AGENDA MEMORANDUM

 

 

Meeting Date:           October 26, 2009

 

From:                          Jerry Boop, Finance Director, CPA, CGFO

 

Subject:                      Resolution accepting the proposal of Bank of America to purchase the City's not to exceed $4.5 Million, Tax-exempt, Capital Improvement Revenue Refunding Note, Series 2009 to refinance the City's outstanding $4.0 Million, Taxable, Bond Anticipation Note (BAN) to Sun Trust Bank, and related costs.

 

 

Staff Recommendation:

Following a City RFP and review by City Staff and our Financial Advisor, Larson Consulting, staff recommends acceptance of the proposal from Bank of America (B of A) to purchase the City’s not to exceed $4.5 Million Capital Improvement Revenue Refunding Note, Series 2009 to refinance the City’s outstanding Bond Anticipation Note to Sun Trust.

 

Analysis:

At its regular meeting on October 6, 2006, the City Commission of the City of Leesburg approved entering into an agreement with Sun Trust Bank to provide the City with a $4.0 Million BAN to acquire the land and Kristen Court Apartments now known as Magnolia Townhomes.  The intended outcome of the project is to improve the property, provide affordable housing, and reduce City code enforcement and public safety costs. 

 

The purpose of the $4.5 million Capital Improvement Revenue Refunding Note is to refund the original BAN which becomes due on November 6, 2009 and to provide some additional capital for the project.  The current Note with SunTrust was structured as a Taxable Note to provide the City with maximum flexibility to allow either sale to a private sector party or developer, or remain under City ownership, and currently carries a variable interest rate which exceeds 6%.  The Note to be purchased by B of A, following analysis by our Bond Counsel, Akerman Senterfitt and our Financial Advisor, will be Tax-exempt, Bank Qualified and at a much lower interest rate, somewhere between 3.3% and 4.0%, due to the City remaining as “owner”.  This will be a reduction of approximately 200 to 300 basis points which translates to about a $100,000 reduction in annual interest expense to the City.  In addition, the Series 2009 Note is structured to maximize the cash flow requirements of the project, facilitate completion, and provide additional time for continued success in obtaining Courts/ State support via the SHIP program and additional grants.  Interest payments will approximate $150,000 per year, with the first principal payment of $835,000 purposely delayed until November 1, 2012, at which time the annual debt service will approximate $970,000.  The Maximum Annual Debt Service (MADS) over the life of the project approximates $982,000. 

 

Options:

1.  Approve the Resolution accepting the proposal of B of A to purchase the City’s not to exceed $4.5 Million Capital Improvement Revenue Refunding Note, Series 2009 to refinance the City’s outstanding $4.0 Million BAN with SunTrust Bank maturing on November 6, 2009; and the proposed Interest Rate Lock Agreement allowing the City to lock in the interest rate on October 27th following Commission action; Or

2.  Such alternative action as the Commission may deem appropriate.

 

 

Fiscal Impact:

Interest payments of $187,000 have been included in the Fiscal Year 2009-10 budget.  The current analysis reflects interest of approximately $150,000 due to the lower rate resulting in a budgetary savings of $37,000.   The lower interest rate is due, in large part, to the City’s recently achieved CB&A “A” category underlying credit ratings. In addition, the scheduling of delayed principal payments until 2012 provides for a period of reduced annual “interest only” debt service obligations, allows for the maximization of the use of funds, and enhances cash flow in the early years, all of which iscritical to the projects..  Both grant revenues and SHIP funds have been obtained to help pay for portions of this project, with unit sales to be used to prepay the Note, and the City providing support, as needed, by its Covenant to Budget and Appropriate from legally available non-advalorem revenues (“CB&A”).

