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HomeMy WebLinkAbout2001-12-18; City Council; 16475; Selecting Financing TeamCITY OF CARLSBAD -AGENDA BILL AB# jb,‘j 75 TfTLE: 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. I 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. 2 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. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 1 2 3 4 5 6 7 a 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 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 5 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] 24531-g-1647032.2 09/l 101 8 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 "i 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