HomeMy WebLinkAboutCC AG PKT 2008-08-11 #J• AGENDA STAFF REPORT
DATE: August 11, 2008
TO: Honorable Mayor and City Council
THRU: David Carmany, City Manager
FROM: Vince Mastrosimone, Director of Public Works
SUBJECT: PROPOSED FINANCING FOR FIRE STATION N0. 48
SUMMARY OF REQUEST:
The City Council is asked to review a proposal from Bank of America for
financing the reconstruction of Fire Station No. 48 through Lease Revenue
Bonds and direct the City Manager to pursue the same
BACKGROUND:
The City has gone forward with the final design plans for the reconstruction of
• Fire Station No. 48. The plans and specifications are 95% complete and are
undergoing final review by the various participants in the project.
Before the City solicits bids for construction, it is appropriate to determine the
source of funding for the project. While City reserves are available to fund
construction, it seems prudent for the City to keep its' funds in reserve while
financing the construction, due to the low interest rate currently available for long
term financing.
The City has received a proposal from the Bank of America (attachment A) to
provide project funding. The key elements of the proposal include:
• Allows funding up to $9 million which may include construction costs, cost
of issuance and the required reserve
• The term recommended by staff is.15 years (option 2)
• Lease Revenue Bonds (Bonds) are the financing vehicle
• Rates fora 15 year term were 4.06%. The actual rates will be established
at the time the Bonds are sold as determined by the market.
• The City Hall property would be used initially as collateral for the Bonds.
The new Fire Station can be substituted once it is completed
• The reserve requirement which, as proposed in Option 1, is an amount
equal to the lesser of: (i) maximum annual debt service, (ii) 125% of
average annual debt service payment, or (iii) 10% of the principal amount
• of the Bonds.
Agenda Item J
Page 2
These Bonds are proposed to be a private placement with the Bank of America.
This will provide the City with certain efficiencies in terms of the time it takes to
prepare the Bond documents and obtain approvals. Issuance costs will be
significantly lower than for a public sale and are not expected to exceed
$100,000. Richards Watson and Gershon is expected to be bond counsel. An
independent financial advisor has reviewed the proposal and found the terms to
be generally consistent with industry standards and the interest rates very
competitive.
FINANCIAL IMPACT:
The City will need to budget for annual debt service payments. An amortization
table fora $7.5 million project is provided as Attachment B. Annual payment will
be about $670,065.
RECOMMENDATION:
It is respectfully requested that the City Council consider the Bank of America
proposal for a Lease Revenue Bond financing for the reconstruction of Fire
Station No. 48 and direct the City Manager to pursue same.
SU MITTED BY:
Vince Mastrosimone, Director Public Works
Attachments:
A. Bank of America Proposal
B. Amortization Table
NOTED AND APPROVED:
~~
David Carmany, City Manager
•
•
•
R~t'!'1RCdYhElu~ ~
Bank®f~9n»eric ®~`
CITY OF SEAL BEACH
Term Facility
(Private Placement Certificates of Participation)
Summary of Indicative Terms and Conditions
July 30, 2008
This Summary of Indicative Terms and Conditions ("Summary of Terms") does not constitute a commitment to
lend by Bank of America ("Bank") or any of its afFllates, but indicates our desire to enter Into or continue
discussions with you and outlines certain of the terms on which we would consider providing or arranging a Term
Loan Facility. Any formal offer is subJect to satisfactory completion of due diligence, and the necessary credit
approval by the Bank. This Summary of Terms is Intended only as an outline of certain basic points of business
understanding around which legal documentations would be structured and does not purport to summarize all of
the conditions, covenants, representations warranties and other provisions which would be contained in definitive
documentation for the transaction involved in this financing.
ISSUER I OBLIGOR : City of Seal Beach (°City") through its financing authority ("Authority")
PURCHASER: Bank of America, N.A. ("Bank")
FACILITY: Up to $9,000,000 Term Facility ("Facility"). The Bank would expect that the
Facility would be documented as a private placement of Certificates of
• Participation ("Certificates" or "COPs") issued by the Authority and purchased by
the Bank for its own account.
