AGENDA MEMORANDUM

Meeting Date: June 28, 2010

From: Jerry Boop, Finance Director, CPA, CGFO

Subject: Resolution accepting the proposal of Sun Trust Bank to purchase the City’s $8.0 Million Utility System Revenue Refunding Note, Series 2010 to refinance the City’s outstanding $8.0 Million Separate Utility System Revenue Bond Substitute Anticipation Note, (Plantation Acquisition Project), Series 2006; Authorizing execution of a loan agreement with said Bank to secure the repayment; providing for the payment of such Note from the Net Revenues of the City’s Gas, Sewer and Water Systems and Water and Sewer Capacity Charges on parity with certain outstanding utility debt of the City all as provided in the loan agreement.

Staff Recommendation:

Staff recommends accepting the proposal of Sun Trust Bank to purchase the City’s not to exceed $8.0 Million, Utility System Revenue Refunding Note, Series 2010, authorizing the execution and delivery of a loan agreement with said Bank, authorizing the proper officials of the City to do any other additional things deemed necessary or advisable in the connection with the execution of the Loan Agreement.

Analysis:

The original $8.0 Million note issued in 2006 carried an interest rate of 3% and was due to be paid in full October 1, 2009. During the onset of banking and market turmoil, 2008 through 2009, Staff sought to renew the note and negotiated a rate of 4.5% and a new due date of October 1, 2012 with the Seller. As the banking industry and financial markets have somewhat stabilized, Staff requested that the City’s Financial Advisor, Jeff Larson of Larson Consulting Services, LLC (FA) work with the City’s Purchasing Manager to issue a request for proposal (RFP) for an amount not to exceed $8.0 Million. The purpose of the request was to obtain more favorable interest rate and repayment terms. The current note has a bullet payment of $8.0 Million due on October 1, 2012 at which time the Utility System would need to obtain financing. Refinancing the note now, during this favorable market, will save the Utility millions of dollars in interest costs.

Following the RFP responses and a review of multiple options, Staff worked with the FA to successfully negotiate of a 15 year note bearing an interest rate of 3.85% with Sun Trust Bank. Staff then directed the City’s FA to work with City Legal Counsel, Fred Morrison, of McLin Burnsed, Bond Counsel, Mike Williams of Akerman Senterfitt and Sun Trust Bank to finalize the agreement. Final closing of the Note is expected on or before July 8, 2010.

Options:

1. Approve and accept the proposal of Sun Trust Bank to purchase the City’s not to exceed $8.0 Million, Utility System Revenue Refunding Note, Series 2010, authorizing the execution and delivery of a loan agreement with said Bank, and authorizing the proper officials of the City to do any other additional things deemed necessary or advisable in the connection with the execution of the Loan Agreement. Or;

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

Fiscal Impact:

Staff views this as a favorable time for refinancing as long term interest rates are currently low. The current sellers note has a bullet payment of $8.0 Million due October 1, 2012 at which time interest rates are projected to be much higher. Refinancing the note now at a rate of 3.85% and extending the final maturity to October 1, 2025, will save the Water and Wastewater Utilities millions of dollars in interest costs, and help avoid any unnecessary rate impacts to the City’s utility customers.

Submission Date and Time: 6/25/2010 4:28 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 __JB____

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 ACCEPTING THE PROPOSAL OF SUNTRUST BANK TO PURCHASE THE CITY’S NOT TO EXCEED $8.0 MILLION UTILITY SYSTEM REVENUE REFUNDING NOTE, SERIES 2010 TO REFINANCE THE CITY’S OUTSTANDING SEPARATE UTILITY SYSTEM REVENUE BOND SUBSTITUTE ANTICIPATION NOTE (PLANTATION ACQUISITION PROJECT), SERIES 2006; AUTHORIZING THE EXECUTION AND DELIVERY OF A LOAN AGREEMENT WITH SAID BANK TO SECURE THE REPAYMENT OF SAID LOAN; PROVIDING FOR THE PAYMENT OF SUCH NOTE FROM THE NET REVENUES OF THE CITY’S GAS, SEWER AND WATER SYSTEMS AND WATER AND SEWER CAPACITY CHARGES ON PARITY WITH CERTAIN OUTSTANDING UTILITY DEBT OF THE CITY, ALL AS PROVIDED IN THE LOAN AGREEMENT; AUTHORIZING THE PROPER OFFICIALS OF THE CITY TO DO ANY OTHER ADDITIONAL THINGS DEEMED NECESSARY OR ADVISABLE IN CONNECTION WITH THE EXECUTION OF THE LOAN AGREEMENT, THE NOTE, AND THE SECURITY THEREFOR; AUTHORIZING THE EXECUTION AND DELIVERY OF OTHER DOCUMENTS IN CONNECTION WITH SAID LOAN; DESIGNATING THE NOTE AS “BANK QUALIFIED;” PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE.

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

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

FINDINGS. It is hereby ascertained, determined and declared:

The City of Leesburg, Florida (the “City”) deems it necessary, desirable and in the best interests of the City that the City refinance its Separate Utility System Revenue Bond Substitute Anticipation Note (Plantation Acquisition Project), Series 2006 (the “Refunded Note”), all as more particularly described in the Loan Agreement (as defined herein). The Refunded Note was originally issued to acquire the Plantation water and sewer facilities (the “Plantation Project”).

