re: Sale of VLF Receivable (Brinedown Opinion)
Ladies & Gentlemen:
Pursuant to that certain Purchase and Sale Agreement dated March 2, 2005 (the
"Sale Agreement") between the City of Petaluma (the "Seller") and the California Statewide
Communities Development Authority (the "Purchaser"), this Office delivered an opinion (the
"Opinion") dated the Pricing Date (as defined in the Sale Agreement) as counsel for the Seller in
connection with the sale of the Seller's VLF Receivable (as defined in the Sale Agreement), the
execution of documents related thereto and certain other related matters.
I confirm that you may continue to rely upon the Opinion as if it were dated as of
the date hereof. Each Credit Enhancer, the underwriters of the Notes and Transaction Counsel
may rely upon this legal opinion as if it were addressed to them. This letter is delivered to you
pursuant to Section 2(b)(ii)(1) of the Sale Agreement.
Very truly yours,
In
Seller's Counsel
Taxable
DOCSSF1:795397.1 132-1
EXHIBIT CI
CLERK'S CERTIFICATE
CERTIFICATE OF THE
CITY CLERK OF
CITY OF PETALUMA, CALIFORNIA
Dated: March 2, 2005
The undersigned City Clerk of the City of Petaluma, California, do hereby certify that the
foregoing is a full, true and correct copy of Resolution No. duly adopted at a
regular meeting of the City Council of said Seller duly and regularly and legally held at the
regular meeting place thereof on the day of , 2005, of which
meeting all of the members of said City Council had due notice and at which all members thereof
were present, and that at said meeting said resolution was adopted by the following vote:
AYES:
NOES:
ABSENT:
ABSTAIN:
I do hereby farther certify that I have carefully compared the same with the original
minutes of said meeting on file and of record in my office and that said resolution is a full, true
and correct copy of the original resolution adopted at said meeting and entered in said minutes
and that said resolution has not been amended, modified or rescinded since the date of its
adoption and the same is now in full force and effect.
1 do hereby further certify that an agenda of said meeting was posted at least 72 hours
before said meeting at a location in the City of Petaluma, California freely accessible to members
of the public, and a brief general description of said resolution appeared on said agenda.
WITNESS my hand as of the day and year first above written.
M1
City Clerk of the City of Petaluma,
California
Taxable
nOCSSF1:795397.1 Cl -1
EXHIBIT C2
SELLER CERTIFICATE
SELLER CERTIFICATE
Dated: March 2, 2005
We, the undersigned officers of the City of Petaluma (the "Seller"), State of
California, holding the respective offices herein below set opposite our signatures, do hereby
certify that on the date hereof the following documents (the "Transaction Documents") were
officially executed and delivered by the Authorized Officer or Officers whose names appear on
the executed copies thereof, to wit:
Document
I. Purchase and Sale Agreement, dated March 2, 2005 (the "Sale
Agreement"), between the Seller and the California Statewide
Communities Development Authority (the "Purchaser")
2. Irrevocable Instructions For Disbursement of Seller's VLF
Receivable to the Controller of the State of California dated the
CIosing Date
Capitalized terms used herein and not defined herein shall have the meaning given
such teens in the Sale Agreement.
We further certify as follows:
At the time of signing the Transaction Documents and the other documents and opinions
related thereto, we held said offices, respectively, and we now hold the same.
2. The representations and warranties contained in the Transaction Documents are true and
correct as of the date hereof in all material respects.
The City Council duly adopted its resolution (the "Resolution") approving the sale of the
Seller's VLF Receivable at a meeting of the City Council which was duly called and held
pursuant to law with all public notice required by law and at which a quorum was present and
acting when the Resolution was adopted, and such Resolution is in full force and effect and
has not been amended, modified, supplemented or rescinded.
4. To the best knowledge of the undersigned, no action, suit, proceeding, inquiry or
investigation, at law or in equity, before or by any court, public board or body, is pending or
threatened, in any way against the Seller affecting the existence of the Seller or the titles of
its City Council members or officers to their respective offices, or seeking to restrain or to
enjoin the sale of the Seller's VLF Receivable or to direct the application thereof of the
Taxable
DOCSSFL795397.1 C2-1
proceeds of the sale thereof, or in any way contesting or affecting the validity or
enforceability of the Resolution, the Transaction Documents, the Indenture, the Notes, or any
other applicable agreements or any action of the Seller contemplated by any of said
documents, or in any way contesting the powers of the Seller or its authority with respect to
the Resolution or the Transaction Documents or any other applicable agreement, or any
action on the part of the Seller contemplated by any of said documents, or which if
determined adversely to the Seller would have a material and adverse effect upon the Seller's
ability to sell the Seller's VLF Receivable, nor to our knowledge is there any basis therefor.
