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HomeMy WebLinkAbout01- Mayor's Office CITY OF SAN 13ERNARDINO REQUEST FOR COUNCIL ACTION From: Mayor Tom Minor Subject: Resolution. . .Approving a certain financing by the SBIAA and acknowledging Dept: Mayor's Office certain obligations incurred by the City of San Bernardino pursuant to a Joint Date: August 29, 1996 Powers Agreement establishing the SBIAA. Synopsis of Previous Council action: NONE Recommended motion: Adopt Resolution (1) Approving a certain financing by the SBIAA and acknowledging certain obligations incurred by the City of San Bernardino pursuant to a Joint Powers Agreement establishing the SBIAA. - 1 Signature Contact person: Mayor Tom Minor Phone: 5133 Supporting data attached: Attached Ward: FUNDING REQUIREMENTS: Amount: -0- Source: (Acct. No.) -0- (Acct. Description) -0- Finance: Previously Council Notes: Res 96- 7 G� 941 76-0262 Agenda Item No, / I'- ACQUISITION AND PARTICIPATION AGREEMENT This ACQUISITION AND PARTICIPATION AGREEMENT ("Agreement") is made as of the 1st day of September, 1996, by the City of San Bernardino (the "City") , the County of San Bernardino (the "County") and the San Bernardino International Airport Authority (the "Debtor") as follows: The City and County (collectively, the "Participants") hereby agree to pay the obligation of the Debtor, to First Trust of California, National Association, as trustee (the "Trustee") for the benefit of the holders of the outstanding $3, 000, 000 San Bernardino International Airport Authority Revenue Anticipation Notes, Issue of 1996 (the "Notes") , on the terms and conditions set forth herein. All capitalized terms not defined herein shall have the meanings ascribed to them in the Indenture of Trust dated as of September 1, 1996, by and between the Agency and the Trustee (the "Indenture") . The terms of this agreement are as follows: SECTION 1 . PARTICIPANTS' OBLIGATIONS. 1 . 1 Limited Obligation. The Participants' obligations to the Trustee hereunder are solely with respect to the debt incurred by Debtor to pay the principal, premium, if any, and interest on the Notes in the event Revenues generated from the Debtor and amounts to be paid by the Member Jurisdictions as described in clauses (i) and (ii) of the definition of Revenues in Section 1 . 01 of the Indenture (the "Initial Sources") are insufficient, or one or more of the Member Jurisdictions refuse, fail or are unable to make payments as provided in said clause (ii) . The Participants' obligation hereunder shall not extend to any other obligation of Debtor to Trustee, or any third party whatsoever, whether prior, contemporaneous or future. In the event of a default by Debtor under the Indenture, the Participants agree to make payments to the Trustee in an amount sufficient to pay the principal, interest and premium, if any, coming due on the next Interest Payment Date as further provided in the Indenture. Collectively, the amount of the Participants' obligations to the Trustee shall not exceed Three Million Dollars ($3, 000, 000) , plus interest thereon, less any principal payments made on account thereof by Debtor or any other party. The portion of this commitment attributable to the City of San Bernardino is two-thirds (2/3) and the portion attributable to the County of San Bernardino - 1 - is one-third (1/3) . Any obligation of the Participants hereunder shall cease upon payment in full of all principal due under the Notes, regardless of the source of said payment. The Participants may not terminate their obligations under the provisions of this Agreement until such time as the Notes have been paid in full or the amount then owed by the Participants pursuant hereto has been paid in full. Pursuant to Section 11 of the Joint Exercise of Powers Agreement Creating an Agency to be Known as the San Bernardino International Airport Authority, as amended (the "JPA Agreement") , upon payment by the Participants hereunder, said funds shall constitute a loan to the Debtor payable as provided in the JPA Agreement. 1 .2 Full Authority. Participants represent and covenant that each has duly authorized this Agreement and that this Agreement is validly existing in accordance with the laws of the State of California. 1 . 