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HomeMy WebLinkAbout01-Council Office , Of//G/HAl , ,.1 , MAYOR AND COMMON COUNCIL OF THE CITY OF SAN BERNARDINO AGENDA February 11. 1997 STAFF REPORT TO: Mayor and Common Council FROM: Timothy J. Saba, Saba & Green DATE: February 11, 1997 RE: $46,000,000 Inland Valley Development Agency Tax Allocation Bonds, Series of 1997 Background The Inland Valley Development Agency has previously issued the $25,000,000 Inland Valley Development Agency, Redevelopment Tax Allocation Notes, Issue of 1993 (the "IVDA Notes") and the Inland Valley Development Agency School Districts Tax Allocation Notes, Issue of 1993 (the "School District Notes") in 1993 for the purposes of funding the capital improvements and working capital commitments of the IVDA and the obligations incurred by the IVDA to the school districts with territory included in the IVDA Redevelopment Project Area. Both prior note issues bear an interest rate of 7.0% and have interest only payments required to be made by the IVDA through the respective maturity dates of April 1, 2000, for the School District Notes and August 1, 1999, for the IVDA Notes. The combined annual debt service obligation for both issues is $2,800,000 ($1,050,000 for the School District Notes and $1,750,000 for the IVDA Notes). During the 1996-97 fiscal year it is anticipated that the IVDA will have approximately $2,100,000 of tax increment revenues for the payment of this annual obligation. The IVDA has experienced a decline in property assessed values since the 1993-94 fiscal year. Although the IVDA has been able to meet the debt service obligations on both the IVDA Notes and the 1 if! ~/1I1'17 Res 97- 1(;;" School District Notes by applying a combination of annual tax increment revenues and proceeds of the original issuances, the IVDA is presently in a position to save approximately 2.5% on the current interest rate which results in a $1,000,000 annual savings on the existing $40,000,000 combined principal balance of the School District Notes and the IVDA Notes. This annual savings can only be accomplished if the IVDA issues a single refunding bond issue that is guaranteed by a direct pay letter of credit to be delivered by Sumitomo Trust & Banking Company, Ltd., New York Branch with a confirming letter of credit issued by Sumitomo Bank. The proposed IVDA issuance of 30-year bonds will provide for a variable interest rate and the ability to establish the interest rates from time-to-time at either a weekly rate, short term fixed rate or a long term fixed rate. This flexibility of a multi-modal bond issue allows the IVDA to lower the debt service payments to a level that can be supported by the tax increment revenues of the IVDA in the near term and further provide the IVDA with the option to establish a long term fixed interest rate in the future when tax increment revenues increase to projected levels. The letter of credit will only be issued by Sumitomo Trust & Banking Company, Ltd., New York Branch if both the County of San Bernardino and the City of San Bernardino enter into an Agreement for Appropriation of Funds with Sumitomo Trust & Banking Company, Ltd., New York Branch in the form as attached to this agenda item. The Agreement for Appropriation of Funds has been reviewed by both County Counsel and the San Bernardino City Attorneys Office and is a valid and legal commitment of both the County and the City. The Agreement for Appropriation of Funds only requires both the County and the City to consider whether or not to include debt service shortfalls, if any, that may be experienced by the IVDA in a future year for the payment of the annual debt service obligation on the refunding bonds. In the event either or both the County and the City refuse or are unable to include the IVDA deficit amounts in the annual budgets of the County and the City, the only remedy available to Sumitomo Trust & Banking Company, Ltd., New York Branch is against the IVDA without any recourse whatsoever to the County and the City. 2 ., . . RECOMMENDATION: Staff recommends adoption of the attached Resolution approving the form of the Agreement for Appropriation of Funds and authorizing the execution and delivery of the final form of the Agreement for Appropriation of Funds. CSBO\OOlS\Doc\a 2\10\97 1230 law 3 AGREEMENT FOR APPROPRIATION OF FUNDS Dated as of March 1, 1997 by and among the COUNTY OF SAN BERNARDINO, as Guarantor and CITY OF SAN BERNARDINO, as Guarantor and SUMITOMO TRUST, as Letter of Credit Institution in connection with the issuance of the $45,500,000 (estimated) Inland Valley Development Agency Tax Allocation Bonds Series 1997 CSBO\001S\COC\S.4 2\10\97 1230 law AGREEMENT FOR APPROPRIATION OF