HomeMy WebLinkAbout2001-12-18; City Council; 16475; Selecting Financing TeamCITY OF CARLSBAD -AGENDA BILL
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MTG. 12/l 8/01
DEPT. FIN
SELECTING FINANCING TEAM FOR THE
FORMATION OF CERTAIN SPECIAL DISTRICTS
AND POTENTIAL BOND ISSUES AND RELATED MATTERS
DEPT. HD. I_%“-
CITY ATTY
CITY MGFi$$
RECOMMENDED ACTION:
Adopt Resolution No. 208 / H 3 7 3 selecting the financing team for the formation
of certain financing districts and related bond issuances and authorizing the Finance
Director to sign certain Deposit/Reimbursement Agreements.
ITEM EXPLANATION:
A number of the City’s goals for the 2001-02 fiscal year focus on improving the
transportation system within the City through completion of certain road segments. Many
of these important segments are the responsibility of the developments being built
around them. In order to assist in the completion of the roads, the city is often asked to
form financing districts that will spread the costs of the public improvement over those
properties that are benefiting from the improvements and have them paid over a period
of time. Such a request came before council at their meeting of July 10, 2001. At that
time, Council directed staff to begin work on the establishment of a financing district for
certain road improvements including Poinsettia Lane and El Fuerte.
There are currently two (2) other developments that have expressed some interest in
forming a financing district. They include the road improvements to:
+ College Blvd. and Cannon Road, and
+ Melrose Avenue and Faraday Avenue
In order to process these requests efficiently staff is requesting (1) authorization to work
on any of the three special districts previously mentioned, pending receipt of a formal
request and sufficient deposits and (2) authorization to establish a financing team of
consultants to work with staff on the formation issues.
Authorization to Begin Work
Council Policies 33 and 38 set forth the policies and procedures to be followed in using
assessment district or Mello-Roos district financing. These documents require that the
proponent of the district deposit sufficient funds to pay all fees and costs of the district.
The attached resolution will direct staff to begin work on the formation of a financing
district for any of the above-mentioned improvements upon the receipt of a deposit and a
written request from the property owners. The deposit will be in an amount as
determined by the Finance Director. The resolution also authorizes the Finance Director
to sign Deposit/Reimbursement Agreements as needed, in a form as shown in the
attached resolution, upon approval by the City Attorney and receipt of the deposit.
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PAGE 2 OF AGENDA BILL NO. IQ-V5
Authorization to Establish Financing Team
Staff is recommending that the firm of Stone and Youngberg (S&Y) be selected as the
underwriter and Best Best and Krieger (BBK) be selected as the bond counsel for any of
the aforementioned districts.
S&Y will provide underwriting services. As underwriter of the bonds, they will be
responsible for the marketing and sale of the bonds as well as preparing the official
statement and participating in the coordination, structure and timing of the bond issue.
S&Y was selected based on their expertise, financial resources and capability of the firm
as well as staffs previous experience with the company. No payments will be due to S&Y
until, and unless, the bonds are issued. At that time, a purchase and sale agreement will
be brought to Council for review and approval.
By selecting an underwriter now, the City is agreeing to use a negotiated process in the
final pricing of the bonds. A negotiated sale is one in which the underwriter is responsible
for the origination tasks, i.e., the preparation of the official statement, making
presentations to rating or insurance agencies, obtaining credit enhancement, etc., and
works closely with the issuer in preparing an issue for sale. At the time of sale, the
issuer, assisted by a financial advisor, negotiates with the underwriter on the price of the
bonds. This is in contrast to using a competitive sales process in which the issuer
performs the origination tasks or pays for someone else to perform these services, and
then sells the bonds to the underwriter offering the lowest bid meeting the terms of the
sale.
There are several advantages to using a negotiated sales process for this issue. These
bonds are secured by vacant land and will require a more intensive sales effort to get the
best price on the bonds. By hiring the underwriter now, we will be able to launch a more
effective pre-sale marketing strategy for the bond issue. Also, a negotiated sale gives us
more flexibility in the timing and structure of the issue. Under a negotiated sale, a target
sales date is announced. However, it can be changed if deemed necessary due to
unfavorable interest rate movements.
In a competitive sale, there are certain notice requirements that limit this flexibility.
Similarly, the structure and credit enhancements of a negotiated issue can be adjusted
up to the time of the sale whereas they must be determined much earlier in a competitive
sale. For these reasons, staff believes it would be beneficial to involve the underwriter
at the beginning of the process rather than at the end.