 

Submission Date and Time:    10/23/2009 3:25 PM____

 

Department: _Finance_______________

Prepared by:  _Jerry Boop___________                     

Attachments:         Yes_X___   No ______

Advertised:   ____Not Required ______                     

Dates:   __________________________                     

Attorney Review :       Yes___  No ____

                                                

_________________________________           

Revised 6/10/04

 

Reviewed by: Dept. Head ________

 

Finance  Dept. ____JB____________                                     

                              

Deputy C.M. ___________________                                                                         

Submitted by:

City Manager ___________________

 

Account No. _________________

 

Project No. ___________________

 

WF No. ______________________

 

Budget  ______________________

 

Available _____________________


RESOLUTION NO. _____

A RESOLUTION OF THE CITY OF LEESBURG, FLORIDA AUTHORIZING A LOAN IN THE PRINCIPAL AMOUNT OF $4,500,000 IN ORDER TO REFINANCE THE CITY’S CAPITAL IMPROVEMENT BOND ANTICIPATION NOTE, SERIES 2006 (TAXABLE) AND TO FINANCE THE COST OF CAPITAL IMPROVEMENTS TO THE CITY OWNED HOUSING PROJECT KNOWN AS MAGNOLIA TOWNHOMES; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION BY THE MAYOR OR MAYOR PRO‑TEM OF A PROMISSORY NOTE AND A LOAN AGREEMENT IN SUBSTANTIALLY THE SAME FORM ATTACHED HERETO AS EXHIBIT “A” WITH BANK OF AMERICA, N.A.; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION BY THE MAYOR OR MAYOR PRO‑TEM OF A RATE LOCK AGREEMENT IN SUBSTANTIALLY THE SAME FORM ATTACHED HERETO AS EXHIBIT “B” WITH BANK OF AMERICA, N.A.; DESIGNATING THE PROMISSORY NOTE AS “BANK QUALIFIED;” PROVIDING FOR SEVERABILITY; PROVIDING FOR REPEALER; PROVIDING AN EFFECTIVE DATE.

            WHEREAS, the City of Leesburg (the “City”), a municipal corporation, is duly created and existing pursuant to the Constitution and Laws of the State of Florida; and

 

            WHEREAS, the City did on November 7, 2006 issue its Capital Improvement Bond Anticipation Note, Series 2006 (Taxable) in a principal amount of not exceeding $4.0 million and with a maturity date of November 6, 2009 (the “Prior Note”); and

 

            WHEREAS, the City in response to a request for proposals has received a proposal from Bank of America, N.A. (the “Bank”) to refinance the Prior Note and to provide funds to finance the cost of certain improvements to the City owned housing project known as Magnolia Townhomes (the “Project”); and

 

            WHEREAS, the City’s Financial Advisor, Larson Consulting Services, LLC (the “Financial Advisor”), the City’s selection committee and senior staff of the City have recommended that the City accept the Bank’s proposal; and

 

            WHEREAS, the City Commission of the City (the “City Commission”) finds and determines that it is in the best interest of the City that the City borrow the funds to refinance the Prior Note and to improve the Project; and

 

            WHEREAS, the Financial Advisor has recommended that due to the current volatility in interest rates for obligations such as the Promissory Note (as hereafter defined) that it is in the best interests of the City to enter into at this time a Rate Lock Agreement with the Bank in substantially the form attached hereto as Exhibit “B” in order to fix the interest rate on the Promissory Note; and

 

            HEREAS, this Resolution is adopted pursuant to the Constitution and Laws of the State of Florida;

 


NOW THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF LEESBURG, FLORIDA, AS FOLLOWS:

Section 1.                Authority for this Resolution

This Resolution is adopted pursuant to provisions of Chapter 166, Florida Statutes, the Florida Constitution, and other applicable provisions of law.

 

Section 2.                Incorporation of Recitals

The foregoing recitals are hereby ratified and confirmed as being true and correct and are hereby made a specific part by this Resolution upon adoption hereof.