PURPOSE: Proceeds of the Facility will be used to finance the construction of a new fire
station, fund the costs of issuance, and to fund a reserve (under Reserve
Requirement- Option #1, below).
TERMIREPAYMENT The Bank would be willing to discuss with the City the following tenor and
SCHEDULE: repayment options for the Faality:
O t~ ion 1:
A 10-year fully amortizing term loan based on equal principal payments.
O to ion 2:
A 15-year fully amortizing term loan based on equal principal payments.
In either option, principal plus interest is payable quarterly in arrears.
All calculations of interest and fees shall be made on the basis of 30 days
elapsed in a 360-day year.
Other repayment options may be available upon further evaluation.
FEES: Upfront fee of $5,000
INDICATIVE INTEREST RATES: The Facility would be anticipated to be atax-exempt bank qualified obligation.
The following assumes the COP amount is $9,000,000. The following are
indicative interest rates only, and may change as market conditions fluctuate:
Indicative 10-vear BQ Fixed Rate: Indicative 15-near BD Fixed Rate:
• 3.75% 4.06%
These are indicative rates as of July 30, 2008. Final rates will be subject to
market conditions at time of closing.
Bank of America, N.A.
Page 1 of 4
The City may wish to consider a variable rate alternative for expanded •
prepayment flexibility. The Bank would be pleased to present various scenarios
for your consideration to assist the City with the efficient management of its
interest rate risk or exposure.
PREPAYMENT: Prepayment fee in an amount sufficient to compensate the Bank for any loss
incurred by it as a result of the prepayment, as documented by the Bank,
induding any loss arising from the liquidation or reemployment of funds obtained
by it to maintain the funds used to fund the financing or from fees payable to
terminate the deposits from which such funds were obtained. For purposes of
this paragraph, the Bank shall be deemed to have funded the transaction by a
matching deposit or other borrowing in the applicable interbank market, whether
or not the transaction was in fact so funded.
SECURITY: The Bonds shall evidence the right to receive lease payments~nstallment
purchase payments in respect of mutually agreeable assets of the Issuer. The
Issuer's obligation to make such lease paymentsrnstallment purchase payments
shall be general fund obligations of the Issuer, subject only to abatement. The
Issuer shall be required to maintain not less than 24 months rental interruption
insurance with respect to such assets.
Lease payments to be made by the City to the Authority pursuant to a lease
agreement covering mutually agreed upon property between the Authority, as
lessor, and the City, as lessee, and the Bank.
All payment accounts (other than rebate accounts) established in conjunction
with the Facility by the Authority, if any.
Proceeds from any insurance, induding rental interruption insurance, covering
the property leased between the Authority, as lessor, and the City, as lessee.
The Bank's right to approve the leased asset(s) for which payments are made •
that support the Facility. The City will be granted the option to substitute the
property subject to the Lease Agreement and Site Lease with the completed fire
station, provided that the City shall satisfy all of the requirements to be conditions
precedent to such substitution (to be determined), among which will be a
certificate stating that the annual fair rental value of the substituted property (fire
station) is at least equal to 105% of the maximum amount of annual Lease
Payments due
RESERVE REQUIREMENT: Option 1: Bank will fund a debt service reserve fund ("Reserve Fund") with
Certificate proceeds at closing. The Reserve fund will be in an amount equal to
125°~ of maximum annual debt service.
Option 2: Minimum Generel Fund Balance Ratio. City will be required to
maintain unrestricted and undesignated general fund balances equivalent to 25~
of total outgo (total expenditures plus transfers out) during the life of the Facility.
CONDITIONS PRECEDENT: The Facility will be subject to satisfaction of conditions precedent including, but
not limited to, the following:
• Completion of Bank due diligence and credit approval
• Opinion of bond counsel, acceptable to Bank, regarding the
authorization to issue COPS and the tax-exempt bank qualified nature
thereof, and other such other customary opinions as required by the
Bank.
• No litigation or government action that purports (a) to materially and
adversely affect the City, or (b) to affect any transaction contemplated
hereby or the ability of the City to perform its obligation hereunder.
• No material adverse change. •
• City would be required to maintain 2 years of rental interruption
insurance covering the assets leased by the Authority under this COP,
with evidence of same prior to closing.
Bank of America, N.A.