BBK was selected as the bond counsel based on their qualifications and the
recommendation of the City Attorney. BBK is a well-recognized bond counsel firm and is
one of the firms Council has previously authorized as special counsel for the City.
Warren Diven, an attorney with BBK, has served the City on a number of issues in the
past and the City Attorney is satisfied with his abilities to serve as bond counsel on these
projects. As bond counsel, BBK will be assisting in the formation process through the
preparation and review of documents to ensure that all legal requirements are met.
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PAGE 3 OF AGENDA BILL NO. ld,
FISCAL IMPACT:
The formation of the districts will not result in any long-term costs to the City. There will
be some staff time expended during the formation of the district, but these costs will be
recovered from the subsequent bond issue or through the deposits from the developers.
The cost of all improvements to be constructed by the district and the associated
financing costs will be funded through the issuance of bonds. These bonds will be repaid
through assessments or special taxes placed on the property within the district boundary.
The fees paid for the services of Stone and Youngberg will be taken in the form of a
discount purchase of the securities sold which is standard in the industry. The price to
be paid for the securities will be negotiated by the City with the assistance of an
independent financial advisor. The financial advisor will insure that the pricing is
reasonable and at a market rate. The financial advisor will be selected when we are
closer to issuing the bonds. All costs will be paid either from the deposits of the
developers or from the bond issue.
Fees for District formation costs by the bond counsel are at a rate of $185 per hour but
not to exceed $15,000 per district. These are payable solely from the developers’
deposits and not from the City. Bond Counsel fees for the bond issuance are based on a
percentage of the amount of bonds issued with a minimum of $25,000 per bond series.
These are also payable solely from the bond issue.
EXHIBITS:
1. Resolution No. dl0S 1 - 3 73 selecting the financing team for the formation of
certain financing districts and related bond issuances and authorizing the Finance
Director to sign certain Deposit/Reimbursement Agreements.
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RESOLUTION NO. 2001-373
A RESOLUlION OF THE CITY COUNCIL OF THE
CITY OF CARLSBAD, CALIFORNIA, SELECTING
THE FINANCING TEAM FOR THE FORMATION OF CERTAIN
FINANCING DISTRICTS AND RELATED BOND ISSUANCES AND
AUTHORIZING THE FINANCE DIRECTOR TO SIGN CERTAIN
DEPOSIT/REIMBURSEMENT AGREEMENTS
WHEREAS, the City Council of the City of Carlsbad has adopted goals focusing
on improving the transportation system within the City through completion of certain
road segments; and
WHEREAS, a number of developers have approached the City staff with
requests to assist them in the financing of the roads by forming financing districts that
will spread the costs of the public improvement over those properties that are benefiting
from the improvements; and
WHEREAS, such a request came before council at their meeting of July 10,
2001, at which time Council directed staff to begin work on the establishment of a
financing district for certain road improvements including Poinsettia Lane and El Fuerte;
and
WHEREAS, additional requests have been received or are anticipated from the
property owners for two other road improvements; commonly known as Cannon Road
and College Boulevard improvements; and Faraday Avenue and Melrose Avenue
improvements; and
WHEREAS, current policies require that the proponents of the district deposit
sufficient funds to pay all fees and costs of the district; and
WHEREAS, staff is recommending that Stone and Youngberg (S&Y) be selected
as the underwriter and Best Best and Krieger be selected as the bond counsel based
on their experience and past performance with the City.
Ill
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NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of
Cartsbad, Catifomia, as fottows:
1. That the above recitations are true and correct.
2. That staff is authorized to begin work on the formation of a financing
district for the Cannon Road and College Boulevard improvements and/or the Faraday
Avenue and Melrose Avenue improvements upon the receipt of‘a deposit and a written
request from the property owners. The deposit will be in an amount as determined by
the Finance Director.
3. That the Finance Director is authorized to sign Deposit/Reimbursement
Agreements as needed, in a form as shown in Appendix A, upon approval by the City
Attorney and receipt of the deposit.
4. That staff is authorized to work with Stone and Youngberg as the
underwriter and Best Best and Krieger as the bond counsel in the formation of the
above-mentioned special districts and related bond issues.
