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CC 2018-05-08_09b 2007 Tax Allocation Bonds_RDA MEMORANDUM TO: SUCCESSOR AGENCY TO THE DISSOLVED ARROYO GRANDE REDEVELOPMENT AGENCY FROM: JAMES A. BERGMAN, EXECUTIVE DIRECTOR BY: DEBBIE MALICOAT, TREASURER SUBJECT: APPROVAL OF PRELIMINARY OFFICIAL STATEMENT FOR THE TAXABLE TAX ALLOCATION REFUNDING BONDS, SERIES 2018 TO REFUND IN FULL THE ARROYO GRANDE REDEVELOPMENT AGENCY, ARROYO GRANDE REDEVELOPMENT PROJECT AREA, 2007 TAX ALLOCATION BONDS DATE: MAY 8, 2018 SUMMARY OF ACTION: Approve actions that will allow the refunding of the 2007 Tax Allocation Bonds issued by the former Redevelopment Agency which will save significant interest costs. IMPACT ON FINANCIAL AND PERSONNEL RESOURCES: By refunding the 2007 Bonds, the Successor Agency can generate an estimated total debt service savings of $1,179,681 net of all costs of issuance, including the consultants fees described in this report, or about $60,000 annually to be shared by the City and the other affected taxing entities. The repayment of principal and interest on the Bonds will be payable solely from Tax Revenues, which is tax increment revenues from the Redevelopment Project deposited into the Successor Agency’s Redevelopment Property Tax Trust Fund, and available after satisfying certain administrative costs of the County and pass-through obligations to affected taxing entities. The Bonds will not be a debt of the City’s General Fund or the State, or any of its political subdivisions (except the Successor Agency). RECOMMENDATION: It is recommended the Board of the Successor Agency: 1. Adopt a Resolution approving the form and authorizing distribution of a Preliminary Official Statement in connection with the offering and sale of tax allocation bonds to refund certain outstanding obligations of the former Arroyo Grande Redevelopment Agency and approving related documents and actions; and 2. Authorize the Executive Director to amend or revise minor, non-substantive changes and approve final documents and agreements as needed to affect the bond refunding, provided they are in substantial compliance with the draft documents and Board direction. Item 9.b. - Page 1 SUCCESSOR AGENCY TO THE DISSOLVED ARROYO GRANDE REDEVELOPMENT AGENCY CONSIDERATION OF REFUNDING 2007 TAX ALLOCATION BONDS MAY 8, 2018 PAGE 2 BACKGROUND: Pursuant to section 34172(a) of the California Health and Safety Code (unless otherwise noted, all section references hereinafter being to such Code), the Arroyo Grande Redevelopment Agency (the “Former Agency”), has been dissolved and no longer exists as a public body, and pursuant to section 34173, and the Successor Agency to the Dissolved Arroyo Grande Redevelopment Agency (the “Successor Agency”) has become the successor entity to the Former Agency. A redevelopment plan for the Former Agency’s Arroyo Grande Redevelopment Project in the City of Arroyo Grande (the “City”) has been adopted in compliance with all requirements of the Code (the “Redevelopment Project”). Prior to the dissolution of the Former Agency, the Former Agency issued the 2007 Bonds to finance redevelopment activities within and for the benefit of the Redevelopment Project. ANALYSIS OF ISSUES: Section 34177.5 authorizes the Successor Agency to issue refunding bonds pursuant to Article 11 (commencing with section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the “Refunding Law”) for the purpose of achieving debt service savings within the parameters set forth in section 34177.5(a)(1) (the “Savings Parameters”). To determine compliance with the Savings Parameters for purposes of the issuance by the Successor Agency of its tax allocation refunding bonds, the Successor Agency has caused its municipal advisor, Wulff, Hansen & Co. (the “Municipal Advisor”), to prepare an analysis of the potential savings that will accrue to the Successor Agency and to applicable taxing entities as a result of the use of the proceeds of the refunding bonds to repay or refund all or a portion of the 2007 Bonds (the “Debt Service Savings Analysis”). An initial analysis based on current interest rates and the refunding bonds being insured has produced an estimated total debt service savings of approximately $1,179,681 by issuing refunding bonds. The 2007 Bonds have an interest rate on the longest term bonds of 5.80%. It is anticipated that the proposed refunding bonds would have an interest rate of approximately 4.70% on the longest term bonds. The term of the refunding bonds would not be extended, and would match the current final maturity date (09/01/2037) of the 2007 Bonds. The Successor Agency desires at this time to approve the form and distribution of the Preliminary Official Statement relating to the Dissolved Arroyo Grande Redevelopment Agency, Taxable Tax Allocation Refunding Bonds, Series 2018, to refund the 2007 Bonds (the “Bonds”), pursuant to an indenture of trust (the “Indenture”), by and between the Successor Agency and Wells Fargo Bank, National Association, as trustee (the “Trustee”); Item 9.b. - Page 2 SUCCESSOR AGENCY TO THE DISSOLVED ARROYO GRANDE REDEVELOPMENT AGENCY CONSIDERATION OF REFUNDING 2007 TAX ALLOCATION BONDS MAY 8, 2018 PAGE 3 Following approval of the POS by the Successor Agency, the Successor Agency’s Municipal Advisor will submit appropriate documents to the bond rating agency and bond insurance companies in preparation for marketing the Bonds. On March 15, 2018 the Oversight Board to the Successor Agency met and approved the required documents for the refinancing. These documents have already been submitted to the State Department of Finance (the (“DOF”) for approval of the transaction. The financing team is currently awaiting word from DOF. The DOF is permitted 65 days to review and approve the Oversight Board action and therefore, such approval is expected on or about May 21, 2018. It is anticipated that the Bonds will be sold to the public through a public offering by Brandis Tallman LLP, as underwriter (the “Underwriter”) and that the issue will be insured by a national bond insurance company. The final savings will be determined when the Bonds are priced and sold, which is expected to occur by the third week of June 2018. Per the attached Resolution, the Successor Agency is being asked to approve the form and distribution of the Preliminary Official Statement to allow the underwriter to market the bonds. The Preliminary Official Statement is on file with the Secretary of the Successor Agency. ALTERNATIVES: The following alternatives are provided for the Successor Agency’s consideration: 1. Proceed with the refunding of the 2007 Tax Allocation Bonds as recommended, thereby saving over $1 million for taxpayers; 2. Do not proceed with the refunding, thereby not saving over $1 million for taxpayers; or 3. Provide other direction to staff ADVANTAGES: Refunding the Bonds will result in significant savings in interest costs to the taxpayers. DISADVANTAGES: Staff time will be utilized to implement the refunding. However, the Municipal Advisor, Wulff, Hansen & Co. will minimize the impact to City staff for this effort. ENVIRONMENTAL REVIEW: No environmental review is required for this item. Item 9.b. - Page 3 SUCCESSOR AGENCY TO THE DISSOLVED ARROYO GRANDE REDEVELOPMENT AGENCY CONSIDERATION OF REFUNDING 2007 TAX ALLOCATION BONDS MAY 8, 2018 PAGE 4 PUBLIC NOTIFICATION AND COMMENTS: The Agenda was posted at City Hall and on the City’s website in accordance with Government Code Section 54954.2. Item 9.b. - Page 4 RESOLUTION NO. SA-2018-__ A RESOLUTION OF THE SUCCESSOR AGENCY TO THE DISSOLVED ARROYO GRANDE REDEVELOPMENT AGENCY APPROVING THE FORM AND AUTHORIZING DISTRIBUTION OF A PRELIMINARY OFFICIAL STATEMENT IN CONNECTION WITH THE OFFERING AND SALE OF TAX ALLOCATION BONDS TO REFUND CERTAIN OUTSTANDING OBLIGATIONS OF THE FORMER ARROYO GRANDE REDEVELOPMENT AGENCY AND APPROVING RELATED DOCUMENTS AND ACTIONS WHEREAS, pursuant to section 34172(a) of the California Health and Safety Code (unless otherwise noted, all section references hereinafter being to such Code), the Arroyo Grande Redevelopment Agency (the “Former Agency”), has been dissolved and no longer exists as a public body, corporate and politic, and pursuant to section 34173, and the Successor Agency to the Dissolved Arroyo Grande Redevelopment Agency (the “Successor Agency”) has become the successor entity to the Former Agency; WHEREAS, a redevelopment plan for the Former Agency’s Arroyo Grande Redevelopment Project in the City of Arroyo Grande (the “City”) has been adopted in compliance with all requirements of the Code (the “Redevelopment Project”); WHEREAS, prior to the dissolution of the Former Agency, the Former Agency issued its Arroyo Grande Redevelopment Agency, Arroyo Grande Redevelopment Project Area, 2007 Tax Allocation Bonds (Federally Taxable) to finance redevelopment and low and moderate income housing activities within and for the benefit of the Redevelopment Project, which remain outstanding (the “2007 Bonds”); WHEREAS, section 34177.5 authorizes the Successor Agency to issue refunding bonds pursuant to Article 11 (commencing with section 53580) of Chapter 3 of Part 1 of Division 2 of Title 5 of the California Government Code (the “Refunding Law”) for the purpose of achieving debt service savings within the parameters set forth in section 34177.5(a)(1) (the “Savings Parameters”); WHEREAS, to determine compliance with the Savings Parameters for purposes of the issuance by the Successor Agency of its tax allocation refunding bonds (the “Refunding Bonds”), the Successor Agency has caused its municipal advisor, Wulff Hansen & Co. (the “Municipal Advisor”), to prepare an analysis of the potential savings that will accrue to the Successor Agency and to applicable taxing entities as a result of the use of the proceeds of the Refunding Bonds to repay or defease all or a portion of the 2007 Bonds (the “Debt Service Savings Analysis”); WHEREAS, the Debt Service Savings Analysis has demonstrated that a refunding of the 2007 Bonds will satisfy the Savings Parameters; Item 9.b. - Page 5 RESOLUTION NO. SA-2018-__ PAGE 2 WHEREAS, the