5. Insofar as it would materially adversely affect the Seller's ability to enter into, carry out and
perform its obligations under any or all of the Transaction Documents, or consummate the
transactions contemplated by the same, the Seller is not in breach of or default under any
applicable constitutional provision, law or administrative regulation of the State of California
or the United States or any applicable judgment or decree or any loan agreement, indenture,
bond, note, resolution, agreement or other instrument to which it is a party or to which it or
any of its property or assets is otherwise subject, and, to the best of our knowledge, no event
has occurred and is continuing which with the passage of time or the giving of notice, or
both, would constitute a default or an event of default under any such instrument, and the
adoption of the Resolution and the execution and delivery by the Seller of the Transaction
Documents, and compliance by the Seller with the provisions thereof, under the
circumstances contemplated thereby, do not and will not in any material respect conflict with
or constitute on the part of the Seller a breach of or default under any agreement or other
instrument to which the Seller is a party or by which it is bound or any existing law,
regulation, court order or consent decree to which the Seller is subject.
6. Prior to the sale of the VLF Receivable to the Purchaser, the Seller was the sole owner of the
VLF Receivable, and has such right, title and interest as provided in the Act. From and after
the conveyance of the VLF Receivable by the Seller to Purchaser on the Closing Date, the
Seller shall have no interest in the VLF Receivable. Except as provided in the Sale
Agreement, the Seller has not sold, transferred, assigned, set over or otherwise conveyed any
right, title or interest of any kind whatsoever in all or any portion of the Seller's VLF
Receivable, nor has the Seller created, or to our knowledge permitted the creation of, any
Lien thereon. Prior to the sale of the VLF Receivable to the Purchaser, the Seller held title to
the VLF Receivable free and clear of any Liens.
7. All approvals, consents, authorizations, elections and orders of or filings or registrations with
any governmental authority, board, agency or commission having jurisdiction which would
constitute a condition precedent to or the absence of which would materially adversely affect,
the sale by the Seller of the Seller's VLF Receivable or the performance by the Seller of its
obligations under the Resolution and the Transaction Documents and any other applicable
agreements, have been obtained and are in Rill force and effect.
Taxable
DOCSSFI :795397.1 C2-2
Dated as of the date first above written.
Name, Official Title
Michael Bierman, City Manager
Joseph D. Netter, Interim Finance Director
Cinde Rubaloff, Accounting Manager
genuine.
Signature
I HEREBY CERTIFY that the signatures of the officers named above are
Dated as of the date first above written.
M
City Clerk of the City of Petaluma,
California
Taxable
DOCSSFL79539TI C2-3
EXHIBIT C3
BILL OF SALE AND BRINGDOWN CERTIFICATE
BILL OF SALE AND BRINGDOWN CERTIFICATE
In consideration of the payment and delivery by the California Statewide
Communities Development Authority (the "Purchaser") to the undersigned (the "Seller") of
$[Final Purchase Price] (the "Final Purchase Price"), and pursuant to terms and conditions of the
Purchase and Sale Agreement (the "Sale Agreement'), dated March 2, 2005, between the Seller
and the Purchaser, the Seller does hereby (a) transfer, grant, bargain, sell, assign, convey, set
over and deliver to the Purchaser, absolutely and not as collateral security, without recourse
except as expressly provided in the Sale Agreement, the VLF Receivable as defined in the Sale
Agreement (the "VLF Receivable"), and (b) assign to the Purchaser, to the extent permitted by
law (as to which no representation is made), all present or future rights, if any, of the Seller to
enforce or cause the enforcement of payment of the VLF Receivable pursuant to the Act (as
defined in the Sale Agreement) and other applicable law.
The Seller hereby acknowledges receipt of the Final Purchase Price.
The Seller hereby certifies that the representations and warranties of the Seller set
forth in the Certificate of the City Clerk dated March 2, 2005, the Seller Certificate dated March
2, 2005, and in the Transaction Documents (as such terms are defined in the Sale Agreement) are
true and correct in all material respects as of the date hereof (except for such representations and
warranties made as of a specified date, which are true and correct as of such date),
Dated: [Closing Date]_
CITY OF PETALUMA
E
Taxable
nOCSSFI:795397.1 C3-1
Authorized Officer
EXHIBIT D
IRREVOCABLE INSTRUCTIONS TO CONTROLLER
IRREVOCABLE INSTRUCTIONS FOR DISBURSEMENT
OF VLF RECEIVABLE OF
CITY OF PETALUMA
,2005
Office of the Controller
State of California
P.O. Box 942850
Sacramento, California 94250-5872
Re: Notice of Sale of VLF Receivable by the City of Petaluma and
Wirine Instructions Information Form
Dear Sir or Madam:
Pursuant to Section 6588.5(c) of the California Government Code, City of
Petaluma (the "Seller") hereby notifies you of the sale by the Seller, effective as of the date of
these instructions written above, of all right, title and interest of the Seller in and to the "VLF
Receivable" as defined in Section 6585(1) of the California Government Code (the "VLF
Receivable"), namely, the right to payment of moneys due or to become due to the Seller out of
funds payable in connection with vehicle license fees to a local agency pursuant to Section
10754.11 of the California Revenue and Taxation Code.
By resolution, the Seller's City Council authorized the sale of the VLF Receivable
to the California Statewide Communities Development Authority (the "Purchaser") pursuant to a
Purchase and Sale Agreement, dated March 2, 2005 and a Bill of Sale, dated [Closing Date].
The VLF Receivable has been pledged and assigned by the Purchaser pursuant to an Indenture,
dated March 2, 2005 (the "Indenture") between the Purchaser and Wells Fargo Bank, National
Association, as Trustee (the "Trustee").
The Seller hereby irrevocably requests and directs that, commencing as of the
date of these instructions written above, all payments of the VLF Receivable (and documentation
related thereto) be made directly to Wells Fargo Bank, National Association, as Trustee, in
accordance with the wire instructions and bank routing information set forth below.
Please note that the sale of the VLF Receivable by the Seller is irrevocable and
that (i) the Seller has no power to revoke or amend these instructions at any time, (ii) the
Purchaser shall have the power to revoke or amend these instructions only if there are no
notes of the Purchaser outstanding under the Indenture and the Indenture has been
discharged, and (iii) so long as the Indenture has not been discharged, these instructions
cannot be revoked or amended by the Purchaser without the consent of the Trustee.
Taxable
OOCSSF1:795397.1 D -I
Bank Name:
Bank ABA Routing #:
Bank Account #:
Bank Account Name:
Further Credit To:
Bank Address:
Bank Telephone #:
Bank Contact Person:
Wells Fargo N.A.
121000248
0001038377
Corporate Trust Clearing
CSCDA VLF #16914200
Wells Fargo Bank
707 Wilshire Blvd., 17 Floor
Los Angeles, CA 90017
(213)614-3353
Robert Schneider
Please do not hesitate to call the undersigned if you have any questions regarding
this transaction. Thank you for your assistance in this matter.
Very truly yours,
CITY OF PETALUMA
M
Authorized Officer
Taxable
DOCSSFI :795397.1 D-2
EXHIBIT E
RESERVED
Taxable
DOCSSF1:795397.1 E-1
EXHIBIT F
ESCROW INSTRUCTION LETTER
PARTICIPATION AGREEMENT
AND
ESCROW INSTRUCTION LETTER
March 2, 2005
California Statewide Communities Development Authority
1100 K Street
Sacramento, CA 95814
Re: VLF Receivable Financine
Dear Sir or Madam:
The City of Petaluma (the "Seller") hereby notifies you of its agreement to
participate in the California Statewide Communities Development Authority VLF Receivable
Financing. By adoption of a resolution (the "Resolution") authorizing the sale of its VLF
Receivable, the Seller's City Council has agreed to sell to the California Statewide Communities
Development Authority, for a purchase price that meets the conditions set forth in the
Resolution, all of its right, title and interest in the VLF Receivable.
Enclosed herewith are the following documents which have been duly approved
and executed by the Seller and which are to be held in escrow by Orrick, Herrington &
Sutcliffe LLP, as transaction counsel ("Transaction Counsel"), as instructed below:
1. certified copy of the Resolution, together with a certificate of the City Clerk,
dated March 2, 2005;
2. the Seller Certificate, dated March 2, 2005;
3. the Opinion of Seller's Counsel, dated March 2, 2005;
4. the Purchase and Sale Agreement, dated March 2, 2005; and
5. the Irrevocable Instructions to the Controller, undated.
The foregoing documents are to be held in escrow by Transaction Counsel and
shall be delivered only upon payment to the Seller on or before April 29, 2005, of the Final
Purchase Price (as defined in the Purchase and Sale Agreement) that meets the conditions of the
Resolution. Upon such payment, Transaction Counsel is hereby authorized to fill in the closing
date on the Irrevocable Instructions to the Controller.
Taxable F-1
DOCSSF7:795397.I
If the Final Purchase Price meeting the conditions of the Resolution is not paid to
the Seller on or before April 29, 2005, this agreement shall terminate and Transaction Counsel
shall return all of the enclosed documents to the Seller.