Page 2 of 4
• City to covenant to annually appropriate the lease payments to the
Authority
• Evidence of general public liability and property damage insurance
satisfactory to the Bank.
• Leased real property asset acceptable to Bank. Bank's satisfaction as
to the value of the property supporting the Facility.
• Receipt of a certificate of fair rental value for the subject leased property
satisfactory to Bank.
• Receipt of satisfactory leasehold title insurance policy for the subject
leased property.
CONDITIONS TO THE FACILITY:
Reporting Requirements: Including but not limited to the following:
1. City's annual audited financial statements within 210 days of the City's
fiscal year end. These financial statements must be audited financial
statements of the City, prepared in accordance with generally accepted
accounting principals for government entities.
2. Concurrent with the delivery of (1) above, a certificate of the City signed
by an authorized officer stating that no event of default has occurred or
continuing.
3. City's annual budget within 30 days of adoption.
4. Additional information as Bank may reasonably request from time to
time.
Covenants: To be determined after further due diligence, but will likely include, but not limited
to the following:
1. No material amendments, modfications to or termination of any of the
COP Documents without Bank consent.
2. City will perform all of its obligations under the COP Documents,
including without limitation, its obligation to make annual appropriations
• for lease payments.
3. City and Authority will not pledge, assign, sell, transfer, lease, lien or
encumber the leased property during the term of the Facility.
4. A financial covenant to be determined.
Other Terms & Conditions: Other provisions with respect to reporting requirements, events of default,
representation and warranties, as may now be standard and customarily found in
agreements for similar transactions that are reasonably appropriate under the
ciroumstances and mutually agreed upon by the Bank and the City.
Indemnification: The City shall indemnify Bank and any officer, employee, agent, attorney or
controlling person thereof, or any holding company thereof, from and against all
' losses, liability, claims, damages or expenses relating to the Facility, including
but not limited to, reasonable attorney's fees and settlement costs.
Expenses: The City shall pay all reasonable costs and expenses incurred in connection
with preparation, due diligence, administration and enforcement of all
documents executed in connection with the Facility, including without limitation,
the reasonable legal fees of Bank's counsel regardless of whether or not the
facility closes once document preparation has commenced. Bank counsel fees
are estimated at $15,000, but may vary depending on the complexity of the
transaction.
Confidentiality: This Summary of Terms and Conditions is delivered with the understanding that
neither this Summary of Terms and Conditions nor any of its terms and
conditions shall be disclosed, directly or indirectly, to any other person except:
1. The City's employees, agents and advisors who are directly involved in the
consideration of this matter; or,
2. As disclosure may be compelled in a judicial or administrative proceeding or
as othervvise required by law (subject to reasonable approval by Bank).
•
Bank of America, N.A.
Page 3 of 4
Agreement by the Obligor:
The Obligor hereby agrees to engage Bank of America to provide the Facility, which is
the subject hereof, pursuant to the terms and conditions stated herein.
Please evidence your acceptance of the foregoing by signing and returning a copy of
the document to Bank of America.
ACCEPTED AND AGREED TO:
By:
Date:
•
•
•
Bank of America, N.A.
Page 4 of 4
l+'[1"A~tIIM1~7C 6
Loan Calculator
Enter Values _ ' '-"~ - ~~ ~ ~-
Loan Summa _
Loan Amount $ 7,500,000.00 ~ Scheduled Payment' $~ 187,516.36 ,
Annual Inten:st Rate 4.06 ~ Scheduled Number of Payments 160 ~
~ Loan Period in Years ~ _ 15 115 I ~ Actual Number of Payments ~ ~ 60
Number of Payments Per Year 4 Total Early Payments ~ $ _
Start Date of Loan 3/1/2009 ~ Total Interest $2,550,981 52 ~
Optional Extra Pa ments ---
Lender Name: ,Bank of America
Pmt
No. Payment
Date Beginning
Balance Scheduled Extra
Payment Payment Total
Payment
Principal
Interest Ending
Balance
1 6/1/2009 $ 7,500,000.00 $ 167,516.36 $ - $ 167,516.36 $ 91,391.36 $ 76,125.00 $ 7,408,608.64
2 9/1/2009 7,408,608.64 167,516.36 - 167,516.36 92,318.98 75,197.38 7,316,289.66
3 12/1/2009 7,316,289.66 167,516.36 - 167,516.36 93,256.02 74,260.34 7,223
033.64
4 3/1/2010 7,223,033.64 167,516.36 - 167,516.36 94,202.57 73,313.79 ,
7,128
831.07
5 6/1/2010 7,128,831.07 167,516.36 - 167,516.36 95,158.72 72,357.64 ,
7,033
672.35
6 9/1/2010 7,033,672.35 167,516.36 - 167,516.36 96,124.58 71,391.77 ,
6,937
547.77
7 12/1/2010 6,937,547.77 167,516.36 - 167,516.36 97,100.25 70,416.11 ,
6,840
447.52
8 3/1/2011 6,840,447.52 167,516.36 - 167,516.36 98,085.82 69,430.54 ,
6,742
361.70
9 6/1/2011 6,742,361.70 167,516.36 - 167,516.36 99,081.39 68,434.97 ,
6,643
280.32
10 9/1/2011 6,643,280.32 167,516.36 - 167,516.36 100,087.06 67,429.30 ,
6,543
193.25
11 12/1/2011 6,543,193.25 167,516.36 - 167,516.36 101,102.95 66,413.41 ,
6,442
090.30
12 3/1/2012 6,442,090.30 167,516.36 - 167,516.36 102,129.14 65,387.22 ,
6,339
961.16
13 6/1/2012 6,339,961.16 167,516.36 - 167,516.36 103,165.75 64,350.61 ,
6,236
795.41
14 9/1/2012 6,236,795.41 167,516.36 - 167,516.36 104,212.89 63,303.47 ,
6,132
582
52
15 12/1/2012 6,132,582.52 167,516.36 - 167,516.36 105,270.65 62,245.71 ,
.
6,027
311
88
16 3/1/2013 6,027,311.88 167,516.36 - 167,516.36 106,339.14 61,177.22 ,
.
5,920
972
74
17 6/1/2013 5,920,972.74 167,516.36 - 167,516.36 107,418.49 • 60,097.87 ,
.
5,813
554
25
18 9/1/2013 5,813,554.25 167,516.36 - 167,516.36 108,508.78 59,007.58 ,
.
5,705
045.47
• 19 12/1/2013 5,705,045.47 167,516.36 167,516.36 109,610.15 57,906.21 ,
5,595
435.32
20 3/1/2014 5,595,435.32 ~
167,516.36 167,516.36 110,722.69 56,793.67 ,
5
484
712
63
21 6/1/2014 5,484,712.63 167,516.36 - 167,516.36 111,846.53 55,669.83 ,
,
.
5
372
866
10
22 9/1/2014 5,372,866.10 167,516.36 - 167,516.36 112,981.77 54,534.59 ,
,
.
5
259
884
34
23 12/1/2014 5,259,884.34 167,516.36 - 167,516.36 114,128.53 53,387.83 ,
,
.
5
145
755
80
24 3/1/2015 5,145,755.80 167,516.36 - 167,516.36 115,286.94 52,229.42 ,
,
.
5
030
468
87
25 6/1/2015 5,030,468.87 167,516.36 - 167,516.36 116,457.10 51,059.26 ,
,
.
4
914
011
77
26 9/1/2015 4,914,011.77 167,516.36 - 167,516.36 117,639.14 49,877.22 ,
,
.
4
796
372
63
27 1211/2015 4,796,372.63 167,516.36 - 167,516.36 118,833.18 48,683.18 ,
,
.
4
677
539
45
28 3/1/2016 4,677,539.45 167,516.36 - 167,516.36 120,039.33 47,477.03 ,
,
.
4
557
500
12
29 6/1/2016 4,557,500.12 167,516.36 - 167,516.36 121,257.73 46,258.63 ,
,
.
4
436
242
39
30 9/1/2016 4,436,242.39 167,516.36 - 167,516.36 122,488.50 45,027.86 ,
,
.
4
313
753
89
31 12/1/2016 4,313,753.89 167,516.36 - 167,516.36 123,731.76 43,784.60 ,
,
.
4
190
022
13
32
33 3/1/2017 4,190,022.13 167,516.36 - 167,516.36 124,987.63 42,528.72 ,
,
.
4,065,034.50
34 6/1/2017
9/1/2017 4,065,034.50
3
938
778
24 167,516.36 -
167
516
36 167,516.36 126,256.26 41,260.10 3,938,778.24
35
12/1/2017 ,
,
.
3,811,240.48 ,
.
-
167,516.36 - 167,516.36
167,516.36 127,537.76
128,832.27 39,978.60
38,684.09 3,811,240.48
3
682
408
21
36
37 3/1/2018 3,682,408.21 167,516.36 - 167,516.36 130,139.92 37,376.44 ,
,
.
3,552,268.30
38 6/1/2018 3,552,268.30 167,516.36 - 167,516.36 131,460.84 36,055.52 3,420,807.46
39 9/1/2018
12/1/2018 3,420,807.46
3
288
012.30 167,516.36 -
167
516
36 167,516.36 132,795.16 34,721.20 3,288,012.30
40
3/1/2019 ,
,
3
153
869.26 ,
.
-
167
516
36 167,516.36 134,143.03 33,373.32 3,153,869.26
41
6/1/2019 ,
,
3,018,364.68 ,
.
-
167,516.36 - 167,516.36
167,516.36 135,504.59
136,879.96 32,011.77
30
636.40 3,018,364.68
2
881
484
72
42
43 9/1/2019
12/1/2019 2,881,484.72
2,743
215.43 167,516.36 -
167
516
36 167,516.36 138,269.29 ,
29,247.07 ,
,
.
2,743,215.43
44
3/1/2020 ,
2,603,542.71 ,
.
-
167,516.36 - 167,516.36
167,516.36 139,672.72
141,090.40 27,843.64
26,425.96 2,603,542.71
2
462
452
31
45
46 6/1/2020
9/1/2020 2,462,452.31
2,319
929.84 167,516.36 -
167
516
36 167,516.36 142,522.47 24,993.89 ,
,
.
2,319,929.84
47
12/1/2020 ,
2,175,960.77 ,
.
-
167,516.36 - 167,516.36
167,516.36 143,969.07
145,430.36 23,547.29
22
086.00 2,175,960.77
2
030
530
42
48
49 3/1/2021
6/1J2021 2,030,530.42
1,883
623.94 167,516.36 -
167
516
36 167,516.36 146,906.47 ,
20,609.88 ,
,
.
1,883,623.94
50
9/1/2021 ,
1,735
226.37 ,
.
-
167
516
36 167,516.36 148,397.58 19,118.78 1,735,226.37
•
51
12/1/2021 ,
1,585,322.55 ,
.
~
167,516.36 167,516.36
167,516.36 149,903.81
151,425.33 17,612.55
16
091.02 1,585,322.55
1
433
897
22
52
53 3/1/2022
6/1/2022 1,433,897.22
1,280,934.92 167,516.36 -
167
516
36 167,516.36 152,962.30 ,
14,554.06 ,
,
.
1,280,934.92
54
911/2022
1,126,420.05 ,
.
-
167,516.36 - 167,516.36
167,516.36 154,514.87
156,083.20 13,001.49
11
433.16 1,126,420.05
970
336
85
55
56 12/1/2022
:3/1/2023 970,336.85
812,669.41 167,516.36 -
167
516
36 167,516.36 157,667.44 ,
9,848.92 ,
.
812,669.41
,
.
- 167,516.36 159,267.76 8,248.59 653,401.65
Pmt Payment Beginning Scheduled Extra Total Ending
No. Date Balance Payment Payment Payment Principal Interest Balance
57 6/1/2023 653,401.65 167,516.36 - 167,516.36 160,884.33 6,632.03 492
517
32
58 9/1/2023 492,517.32 167,516.36 - 167,516.36 162,517.31 4,999.05 .
,
330
000
01 •
59 12/1/2023 330,000.01 167,516.36 - 167,516.36 164,166.86 3,349.50 ,
.
165
833
15
60 3/1/2024 165,833.15 167,516.36- - 165,833.15 164,149.95 1,683.21 ,
.
0.00
f 1
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