 

Section 3.                Definitions

.  Words and phrases used in capitalized form in this Resolution and not otherwise defined herein shall have the meanings ascribed hereto in the Loan Agreement (hereinafter defined) and, in addition, the following words and phrases shall have the following meanings when used herein:

 

“Authorized Signatory” means any one of the Mayor, Mayor Pro‑Tem, or City Manager of the City.

 

“Loan Amount” means $4,500,000.00.

 

Section 4.                Authorization of Transaction

In order to obtain funds to refinance the Prior Note and to construct improvements to the Project, the City is authorized to obtain a loan (the “Loan”) from and to borrow from the Bank the Loan Amount.

 

The City Commission finds and determines as recommended by the City’s Financial Advisor and staff that a negotiated borrowing and sale to be undertaken in the form of the Loan from the Bank as described in the Loan Agreement and herein is in the best interest of the City (rather than a sale through competitive bidding) because the Loan offers (i) borrowing at lower costs than available alternatives and (ii) flexibility of financing that could not be obtained in a sale through competitive bidding.

Section 5.                Loan Agreement and Promissory Note

The City is authorized to execute a Loan Agreement with the Bank in substantially the form attached hereto as Exhibit “A” (the “Loan Agreement”) and to execute the Promissory Note (the “Promissory Note”) in substantially the form attached to the Loan Agreement. The forms and terms of the Loan Agreement and Promissory Note (jointly, the “Loan Documents”) attached hereto are hereby approved by the City and the Authorized Signatory is authorized to execute the same, with such changes as may be approved by the Authorized Signatory, such approval to be conclusively evidenced by the execution thereof by the Authorized Signatory.

 

Section 6.                Rate Lock Agreement

The City is authorized to execute a Rate Lock Agreement with the Bank in substantially the form attached hereto as Exhibit “B” (the “Rate Lock Agreement”). The form and term of the Rate Lock Agreement attached hereto is hereby approved by the City and the Authorized Signatory is authorized to execute the same, with such changes as may be approved by the Authorized Signatory, such approval to be conclusively evidenced by the execution thereof by the Authorized Signatory.

 

Section 7.                Authorization of Other Documents to Effect Transaction

To the extent that other documents, certificates, opinions, or items are needed to effect any of the transactions referenced in this Resolution, the Loan Documents and the security therefore, the Mayor, the City Clerk, the City Manager, the City Finance Director and the City Attorney are hereby authorized to execute and deliver such documents, certificates, opinions, or other items and to take such other actions as are necessary for the full, punctual, and complete performance of the covenants, agreements, provisions, and other terms as are contained herein and in the documents included herein by reference.

 

Section 8.                Paying Agent and Registrar

The City hereby accepts the duties to serve as Registrar and Paying Agent for the Promissory Note.

 

Section 9.                Bank Qualified

The City hereby designates the Promissory Note as “qualified tax-exempt obligations” within the meaning of Section 265(b)(3) of the Code.  The City and any subordinate entities of the City and any issuer of “tax-exempt” debt that issue on behalf of the City do not reasonably expect during the calendar year 2009 to issue more than $30,000,000 of “tax-exempt” obligations including the Promissory Note, exclusive of any private activity bonds as defined in Section 141(a) of the Code (other than qualified 501(c)(3) bonds as defined in Section 145 of the Code).

 

Section 10.            Severability

. If any provision of this Resolution shall be held or deemed to be or shall, in fact, be illegal, inoperative or unenforceable in any context, the same shall not affect any other provision herein or render any other provision (or such provision in any other context) invalid, inoperative or unenforceable to any extent whatever.

 

Section 11.            Repealer

All resolutions of the City or parts thereof in conflict herewith are hereby repealed.

 

Section 12.            Effective Date

. This Resolution shall take effect immediately upon its adoption.

 

PASSED, APPROVED AND ADOPTED this 26th day of October, 2009.

 

                                                                                   
Mayor

ATTEST:

 

 

____________________________________

City Clerk

 

 

APPROVED AS TO FORM

AND CORRECTNESS

 

 

____________________________________

City Attorney