3 Benefits to Participants. In consideration for the provision of funds hereunder, each Participant shall be granted an increased voting interest in the Debtor. Each Participant finds and determines that this Agreement is of benefit to said Participant as (i) it provides each Participant an opportunity to obtain more control of the activities of the Debtor; and (ii) it allows each Participant to carry out its redevelopment interests, thereby benefitting each Participant' s jurisdiction. SECTION 2 . RIGHTS AND DUTIES OF TRUSTEE. Trustee may not, without the prior written consent of the Participants, enter into any modification, amendment, waiver or other change in the terms, amount or conditions of the Notes, nor renew, extend or postpone the time for payment or otherwise change the terms of the Notes, nor release any security, if any, held therefor. Trustee shall enforce this Agreement as provided by law. Trustee is familiar with its rights under the California Civil Code and expressly waives any right to recover any asset of the Participants which may be in the possession of the Trustee at any time, and agrees solely to exercise its rights under this Agreement in accordance with the terms hereof. SECTION 3 . OBLIGATIONS OF DEBTOR. The parties hereto have entered into this Agreement to provide for the payment of Debt Service on the Notes in the event of any deficiencies in the payments from the Initial Sources. The Debtor hereby covenants and warrants that it shall do everything possible to ensure that (i) its facilities are operated in an efficient and professional - 2 - manner; (ii) that it collects all fees and rents due and owing; and (iii) that it actively seeks to lease its facilities all in order to generate revenues to repay the Notes . Section 4 . MISCELLANEOUS . 4 . 1 Governing Law. This Agreement and the respective rights and obligations created hereby shall be construed according to the laws of the State of California. 4 .2 Assignment. Trustee may assign its rights under this Agreement subject to providing fifteen (15) days prior written notice thereof to the Participants . 4 . 3 Execution. This Agreement may be executed in counterparts each of which shall constitute an original. 4 .4 Immunity and Indemnity of Trustee. The Trustee is entering into this Agreement solely in its capacity as Trustee under the Indenture and the provision of the Indenture relating to the immunities, indemnities and exceptions from liability as they relate to the Trustee shall apply to ,this Agreement. 3 - IN WITNESS WHEREOF the parties hereto have executed this Acquisition and Participation Agreement all as of the date first written above. CITY OF SAN BERNARDINO By: ATTEST: Secretary [CITY SIGNATURE PAGE - ACQUISITION AND PARTICIPATION AGREEMENT] COUNTY OF SAN BERNARDINO By: ATTEST: Secretary [COUNTY SIGNATURE PAGE - ACQUISITION AND PARTICIPATION AGREEMENT] FIRST TRUST OF CALIFORNIA, NATIONAL ASSOCIATION as Trustee By: Assistant Vice-President [TRUSTEE SIGNATURE PAGE - ACQUISITION AND PARTICIPATION AGREEMENT] SAN BERNARDINO INTERNATIONAL AIRPORT AUTHORITY By: Airport Director [AIRPORT AUTHORITY SIGNATURE PAGE - ACQUISITION AND PARTICIPATION AGREEMENT] CITY OF SAN BERNARDINO INTEROFFICE MEMORANDUM CITY CLERK'S OFFICE DATE: 3 1 TO: All Clients FROM: City Clerk's Office RE: SCANNING MISSING DOCUMENT NOTICE DOCUMENT IDENTIFICATION: 6 ��76- 09� � . At the time the above refer nced docume w4s scanned, it was not co plete and wy missing certain attachment(s). An effort is being made to secure the missing documentation. If that documentation is located, the imaging database will be updated. The missing documentation is identified as: `— Should you have any questions on this matter, please do not hesitate to contact either Administrative Operations Supervisor Sandra Medina or Deputy City Clerk Melanie Miller at (909) 384-5002. Rachel Clark City Clerk RC:mam DOCUMENT LOCATION: FORMS&anning Missing Document Notice Memo CC Form No.112 Last Updated: 09/24/1996 ORIGINAL MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AGENDA September 9 , 1996 - 10 : 00 A.M. STAFF REPORT TO: Mayor and Common Council FROM: Timothy J. Sabo, Sabo & Green DATE : September 5, 1996 Re : Status of financing for SBIAA operations and capital expenditures for the 1996-97 fiscal year I . Background The focus in recent weeks has been on a public issuance of tax-exempt notes to be issued by the SBIAA and guaranteed by the member jurisdictions . It has been determined that at this time tax-exempt financing is the only viable alternative to provide for necessary operating expenses on a short term basis, as the original avenues of financing explored have not been feasible . For example, a local bank contacted us and expressed an interest in providing a loan to the SBIAA based upon the article that appeared in the newspaper in the latter part of June, 1996 . We met with two representatives of the bank in July, 1996, and provided them with the documents and other financial information they requested as to the SBIAA and the member jurisdictions . As of August 26, 1996, the bank would only be interested in further considering the loan approval process if the County and each city would execute a continuing guaranty in a form acceptable to the Bank that would provide for joint and several liability for 1 each member jurisdiction of the SBIAA. The Bank sought the ability to file a law suit against any one member of the SBIAA to collect any deficiencies on any Bank loan to the SBIAA and did not desire to become involved in a collection process where multiple lawsuits and collection efforts may be required. The Bank would not proceed in the manner as presently contemplated even with the City of San Bernardino and the County being willing to guaranty the entire amount of the financing in a 2/3 for the City of San Bernardino and 1/3 for the County split . The possibility of utilizing the proceeds from the Internal Revenue Code Section 467 lease and lease-back for operating expenses remains a viable option, but not until after the beginning of calendar year 1997 . The revised federal regulations affecting Section 467 transactions as adopted in May, 1996, continue to have the effect of decreasing the financial benefits of the transaction to governmental entities seeking to participate in such a transaction. It is anticipated that the current limitations on the financial benefits of such transactions as mandated by the recently adopted Federal regulations will be mitigated as more of these transactions are marketed during the next several months . It is this lease and lease-back transaction that is expected to repay any interim financing obtained by the SBIAA whether in the form of a bank loan or publicly issued tax-exempt notes . The SBIAA Board had previously directed SBIAA staff to pursue the possibility of obtaining a two-year financing that would provide funds for two years of operations and capital funding for the SBIAA. This alternative was analyzed as was a two-year financing containing a one-year operations and capital funding amount . Legal issues were raised by County Counsel as to the State Constitutionality of the County or any municipal corporation guarantying an obligation beyond the fiscal year within which the SBIAA received funds for the benefit of the member jurisdiction. In an effort to avoid the unnecessary complexities that would be required (i) to extend the term, or (ii) to provide for a mandatory call and redemption on June 30, 1996 (end of fiscal year) , if the guarantees could not legally be extended for the additional year, the option of a one-year note with in excess of the one-year funding requirement appears to be the most cost effective . The Notes, as presently structured, would provide the following amounts for use by the SBIAA in the 1996-97 fiscal year 2 or carried forward into the 1997-98 fiscal year, as necessary: Capitalized interest (through 6/30/97) $ 140 , 000 1996-97 operations deficit $ 1, 100, 000 Matching grant portion - MAP $ 500 , 000 Matching grant portion - EDA roads $ 482, 000 Costs of issuance and placement fees $ 150, 000 Additional funds for 1997-98 S 628 , 000 TOTAL NOTE PRINCIPAL $3 , 000, 000 II . Current Action It is proposed that both the County of San Bernardino and the City of San Bernardino execute a separate document (Acquisition and Participation Agreement) with the Trustee for the Notes that constitutes an unequivocal guaranty agreement of the principal and interest on the proposed Note financing. Pursuant to the terms of the Acquisition and Participation Agreement, the other non- defaulting members of the SBIAA together with the County and the City of San Bernardino will have the opportunity on June 17, 1997, to pay a proportionate share of the guaranty amount of any one or more defaulting members . If none of the non-defaulting members elected to participate with the County and the City of San Bernardino on this voluntary basis, then, and only then, would the County and the City of San Bernardino be legally obligated to pay to the Trustee the defaulted amount on the basis of 1/3 for the County and 2/3 for the City of San Bernardino. The Official Statement for the SBIAA Note issuance will only need to disclose the financial information of the County and the City of San Bernardino because it will be only these two members whose credit will be relied upon by the Noteholders in the event of (i) a default or inability of the SBIAA to roll-over, refinance or repay the Notes on June 30, 1997, and (ii) any default by one or more members of the SBIAA in remitting their proportionate amount of the SBIAA