FUNDS THIS AGREEMENT FOR APPROPRIATION OF FUNDS (the "Agreement"), dated as of March 1, 1997, is by and among the County of San Bernardino, a political subdivision of the State of California, duly established and existing pursuant to the laws of the State of California (the "County"), the City of San Bernardino, a municipal corporation duly established and existing pursuant to the constitution and laws of the State of California and pursuant to the City Charter (the "City"), and Sumitomo Trust, a , duly established and existing pursuant to the laws of (the "Bank"); WIT N E SSE T H: WHEREAS, the Inland Valley Development Agency (the "IVDA") has previously issued its $15,000,000 Inland Valley Development Agency, School District Tax Allocation Notes, Issue of 1993 (the "School District Notes") and the $25,000,000 Inland Valley Development Agency, Inland Valley Redevelopment Project Area, Tax Allocation Notes, Issue of 1993 (the "1993 IVDA Notes"); WHEREAS, the IVDA intends to issue its refunding obligations to be described as the $45,500,000 * (estimated) * Inland Valley Development Agency, Tax Allocation Bonds, Series 1997 (the "1997 Bonds") for the purpose of redeeming both the School District Notes and the 1993 IVDA Notes as of the next available dates set for the call and redemption prior to the respective maturity dates; WHEREAS, the Bank has expressed an interest to issue its direct pay irrevocable letter of credit in a total amount equal to $4_,000,000 (the "Letter of Credit") for the purpose of providing both the liquidity facility and the credit facility required for the IVDA to successfully issue the 1997 Bonds as variable rate 1 multi-modal notes at the highest municipal bond rating as may be obtained from the nationally recognized municipal bond rating agencies; WHEREAS, the Bank would not issue the Letter of Credit without the approval and execution of this Agreement by both the County and the City for the purpose of providing additional assurances to the Bank as to the willingness of the County and the City to assist in providing the payment of certain deficit amounts in the event that the tax increment revenues of the IVDA and other legally available funds of the IVDA are insufficient for the payment of the required annual debt service amounts on the 1997 Bonds for the period of time that the Letter of Credit remains outstanding. NOW THEREFORE, THE PARTIES MUTUALLY AGREE AS FURTHER PROVIDED IN THE FOLLOWING TERMS AND CONDITIONS OF THIS AGREEMENT. Section 1. Definitions. All terms used in this Agreement which are not otherwise defined herein shall have the same meanings as set forth in the applicable documents and agreements with respect to the issuance of the 1997 Bonds (collectively, the "1997 Note Documents"). The terms as so defined in this Agreement or in the 1997 Note Documents shall have the meanings ascribed to them herein or therein unless the context clearly requires some other meaning. Section 2. Renresentations. Covenants and Warranties of the Countv. The County represents, covenants and warrants to the Bank as follows: (a) Due Or9'anization and Existence. The County is a political subdivision of the State, duly organized and existing under the laws of the State. (b) Authorization. The laws of the State authorize the County to enter into this Agreement and to enter into the transactions contemplated by and to carry out its obligations under this Agreement, the County has duly authorized and executed this Agreement and this Agreement constitutes the legal, valid and 2 ,.-.- , binding agreement of the County, enforceable against the County in accordance with the terms hereof. (c) No Violations. Neither the execution and delivery of this Agreement, the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction, agreement or instrument to which the County is now a party or by which the County is bound, constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrances whatsoever upon any assets of the County. (d) authorized and of the State. Execution and Deliverv. The County has duly executed this Agreement in accordance with the laws Section 3. Renresentations. Covenants and Warranties of the City. The City represents, covenants and warrants to the Bank as follows: (a) Due Or<;ranization and Existence. The City is a municipal corporation and charter city, duly organized and existing under the Constitution and laws of the State. (b) Authorization. The laws of the State authorize the City to enter into this Agreement and to enter into the transactions contemplated by and to carry out its obligations under this Agreement, the City has duly authorized and executed this Agreement and this Agreement constitutes the legal, valid and binding agreement of