8.1 TO: FROM: SUBJECT: Kent Studebaker, Mayor Members of the City Council Shawn Cross, Finance Director RESOLUTIONS 17-58 AND 17-61, BOND REFINANCING DATE: October 27, 2017 MEETING DATE: November 7, 2017 SUGGESTED MOTION Move to adopt Resolutions 17-58 and 17-61 authorizing the refinancing of the 2005 storm water revenue bonds, the 2007 water revenue bonds, and the 2009 sewer full faith & credit (FF&C) obligations; and adopt Resolution 17-61 to amend the FY2017-18 budget for the proceeds and payments related to refinancing the bonds. INTRODUCTION/BACKGROUND The 2005, 2007, and 2009 bonds have matured enough to allow them to be callable and refinanced. DISCUSSION Staff routinely explores refinancing our current bonds to see if doing so would save the City future debt service payments. This is very similar to refinancing one s home. We evaluate whether there is enough savings with a lower rate to offset any new issuance costs and still give savings to the City. Staff has been looking at the 2009 FF&C bonds and found that we could save about $5 million in debt service with a net present value amount of about $4 million over the life of the bonds. We are only eight years into the 25 year term on the obligations. The bonds are not callable until after ten years, so the City will need to do what is called an advanced refunding. That means the City will need to deposit the funds from the refinancing into an escrow account to pay the debt service for the next two years and then pay off the bonds at that time. This is not out of the ordinary and is quite routine when looking at refinancing bonds. The City did this in 2007 with the 1999 Water Revenue Bonds. The savings stated above is taking this defeasance into account. 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.ci.oswego.or.us
Page 2 At the same time, we looked at the City s two revenue bond issues. Since we were already looking at refunding the 2009 bonds, there could be savings through economies of scale and refinancing these two at the same time. Then we would only need to pay for the bond sale expenses once instead of three different times. The estimated savings on the future debt service payments for the 2005 and 2007 bonds are $100,000 and $340,000 with an estimated net present value of $90,000 and $300,000 respectively. Also, refinancing these bonds will not lengthen the time left to pay on the specific bond series. I.e. the 2005 Stormwater Revenue Bonds will still be paid off in fiscal year 2023-24. The City is tentatively scheduled to have a teleconference with both Moody s and S&P in mid- December, to have bid opening in late-january, and the bond closing in late-february. FISCAL IMPACT Refinancing these three bond issues will reduce the annual debt service requirements for the three enterprise funds over the remaining life of the bonds. This is roughly about $315,000/year in savings in the Sewer Fund, $34,000/year in the Water Fund, and $15,000/year in the Stormwater Fund. RECOMMENDATION Adopt Resolutions 17-58 and 17-61. ATTACHMENTS 1. Resolution 17-58 2. Resolution 17-61 503.635.0215 380 A Avenue PO BOX 369 Lake Oswego, OR 97034 www.ci.oswego.or.us
ATTACHMENT 1 RESOLUTION 17-58 A RESOLUTION OF THE CITY OF LAKE OSWEGO, OREGON, AUTHORIZING THE ISSUANCE, SALE, EXECUTION AND DELIVERY OF FULL FAITH AND CREDIT REFUNDING BONDS, IN ONE OR MORE SERIES, TO REFUND ALL OR A PORTION OF CERTAIN OUTSTANDING DEBT OF THE CITY; AUTHORIZING A PLEDGE OF THE FULL FAITH AND CREDIT OF THE CITY TO SECURE THE FULL FAITH AND CREDIT REFUNDING BONDS; AUTHORIZING THE EXECUTION AND DELIVERY OF FINANCING, LEGAL AND DISCLOSURE DOCUMENTS THAT ESTABLISH THE TERMS FOR THE EXECUTION, SALE AND DELIVERY OF THE FULL FAITH AND CREDIT REFUNDING BONDS; DESIGNATING AUTHORIZED REPRESENTATIVES AND DELEGATING RESPONSIBILITIES; AND RELATED MATTERS. WHEREAS, the City of Lake Oswego, Oregon ( City ) is authorized to issue bonds pursuant to Oregon Revised Statutes ( ORS ) Section 287A.150, related provisions of ORS Chapter 287A and the laws of the State of Oregon (collectively, the Act ), for any public purpose and to secure those bonds with a pledge of the City s full faith and credit as provided in ORS 287A.315; WHEREAS, the Act permits the City to authorize the issuance of such bonds by adopting a resolution, but prohibits the City from selling such bonds until at least 60 days following publication of a Notice of Intent to Issue Bonds (the Notice ) authorized by Section 1 herein; WHEREAS, the City previously authorized the sale, issuance and delivery of its City of Lake Oswego Surface Water Revenue Bonds, Series 2005, issued in the original aggregate principal amount of $3,000,000 (the 2005 Bonds ), its City of Lake Oswego Water Revenue and Refunding Bonds, Series 2007, issued in the original aggregate principal amount of $9,560,000 (the 2007 Bonds ), and its City of Lake Oswego Full Faith and Credit Obligations, Series 2009A, issued in the original aggregate principal amount of $60,000,000 (the 2009 Obligations and together with the 2005 Bonds and the 2007 Bonds, the Refunded Obligations ); WHEREAS, the City Council has determined that it is financially feasible and in the best interests of the City to authorize the issuance, in one or more series, of bonds (the Bonds ) to refund the Refunded Obligations, and to pledge the full faith and credit of the City to secure the Bonds, all as more fully described below; WHEREAS, the City intends to use the proceeds of the Bonds, together with other lawfully available funds of the City, to finance all or a portion of the following projects (the Project ); (1) currently refund all or a portion of the 2005 Bonds and the 2007 Bonds; (2) advance refund all or a portion of the 2009 Obligations; and (3) pay costs of issuance of the Bonds.
