TO:
Honorable Mayor Powell and Members of the City Council
THROUGH:
David N. Carmany, City Manager
FROM:
Bruce Moe, Finance Director
Henry Mitzner, Controller
SUBJECT: Title
Resolution No. 12-6392 Approving the Documents Related to the Replacement of the Existing Marine Avenue Sports Fields Variable Rate Debt Letter of Credit and a Remarketing Agreement with Loop Capital Markets
ADOPT RESOLUTION NO. 12-6392
Body
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RECOMMENDATION: Staff recommends that the City Council adopt Resolution No. 6392 approving the following documents in support of the 2002 Marine Avenue Sports Fields Certificates of Participation (COPs):
a) Replacement Letter of Credit/Reimbursement Agreement with Union Bank;
b) Fee Agreement with Union Bank;
c) Remarketing agreement with Loop Capital Markets; and
d) Remarketing Circular.
FISCAL IMPLICATIONS:
The balance owed on the Marine Avenue Sports Fields is approximately $7.235 million, with a remaining amortization period of twenty years. Annual debt service, which is based on variable interest rates, is budgeted at $600,000. However, due to the low interest rate environment, actual annual debt service has been approximately $340,000. Approval of the replacement letter of credit will not change the amortization schedule. The cost of obtaining the replacement letter of credit is approximately $47,235. This includes Bond/Disclosure Counsel ($15,000), Rating Agency ($5,000), Bank Counsel ($20,000) and the remarketing placement fee ($7,235).
BACKGROUND:
Bank of America currently provides the letter of credit for the City's 2002 Marine Avenue Sports Fields Certificates of Participation (COPs). Bank of America will not be renewing the letter of credit after it expires on November 1, 2012. As a result, at the August 7, 2012 meeting, the City Council approved the acquisition from Union Bank of a replacement letter of credit for the Marine Avenue Sports Fields Variable Rate Debt COPs. The City Council also approved the selection of Loop Capital Markets as remarketing agent for the COP's, also replacing Bank of America (Merrill Lynch) in that role.
DISCUSSION:
In order to complete the transaction, the City Council must approve several documents, including the Letter of Credit/Reimbursement Agreement (Union Bank); a Fee Agreement (Union Bank); the Remarketing Agreement with Loop Capital Markets; and a Remarketing Circular (each document is attached). Adoption of Resolution No. 6392 will accomplish that requirement.
Adoption of Resolution No. 6392 also authorizes the City Manager and/or the Finance Director to negotiate and execute the final documents listed. While the documents presented with this staff report are in substantially final form, occasionally minor corrections and adjustments must be made to complete the documents. As a result, and as approved for past financings, staff recommends that authority be provided for this process through adoption of the Resolution. This will allow for the timely completion of the replacement Letter of Credit and remarketing activities.
The documents for approval are as follows:
Letter of Credit/Reimbursement Agreement (Attachment "1")
This document is the credit facility that provides liquidity for the monthly interest expense payments and annual principal payments. Draws are made on the LC monthly and are reimbursed each month by the City via the trustee. In addition, in the event of a failed remarketing, the City may draw on the LC to purchase the bonds. This is the facility being replaced by Union Bank.
Fee Agreement (Attachment "2")
This document lists Union Bank's fees associated with providing the Letter of Credit. The fees are in accordance with the proposal originally provided by Union Bank.
Remarketing Agreement (Attachment "3")
This document between the City and Loop Capital Markets sets forth the terms and conditions under which Loop Capital will remarket the City's Marine Avenue COPs on a weekly basis.
Remarketing Circular (Attachment "4")
Similar to an Official Statement issued for other debt, the Remarketing Circular is used to market the COP's and includes demographic, financial and other information about the City and the financing. This document must contain all relevant information relating to the COP's and to City finances generally that would be material to investors.
Staff recommends that the City Council adopt Resolution No. 6392. Adoption will approve the replacement Letter of Credit/Reimbursement Agreement, the Fee Schedule, the Remarketing Agreement and the Remarketing Circular for the 2002 Marine Avenue Sports Fields COPs. If approved, staff will complete the replacement Letter of Credit/Remarketing conversion to accommodate the November 1, 2012, expiration of the existing Letter of Credit.
Attachment:
1. Letter of Credit/Reimbursement Agreement
2. Fee Agreement
3. Remarketing Agreement
4. Remarketing Circular
5. Resolution No. 12-6392