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HomeMy WebLinkAboutAgenda Bill 2.A 07/14/2003la Il 114 ?npq 4 CITY OF PETALUMA, CALIFORNIA AGENDA BILL Agenda Title: Meeting Date: esolution Regarding the Intent to Issue Tax - Exempt Obligations July 14, 2003 Meeting Time 3:00 PM ❑ 7:00 PM Category (check one) Z Consent Calendar ❑ Public Dearing ❑ New Business ❑ Unfinished Business ❑ Presentation Department Director Contact Person Phone.Number Finance Finance W. Thomas 778 -4323 Cost of Proposal Account. Number N/A Various Amount Budgeted Name of Fund: N/A Airport and General Fund _Attachments to Agenda Packet Item Resolution Summary Statement The City currently has outstanding Certificates of Participation (COPs) that were issued in 1993 in the amount of $9,185,000. These bonds were issued to refinance a number of outstanding bond issues that were outstanding at the time. Those bonds represented debt on the Police facility, the Community Center, street light acquisition and improvements at the Petaluma Airport. A The Airport wishes to finance a hanger project, which will provide between 51 and 55 new hangers. This project will require funds beginning in August 2003 but actual construction will not commence until the Spring of 2004. The initial costs are associated with design work. The Airport will need a minimum of $200,000 in funds from the City for the first phase. The' City intends to refund the current COPs and borrow additional funds for the airport project. Due to the structure of the existing COPs, the refunding cannot close until the next payment date, which is in November 2003. Recommended City ' Council' Action /S uggested.Motion Adopt the proposed resolution authorizing the City to advance funds to the Airport wed by Finance Director: Reviewed by City Attorney Date: A rove City Manager: Date: D te• ( I oday'ZDate : L �` Revision # and Date Revised: File Code: # July 8, 2003 CITY OF PETAL,UMA CALIFORNIA JULY 14, 2003 AGENDA REPORT FOR Resolution Regarding the Intent to Issue Tax - Exempt Obligations 1. EXECUTIVE SUMMARY The City currently has outstanding Certificates of Participation (COPS) that were issued in 1993 in the amount of $9,185,000. These bonds were issued to refinance a number of outstanding bond issues that were outstanding at the time. Those bonds represented debt on the Police facility, the Community Center, street light acquisition and improvements at the Petaluma Airport. A The Airport wishes to finance a hanger project, which will provide between 51 and 55 new hangers. This project will require funds beginning in August 20,03 but actual construction will not commence until the Spring of 2004. The initial costs are associated with design work. The Airport will need a minimum of $200,000 in funds from the City for the first phase. The City intends to refund the current COPS and borrow additional funds for the airport project. Due to the structure of the existing COPs the refunding cannot close until the next payment date, which is in November 2003. 2. BACKGROUND In June 1985, the City issued $2,000;000 in.debt to finance the acquisition and remodeling of the police facility. In 1987, the City issued $3,21.5 in debt to finance the construction of the Community Center. In 1989, the City issued $1.,222,000 in debt to finance the acquisition from PG &E the Street Light Facilities, which PG &E ed and operated within the City and a boom (ruck to service the lights. Subsequent to 1984 and through 3, the City entered into loans with the Department of Transportation, Division of Aeronautics of the State of California in the aggregate amount of $1,439,'250. These loans were for the :acquisition and construction of the Airport. All of these debt instruments were refunded and refinanced with the 1993 Certificates of Participation in the amount of $9,185,000. All of this debt, except for the airport debt, was an obligation of 'the General Fund. The City began to put away funds in addition to the annual debt service payments to prepay the Police Facility when the bonds were first callable without penalty in August 2005. Sufficient funds were accumulated by FY 2001 to prepay that debt. The Community Center debt was being paid for out of Park Development Impact Fees. Due to the volatile nature of the fee source, the City began to put away additional fund to pre -fund this debt beginning in FY 2002. In FY 2003, the City Council authorized the use of Community: Facilities Impact Fees to pay this debt in lieu of using Park Development, Impact Fees. With the adoption of the FY 2004 budget, the City has accumulated sufficient funds to, pre -pay this debt service. The Street Light Facilities debt service is still outstanding. The cost to the General Fund is approximately.