the City, enforceable against the City in accordance with the terms hereof. (c) No Violations. Neither the execution and delivery of this Agreement, the fulfillment of or compliance with the terms and conditions hereof, nor the consummation of the transactions contemplated hereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction, agreement or instrument to which the City is now a party or by which the City is bound, constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrances whatsoever upon any assets of the City. 3 (d) authorized and of the State. Execution and Deliverv. The City has duly executed this Agreement in accordance with the laws Section 4. Reoresentations. Covenants and warranties of the Bank. The Bank represents, covenants and warrants to the County and to the City as follows: (a) Due Organization and Existence. The Bank is a corporation, duly organized and existing under the laws of the State of (b) Authorization. The laws of the state of incorporation and of the State authorize the Bank to enter into the Reimbursement Agreement, to execute and deliver the Letter of Credit and to enter into this Agreement and to enter into the transactions contemplated by and to carry out its obligations under all of the aforesaid agreements, the Bank has duly authorized and executed all of the aforesaid agreements and the Letter of Credit and such agreements and the Letter of Credit constitute the legal, valid and binding agreements of the Bank, enforceable against the Bank in accordance with their respective terms. (c) No Violations. Neither the execution and delivery of the Reimbursement Agreement, the Letter of Credit nor this Agreement, or the fulfillment of or compliance with the terms and conditions hereof or thereof, nor the consummation of the transactions contemplated hereby or thereby, conflicts with or results in a breach of the terms, conditions or provisions of any restriction, federal or state banking regulation or securities law, agreement or instrument to which the Bank is now a party or by which the Bank is bound, constitutes a default under any of the foregoing, or results in the creation or imposition of any lien, charge or encumbrances whatsoever upon any assets of the Bank, or upon the Letter of Credit or this Agreement. (d) authorized and of the State. Execution and Delivery. The Bank has duly executed this Agreement in accordance with the laws Section 5. Term of Agreement. The term of this Agreement shall commence on the date hereof, and shall end on the date the Bonds are paid in full. If on any date prior to the 4 termination date of this Agreement the 1997 Note Documents shall be discharged by their terms and no further payments are required to be made pursuant to the Reimbursement Agreement, the term of this Agreement shall thereupon end. Section 6. Obligation to Pav. Subject to the prov1s1ons of Section 7(b) hereof, the County and the City each agree to pay to the Bank, or directly to the IVDA if directed by the Bank in writing, an amount not to exceed fifty percent (50%) of (i) the interest payment required to be made by the IVDA with respect to the 1997 Note Documents in any single fiscal year during the term of this Agreement, and (ii) the interest amounts payable by the IVDA to the. Bank pursuant to the Reimbursement Agreement. The obligations of the County and the City as hereby incurred shall be payable only as to such annual amount to the extent that the IVDA has failed to pay the full amount of the interest payment for the 1997 Bonds on any Interest Payment Date pursuant to the 1997 Note Documents. The County and the City shall only be responsible for the percentage payments to the Bank for their respective portion of the amounts determined in accordance with (i) and (ii) above and not for any deficit caused by the failure to pay by the other party. Both the County and the City shall be obligated to remit the payments pursuant to the terms of this Section 6 during such period of time that the 1997 Bonds remain outstanding pursuant to the provisions of the 1997 Note Documents for the term of this Agreement. Section Annropriations. 