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Home My WebLink AboutR09-Redevelopment Agency , R&VELOPMENT MENCY.baT FOR 9-.1SSION/COUNCIL AglON GLENDA SAUL Subject: AMENDMENT TO ORDINANCE NO. 3815 CONCERNING BOND TRUSTEES 0:: Redevelopment Agency Date: AUGUST 13, 1986 Synopsis of Previous Commission/Council ection: In June, 1985, the Mayor and Common Council issued multifamily mortgage revenue bonds in the amount of $9,350,000 (series 1985) for Federicks Development (Puma1o Palms). On July 21, 1986, the Mayor and Common Council heard the first reading of the amendment to Ordinance No. 3815 and requested an analysis of the advantages and disadvantages of out-of-state trustees for municipal financings. On August 4, 1986, the Mayor and Common Council continued this matter to August 18, 1986. Recommended motion: (MAYOR AND COMMON COUNCIL) o SECOIm IlEADIRG ORDINANCE OF THE CITY OF SAN BERNARDINO AMENDING ORDINANCE NO. 3815 RELATING TO THE FINANCING OF PROJECTS FOR THE ENCOURAGING OF INCREASED EMPLOYMENT WITHIN THE CITY. &:~~~~~j/ Signature Contact person: GLENDA SAUL/KEN HENDERSON Phone: 383-5081 Supporting daui Ittached: FUNDING REQUIREMENTS: YES/STAFF REPORT Amount: $ N/A 1-7 Ward: Project: ALL No 8dvene III1p8Ct on City: Oeil Notlls: Om: AUGUST 18, 1986 Agenda Item No. /:- 9' . CI10 OF SAN BERNARDIO) - REQUECJ FOR COUNCIL ACON o o o 'lIo02__ STAFF REPORT In JUDe, 1986, the Mayor and Common council authorized the issuance of multif8llli1y mortgage revenue bonds in the 8IDOunt of $9,350,000 (series 1985) for Fredericks Deve10plllent (PUID810 Palms). Ordinance No. 3815 requires trust companies or banks having powers of a trust COlllpauy be within the State of California. This particular requirement has caused Fredericks a nUDlber prob1eJ118 inaslDUCh as the original trustee was an out-of-state company. To temporarily remedy the situation, an in-state company has been operating as interilll trustee for the Puma10 Palma project until such time as the Mayor and Common Council considered an aeudment to Ordinance No. 3815. The aendment would specifically allow trust companies or banks having powers of a trust company either within or outside the State of California to act as a trustee for the purposes of municipal financings. On July 21, 1986, the Mayor and COlDIDon Council heard the first reading of the amendment to OrdiDauce No. 3815 and requested an analysis of the advantages and disadvantages of out-of-state trustees for municipal financings. During the time between the July 21, 1986 and August 4, 1986, Council meetings, staff received two (2) memoranda from Sabo and Deitsch, both of which are attached to this report. Although there could be prob1eIDB associated with an out-of-state trustee as outlined in Mr. Sabo's second memorandum, staff recommenda the approval of the 818endment that would give the City that option. If a particular developer requested an out-of-state trustee the request could be evaluated based upon the four (4) points outlined in Mr. Sabots second memorandum. 1269L .. , " o o SASo & DEITSCHO ""~S~CO'l'OMTION AT10IIIIEYS AT lW/ IUlTllle ... To-,_ C&NVVN ~"'_.D WOODLAND HIllS, CAUI'OIINlA_' -.. 44OWUT_ITllCCT IAN II~. CAlJJllllI<IA I240l ""1"'_ (rMjU..71Q2 , tIlI)~" o 'ILECOPiP: (I"I7OW7211 MEMOP.AHD1lM To: The lonorable Mayor and Comon Council of the City of ,. . .. . .... San Iemar4ino '. '. From: t1Jllotll1 J . saba J>at.: Jul125.. 1986 . "- .., 'ropol.d Ordinanc. Amendiftl Ordinance Xo. 3815 Q \.... o fou bave rlllU..t.d advice concernin. tba na.ona for ....lIdiD. Ordiunc. JIG, 3815 of tile City of San I.rnardino (th. "OrdilllftC.") for thl purpo.. of ptrlllitUna the appointlll.nt of out-of-Itat. tna.t... for the inuanc. of bond. and IlmUar II\Iftldpal finaDciqa. 