COUNTY OF SONOMA AGENDA ITEM SUMMARY REPORT

Transcription

1 COUNTY OF SONOMA AGENDA ITEM SUMMARY REPORT Clerk of the Board Use Only Meeting Date Held Until / / / / Agenda Item No: Agenda Item No: Department: CAO / Water Agency/NSC APCD Contacts: Lori Norton, Pam Johnston, Phone: (707) Board Date: 10/27/2009 ( ) 4/5 Vote Required Deadline for Board Action: 11/06/09 AGENDA SHORT TITLE: PROPOSITION 1A RECEIVABLE SECURITIZATION REQUESTED ACTIONS: See Supplemental Page EXPENDITURES ADD'L FUNDS REQUIRING BOARD Estimated Cost $ Contingencies $ (Fund Name:) Amount Budgeted $ Unanticipated Revenue $ (Source:) Other Avail Approp. $ (Explain below) Other Transfer(s) $ (Source:) Additional Requested: $ Add'l Funds Requested: $ Explanation (if required): Prior Board Action(s): None Alternatives - Results of Non-Approval: The Board could determine not to participate in the securitization program, to pursue borrowing independent of this program, or not to borrow to backfill these funds. Staff has considered alternatives and believes securitization represents the best option for the County. BD09-23

2 SUPPLEMENTAL PAGE Requested Actions: Board of Supervisors approve the following actions to securitize Proposition 1A receiveables: Therewith (County General Fund and various Lighting Districts) Therewith (CSA 40) Therewith (CSA 41 Park Sonoma Valley) Board of Directors of the Sonoma County Water Agency approve the following actions to securitize Proposition 1A receivables: Therewith (Water Agency General Fund, Spring Lake Park, and various Flood Zones) Board of Directors of the North Sonoma County Air Pollution Control District approve the following actions to securitize Proposition 1A receivables: Therewith (North Sonoma County Air Pollution Control District)

3 Background: Proposition 1A When faced with budget shortfalls, the State has historically borrowed or taken funding from local governments. In 2004 California voters passed Proposition 1A as a means to protect local governments by restricting the circumstances under which the State can borrow or take local funding. Through Proposition 1A voters wanted to safeguard local funding for critical local services such as public safety, health, human services, libraries, parks, etc. Proposition 1A contains a provision to allow it to be suspended if the Governor declares and two-thirds of the Legislature concurred that a fiscal necessity exists. On July 28, 2009, as part of the State s FY budget package, and in light of the State s severe fiscal crisis, the Legislature passed and the Governor signed legislation to suspend Proposition 1A. Under Proposition 1A, the State can only suspend the Proposition two times in ten years, cannot suspend for a second time until all previously borrowed funds are repaid, and must repay borrowed funds with interest. As a result of the suspension of Proposition 1A, the State will borrow approximately $2 billion statewide from local governments. This equates to 8% of the amount of property tax revenue which would normally be apportioned to cities, counties and special districts. The State will repay local governments for borrowed property taxes plus 2% interest, by June 30, However, many local governments who are already suffering from reductions in local taxes and severe State budget cuts cannot afford to finance the State s budget shortfall for three years. In Sonoma County, the suspension of Proposition 1A will result in the State borrowing property tax totaling approximately $25 million. This total includes property taxes borrowed from the county, cities, and special districts. California Communities and the Proposition 1A Securitization Program California Statewide Communities Development Authority ( California Communities ) is a joint powers authority sponsored by the California State Association of Counties and the League of California Cities. California Communities is sponsoring the Proposition 1A Securitization Program to enable local agencies to pool and sell their respective Proposition 1A property tax receivables to California Communities. Through securitization, participating local governments will receive an amount equal to 100% of the property taxes borrowed by the State. In simple terms, securitizing means that California Communities will purchase Proposition 1A receivables from local governments, issue bonds in an amount equal to the total of the receivables, and through the sale of the bonds provide participating local government with cash equal to 100% of their receivable. Local governments will be paid in two equal installments, made on January 15, 2010 and May 3, These dates coincide with the dates the State will shift property tax from local governments. In short, participating local governments will be shielded from the negative consequences of the State borrowing local property taxes. Benefits of Participation in the Proposition 1A Securitization Program The benefits of participation in the Proposition 1A Securitization Program include: Immediate cash relief The sale of Proposition 1A receivable will provide participating entities with 100% of the amount of property tax borrowed by the State in two equal installments, on January 15, 2010 and May 3, 2010.