Note indebtedness on June 16 , 1997 . Resolutions approving a guaranty of any financing of the SBIAA have been distributed to each city attorney and city manager for their review and comment . Final Guaranty Resolutions have been sent to each City and to the County, and it is expected that each 3 Guaranty Resolution will be adopted no later than the second week of September. The Guaranty Resolution requires each member jurisdiction to pay to the SBIAA an amount equal to $500 , 000 for each vote allocated to the members of the SBIAA not later than June 16, 1997 . Any payment not made on said day will result in the immediate loss of membership and all participation rights in the SBIAA on September 11, 1997 . The other non-defaulting members of the SBIAA will then have the option, but not the obligation, to proportionately assume the financial obligation of any such defaulting member or defaulting members . It is proposed that the SBIAA Board approve the Note financing on September 11, 1996 . Each member that expects to adopt a guaranty resolution should adopt such guaranty resolution by September 17, 1996 . The preliminary marketing of the Notes will commence on September 18 with an expected closing to occur on September 30, 1996 . It is most critical that both the County and the City of San Bernardino adopt and execute the additional guaranty agreement and provide the necessary financial information that will be relied upon by the prospective Noteholders . Moneys should then be available for use by the SBIAA as of the September 30, 1996, the closing date . III . Recommendation We recommend approval of the following resolution: RESOLUTION OF THE MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO APPROVING A CERTAIN FINANCING BY THE SAN BERNARDINO INTERNATIONAL AIRPORT AUTHORITY, ACKNOWLEDGING CERTAIN OBLIGATIONS INCURRED BY THE CITY OF SAN BERNARDINO PURSUANT TO A JOINT POWERS AGREEMENT ESTABLISHING THE SAN BERNARDINO INTERNATIONAL AIRPORT AUTHORITY AND APPROVING A CERTAIN ACQUISITION AND PARTICIPATION AGREEMENT SBIA\0006\DOC\10 9\5\96 1200 law 4 eA ACQUISITION AND PARTICIPATION AGREEMENT This ACQUISITION AND PARTICIPATION AGREEMENT ( "Agreement" ) is made as of the 1st day of September, 1996, by the City of San Bernardino (the "City" ) , the County of San Bernardino (the "County" ) and the San Bernardino International Airport Authority (the "Debtor" ) as follows : The City and County (collectively, the "Participants" ) hereby agree to pay the obligation of the Debtor, to First Trust of California, National Association, as trustee (the "Trustee" ) for the benefit of the holders of the outstanding $3 , 000, 000 San Bernardino International Airport Authority Revenue Anticipation Notes, Issue of 1996 (the "Notes" ) , on the terms and conditions set forth herein. All capitalized terms not defined herein shall have the meanings ascribed to them in the Indenture of Trust dated as of September 1, 1996, by and between the Agency and the Trustee (the "Indenture") . The terms of this agreement are as follows : 1 SECTION 1 . PARTICIPANTS' OBLIGATIONS . 1 . 1 Limited Obligation. The Participants' obligations to the Trustee hereunder are solely with respect to the debt incurred by Debtor to pay the principal, premium, if any, and interest on the Notes in the event Revenues generated from the Debtor and amounts to be paid by the Member Jurisdictions as described in clauses (i) and (ii) of the definition of Revenues in Section 1 . 01 of the Indenture (the "Initial Sources") are insufficient, or one or more of the Member Jurisdictions refuse, fail or are unable to make payments as provided in said clause (ii) . The Participants' obligation hereunder shall not extend to any other obligation of Debtor to Trustee, or any third party whatsoever, whether prior, contemporaneous or future . In the event of a default by Debtor under the Indenture, the Participants agree to make payments to the Trustee in an amount sufficient to pay the principal, interest and premium, if any, coming due on the next Interest Payment Date as further provided in the Indenture . Collectively, the amount of the Participants' obligations to the Trustee shall not exceed Three Million Dollars ($3, 000, 000) , 2 plus interest thereon, less any principal payments made on account thereof by Debtor or any other party. The portion of this commitment attributable to the City of San Bernardino is two-thirds (2/3) and the portion attributable to the County of San Bernardino is one-third (1/3) . Any obligation of the Participants hereunder shall cease upon payment in full of all principal due under the Notes, regardless of the source of said payment . The Participants may not terminate their obligations under the provisions of this Agreement until such time as the Notes have been paid in full or the amount then owed by the Participants pursuant hereto has been paid in full . Pursuant to Section 11 of the Joint Exercise of Powers Agreement Creating an Agency to be Known as the San Bernardino International Airport Authority, as amended (the "JPA Agreement" ) , upon payment by the Participants hereunder, said funds shall constitute a loan to the Debtor payable as provided in the JPA Agreement . 1 . 2 Full Authority. Participants represent and covenant that each has duly authorized this Agreement and that this Agreement is validly existing in accordance with the laws of the State of California. 3 e 1 . 3 Benefits to Participants . In consideration for the provision of funds hereunder, each Participant shall be granted an increased voting interest in the Debtor. Each Participant finds and determines that this Agreement is of benefit to said Participant as (i) it provides each Participant an opportunity to obtain more control of the activities of the Debtor; and (ii) it allows each Participant to carry out its redevelopment interests, thereby benefitting each Participant' s jurisdiction. SECTION 2 . RIGHTS AND DUTIES OF TRUSTEE. Trustee may not, without the prior written consent of the Participants, enter into any modification, amendment, waiver or other change in the terms, amount or conditions of the Notes, nor renew, extend or postpone the time for payment or otherwise change the terms of the Notes, nor release any security, if any, held therefor. Trustee shall enforce this Agreement as provided by law. Trustee is familiar with its rights under the California Civil Code and expressly waives any right to recover any asset of the Participants which may be in the possession of the Trustee at any 4 time, and agrees solely to exercise its rights under this Agreement in accordance with the terms hereof . SECTION 3 . OBLIGATIONS OF DEBTOR. The parties hereto have entered into this Agreement to provide for the payment of Debt Service on the Notes in the event of any deficiencies in the payments from the Initial Sources. The Debtor hereby covenants and warrants that it shall do everything possible to ensure that (i) its facilities are operated in an efficient and professional manner; (ii) that it collects all fees and rents due and owing; and (iii) that it actively seeks to lease its facilities all in order to generate revenues to repay the Notes . Section 4 . MISCELLANEOUS. 4 . 1 Governing Law. This Agreement and the respective rights and obligations created hereby shall be construed according to the laws of the State of California. 4 . 2 Assignment . Trustee may assign its rights under this Agreement subject to providing fifteen (15) days prior written notice thereof to the Participants. 5 4 . 3 Execution. This Agreement may be executed in counterparts each of which shall constitute an original . 4 .4 Immunity and Indemnity of Trustee . The Trustee is entering into this Agreement solely in its capacity as Trustee under the Indenture and the provision of the Indenture relating to the immunities, indemnities and exceptions from liability as they relate to the Trustee shall apply to this Agreement . 6 IN WITNESS WHEREOF the parties hereto have executed this Acquisition and Participation Agreement all as of the date first written above . CITY OF SAN BERNARDINO By: ATTEST: - - Secretary COUNTY OF SAN BERNARDINO By: ATTEST: Secretary R 7 s FIRST TRUST OF CALIFORNIA, NATIONAL ASSOCIATION as Trustee By: Assistant Vice-President ATTEST: Secretary San Bernardino International Airport Authority By: President SBIA\0006\DOC\5.2 9\3\96 425 law 8 Qor� CITY OF SAN BERNARDINO INTEROFFICE MEMORANDUM TO: Mayor and Common Council FROM: Dennis A. Barlow, Sr. Assistant City Attorney DATE: September 5, 1996 RE: Proposed Financing Commitment by the City of San Bernardino to the San Bernardino International Airport Authority On May 20, 1992, the City of San Bernardino along with the Cities of Colton, Highland, Loma Linda, Redlands, and the County of San Bernardino entered into a joint powers agreement to establish the San Bernardino Regional Airport Authority (later renamed the San'Bemardino International Airport Authority). It was understood from the beginning that it would take some time for the airport to generate revenue, which would require that the member agencies would have to loan the Authority operating funds to foster the hoped-for income. In pertinent part Section 11 of the joint powers agreement provides