1a additiDA. you bav. r.qu.st.d advic. concernin. tb. bln.flts .lId d.trilDeDtal .ff.ct. of _dilll the Ordilllnce for tllia purpos.. For tha nasana aet forth bereilllfter. it i. our recOlDlDlnd.tion that tha Common Council approve the amendment to Ordinance No. 3815 to authorize the appointment of out-of-Itate trultee.. in addition to in-.tate trulte... Section 15 of the Ordilllnce curr.ntl, provid.. tbat any bonds b.ud pur.uant to the OrdinanCl ...y be .ecureel by {d.ntur. provido'lls in a leaolution of bluance by and betwel11 tbe City and a corporate truet.. or tnaat.... which III&Y be any truet cOIllp.n, or bank bavilll the powlr. of . tru.t comp.ny within tbl State. On Jul, 11. 1186. the COlDlDOn Council conducted the Urat reae!inl of a propolle! OrtlllWlC' ,ur.ual\t to wbicb Ordinanc. No. 3815 would b. amendld to permt. In addition to In-atat. trust.... a corporat. trult.. which IDlY b. a tnaat COlIIpIllf or bank baviDI the powen of a tru.t company outlld. of CaUfomla to act II a trult.. with re,ard to bonds i..u.d pur.uant to the Ordlaanc.. In tb. fint inlt,nc.. var10Ul .tatutory p~ovhlolla authorhilll tbe i.,uance of bond. cl.arly permit a bank or tru.t cDIDPal\1 from .ither withie or out.idl tbe State of ealifornia to act .1 trult... !l!. ..... Gov.~nt Cod. Sectlon 91504 .nd Bealth alld Saflt)' Cod. S.ction non. III fact. appolnt.lHnta of bot.h iii-stat. and out-of-.tate tnaate.. wen d.ad)' cont.mplat.d 11)' tb. dr.ftu. of tb. varioue nat. unnu. bOlld atatutor, provi.ioDl. .. 0- 0.' '- 0' \,., o _. 0 -0 - o . '..e Z In or'er to ...ure tb. ,roper performance of .Itb.r an In-.t.t. or out-of-.t.t. truat.e. .n h.ulll' ..enc, baa tbe .utbodt)' to lllelude Sn the r..olutloo .utborili., tb. I..UAne. of bond. or. .It.raativel,. in .11 illd.nture a.curi., the bond b.lIlI. ".rioue COYeUllt. outUllill. the .utboric, of tbe truat... Io1on. witb the p.rmitted coveullta which NY .. Ulpo... upon out-of-.t.te truate... ill particular. II" tho.. att fortb iD CalUomla atltutory providolll which re,ulate truat .cUvide. of foreim eorporatioD'. I!!. '.1.. California finaDcial Code Section 1700. !1 IIC!. In pracUeal tel'llll. th.re ara Illlllllrou' HneUt. ill pemittill& the appoill_lIt of .11 out-of...t.te tru.t... Oft.o, aucla truat.e. .r. located in proximity to relevant financial atrket.. tber.~, re.ultl., in lIOn cOIIPetltive r.t.. for tlleir a.rvice.. 101011& with provi'lll& cOlDpetitlv. ...t.a. the, can b. apeciaUaU ill the vadoue type. of bolld SUUII cootellplate'. In 84.i&1oo. tb. 10cIUoo of an ollt-of-.tate truete. _, 11. hel,ful in faclUtatlnl bon' trallalctiOlll illeludllll. but DOt lWted to. ".rtOIll o1lU,atlona require. to b. 'erfo..... b, the truat.. followllll la.\IIlIe. of the bGlld.. For eXlllpl.. . X.. York truat.. at, be famUI.r witll local 1IallUII, houra an' .., baTe .ucb l'I,ul.r 1I1111n... hour. lIO.t conducive to bOil' i..ua-r.latad t...lllaetloo. oecurri., ill Jlev fork. 10 truat.. .., aimUar1, H 1101" rea'U, Ibl. to "rfoftl the payilll a,.llt &lid v.dabl. r.t. f\IIICtiOll' of . truatee d.pendilll upon ita locatioo. A.. further .llIIlpl.. In t..... of In)' n.c....ry tran.action. rel.ted to . 