Very truly yours,
CITY OF PETALUMA
10
Authorized Officer
Enclosures
cc: Orrick, Herrington & Sutcliffe LLP
Taxable F-2
DOCSSFI :795397.1
Netter, Joe
From:
Gomez, Michael T (MSDj (michael.t.gomez@citigroup.comj
Sent:
Monday, January 24, 2005 9:49 AM
To:
Netter, Joe
Subject:
VLF Financing - Minimum Net Proceeds
Petaluma_taxable-Petaluma _ taxable_
current_i-21.... current+100-1...
Joe -
[dice to speak with you this morning.
Attached please find two files which I hope will help you decide the minimum acceptable
sale price for your VLF receivable. This is a number that Orrick will insert in the Sale
Resolution to be adopted by your City Council.
The first file estimates net proceeds using current interest rates. The second file shows
the effect of a 100 by increase in interest rates. The full detail of the components of
the discount (interest, credit enhancement costs, other program fees) can be found on the
second pace of each file.
If you give me the number you want to put in before 1pm, documents in final, adoptable
form will arrive from Orrick the next day by FED EX. If you tell me after 1pm, we promise
the documents for delivery the second morning after.
Please call if you have any questions, and to let me know what you decide.
Best,
Michael
Michael T. Gor az
Director
Citigroup Global Markets Inc.
One Sansome Street, 28th Floor
San Francisco, California 94104
Tel: (415) 951-1615
Fax: (415) 951-1748
E-mail: michael.t.gomez@citigroup.com
1
Program Size-
$200,000,000
Local Agency
PETALUMA
VLF Amount
$951,083.48
Taxable Boirotning
Coupon Rate
3.75%
Yield -
3.75% -
CAPI Earnings Rate
2.50%
Using this set of assumptions, PETALUMA would receive
Proceeds in the amount of (1):
Proceeds as a % of VLF Gap Loan Amount (1):
Possible, Additional Proceeds/Reinvestment
$871,653.47
91.65%
There, are -two -ways in which Local Agencies may be able to takeadvantageof, reinvestment opportunities to increase the
percentage ofttteir VLF Gap Loan amount they -will ultimately receive.
First, for those who participate in the taxable program (2) and do not spendm
, the sale proceeds immediately; Investment_ earnings
may increase the net proceeds which the Local Agency can count on'in future periods. An estimate of the total ,net proceeds —
original sale proceeds plus interest earnings — which would be available to your Local Agency on August 15;, 2006.(the date the
State has promised torepaythe VLF Gap Loan), November 15; 2006 (the maturity date of the VLF Notes) and'August 15, 2007
(the one-year anniversary of the State's promised repayment date), if all of the original sale proceeds were reinvested for the time
period.at the rates indicated, is listed in Table 1, below. - - - -
Second; if the State actually repays the VLF Gap Loan on August 15,'2006, all Local Agencies -who participate inthe program —
whether 'on a taxable; or tax-exempt basis - will receive additional funds. This is. because CSCDA will capitalize all required
interest expepse on the Notes through the final maturity date --November 15, 2006. Tf. the State pays CSCDA on August 15, 2006,
CSCDA will' invest the amount of the State's, repayment until November 15, 2006, when it will be,used to iedre the Notes.
lateresi earnings generated, durin&that.period will be "excess" to the. debt service requirements on the Notes, ,:CSCDA intends to
return.that "excess" to Local Agency participants. An estimate of the totals net proceeds —original sale proceeds -plus interest
earnings — which the Program would be able to pay to your Local Agency by November 15, 2006--assuming.the State repays the
Crap Loan amount onA11Ru5t 15, 2006'- is listed in Table 2, below. - °- -- -
From_ 16 Mac -OS to Assumed Rate' -Earnings % of VLF Gap; LoanilmountRecetved iaNet
Proceeds and Eamings by 15 -Nov -06 -
�.-.. 15 -Aug -06 .3.12% .''- $38,451.54 95.69%.
15 -Nov -06.- 3.19% - $46,265.67 1 96.51"/0,
1'5-Aug707 3.33% 1 $70,065.69 99.02% -
Table 2:
Tn7tial Sale Proceeds as % "Excess" Earnings Assuming State Repays I % of VLF Gap Loan AmountReceived in Net
of VLF Amount VLF Gap Loan on 15 -Aug -06 - Proceeds and Earnings by 15 -Nov -06 I1
91 65% 0.57% I - 9 21% 1
(I) PRELIAlINARY- Subject to Change;This analysis is preliminary and is subject to market conditions and actual costs of
issuance and credit enhancement at pricing. This analt+sis provides an estimate of the net proceeds available as of the date of
analysis but it, no way guarantees the final amount available upon delivery.
(2) Participants in the tar -exempt program nun, be able to retabt some interest earnings on proceeds mvaiting expenditure, but
these will depend on the individual circumstances ofeach participant and are not easy to estimate.
(3) Applies only to tavable borrowing scenario.