as follows: "All Parties shall loan to the Authority any and all of the necessary annual budgeted expenditures of the Authority. . . . Each Party shall be responsible for its respective percentage of all annual expenses of the Authority in an amount equal to the percentage produced when dividing (i) the number of Members allocated to a Party under this Agreement, by (ii) the total number of Members then in the membership under this Agreement. All such loan funds shall be advanced by each Party on a monthly basis not later than the first business day of each calendar month. Any Party that is then in arrears by three (3) monthly loan advances, shall have the rights of its Member or Members to vote and participate in Commission meetings suspended until such time as all arrearages are then made current by such Parry in whole, plus interest thereon, and the Authority shall not accept any partial payments of said amounts. During any period of time that a Party has not advanced its proportionate share of the annual expenses on a monthly basis, the other Parties shall each increase their percentage monthly advances commencing as of the month in which a default occurs by such Party by an amount equal to the dollar amount attributable to the defaulting Party's previously calculated percentage in the manner as provided above multiplied by the percentage produced when dividing (i) the number of Members allocated to a Party under t this Agreement, by (ii) the total number of non-defaulting Members then in the membership under this Agreement. Upon any Party accumulating DAB/tbm [Airport.Meml 1 C� Y arrears on twelve (12) monthly loan advances, such Party shall be automatically expelled as a Party to this Agreement without further action by the Authority, the Commission or any other Party. . . ." (Emphasis added) Earlier this year, when faced with the possibility of coming up with a significant amount of funds, the City of Redlands officially withdrew from the Authority. The Authority is now seeking $3,000,000.00 to provide for public improvement projects to gain better vehicular access to the Airport, to upgrade the aviation facilities on the Airport, and paying the operating deficits created by the ongoing operations of the Airport. It is proposed that the funds be obtained through the issuance of either tax-exempt notes, the obtaining of a tax-exempt loan, or a conventional loan from a commercial lender or other financing institution. As part of this financing commitment, the City of San Bernardino and the County of San Bernardino, as the two largest members of the Authority, are being asked to obligate their respective general funds and guarantee the entire financing on the basis of 1/3 to the County and 2/3 to the City. Initially the City agrees to pay $1,000,000.00 on or before June 16, 1997. If the City fails to pay said amount by said date, then the proposed resolution will have the effect of amending the joint powers agreement to the effect that rather than waiting for the 12 month period of non-payment, the City would automatically be expelled as of June 17, 1997. The City also again agrees to pay its proportionate share of the funds which would otherwise have been paid by a defaulting member. Then in the "Acquisition and Participation Agreement" the City, with the County, agrees to guarantee the payment of the $3,000,000.00, plus interest. According to the terms of the Agreement, the City's obligation is triggered only if the Authority's income and the payments by the member agencies fall short. As noted above the division of the obligation between the City and the County is 2/3 to 1/3 respectively. If the City and the County are required to make good on their guarantee, then their voting power on the Commission is increased accordingly. It should be noted that if the City is called upon to make any significant payments under the guarantee it will be because the other member jurisdictions have not done so. If that is the case, after three months their right to participate and vote on the Commission will be suspended as provided above. If that default lasts for twelve months they will be automatically expelled, leaving the City, and presumably the County, to operate the Airport that is located entirely within our City. If we fail to guarantee the financing, the loan will not be made and the Airport will run out of funds, forcing it to close. If that occurs, the matching funds for Airport improvements will be lost and the potential to have a viable operating airport within our City will likewise be lost. De nni . Barlow Sr. Asst. City Attorney DAB/tbm lAirport.Meml 2