7. Source of Payments: Budaet and (a) Payments to be made by the County and the City pursuant to this Agreement shall be payable from any source of legally available funds of the County and the City, respectively, subject to the provisions as set forth in Section 6 and as hereinafter set forth. (b) In the event there is a deficit in the interest to be paid by the IVDA to the Bank in any year, upon notice by the IVDA to the City and the County, the County and the City shall, for the next succeeding fiscal year subsequent to a fiscal year during which the IVDA has failed to remit the full interest payment on the 1997 Bonds, consider as a part of the budget adoption process whether to make funds available for the payment of amounts due 5 under Section 6 hereof. The covenants on the part of the County and the City herein contained shall be deemed at all times to be subject to and limited as to enforcement as required by applicable State law and the Constitution of the State for all actions otherwise required of the County and the City to carry out and perform the covenants and agreements in this Agreement agreed to be carried out and performed by the County and the City. Section 8. Maintenance of Tax-Exemption. Neither the County, the City nor the Bank shall take any action, or fail to take any action, as may be required to assure that the exclusion of interest payable by the IVDA with respect to the 1997 Bonds from the gross income of the Holders of the 1997 Bonds to the extent as such interest is permitted to be excluded from gross income under the Code as in effect on the date of issuance of the 1997 Bonds. Section 9. Assignment by the Bank. The rights of the Bank under this Agreement, including the right to receive payments of those amounts as may be remitted by the County and the City under this Agreement as limited by Sections 6 and 7 hereof, have been assigned to the Trustee pursuant to the 1997 Note Documents. Section 10. Events of Default Defined. The following shall be "Events of Default" under this Agreement and the terms "Events of Default" and "Default" shall mean, whenever they are used in this Agreement, anyone or more of the following events: (a) Failure by the County or the City to pay any payment required to be paid hereunder in the manner, to the extent and at the time specified hereunder. (b) Failure by the County or the City to observe and perform any covenant, condition or agreement on its part to be observed or performed under this Agreement other than as referred to in clause (a) of this Section 10, for a period of thirty (30) days after written notice specifying such failure and requesting that it be remedied has been given to the County or the City by the Bank; provided, however, if the failure stated in the notice can be corrected, but not within the applicable period, the Bank shall not unreasonably withhold its consent to an extension of such time if corrective action is instituted by the either the County or the City within the applicable period and diligently pursued until the Default is corrected. 6 (c) Failure of the appointed staff members of the County or the City to request that the necessary payments be included in the particular annual budget of the County and the City when required by this Agreement. (d) The filing by the County or the City of a voluntary petition in bankruptcy, or failure by the County or the City promptly to lift any execution, garnishment or attachment, or adjudication of the County or the City as a bankrupt, or assignment by the County or the City for the benefit of creditors, or the entry by the County or the City into an agreement of composition with creditors, or the approval by a court of competent jurisdiction of a petition applicable to the County or the City in any proceedings instituted under the provisions of the Federal Bankruptcy Act, as amended, or under any similar acts which may hereafter be enacted. Section 11. Remedies on Default: Exclusive Remedv. Whenever any Event of Default referred to in Section 10 hereof shall have occurred and be continuing, it shall be lawful for the Bank to exercise any and all remedies available to the Bank pursuant solely to this Section 11. Neither the Bank, the Trustee nor any Holder of all or any amount of the 1997 Bonds may initiate any action in law or in equity or exercise any other remedy except as specifically set forth in this Section 11. The Bank shall have as the exclusive remedy pursuant to this Section 11 the right at its discretion upon the occurrence of any such Event of Default to terminate the Letter of Credit and to thus terminate all other rights and obligations of the Bank with respect to the 1997 Bonds and the Reimbursement Agreement all as may be further provided and limited by the 1997 Note Documents. Section 12. No Additional Waiver Implied bv One Waiver. In the event any provision contained in this Agreement should be breached by any party hereto and thereafter waived by any of the other parties, such waiver shall be limited to the particular breach so waived and shall not be deemed to waive any other breach hereunder by any party. ! I Expenses. under any Section 13. Aareement to Pay Attorneys' Fees and In the event any party to this Agreement should Default of the provisions hereof and the non-defaulting party or 7 parties should