Uses as % of Gap Loan Amount
Deposit to Capitalized Interest Fund
CIT IF s
6.08%
Bond Insurance Premium
VLF GAP LOAN FINANCING PROGRAM
0.69%
CSCDA Bonds used to purchase Petaluma VLF Receivable
Analysis assuming Taxable Borrowing
Net Proceeds
Sources and Uses of Funds
91.65%
Sources
--
Par Amount of Bonds
$951,083.48
Premium[ Original Issue Discount
$0.00
Total
$951,083.48
53,233.68
CSCDA Fees
Deposit to Capitalized Interest Fund
557.79271
Bond Insurance Premium 0,650'.
56,567.78
Other Program Costs
515,064.52
Net Proceeds
$871,653.47
Total
$951,083.48
Uses as % of Gap Loan Amount
Deposit to Capitalized Interest Fund
6.08%
Bond Insurance Premium
0.69%
Other Program Casts
Net Proceeds
91.65%
Total
100.00°5
Other Progrant Cosh ". '
' - ' Fee Basis ' = : -' `
" - -" PETALUMA Share(I) "
Underwriters' Discount
53.40/51000
53,233.68
CSCDA Fees
$0.5/51000
$47554
Disclosure/Undenvriters' Counsel
580,000
5380.43
Rating Agency Fees
$130,000
5618.20
Bond Counsel Flat Fee:
'S100.000
52,500
50.00
$101,000-5399,000
$5,000
$0.00
>$400,000
10,000 00
$10,00000
Bond Counsel Additional Fee
Tax Exempt (Capital Projects)
510,000/borrower
$0.00
Tax Exempt (Working Capital)
520,000/borrower
5000
Administrative Costs (2)
575,000
535666
Total Other Program Costs
$15,064.52
(1) rlasesnes a program sce of S200.00000 00
(2) Include., troveeJec , pnnnngJce.,, program development and marketing erpen,c., and mevicelluncow ora -of -pocket espenaev
* PRELIMINARY- Subject to Change. 2
Program Size
Local Agency
VLF Amount
Taxable Borrowing
Coupon Rate
Yield
CAP] Earnings Rate
$200,000,000
PETALUMA .
$951,083.48
4.75%
4.75%;
2.50%
Using this set of assumptions, PETALUMA would receive
Proceeds in the amount of (1):
Proceeds as a % of VLF Gap Loan Amount (1):
,.� ltA+,I:i
5856,137.88
90.02% J
Possible Additional Proceeds/Reinvestment
There are two ways in, which Local Agencies may -be able to take advantage of reinvestment opportunities to. increase the
percentage of their VLF Gap Loan amount they will ultimately receive.
First;" for those tivho participate in the taxable program (2) and -do not spend the ;sale proceeds immediately, investment earnings
may increase the net proceeds "which the.LocalAgency can count on in future periods. Art estimate of the total net proceeds -
original sale proceeds plus interest earnings - which would-be available to your Local Agency on August 15; 2006 (thedatethe
State hos ,promised to repay the VLF Gap Loan), November 15, 2006 (the maturity date of the-VLF.Notes) and AuIgust,15, 2007
(the one-year anniversary of the State's promised repayment date), if all of the;original sale proceeds_ were reinvested _for the time
period at the 'rates indicated, is listed in Table l; below. - - - -
Second, if the State actually repays the, VLF Gap Loan on August 15,_2006, all Local Agencies who participate in the program -
Whether on, a taxable or tax-exempt basis - will receive additional -funds. This is because CSCDA will capitalize all required
interest expense on the Notes through the final maturity date -November 15, 2006, If the State pays CSCDA on _August 15, 2006,
CSCDA will invest the amount of the State's repayment until November?15, 2006,"when it will be- used,to'retire the Notes.
Interest earnings generated during that. period will be,"excess to the, debt service requirements an the Notes: CSCDA, intends to
retum that "excess" to Local Agency participants.:I An estimate, of. the total net proceeds— original sale proceeds plus interest
earnings- which the Program would be able to pay to your Local Agency by November 15, 2006- assuming the State repays the
Gal) Loan amount on August 15,'2006 - is listed in Table'-), below. - -
From`' 16MarOS;to.
Assumed Eammgs.";',
-
%ofVLFGripLoanArnountRe7. ceivedinNet
Proceeds and Earnings by 15 -Nov -06
15=Au -06
3.12%-$37,767:10
93;99/
15-Nov-06' .''
3.19% ... $45,442.13 �.
