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HomeMy WebLinkAboutItem 4C: Resolution Authorizing Issuance of Parks, Athletic Fields and Open Space Bonds ECC UGENE ITY OUNCIL AIS GENDA TEM UMMARY Adoption of Resolution 4898 Authorizing Issuance of Parks, Athletic Fields and Preservation of Open Space Bonds Meeting Date: January 8, 2007 Agenda Item Number: 4C Department: Central Services Staff Contact: Sue Cutsogeorge www.eugene-or.gov Contact Telephone Number: 682-5589 ISSUE STATEMENT The City Council is asked to authorize issuance of the $27,490,000 of General Obligation Parks, Athletic Fields and Preservation of Open Space Bonds approved by voters in the November 2006 election. BACKGROUND The City Council placed a $27,490,000 General Obligation Bond measure on the November 2006 ballot to fund parks, athletic fields and open space projects. Voters approved the measure by a margin of 59% to 41%. The measure included the following projects: Purchasing land for neighborhood and community parks in the Bethel, River Road/Santa Clara, ? south Eugene, Willakenzie and Willow Creek areas. Purchasing land to expand Amazon Park and parkland in front of the Shelton-McMurphey- ? Johnson House. Expanding and constructing park facilities at Golden Gardens Park. ? Purchasing land for the preservation of natural open spaces near the Ridgeline Trail, the ? Willamette River and Gillespie Butte. Developing a West Eugene Wetlands Education Center in partnership with other federal and ? local agencies. Refurbishing existing synthetic-surface ball fields, and developing new fields and related ? facilities (such as restrooms, lights and bleachers), in partnership with the Eugene 4J and Bethel school districts. Staff has begun work with the City’s bond counsel and financial advisor to develop a plan for issuance of the bonds for these projects. The goals of the issuance plan are to: 1) ensure that the City has sufficient funds on hand to accomplish the projects and make the property purchases when it is most advantageous to do so; 2) comply with all federal and state laws regarding issuance of tax-exempt bonds; and 3) minimize the out-of-pocket costs and staff time required to accomplish these goals. This bond measure is different from other City measures in the recent past because approximately two- thirds of the bond proceeds are programmed to be used for acquisition of property. Due to the many factors involved in the acquisition process, it is difficult to know exactly when a particular property L:\CMO\2007 Council Agendas\M070108\S0701084C.doc acquisition might occur. The IRS requires tax-exempt bond issuers to meet several tests, such as that the issuer has a “reasonable expectation” that 5% of the bond proceeds will be spent within six months, and that the issuer believes they can spend 85% of the bond proceeds within three years. Because of the heavy emphasis on property acquisition in this measure, there is significant uncertainty about when the bond proceeds will be spent. On the other hand, staff must be certain that the funds will be available when the acquisitions are made. In addition, bond counsel advises that property acquisitions can sometimes contain terms that would make those acquisitions ineligible for tax-exempt financing. For the reasons stated above, bond counsel has recommended that the City develop a flexible issuance plan that would include the ability to issue short-term debt or long-term debt. One approach would be that the funds could be borrowed in a manner similar to a line of credit. The City could repay the short- term debt either through a property tax levy, or by refunding it with long-term debt. Issuance of short- term debt would not carry the same IRS requirements about the rate of spending. In addition, bond counsel has recommended that the City have the ability to issue taxable debt, if that is required by the terms of any of the property acquisitions. City staff is continuing to work with its bond counsel and financial advisor to develop the issuance plan. The attached resolution would allow the City the flexibility to issue short- or long-term debt, and to issue taxable or tax-exempt debt, as appropriate according to IRS tax laws. The resolution also allows the City Manager to issue the debt as needed to fund the projects, without further council authorization. Staff would, however, notify the council through a Council Newsletter item when any debt is issued under the authorization. In the materials presented to voters for the bond measure, it was estimated that the average tax rate over the life of the bonds would be about $0.15 per $1,000 of assessed value. In developing a bond issuance plan, staff will attempt to keep the average tax rate at or below the level estimated in the bond measure materials. Oregon law does not require the council to authorize spending authority for the proceeds of a General Obligation Bond issue if the proceeds are spent in the same fiscal year as the bond election. Therefore, staff will not bring an FY07 supplemental budget to council for this item. The FY08 budget may include additional spending of bond proceeds, depending on the issuance strategy that is ultimately developed with the City’s bond counsel and financial advisor. RELATED CITY POLICIES The Budget Committee approved a set of debt issuance guidelines in February 2004. Those guidelines limit the amount of net direct debt outstanding to 1% of the City’s real market value. Issuance of the Parks, Athletic Fields and Open Space Bonds for $27,490,000 would not cause the City to violate this policy, as there is sufficient room under the debt limit for this purpose. The debt issuance guidelines state that voter-approved General Obligation bonds will be sold by competitive bid. Those policies assumed that General Obligation bonds would always be sold as long- term debt, and did not foresee a situation like the current one where a short-term, line of credit-type of debt instrument might be needed in order to meet IRS rules for tax-exempt financing. A line of credit cannot be sold by competitive bid. Therefore, approval of the attached resolution will mean that council is granting an exception to the policy of requiring a competitive bid for these Parks, Athletic Fields and L:\CMO\2007 Council Agendas\M070108\S0701084C.doc Preservation of Open Space Bonds. If a line of credit-type of debt instrument is used as part of the debt issuance plan, staff will use a competitive process to choose a bank to provide the line of credit. The City uses a line of credit to fund some of its assessment projects during the construction period, and a competitive process was used to choose the line of credit provider in that instance. COUNCIL OPTIONS The council may approve the authorization as presented or request changes in the authorization. If changes are requested in the authorization, staff would need to return to the council at a later date with the bond issuance resolution, after consultation with bond counsel. CITY MANAGER’S RECOMMENDATION The City Manager recommends adoption of the resolution. SUGGESTED MOTION Move to adopt Resolution 4898 authorizing issuance of the Parks, Athletic Fields and Preservation of Open Space Bonds. ATTACHMENTS A. Resolution FOR MORE INFORMATION Staff Contact: Sue Cutsogeorge, Financial Analysis Manager Telephone: 682-5589 Staff E-Mail: Sue.L.Cutsogeorge@ci.eugene.or.us L:\CMO\2007 Council Agendas\M070108\S0701084C.doc ATTACHMENT A RESOLUTION NO. A RESOLUTION AUTHORIZING THE SALE OF GENERAL OBLIGATION BONDS FOR PARKS, ATHLETIC FIELDS AND PRESERVATION OF OPEN SPACE. The City Council of the City of Eugene, Oregon, finds as follows: A. The voters of the City of Eugene (the “City”) authorized the City to issue $27,490,000 of general obligation bonds at the general election held on November 7, 2006, to finance parks, athletic fields and preservation of open space as described in the ballot title for the measure. B. It is now desirable to authorize the sale of the bonds that were approved by the voters at the November 7, 2006 election in multiple series. C. The City has appointed bond counsel pursuant to ORS 288.523. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Eugene, a municipal corporation of the State of Oregon, as follows: Section 1.Bonds authorized. The City hereby authorizes the issuance of not more than $27,490,000 (Twenty-Seven Million Four Hundred Ninety Thousand Dollars) in aggregate prin- cipal amount of general obligation bonds to finance the projects described in the ballot measure for Parks, Athletic Fields and Preservation of Open Space submitted to the City’s voters at the November 7, 2006 election and to pay costs of issuing the general obligation bonds (the “Pro- ject”). The City also authorizes the issuance of general obligation bonds pursuant to ORS 288.592 or any replacement statute, to refund any general obligation bonds authorized by this resolution. The general obligation bonds authorized by this resolution are herein referred to as the “Bonds.” Section 2.Delegation . The City Manager or the person designated by the City Manager to act on behalf of the City pursuant to this Resolution (the “City Official”) may, on behalf of the City and without further action by the Council: (1)Issue the Bonds in one or more series. (2)Issue Bonds to provide interim financing for the Project, enter into lines of credit or similar documents which permit the City to draw Bond proceeds over time, and issue Bonds to refund the Bonds that provide interim financing for the Project. (3)Participate in the preparation of, authorize the distribution of, and deem final any official statement or other disclosure documents relating to each series of the Bonds. (4)Establish the form, final principal amounts, maturity schedules, interest rates, sale prices and discount, prepayment terms, payment terms and dates, and other terms of each series of Bonds. (5)Execute and deliver a bond declaration for each series of Bonds, specifying the terms under which each series of Bonds are issued, and making covenants for the benefit of Resolution - Page 1 Bondowners. The bond declarations may also contain covenants for the benefit of any insurers of the Bonds. (6)Publish a notice of sale, receive bids and award the sale of each series to the bidder complying with the notice and offering the most favorable terms to the City, or select one or more underwriters, commercial banks or other investors and negotiate the sale of any series with those underwriters, commercial banks or investors. (7)Undertake to provide continuing disclosure for each series of Bonds in accordance with Rule 15c2-12 of the United States Securities and Exchange Commission. (8)Apply for ratings for each series of Bonds, determine whether to purchase municipal bond insurance or obtain other forms of credit enhancements for each series of Bonds, enter into agreements with the providers of credit enhancement, and execute and deliver related documents. (9)Appoint a paying agent for the Bonds and negotiate the terms of and execute an agreement with such paying agent. (10)Determine whether each series of Bonds will bear interest that is excludable from gross income under the Internal Revenue Code of 1986, as amended, or is includable in gross income under that code. If a series bears interest that is excludable from gross income under that code, the City Official may enter into covenants to maintain the excludability of interest on that series of the Bonds from gross income. (11)Execute and deliver each series of Bonds to their purchaser. (12)Execute and deliver any agreements or certificates and take any other action in connection with each series of Bonds which the City Official finds is desirable to permit the sale and issuance of that series of Bonds in accordance with this Resolution. Section 3.Security for Bonds. The Bonds shall be general obligations of the City. The City hereby pledges its full faith and credit to pay the Bonds, and the City covenants for the benefit of the Bondowners that the City shall levy annually, as provided by law, in addition to its other ad valorem property taxes and outside the limitations of Sections 11 and 11b of Article IX of the Oregon Constitution, a direct ad valorem tax upon all of the taxable property within the City in sufficient amount, after considering discounts taken and delinquencies that may occur in the payment of such taxes, to pay the Bonds promptly as they mature. Section 4.Duration. The authority granted by this resolution shall remain in effect as long as necessary to permit the sale, delivery, administration and payment of all Bonds authorized by this resolution. Section 5.Effective Date. This resolution shall take effect immediately upon adoption. The foregoing Resolution adopted by the City Council on the 8th day of January 2007. ______________________________________ City Recorder Resolution - Page 2