Successor Agency desires at this time to authorize the issuance of its Successor Agency to the Dissolved Arroyo Grande Redevelopment Agency Taxable Tax Allocation Refunding Bonds, Series 2018, to refund the 2007 Bonds (the “Bonds”), pursuant to an indenture of trust (the “Indenture”), by and between the Successor Agency and Wells Fargo Bank, National Association, as trustee; WHEREAS, the Successor Agency, by its Resolution adopted on March 13, 2018, authorized the issuance of the Bonds and approved the form and authorized the execution of the various documents prepared in connection therewith; WHEREAS, a preliminary official statement to be used in connection with the offering and sale of the Bonds has been prepared and it is appropriate at this time for the Successor Agency to approve the form thereof and its distribution to prospective purchasers of the Bonds; and WHEREAS, the Successor Agency has determined to sell the Bonds to Brandis Tallman LLC (the “Underwriter”). NOW, THEREFORE, THE BOARD OF DIRECTORS OF THE SUCCESSOR AGENCY TO THE DISSOLVED ARROYO GRANDE REDEVELOPMENT AGENCY DOES RESOLVE AS FOLLOWS: SECTION 1. Approval of Preliminary Official Statement. The Successor Agency hereby approves and deems final within the meaning of Rule 15c2-12 of the Securities Exchange Act of 1934 except for permitted omissions, a preliminary official statement describing the Bonds in the form on file with the Secretary (the “Preliminary Official Statement”). Distribution of the Preliminary Official Statement by the Underwriters to prospective purchasers of the Bonds is hereby approved. The Chair, the Vice Chair, the Treasurer or the Executive Director (the “Authorized Officers”) are hereby authorized to execute the final form of an official statement, including as it may be modified by such additions thereto and changes therein as an Authorized Officer shall deem necessary, desirable or appropriate (the “Final Official Statement”), and the execution of the Final Official Statement by an Authorized Officer shall be conclusive evidence of the approval of any such additions and changes. The Successor Agency hereby authorizes the distribution of the Final Official Statement by the Underwriter. The Final Official Statement shall be executed in the name and on behalf of the Successor Agency by an Authorized Officer. SECTION 2. Approval of Continuing Disclosure Certificate. The continuing disclosure certificate, in the form on file with the Secretary (the “Continuing Disclosure Certificate”), is hereby approved and any Authorized Officer is hereby authorized and directed, for and in the name and on behalf of the Successor Agency, to execute and deliver the Continuing Disclosure Certificate in such form together with such changes therein, deletions therefrom and additions thereto as the Authorized Officer executing the same shall approve, such approval to be conclusively evidenced by the execution and delivery Item 9.b. - Page 6 RESOLUTION NO. SA-2018-__ PAGE 3 of the Continuing Disclosure Certificate. The Successor Agency hereby authorizes the delivery and performance of the Continuing Disclosure Certificate. SECTION 3. Official Actions. The Authorized Officers and any and all other officers of the Successor Agency are hereby authorized and directed, for and in the name and on behalf of the Successor Agency, to do any and all things and take any and all actions, which they, or any of them, may deem necessary or advisable in obtaining the requested approvals by the Oversight Board and the California Department of Finance and in the issuance, sale and delivery of the Bonds. Whenever in this Resolution any officer of the Successor Agency is directed to execute or countersign any document or take any action, such execution, countersigning or action may be taken on behalf of such officer by any person designated by such officer to act on his or her behalf in the case such officer is absent or unavailable. SECTION 4. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. SECTION 5. Certification. The Secretary shall certify to the passage and adoption hereof. On motion of Board Member _________, seconded by Board Member ________, and on the following roll call vote, to wit: AYES: NOES: ABSENT: The foregoing Resolution was passed and adopted this 8th day of May, 2018. Item 9.b. - Page 7 RESOLUTION NO. SA-2018-__ PAGE 4 JIM HILL, CHAIR ATTEST: KELLY WETMORE, SECRETARY APPROVED AS TO CONTENT: JAMES A. BERGMAN, EXECUTIVE DIRECTOR APPROVED AS TO FORM: HEATHER K. WHITHAM, GENERAL COUNSEL Item 9.b. - Page 8 RESOLUTION NO. SA-2018-__ PAGE 5 STATE OF CALIFORNIA ) COUNTY OF SAN LUIS OBISPO ) .ss CITY OF ARROYO GRANDE ) I, Kelly Wetmore, Secretary of the Successor Agency to the Dissolved Arroyo Grande Redevelopment Agency of the City of Arroyo Grande, hereby certify that the foregoing Resolution was duly adopted by the Successor Agency at a regular meeting held on the 8th day of May 2018. _________________________________ KELLY WETMORE, SECRETARY Item 9.b. - Page 9 THIS PAGE INTENTIONALLY LEFT BLANK Item 9.b. - Page 10