- 94.80%
I:" 15 -Aug -07 -
3.33% $68;818.50
97.25%'
Table 2:
Initial Sale Proceeds as %
' "Excess" Earnings Assuming State Repays
_% of VLF Gap Loan Amount Received in Net
of VLF Amount
VLF Gap Loan "on 15 -Aug -06 ; :
Proceeds and Earnings by 15-Nov46 J
90.02%:
0.57% -:
90:58%
(1) PRELIMINARY- Subject to Change;This analysis is preliminary and is subject to market conditions and actual costs of
issuance and credit enhancement at pricing. This analysis provides an estimate of the net proceeds available as of the date of
analysis bat in no mm+guarantees thefinal amount mailable upon delivery.
(2) Participants in the tax-exempt program may be able to retain some interest earnings on proceeds awaiting expenditure, but
these will depend on the individual circumstances of each participant and are not easy to estimate.
(3) Applies only to taxable borrowing scenario.
VLF GAP LOAN FINANCING PROGRAM
CSCDA Bonds used to purchase Petaluma VLF Receivable
Analysis assuming Taxable Borrowing
Sources and Uses of Funds*
Sources
Par Amount of Bonds
Premium / Original Issue Discount
Total
Uses:
Deposit to Capitalized Interest Fund
Bond Insurance Premium 0.550%
Other Program Costs
Net Proceeds
Total
ftes. as'06vf Gap Loan Amount
CIi IF. �i
5951,083.48
$0.00
S951,083.48
$73,210.44
$6,67064
$15,064.52
$856,137.88
5951,083.48
Deposit to Capitalized Interest Fund
7.7045
Bond Insurance Premium
0.70
Other Program Costs
1.5890
Net Proceeds
9002%
Tutu]
100 0045
OdierProgranr Cases*
- Fee Basis -
PETAL VM Sh tre(l)
Underwriters' Discount
53.40/$1000
$3,23368
CSCDA Fees
$0.5/$1000
$475.54
Disclosure/Undenvnters Counsel
$80,000
$380.43
Rating Agency Fees
$130,000
$618.20
Bond Counsel Flat Fee:
<S 100,000
$2,500
$0.00
$101,000-$399,000
$5,000
$000
>s400,000
10,000.00
$10,00000
Bond Counsel Additional Fee
Tax Exempt (Capital Projects)
$10,000/borrower
50.00
Tax Exempt (Working Camml)
S20,000/bomower
$0.00
Administrative Costs (2)
$75,000
$356.66
Total Other Program Costs
$15,064.52
(1) Aseumea aprogram .wr-c of $200,000,000.00
(1) Include., rncwree Jeer, printingfeer, program development
and marketing erpemree
and meccellanemrs out-n(-pockel espenim
PRELIMINARY- Subject to Change. 2
California Communities I VLF Program
CALIFORNIA
COMMUNITIES
VLF Gap Loan Financing Program (VLF Program)
Page 1 of 7
Anticipated Schedule
summary
November 2004 - Regional
California Communities plans to issue bonds to purchase Vehicle informational workshops & conference
License Fee Gap Loan (VLF) receivables from cities and counties calls
("Local Agencies"). Local Agencies can elect to sell their VLF End of November 2004 - Local
receivables to California Communities for an upfront fixed price Agencies complete online preliminary
between 90-96%** of the VLF receivables' value. participation form
End of January 2005 - Approval by
Jump to: ■The VLF Gap-Locn_ Financino Prooram Presentation Local Agency governing bodies
(Pdf) February 2005 - Bonds are issued and
■ Fill Out Online Preliminary Participation Form Local Agencies receive their money
■ What is my VLF Gap Loan Amount?
■ How Much Will Your Agent Receive?
■ What is the Issuance Process?
■ Contact Us
Proqram Benefits to Local Aqencies
• Provides Immediate Cash Relief
• Levels Out Cash Flow from the State Over the Next Two Years
• Mitigates Impact of Property Tax In -Lieu of VLF Swap Over Next Two Years
• Creates Financial Flexibility for Budgets This Year and Next
• Financing for Ongoing or Extraordinary Capital Needs on Tax -Exempt Basis
• Financing to Make Debt Payments or Repay Existing Debt
https:Hsecure.cacommunities.com/eacomm/apps/vlf/ 11/23/2004
California Communities I VLF Program
Overview
In FY 2003-2004, the State failed to make 3 months of
VLF backfill payments (totaling about $1.3 billion) to
cities and counties resulting in a VLF funding gap ("VLF
gap loan"). The State has agreed to make these VLF
gap loan payments to cities and counties by August 15,
2006. To find out the amount of the VLF gap loan
payment owed to your Local Agency, please use the
VLF Gap Loan Amount lookup.
Page 2 of 7
VLF Gap Loan Amount
Type In your city or county to determine the VLF gap loan due to
your agency from the State by August 15, 2006.