Pursuant to Section 2(b), Article VIII of the State Constitution, and Section 166.021, Florida Statutes, municipalities have the governmental, corporate and proprietary powers to enable them to conduct municipal government, perform municipal functions, and render municipal services, and may exercise any power for municipal purposes, except when expressly prohibited by law. The issuance by the City of its Utility System Revenue Refunding Note, Series 2010 (the “2010 Note”) and the execution and delivery of the Loan Agreement for the purposes of refinancing the Refunded Note is not prohibited by law.

The City‘s financial advisor, Larson Consulting Services, LLC (“Financial Advisor”), and City staff have reviewed the proposal of SunTrust Bank (the “Bank”) regarding a loan in an amount of not to exceed $8.0 million as provided in the 2010 Note (the “Loan”) to the City, the proceeds of which will be applied to refinance the Refunded Note.

The 2010 Note will be issued as “Additional Bonds” in accordance with the provisions of City Resolution No. 7143 (the “Original Instrument”) and will be secured by the Pledged Revenues as provided in Section 6 hereof and the Loan Agreement pursuant to which the City will issue the 2010 Note to secure the repayment of the Loan. Pursuant to the provisions of the Original Instrument at the time of issuance of the 2010 Note as Additional Bonds pursuant to the Original Instrument the Plantation Project will become part of the Water System and Sewer System within the meaning of the Original Instrument.

In accordance with the provisions of City Resolution 7143, it is hereby found that all of the covenants contained in said resolution shall be fully applicable to the 2010 Note except as otherwise provided in the Loan Agreement.

The City is advised by its Financial Advisor that due to the present volatility of the market for municipal debt, it is in the best interest of the City to issue the 2010 Note pursuant to the Loan Agreement by negotiated sale, allowing the City to issue the 2010 Note at the most advantageous time, rather than a specified advertised future date, thereby allowing the City to obtain the best possible price, interest rate and other terms for the 2010 Note and, accordingly, the City Commission of the City hereby finds and determines that it is in the best financial interest of the City that a negotiated sale of the 2010 Note to the Bank be authorized.

AUTHORIZATION OF REFINANCING OF REFUNDED NOTE. The City hereby authorizes the refinancing of the Refunded Note as more particularly described in the Loan Agreement.

ACCEPTANCE OF COMMITMENT LETTER WITH BANK. Based on a recommendation from the City’s selection team and the City’s Financial Advisor, the City hereby accepts the commitment letter of the Bank dated May 13, 2010 as supplemented to provide the City with the Loan.

APPROVAL OF FORM OF AND AUTHORIZATION OF LOAN AGREEMENT AND EXECUTION OF LOAN AGREEMENT AND 2010 NOTE. The Loan and the repayment of the Loan as evidenced by the 2010 Note shall be pursuant to the terms and provisions of the Loan Agreement and the 2010 Note. The City hereby approves the Loan Agreement in substantially the form attached hereto as Exhibit A and authorizes the Mayor or the Mayor Pro-Tem of the City (collectively, the “Mayor”) and the City Clerk or any deputy or assistant City Clerk of the City (collectively, the “City Clerk”) to execute and deliver on behalf of the City the Loan Agreement by and between the City and the Bank substantially in the form attached hereto as Exhibit A (the “Loan Agreement”) and the 2010 Note in substantially the form attached to the Loan Agreement, with such changes, insertions and additions as they may approve, their execution thereof being evidence of such approval.

PAYMENT OF DEBT SERVICE ON 2010 NOTE. Pursuant to the Loan Agreement, the 2010 Note will be secured by the Net Revenues of the City’s Gas, Sewer and Water Systems and Water and Sewer Capacity Charges on parity with the City’s outstanding Utility System Revenue Bonds, Series 2004 and the City’s outstanding Utility System Revenue Bonds, Series 2007A and Taxable Utility System Revenue Bonds, Series 2007B, all as more particularly described in the Loan Agreement.

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 Agreement or the 2010 Note and the security therefore, the Mayor, the City Clerk, the City Manager, the 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.

PAYING AGENT AND REGISTRAR. The City hereby accepts the duties to serve as Registrar and Paying Agent for the 2010 Note.

LIMITED OBLIGATION. The obligation of the City to repay amounts under the Loan Agreement and the 2010 Note are limited and special obligations, payable solely from the sources and in the manner set forth in the Loan Agreement and shall not be deemed a pledge of the faith and credit or taxing power of the City.

DESIGNATION OF 2010 NOTE AS BANK QUALIFIED. The City designates the 2010 Note as a “qualified tax-exempt obligation” within the meaning of Section 265(b)(3) of the Internal Revenue Code of 1986, as amended (the “Code”). The City does not reasonably anticipate that the City, any subordinate entities of the City, and issuers of debt that issue “on behalf” of the City, will during the calendar year 2010 issue more than $30,000,000 of “tax-exempt” obligations, exclusive of those obligations described in Section 265(b)(3)(C)(ii) of the Code.

EFFECT OF PARTIAL INVALIDITY. If any one or more provisions of this Resolution, the Loan Agreement or the 2010 Note shall for any reason be held to be illegal or invalid, such illegality or invalidity shall not effect any other provision of this Resolution or the 2010 Note or the Loan Agreement, but this Resolution, the Loan Agreement and the 2010 Note shall be construed and enforced as if such illegal or invalid provision had not been contained therein. The 2010 Note and Loan Agreement shall be issued and this Resolution is adopted with the intent that the laws of the State of Florida shall govern their construction.

EFFECTIVE DATE. This Resolution shall take effect immediately upon its adoption.

PASSED, APPROVED AND ADOPTED this 28^th day of June, 2010.

CITY OF LEESBURG, FLORIDA

[SEAL]

By:
Mayor

ATTEST:

By

City Clerk

Approved as to form and correctness:

City Attorney