PASSED, APPROVED AND ADOPTED at a regular meeting of the Carlsbad
City Council held on the 18th day of DECEMBER 1 2001 by the
following vote, to wit:
AYES: Council Members Lewis, Kulchin, Finnila, Nygaard, Hall
NOES: None
ABSENT: None
ATTEST: , :
LORRAi-NE M. WO KAREN R. KUNDTZ, Assistant City Clerk
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APPENDIX A
DEPOSIT/REIMBURSEMENT AGREEMENT
{Enter Property Location Names Here)
THIS DEPOSIT/REIMBURSEMENT AGREEMENT (the “Agreement”) is by and
between the CITY OF CARLSBAD, a municipal corporation, (“City”), and {Enter Developer
Name or Other}, a {Enter Company Type, ie, corporation, LLP, etc.}, (“ {Enter Company
Short Name) “) and {Enter Developer Name or Other}, a {Enter Company Type, ie,
corporation, LLP, etc.}, (“ {Enter Company Short Name} “). {Enter Short Name} and {Enter
Shot-t Name} are sometimes collectively referred to as the “Developers.”
RECITALS
WHEREAS, the Developers have requested that the City consider the formation of a
District and the issuance of bonds for a District; and
WHEREAS, the Developers are willing to deposit funds with the City to ensure payment
of the costs of the City in forming the proposed District and otherwise in connection with the
issuance of bonds for the District and the proposed expenditure of the proceeds thereof,
provided that such funds so advanced are reimbursed to the Developers from the proceeds of
any bonds issued by the City for the District to the extent provided herein; and
WHEREAS, the City and the Developers now desire to specify the terms of said deposit
and reimbursement.
AGREEMENT
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants set
forth herein, and for other consideration the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
Section 1. The Decosit. Each of {ENTER SHORT NAMES HERE} have provided $
{ENTER DOLLAR AMOUNT} to the City for a total of $ {ENTER DOLLAR AMOUNT} (the
“Deposit”), to be used by the City to pay the costs in conducting proceedings for the formation of
the District and the issuance of bonds for the District (as more fully described in Section 2(a)
below, the “Initial Costs”), said amount having been heretofore delivered by the Developers to
the Finance Director of the City by means of checks made payable to the “City of Carlsbad.”
The City, by its execution hereof, acknowledges receipt by the City of the Deposit. The checks
representing the Deposit will be cashed by the City, and the Deposit may be commingled with
other funds of the City for purposes of investment and safekeeping, but the City shall at all times
maintain records as to the expenditure of the Deposit.
The Developers hereby agree to advance (in equal amounts for each of {ENTER
SHORT NAMES HERE) any additional amounts necessary to pay any Initial Costs incurred by
the City, in excess of the amount of the Deposit, promptly upon written demand therefore by the
Finance Director of the City; provided that the amount of the Deposit, plus any such additional
24531-g-1647032.2 09/1101 6
amounts (the “Additional Deposits” and, collectively with the Deposit, the “Deposits”), shall not
exceed $ {Enter dollar figure} without the prior written consent of both (Enter Short Names
Here}. Notwithstanding the foregoing, the City Manager may direct City staff and consultants to
cease all work related to the formation of the District and the issuance of the Bonds until any
additional amounts so demanded has been received by the City.
Section 2. Use of Funds. The Deposits shall be administered as follows:
(4 The Finance Director of the City may draw upon the Deposits from time to time to
pay the Initial Costs, including but not limited to: (i) the fees and expenses of any consultants to
the City employed in connection with the issuance of the Bonds and the proposed expenditure
of the proceeds thereof (such as assessment engineering, legal counsel, including the City
Attorney, Bond Counsel, and financial advisory fees); (ii) the costs of market absorption,
appraisal and feasibility studies and other reports necessary or deemed advisable by City staff
or consultants in connection with the Bonds; (iii) costs of publication of notices, preparation and
mailing of ballots and other costs related to any election with respect to the District, the
assessments to be levied therein and any bonded indebtedness thereof; (iv) a reasonable
charge for City staff time, as determined by the Finance Director in her sole discretion, in
analyzing the District, the Bonds and the expenditure of the proceeds thereof, including a
reasonable allocation of City overhead expense related thereto; and (v) any and all other actual
costs and expenses incurred by the City with respect to the District or the Bonds after the date
of execution of this Agreement.
lb) If the Bonds are issued by the City, the City shall provide for reimbursement to
the Developers, without interest, of all amounts charged against the Deposits, said
reimbursement to be made solely from the proceeds of the Bonds and only to the extent
otherwise legally permitted. On or within thirty (30) business days after the date of issuance and
delivery of the Bonds, the Finance Director of the City shall return the then unexpended
Deposits to the Developers, without interest, less an amount equal to any costs incurred by the
City or that the City is otherwise committed to pay, which costs would be subject to payment
under Section 2(a) above, but have not yet been so paid.