employ attorneys or incur other expenses for the collection of moneys or the enforcement or performance or observance of any obligation or agreement on the part of the defaulting party or parties herein contained, the defaulting party agrees that it will on demand therefor pay to the non-defaulting party or parties the reasonable fees of such attorneys and such other expense so incurred by the non-defaulting party or parties; provided, however, that both the County and the City shall be liable for such costs and expenses to the extent that either the County or the City elect to make the necessary appropriations for such purposes pursuant to Section 7 hereof. Nothing contained herein shall preclude the Bank from seeking payment of such costs and expenses from the IVDA pursuant to the terms and provisions of the Reimbursement Agreement by and between the Bank and the IVDA. The costs, salary and expenses of the City Attorney and County Counsel and members of his office in enforcing this Agreement on behalf of the City and County shall be considered as "attorneys' fees" for the purposes of this section. Section 14. Notices. All notices, certificates or other communications hereunder shall be sufficiently given and shall be deemed to have been received forty-eight (48) hours after deposit in the United States mail in first class form with postage fully prepaid unless delivered by hand or by verified facsimile or other electronic transmission: If to the County: County of San Bernardino 385 North Arrowhead Avenue San Bernardino, CA 92415 Attn: County Administrative Officer If to the City: City of San Bernardino 300 North "0" Street San Bernardino, CA 92418 Attn: City Administrator If to the Bank: Sumitomo Trust 527 Madison Avenue New York, New York 10022 Attn: 8 If to the Trustee: First Trust of California, National Association Corporate Trust Dept., Fifth Floor 550 South Hope Street Los Angeles, CA 90071 The County, the City, the Bank and the Trustee, by notice given hereunder, may designate different addresses to which subsequent notices, certificates or other communications will be sent. Section 15. Binding Effect. This Agreement shall inure to the benefit of and shall be binding upon the County, the City and the Bank and their respective successors and assigns. Section 16. Severabilitv. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision hereof. Section 17. Further Assurances and Corrective Instruments. The County, the City and the Bank agree that they will, from time to time, execute, acknowledge and deliver, or cause to be executed, acknowledged and delivered, such supplements hereto and such further instruments as may reasonably be required for correcting any inadequate or incorrect description contained herein or intended so to be or for carrying out the expressed intentions of this Agreement. Section 18. Execution in Counterparts. This Agreement may be executed in several counterparts, each of which shall be an original and all of which shall constitute but one and the same instrument. Section 19. ~pplicable law. This Agreement shall be governed by and construed in accordance with the laws of the State. Section 20. Countv and City Official Actions. Whenever under the provisions of this Agreement the approval of the County or the City is required, or the County or the City is required to take some action at the request of the Bank, such approval or action shall be given or undertaken for the County by official action of the Board of Supervisors of the County and for 9 the City by official action of the Mayor and Common Council of the City, and each party hereto shall be authorized to rely upon any such approval or action only if acted upon by the Board of Supervisors and the Mayor and Common Council at duly noticed public meetings in the manner as required by the laws of the State. Section 21. Caotions. The captions or headings as contained in this Agreement are for convenience only and in no manner define, limit or describe the scope or intent of any provisions or section of this Agreement. 10 IN WITNESS WHEREOF, the County has caused this Agreement to be executed in its corporate name by its duly authorized officers and sealed with its seal; and the City has caused this Agreement to be executed in its name by its duly authorized officers and sealed with its seal; and the Bank has caused this Agreement to be executed in its name by its duly authorized officers and sealed with its seal, as of the date first above written. COUNTY OF SAN BERNARDINO By: Chairman ATTEST: By: Clerk of the Board APPROVED AS TO FORM: By: CITY OF SAN BERNARDINO By: Mayor ATTEST: By: City Clerk APPROVED AS TO FORM: By: SUMITOMO BANK By: Title: ATTEST: By: Title: CSBO\OOlS\DOC\S.4 11