City or County: jPetaluma
VLF Gap Loan Amount: $951,083.48
(Due by August 15, 2006)
Authorized under SB 1096, the California Communities
VLF Gap Loan Financing Program ("VLF Program") enables Local Agencies to sell their VLF receivable to California
Communities for an upfront fixed price between 90-96%** of their receivable. California Communities is planning to
issue bonds and use the proceeds to purchase the VLF receivables and pay financing costs ("VLF Bonds"). California
Communities will pledge the VLF receivables to secure payment on the VLF Bonds. A Local Agency's sale of its
VLF receivable is irrevocable and investors will have no recourse to the Local Agency if the State does
not repay the VLF gap loan.
After paying financing costs, Local Agencies will receive their share of the proceeds. The VLF Bonds will be issued as
fixed rate bonds on either a taxable or tax-exempt basis depending on the use of the bond sale proceeds by
participants.
Prooram Benefits
The VLF Program provides Local Agencies many
benefits:
• Provides Immediate Cash Relief -
Selling your VLF receivable will provide
your agency approximately 90-96%*` of
your future VLF gap loan payment today
which can be used to pay for immediate
funding needs.
• Levels Out Cash Flow From State Over
Next Few Years - In this fiscal year and
next, cities and counties will lose $700
million annually in ERAF payments to the
State. Thereafter, the obligation to make
Lc,Ct1A V,LV GaE Laan Financing
Bridge the Gap
htti)s://secure.eacommunities.com/cacomm/apps/vlf/ 11/23/2004
California Communities I VLF Program
Page 3 of 7
ERAF payments will end - just at the very
same time cities and counties receive their VLF gap loan payments in FY 2006-07. The chart on the left below
represents the cash flow a Local Agency can expect from the State if no action is taken.
In contrast, a Local Agency can "level out" its receipts and payments from the State over the next few years
by participating in the VLF Program. Namely, a Local Agency could use the proceeds from the sale of its VLF
receivables today to offset its ERAF contributions over the next two years. The chart on the right below
conceptually represents how cash from the State would be "leveled out" utilizing this approach.
"Cash From the State if No Action Taken"
"Cash From the State After Selling
VLF Gap Receivable"
2004-05 2005-08 2008-07
Mitigates Impact of Property Tax In -Lieu of VLF Swap Over Next Two Years - Beginning in FY 2004-
05, the State has permanently eliminated the VLF backfill paid to Local Agencies and replaced it with an equal
amount of property tax. While the dollar impacts of these actions are intended to cancel each other out, Local
Agencies are now receiving these payments semi-annually as property taxes, rather than monthly as VLF
backfill payments. This situation may create cash flow problems for some Local Agencies which could be
solved temporarily by utilizing the VLF Program.
Creates Financial Flexibility for Budgets This Year and Next - Many Local Agencies have made difficult
decisions for their budgets this year. By participating in the VLF Program, Local Agencies can apply their
proceeds to solve their budget challenges in this and the next fiscal years' budgets.
Financing for Ongoing or Extraordinary Capital Needs on Tax -Exempt Basis - A Local Agency may
elect to have its VLF receivable purchased on a tax-exempt basis to lower the interest costs on the VLF Bonds
(i.e. enabling California Communities to pay a higher price for that participant's VLF receivable).
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California Communities I VLF Program
Page 4 of 7
A participant may qualify for this tax-exempt option by demonstrating that the sale proceeds will be spent on
tax-exempt uses such as:
• Capital Improvement Costs (Hard & Soft Costs)
• Court -Mandated Judgment Obligations
• Working Capital
To qualify for the tax-exempt option, a Local Agency will need to provide additional information and work with
Bond Counsel to complete the required tax analysis. In the case of reimbursing capital costs, a Local Agency
must adopt a reimbursement resolution prior to paying any of these costs. In the case of financing working
capital, a Local Agency must provide evidence that it expects to run a cash flow deficit during the life of the
VLF bonds.
If a Local Agency chooses to finance on a tax-exempt basis, its share of total issuance costs will reflect the
additional legal work involved. As a result, this option is likely to make economic sense only for those Local
Agencies with a large VLF gap loan.
Financing to Make Debt Payments or Repay Existing Debt — Enables a Local Agency to make debt
payments or refund existing debt, as long as the refunded debt was used for tax-exempt purposes and is not
prohibited from being refunded under federal tax law. A Local Agency will need to provide Bond Counsel
information on the prior debt issue.
How Much Will Your Aaencv Receive?
Upon delivery of the bonds, California Communities will make available to each Local Agency a fixed dollar payment.
The payment will be equal to an Agency's VLF gap loan amount less capitalized interest costs, credit enhancement
fees and bond issuance costs. For an Agency selling a $1 million receivable on a Taxable basis, the payment from
California Communities (based on interest rates as of November 3, 2004) is estimated to be approximately 92%' of
the gap loan amount.