(c) If the Bonds are not issued, the Finance Director of the City shall, within thirty
(30) business days after written request of either {Enter Short Names Here), immediately
cease all work on the formation of the District and return the then unexpended Deposits to the
Developers, without interest, less an amount equal to any costs incurred by the City or that the
City is otherwise committed to pay, which costs would be subject to payment under Section 2(a)
above but have not yet been so paid.
Section 3. Reimbursement of Other Develooer Costs. To the extent legally permitted
and otherwise provided for, at the reasonable discretion of the City, in the proceedings for the
issuance of the Bonds, nothing contained herein shall prohibit reimbursement of other costs and
expenses of the Developers, or any other entity with an interest in all or any portion of the land
in the District, incurred in connection with the District from the proceeds of the Bonds, including,
but not limited to fees and expenses of legal counsel to the Developers and financial and
assessment spread consultant expenses. Any such reimbursement shall be made solely from
the proceeds of the Bonds, if any.
24531-g-1647032.2 09/l 101 3
Section 4. Aqreement Not Debt or Liabilitv of Citv. It is hereby acknowledged and
agreed that this Agreement is not a debt or liability of the City. The City shall not, in any event,
be liable hereunder other than to return the unexpended and uncommitted portions of the
Deposits as provided in Section 2 above and provide an accounting under Section 7 below. The
City shall not be obligated to advance any of its own funds with respect to the District or for any
of the other purposes listed in Section 2(a) hereof. No member of the City Council or officer,
employee or agent of the City shall to any extent be personally liable hereunder.
Section 5. No Obliqation to Issue Bonds. The provisions of this Agreement shall in no
way obligate the City to form the District, to issue any bonds, or to expend any of its own funds
in connection with the District.
Section 6. Severability. If any part of this Agreement is held to be illegal or
unenforceable by a court of competent jurisdiction, the remainder of this Agreement shall be
given effect to the fullest extent reasonably possible.
Section 7. Accountinq. The City Finance Director shall provide the Developer with a
written accounting of moneys expended under this Agreement, within thirty (30) business days
of receipt by the Finance Director of the City of a written request therefore submitted by an
authorized officer of the Developer. No more than one accounting will be provided in any
calendar month and the cost of providing the accounting shall be charged to the Deposits.
Section 8. Successors and Assisns. This Agreement shall be binding upon and inure
to the benefit of the successors and assigns of the parties hereto.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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Section 9. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
IN WITNESS THEREOF, the parties hereto have executed this Agreement as of the day
and year written alongside their signature line below.
Executed on:
{Enter Date}
DEVELOPERS:
fType Developer Name Here}
a {Enter Company Type-Carp, LLP, etc.}
By:
uype Signer’s Name Here}
{Enter Company Type, as above}
Its: {Enter Signer’s Title)
Executed on: vype Developer Name Here)
{Enter Date} a {Enter Company Type-Corp, LLP, etc.)
Executed on:
{Enter Date}
By:
uype Signer’s Name Here}
{Enter Company Type, as above)
Its: {Enter Signer’s Title)
CITY:
CITY OF CARLSBAD,
By:
uype Signer’s Name Here)
Its: Finance Director
APPROVED AS TO FORM:
RONALD R. BALL, City Attorney
By:
Deputy City Attorney
24531-g-1647032.2 09/I 101
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STATE OF CALIFORNIA )
) ss.
COUNTY OF 1
On the of day 120-d before me,
personally appeared personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name(s) are/is
subscribed to the within instrument and acknowledged to me that he/she/they executed
the same in his/her/their authorized capacity, and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature
STATE OF CALIFORNIA )
) ss.
COUNTY OF )
On the of day t 20-V before me,
personally appeared personally known to me (or proved
to me on the basis of satisfactory evidence) to be the person whose name(s) are/is
subscribed to the within instrument and acknowledged to me that he/she/they executed
the same in his/her/their authorized capacity, and that by his/her/their signature(s) on
the instrument the person(s), or the entity upon behalf of which the person(s) acted,
executed the instrument.
WITNESS my hand and official seal.
Signature
24531-g-1647032.2 09/I 101
IO