$120,000 per year, which provides approximately $20,000 that is being applied to a "pre- pay" account for this debt. This debt is not expected to be retired in the near future. The debt for the Airport is being financed through the Airport Enterprise Fund. Approximately $376,000 is budgeted for FY 2004 debt service principal and interest on all Airport debt. The Airport has the following debt obligations at June 30, 2003: F, - ] California Department & Transportation Loan @ 5.5122% $ 626,833 Loan @ 5.48040% 23,747 Loan @ 4.6358% 24,446 Sub -Total 675,026 1993; Certificates Participation New Hangers 999;,000 Old Hangers 90,400 Airport Acquisition 580 000 Sub -Total 1.669.400 Total Currently, the Airport is generating sufficient operating revenues to cover all of their .ongoing expenses as well as their existing debt.; With the refunding, the debt service for1he 1993 . COPS will be reduced through lower interest rates. The Airport through. the anticipated increase,in rents will pay the new debtas part of that debt issuance and service related revenues as a result of the increase in the number or hangers. This new debt issuance will-inelude not only the refunding of old debt (1,993 COPS) but" also will provide approximately $3 million in new moneyfor the Airport expansion project. However, covenants in the 1993 COPS do not allow,for refunding except on scheduledpayment dates. This will delay the actual close of the new debt until November 2003. The Airport requires. approximately $700,000 in operating funds between now and November. The Airport_ will receive $500,000 of;those funds from the' Federal Government in a form of a Airport Improvement Grant. ''The City -will advance the remainder to the Airport and the proposed Resolution provides the authority to do so. 3. ALTERNATIVES Do not approve the Resolution and the Airport, which will result'in a. delay in the start of the projeci and potentially require the Airport to delay actual cons "traction until March 2005. 4. FINANCIALJMPACTS The Resolution provides that the Airport Will reimburse the,costs of the project °that are advanced from the proceeds of the bonds. Interest will be charged according to the current City's "Interfund' Loan Policy ". 5. CONCLUSION The Airport desires to begin design of the hanger expansion in August so'that it is able to begin. construction in the spring of 2004. Due to the soil, conditions at the Airport, there is a limited "window available to them to begin construction. Since the City is'unabl`e to refund the existing COPs until November-2003, the Airport requires funding for, design work in August. This resolution will allow for the City to advance the Airport funds in anticipation of our intent to issue bond obligations in November 2003. 6. , 0UTCOMES'ROR.PERFORMANCE MEASUREMENTS' THAT WILL.IDENTIFY SUCCESSOR COMPLETION: Funds will be advanced to the, Airport to begin the design phast and the advances, with interest, will be reimbursed out of bond proceeds in November 2003. r, 7. RECOMMENDATION Adopt the proposed resolution. REIMBURSEMENT RESOLUTION RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF PETALUMA REGARDING ITS INTENTION TO ISSUE TAX - EXEMPT OBLIGATIONS WHEREAS, the City Council of the City of Petaluma (the "Issuer ") desires to finance the costs of acquiring, installing', constructing and/or equipping certain capital improvements consisting of certain airport hangers, as provided in Exhibit A attached hereto and incorporated herein (the "Project "); and WHEREAS, the Issuer intends to finance the acquisition, installation, construction and /or equipping of the Project or portions of the Project with the proceeds of the sale of obligations the interest upon .which is excluded from gross income for federal income tax purposes (the "Obligations "); and WHEREAS, prior to the issuance of the Obligations the Issuer desires to incur certain capital expenditures (the "Expenditures ") with respect to the Project from available moneys of the Issuer; and WHEREAS,. the City Council of the Issuer has determined that those moneys to be advanced on and after the date hereof to pay the Expenditures are available only for a temporary period and it is necessary to reimburse the Issuer for the Expenditures from the proceeds of the Obligations; and NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PETALUMA DOES HEREBY RESOLVE ORDER AND DETERMINE AS FOLLOWS: SECTION L . The Issuer hereby states: its intention and reasonably expects to reimburse Project costs incurred prior to the issuance of the Obligations with proceeds of the Obligations. Exhibit A describes either the general character, type, purpose, and function of the Project, or the fund or account from which Project costs are to be paid and