Interest Costs — By selling its gap loan receivable, an Agency will receive its payment earlier than if it waits until
the State pays in 2006. It can receive its money early because California Communities borrows the purchase price
from investors who must be paid interest. Therefore, about 70%` of the reduction in an Agency's payment below its
gap loan amount is the interest it pays to receive its money early. California Communities will retain a portion of
bond proceeds to pay interest to investors until 2006. This funding of interest from the bonds (known as capitalized
interest) reduces the amount payable to an Agency.
Credit Enhancement Fees — To broaden the appeal of the bonds to investors and secure the lowest possible
interest rate, California Communities expects to purchase credit enhancement from a highly rated financial
institution that will guarantee the repayment of bond principal in 2006. Using credit enhancement increases the net
11/23/2004
California Communities I VLF Program
proceeds received by Local Agencies.
Page 5 of 7
Bond Issuance Costs — These include the fees and expenses of such participants as legal counsel, the
underwriters, the rating agencies and California Communities. A Local Agency's share of the total fees will depend
upon the size of its gap loan and whether it finances on a taxable or tax-exempt basis. For a hypothetical $1 million
taxable sale, issuance costs are estimated to reduce the payment by about 1.4%*. On a percentage basis, a Local
Agency's share of issuance costs will be larger if its loan amount is less, and smaller if its loan amount is more. In
addition, Local Agencies that sell their gap loan receivables on a tax-exempt basis will pay larger issuance costs.
The chart below shows the breakdown of sale proceeds and financing costs based on the taxable sale of a $1 million
VLF gap loan.
100% -
90% -
80% -
70% -
60% -
50%_
40%
0%-
40% -
30% -
20% -
10% -
0%
Issuance Process
VLF Crap Loan
Financing Cost 13realcdown*
I - ( $14,000-BmullssmweCosts
jVZ- ` ' _= =.i'PTl $9,000- Cmdlt Enhamement
$55,000 - Capitahmd lntamst
id to Agency*
Eslinated salepmceeds and f=winb coslx
1. Complete the on-line VLF Preliminary Particioation Form. Filling out this form does not commit a Local Agency
to participate in the program.
2. CSCDA Program Manager and financing team members will assist the Local Agency in understanding the
benefits and requirements of the VLF Program. Review California Communities' General_ Policies and Issuance
California Communities I VLF Program Page 6 of 7
Policies.
3. CSCDA Program Manager and financing team members will assist the Local Agency in determining whether it
can participate in on a tax-exempt or taxable basis. If the tax-exempt option is pursued, the Local Agency will
be required to provide Bond Counsel the proper paperwork and evidence to complete the tax-exempt analysis.
4. Governing body of Local Agency approves and executes a sales agreement between itself and California
Communities subject to meeting minimum threshold net proceeds levels. If the tax-exempt option is pursued,
additional legal documents will be required.
5. Bonds are issued.
6. Issuance fee collected.
Contact Us
Please contact Program Manager James Hamill at (925) 933-9229 ext. 216, if you have any questions.
The following financing team members are also available to answer you questions.
Financing Team Contacts
Underwriter
Co -Senior Manager
Citigroup Global Markets Inc.
Michael Gomez (SF)
(415) 951-1615
michael.t.aomez@)citiaroup,com
Kimberly Quinones (LA)
(213) 486-7175
kimberly.quinones Citi roup_com
Jamison Feheley (SF)
(415) 951-1699
is mison.fehelev(o) citia rouo.com
Tony Hughes (SF)
(415)951-1690
Co -Senior Manager
E. J. De La Rosa & Co., Inc.
Paul Rosenstiel (SF)
(415) 495-8863
prosenstiel(@eidelarosa.com
John Kim (SF)
(415)495-8863
jkim(a)eidelarosa.com
Raul Amezcua (LA)
(310) 207-1975
ramezcuaCa)eidela rosa.com
California Communities I VLF Program
tonv.huahes(alcitiarouo.com
Bond Counsel
Orrick, Herrington & Sutcliffe LLP
John H. Knox
(415) 773-5626
iknox(a)orrick.com
Disclosure Counsel
Sidley, Austin, Brown & Wood LLP
Mary Neale
(213) 896-6083
mneale(a)sidlev.com
Underwriters' Counsel
O Melveny & Myers LLP
Rick Jones
(213) 430-6695
riones(d)omm.com
Sponsors
League of California Cities
Daniel B. Harrison
(916) 658-8267
dharrisonecacities.ora
*'Preliminary, subject to change.
Printer -friendly
version
California State Association of Counties
Norma Lammers
(916) 327-7500 ext.554
nlammersacounties.ora
California Communities 1 2175 North California Blvd., Suite 559, Walnut Creek, CA 94596 1 (888) 635-3993 1 info@cacommunities.com
Page 7 of 7
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