'olld bau.' to b. perfo..... vitb r.,ar' to the F,'eral I...rv. Jallk. tbe Federal I.atrve time .,.tu 11 Ia.tern tt.e .nd the appointMnt of .n ollt-of-.t&tl truat.e loelted ill tb. .aat _y provi'e c.rtain I'VlAtal", In 11ll1t of tile forelollll, we recOllllltDd that Ordinance Ho. 3815 II. uend.d la order to permit the Cit, to hav. ,r..ter flexibUity ill Ippointilll tl'\llt... for bond luu.. b, lutllorhllll the appoiD_nt of botll iD-.tat. and out-o(-.tat. tl'\llt.... I all.U r'Nill avanlbl. It ,our r.qua.t to provide fUrther luiataDc. cOllceminl tbb utter, all' .ball ,lan to att.n' the C-n Councn ....Unl 011 AIlJU.t 4. 1986 ill ord.r to an.ver IftJ further q\llltlon. wblcll 7011 _, !lave. 'lJllub /11061 - ..0 . o SABO & DEITSCH 0 o A PROFESSIONAL CORPORATION (818) 704-0195 o TELECOPIER: (818) 704-4729 AnORNEVS AT lJIIN SUITE 100 585S TOPANGA CANYON BOULEVARD WOODLAND HillS. CALIFORNIA 91367 SUITE 207 440 WEST COURT STREET SAN BERNARDINO. CALIFORNIA 92401 (714) 884.2960 (714) 824-7302 MEMORANDUM ~ 1E((g~~W~ [iI r ",~ t.. -, . .l;:- iJ i:.:.;. REDfVfLOPMtfn AGt f;-, 01 Tiif CITY OF SAN BfR'-.i~' " " , , 'lot.> l.o-.. To: Glenda Saul From: Timothy J. Sabo Date: August 1, 1986 Re': Out-of-State trustees and the proposed amendment to OrdinancE: No. 3815 You have requested my views with regard to any potential o negative aspects prior to the final reading by the Mayor and COllllllOn Council of the Ordinance amending Section 15 of Ordinance No. 3815, as amended, as such amendment relates to the employment of out-of-state trustees by the City on certain industrial development bond issues and mortgage revenue bond issues of the City. Said amendment permits the City at its discretion to utilize an out-of-state trustee but does not require it to do so. appointment would be in the best interests of the City. The City would ROU!!NG GS .<. continue to be able to exercise its independent judgment whether such SL KH ME BL LV t- 5 I) ,..,.., I Possible negative aspects of the use of an out-of-state trustee MW CCTO , .-; ~- could include the following items: o -r- ORIG. ' . Nt-- ROUTE COPY _ ,/ ..0 o o o o o o Page 2 (1) an out-of-state trustee in an isolated bond transaction may have less desire to provide the quality of reporting and investment services than a California trustee because a California trustee would be more interested to maintain an ongoing relationship with the City and to perhaps attract other City deposit funds; (2) if collateral in the form of securities is delivered to an out-of-state trustee to guaranty performance of a developer under a bond issue, this Firm as bond counsel would be concerned as to the laws of the state where the collateral was to be physically located to determine which state laws would apply to perfect a security interest in said collateral and the method required in addition to opinions of counsel licensed to practice in the other state on such point of perfection of a security interest; (3) an out-of-state trustee may have either legal or practical difficulty in foreclosing upon real property located in California without retaining the services of a local trustee under such extreme situations to acco~lish all details of a foreclosure; and (4) time delays may result primarily to the developer in the processing of construction fund disbursements unless a local agent has been appointed to expedite onsite construction progress inspections and to authorize the immediate wire transfer of funds. It is still my view that an out-of-state trustee may not be advisable under all circumstances, but the City should have the option to appoint an out-of-state trustee under Ordinance No. 3815 for a particular e., - ..-0 . o Q o .Il. - -- o o Page 3 bond issue the same as it may under other California bond issuance statutes as set forth in my July 25. 1986. memorandum to the Mayor and COlllDOn Counc i1 . TJS:sg /1810S o