4 Financing costs borne by the State Participating entities will not pay any interest cost or costs of issuance in connection with its participation. No obligation on Bonds Participating entities will have no obligation for payment of the bonds, nor any reporting, disclosure or other compliance obligations associated with the bonds. The election to participate in the securitization program is irrevocable. California Communities will pledge receivables to secure the repayment of a corresponding amount of the Proposition 1A Bonds. County Election to Participate A number of entities governed by the Board of Supervisors or Board of Directors have elected to participate in the Proposition 1A Securitization Program. These entities and the amount to be securitized are listed in the table below. Some County entities, primarily very small lighting districts, have elected not to securitize their Prop 1A receivables. Non-participating entities will be repaid the amount borrowed with interest (2%) by June Legal Entity PSA Reso Cert Est. Prop 1A Sub Entity to be listed on Certificate Sonoma County (County General) x x x $ 14,251, Guerneville Lighting $ 10, Monte Rio Lighting $ 3, Valley of the Moon Lighting $ 24, Est. Total County of Sonoma $ 14,290, CSA #40 Fire Services x x N/A $ 216, CSA #41 PK Sonoma Valley (#35) $ 9, Water Agency (General #1 Water) x x x $ 400, Sping Lake Park Water $ 129, Zn 1A Laguna Mark West Water $ 423, Zn 2A Petaluma Basin Water $ 106, Zn 3A Valley of the Moon Water $ 63, Zn 5A Lower Russian River Water $ 13, Zn 8A South Coast Water $ 11, Est. Total Water Agency $ 1,147, North Sonoma County Air Pollution Control District x x N/A $ 7, Proceeds of the Sale of the County's Proposition 1A Receivable Upon delivery of the Proposition 1A Bonds, California Communities will make available to each participating County or Water Agency entity its fixed purchase price, which will equal 100% of the Proposition 1A receivable. These funds may be used for any lawful purpose and are not restricted by the Securitization program.

5 Proposed Proposition 1A Receivables Sale Resolutions The proposed Proposition 1A Receivables Sale Resolutions: 1. Authorizes the sale of Proposition 1A Receivable to California Communities for 100% of its receivable; 2. Approves the form, and directs the execution and delivery, of the Purchase and Sale Agreements with California Communities and related documents; 3. Authorizes and directs any Authorized Officer to send, or to cause to be sent, an irrevocable written instruction required by statute to the State Controller notifying the State of the sale of the Proposition 1A Receivable and instructing the disbursement of the Proposition 1A Receivable to the Proposition 1A Bond Trustee; 4. Appoints officers and officials as Authorized Officers for purposes of signing documents; and 5. Authorizes miscellaneous related actions and makes certain ratifications, findings and determinations required by law. Proposed Purchase and Sale Agreements The proposed Purchase and Sale Agreement: 1. Provides for the sale of the Proposition 1A Receivable to California Communities; 2. Contains representations and warranties to assure California Communities that the Proposition 1A Receivable has not been previously sold, is not encumbered, that no litigation or other actions is pending or threatened to disrupt the transaction and the this is an arm's length "true sale" of the Proposition 1A Receivable. 3. Provides mechanics for payment of the Purchase Price 4. Contains other miscellaneous provisions. Proposed Purchase and Sale Agreement Exhibits: The proposed Proposition 1A Purchase and Sale Agreement Exhibits include the following: B1. Opinion of Counsel: This is an opinion of County Counsel covering basic approval of the documents, litigation, and enforceability of the document against the Seller. It will be dated as of the Pricing Date of the bonds (currently expected to be November 10, 2009). B2. Bringdown Opinion: This simply "brings down" the opinions to the Closing Date (currently expected to be November 19, 2009). C1. Certificate of the Clerk of the Local Agency: A certificate of the Clerk confirming that the resolution was duly adopted and is in full force and effect. C2. Seller Certificate: A certification of the Seller dated as of the Pricing Date confirming that the representations and warranties of the Seller are true as of the Pricing Date, confirming authority to sign, confirming due approval of the resolution and providing payment instructions. C3. Bill of Sale and Bringdown Certificate: Certificate that brings the certifications of C2 down to the

6 Closing Date and confirms the sale of the Proposition 1A receivable as of the Closing Date. D. Irrevocable Instructions to the Controller: Required in order to let the State Controller know that the Proposition 1A receivable has been sold and directing the State to make payment of the receivable to the Trustee on behalf of the Purchaser. E. Escrow Instruction Letter: Instructs Transaction Counsel (Orrick) to hold all documents in escrow until closing, and if closing does not occur by December 31, 2009 for any reason, to destroy all documents. The Resolutions and Purchase and Sale Agreements were provided by California Communities. They are a standard format that all participating local governments must utilize to participate in the program. They may not be revised in any way. County Counsel had reviewed the documents and approved of their form and substance. Clean-Up Legislation Required The legislature recently passed clean-up legislation, SB 67 which provides critical changes to the previously passed suspension legislation. While SB 67 has not yet been signed into law, California Communities expects that to occur prior to funding the Program. If for any reason SB 67 is not enacted and the bonds cannot be sold by December 31, 2009, these documents, which will be placed in escrow with Transaction counsel will be of no force and effect and will be destroyed. In the unlikely event this occurs, the County will consider other options such as internal or independent financing, and will return to the Board with a recommendation as to how to proceed. Recommended Action: For each of the entities listed above, approve by a simple majority vote a: Sale Agreement and Related Documents with Respect to the Sale of the Seller s Proposition 1A Receivable from the State; and Directing and Authorizing Certain Other Actions in Connection Therewith. Attachments: Sample Resolution On File With Clerk: Resolutions and Purchase and Sale Agreements for each of the entities who will participate in the Securitization Program CLERK OF THE BOARD USE ONLY Board Action (If other than "Requested") Vote: