TO:
Honorable Mayor and Members of the City Council
THROUGH:
Bruce Moe, City Manager
FROM:
Steve S. Charelian, Finance Director
Henry Mitzner, Controller
Libby Bretthauer, Senior Financial Analyst
SUBJECT:Title
Consider Adopting Resolutions Approving Financing Documents and Authorizing the Execution and Delivery of Limited Obligation Improvement Bonds for Underground Utility Assessment Districts (UUAD) 19-12 and 19-14 and Approval to Sell Bonds for Districts 19-12 and 19-14 (Finance Director Charelian).
a) ADOPT RESOLUTION NOS. 19-0101 AND 19-0102
b) APPROVE SALE OF BONDS FOR UUAD 19-12 AND UUAD 19-14
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council: a) adopt Resolution Nos. 19-0101 and 19-0102 approving the issuance of the Bonds and authorizing the execution and delivery of the Fiscal Agent Agreements, Bond Purchase Agreements, Preliminary Official Statements, and Continuing Disclosure Certificates for Underground Utility Assessment Districts (UUAD) 19-12 and 19-14, respectively; and b) approve the sale of bonds for principal amounts not to exceed $6,735,000 and $6,810,000 for UUAD 19-12 and UUAD 19-14, respectively.
FISCAL IMPLICATIONS:
The following not to exceed totals for UUAD 19-12 and UUAD 19-14 resulted from the outcome of the Proposition 218 balloting procedures:
Category District 19-12 District 19-14
Number of Assessable Parcels 228 244
Design Costs $ 197,308.45 $ 225,178.45
Construction Costs $5,309,833.06 $5,345,831.47
Project Contingency Costs $ 265,491.65 $ 267,291.57
Incidental Expenses $ 332,634.06 $ 334,814.07
Bond Costs $ 629,732.78 $ 636,884.44
Total Undergrounding Costs $6,735,000.00 $6,810,000.00
The City will be reimbursed for total costs incurred, including Assessment Engineering fees, utility design fees, and past and future staff time up to the amount of $332,634 for UUAD 19-12 and $334,814 for UUAD 19-14. These totals were calculated by the Assessment Engineer and the City’s Financial Advisor.
BACKGROUND:
At the regular meeting on October 1, 2019, the City Council conducted public hearings and heard testimony either in support of or opposition to the Districts. After tabulating the assessment ballots, both Districts were authorized and formed by approval of Resolution Nos. 19-0091 and 19-0092. Property owners were given a minimum of 30 days to pay their assessment during a cash collection period. Owners had a choice of paying for the improvements in full, or participating in a bond issue wherein the bonded assessments are paid off over a 20 year period through the annual consolidated property tax bill. The fully-burdened assessment ranges for property owners in the Districts are:
• UUAD 19-12: $19,754.22 to $43,582.38, with an average of $29,539.47
• UUAD 19-14: $23,421.85 to $56,184.87, with an average of $27,909.84
The cash collection period ends November 5, 2019. The total amount of cash collected will reduce the amount of total undergrounding costs going to bond.
DISCUSSION:
At the completion of the cash collection period, the City will initiate steps to market bonds, such that bond proceeds and prepayment funds will finance total undergrounding costs. The bonds are secured by liens on the properties associated with the unpaid assessments. Annual debt service assessments will be included in the regular property tax bill over the life of the bonds to pay for the debt service.
Determination of the bonding amount will be based on the final amount of unpaid assessments and market conditions at the time of sale. In order to proceed with the bonding of UUAD 19-12 and UUAD 19-14 unpaid assessments, City Council must approve Resolution Nos. 19-0101 and 19-0102, approving the issuance of bonds and related documents, including Preliminary Official Statements and necessary agreements. Each resolution (one for each district) contains a descriptive narrative of the respective Preliminary Official Statement and agreements. The following is a summary of the attached Resolutions and other required documents:
Resolution No. 19-0101 (Attachment 1)
This Resolution approves the issuance of the Bonds and the execution and delivery of the below listed documents for District 19-12.
Resolution No. 19-0102 (Attachment 5)
This Resolution approves the issuance of the Bonds and the execution and delivery of the below listed documents for District 19-14.
Fiscal Agent Agreements (Attachments 2 & 6)
Sets forth the provisions governing the bonds and the payments on the bonds for Districts 19-12 and 19-14. This Agreement establishes the City’s relationship with U.S. Bank National Association (U.S. Bank) as trustee of the funds. U.S. Bank will be responsible for receiving proceeds of the refunding bonds and distributing funds, handling on-going principal and interest payments, as well as other expenses associated with the bonds.
Bond Purchase Agreements (Attachments 3 & 7)
Sets forth the provisions governing the sale of the bonds from the City to the Underwriter for Districts 19-12 and 19-14. This Agreement is between the Underwriter (BofA Securities, Inc.) and the City, whereby the Underwriter agrees to purchase the bonds from the City for marketing purposes.
Preliminary Official Statements (Attachments 4 & 8)
Used by the Underwriter to market the bonds and includes demographic, financial and other information regarding the bonds, the Assessment Districts, and the City for Districts 19-12 and 19-14. Under federal securities laws, this document must contain all relevant information relating to the bonds that would be material to investors. For approval purposes, the statements are preliminary, and subject to minor modifications.
Continuing Disclosure Certificates (Appendix F of Attachments 4 & 8)
Required by SEC Rule 15c2-12. These documents, located in Appendix F of each Preliminary Official Statement, obligate the City to file certain information annually and to provide notices of certain events that, if they were to occur, would require disclosure during the life of the debt for Districts 19-12 and 19-14.
After these required documents are approved by the City Council, several more steps will occur to fully execute the bond issuance. The Preliminary Official Statement will be posted around November 13, 2019, and marketing of the bonds will begin. Pricing of the bonds will then occur and the final Official Statements will be posted on November 26, 2019. The City expects the sale of the bonds to close by December 10, 2019.
PUBLIC OUTREACH:
After analysis, staff determined that public outreach was not required for the financing of UUAD 19-12 and UUAD 19-14, which were previously approved by the City Council.
LEGAL REVIEW:
Bond Counsel has reviewed this staff report and all the attachments and has approved as to legal form.
ATTACHMENTS:
1. UUAD 19-12 - Resolution No. 19-0101
2. UUAD 19-12 - Fiscal Agent Agreement
3. UUAD 19-12 - Bond Purchase Agreement
4. UUAD 19-12 - Preliminary Official Statement
5. UUAD 19-14 - Resolution No. 19-0102
6. UUAD 19-14 - Fiscal Agent Agreement
7. UUAD 19-14 - Bond Purchase Agreement
8. UUAD 19-14 - Preliminary Official Statement