the general functional purpose of the fund or account. SECTION 2 . The reasonably expected maximum principal amount of the Obligations is $3;500 SECTION 3 . This resolution is being adopted no later than 60 days after the date on which the Issuer will expend moneys for the portion of the Project costs to be reimbursed from proceeds of the Obligations. • 13172.1 026294 RES SECTION 4 . The Issuer°will make, reimbursement allocation, which is a written allocation that evidences the Issuer's use of proceeds- of the Obligations 'to reimburse an Expenditure no later than 18 months after the later of the date on which the .Expenditure is paid or the Project is placed in service: or abandoned, but in no event more than three years after the date on which the Expenditure is paid. SECTION 5 . The limitations described in Section 3 and Section 4 do not apply to (a) costs of, issuance of the Obligations, (b) an amount not in excess of the lesser of $106,000 or five percent (5 1 /o) of the proceeds of the Obligations; or (c) any preliminary expenditures, such t. as architectural, engineering, surveying, soil testing, and similar costs other than land acquisition, site preparation, and similar costs incident to commencement of construction, not in e of twentype t, (20 %). of the aggregate issue price of the Obligations that finances the Project'for which the preliminary expenditures were incurred. SECTION 6 . Each Expenditure will be either (a) of a type properly chargeable to a capital account under general federal income tax principles (determined in each case as of the date of the Expenditure), (b) a cost of issuance with respect to the Obligations, (c) a nonrecurring item that is not .customarily payable from current revenues, or (d) a grant toy a party that is not related to or an. agent of the Issuer so long as such .grant does not impose any obligation or condition (directly or indirectly) to repay any amount to or for the benefit of the Issuer. SEC CTION . 7 : This resolution is consistent with the budgetary and ,financial circumstances of the Issuer, as of the date hereof. No ,moneys from sources other than the Obligations are; or are reasonably expected to be reserved, allocated on a long -term - basis,, or otherwise set aside by the Issuer (or any related party) pursuant to their budget or. financial po with respect to the Project costs. To the best. of our knowledge, this City Council is not aware of the previous adoption of official, intents by the Issuer that have been made as a matter of course for the purpose of reimbursing expenditures mid for which tax - exempt obligations have not been, issued. SECTION 8 . Proceeds of the Obligations to be used to reimburse for 'Project costs are not expected to; be used, within one year of reimbursement, directly or, indirectly to pay debt service with respect to any obligation (other than to pay current debt service coming due within the next succeeding one year period on any tax - exempt obligation of the Issuer (other than'- the Obligations)) or to be held asl a reasonably required reserve or replacement fund with respect to an obligation of the :Issuer or any entity related in any manner to the Issuer,. or to reimburse any expenditure that was originally paid with the proceeds of any obligation, or to replace funds that are or will be used in,such.manner. SECTION 9 . This resolution is adopted as official action of the Issuer in order to comply with Treasury Regulation Section 1.1.50 -2. and any other regulations of the Internal Revenue Service relating to the qualification for reimbursement of Issuer expenditures incurred prior to the date of issue of the Obligations. 13172A 026294:RES SECTION 10 . All the recitals in this Resolution are true and correct and this City Council so finds, determines and represents. ADOPTED, SIGNED AND APPROVED this _th day of , 2003. CITY OF PETALUMA [MAYOR] Attest: [CITY CLERK/AUDITOR] 3 13172.1 026294 RES t STATE OF CALIFORNIA COUNTY OF SONOMA ) CITY OF PETALUMA ) do hereby , certify that the foregoing is' a true and correct copy of Resolution No. , which was duly adopted by the City Council of the City of Petaluma at a meeting- thereof held. on the _th day of , 2003, and that it was so adopted by the following vote: AYES: NOES: ABSENT ABSTENTIONS: By CITY CLERK 1 0 r, 0 4 13172.1 Q6294.RES EXHIBIT A DESCRIPTION OF PROJECT C7 The project to be financed consists of the acquisition, installation, construction and /or equipping of certain capital improvements consisting of certain airport hangers to be located within the City of Petaluma,(including but not limited to all necessary legal, financial, architectural, environmental, engineering and contingent costs in connection therewith). E 13172.1 026294 RES