WHEREAS, it is in the best interests of the City to authorize the execution and delivery of one or more bond declarations to establish the terms and conditions of the issuance, sale, execution and delivery of the Bonds (the Bond Declaration ) and the preparation of any disclosure or offering documents (the Official Statement ) and such other purchase agreements, sale documents and any other agreements, certificates or documents to provide for the issuance, sale, execution and delivery of the Bonds to finance the Project (collectively, the Financing Documents ); WHEREAS, the City adopts this Resolution to authorize and provide for (i) publication of the Notice; (ii) the terms under which the City may sell the Bonds, subject to market conditions; (iii) the sale of the Bonds through a competitive sale or negotiated sale process; (iii) the establishment of the terms of issuance, sale, execution and delivery of the Bonds, in one or more series, pursuant to the Financing Documents; and (iv) authorization of certain officials and employees of the City to take action on the City s behalf in connection with the Bonds authorized by this Resolution and the execution and delivery of the Financing Documents related to the Bonds; NOW, THEREFORE, IT IS RESOLVED AS FOLLOWS: Section 1. Publication of the Notice. The City is authorized pursuant to ORS 287A.150(4) to publish the Notice, such notice being in substantially the form attached to this Resolution as Exhibit A (the Notice ) in The Lake Oswego Review, a newspaper of general circulation within the boundaries of the City, in the same manner as are other public notices of the City. The Notice shall specify the last date on which petitions may be submitted. None of the Bonds may be sold, and no purchase agreement for such amount of Bonds may be executed, for at least 60 days following publication of the Notice. If petitions for an election containing valid signatures of at least five percent (5%) of the City s electors are received within the time indicated in the Notice, the question of issuing the Bonds shall be referred to a vote at the next lawfully available election date. If such petitions are received, no Bonds may be sold unless a majority of the electors voting on the question of issuing the Bonds approve. Section 2. Authorization of the Bonds. The City hereby authorizes the issuance, in one or more series, of the Bonds in an aggregate principal amount not more than the amount necessary to effect the refunding of the Refunded Obligations and to pay costs of the Project. The Bonds may be issued to currently refund or advance refund, as the case may be, all or any portion of the Refunded Obligations so long as the refunding generates aggregate net present value savings of three percent (3%) of the par amount of the Refunded Obligations. The Bonds shall be special obligations of the City that are payable from any lawfully available funds of the City and secured by a pledge of the full faith and credit of the City as specified in Section 3 below. The proceeds of the Bonds received by the City pursuant to the terms of the Financing Documents shall be used, together with other lawfully available funds of the City, to pay all or a portion of the costs of the Project. Section 3. Security. The Bonds shall be secured by and payable from the City s general non-restricted revenues and other funds that are lawfully available for that purpose, including,
the proceeds of the Bonds and revenues from an ad valorem tax authorized to be levied under the City s permanent rate limit under sections 11 and 11b, Article XI of the Oregon Constitution, and revenues derived from other taxes, if any, levied by the City in accordance with and subject to limitations and restrictions imposed under applicable law or contract, that are not dedicated, restricted or obligated by law or contract to an inconsistent expenditure or use. The City pledges its full faith and credit and taxing powers to the repayment of the Bonds as contemplated by ORS 287A.315, and any successor statute. The registered owners of the Bonds will not have a lien or security interest on the projects financed or refinanced with the proceeds of the Bonds. Section 4. Authorized Representative. The City authorizes and directs each of the City Manager, the Assistant City Manager, the Finance Director, or the designee of any of them (each acting individually or collectively, an Authorized Representative ) each acting individually, to act on behalf of the City to negotiate, execute and deliver the Financing Documents related to the issuance, sale, execution and delivery of the Bonds and to determine the terms of the Bonds, consistent with the provisions of this Resolution. Section 5. Tax-Exempt Status and Covenant as to Arbitrage. The City covenants to comply with the instructions and requirements of the Tax Certificate to be executed upon delivery of the Bonds. This covenant shall survive payment in full or defeasance of the Bonds. Section 6. Bond Financing Documents and Sale Authorized. Subject to this Resolution taking effect, each Authorized Representative, acting singly, is authorized and directed, on behalf of the City without further approval of the City Council to take all such actions as are necessary to effect the issuance, sale, execution and delivery of the Bonds to finance the Project, as provided below: (a) Issue and sell the Bonds in one or more series and at different times and establish maturity dates for the Bonds, provided that the final maturity of any series of Bonds shall not extend beyond the final maturity of the respective Refunded Obligations; (b) Submit an advance refunding plan and related documents to the Oregon State Treasurer s office; (c) Make any designations with respect to the federal tax treatment of the Bonds as may be necessary or appropriate upon the advice of Bond Counsel, enter into any covenants with respect to the tax status of the Bonds, and execute and deliver a tax certificate with respect to the tax status of the Bonds; (d) Establish the principal and interest payment dates, principal amounts, optional and mandatory redemption provisions, if any, interest amounts, premium and/or discount, if any, denominations and all other terms for the Bonds; (e) Establish the method of sale of the Bonds, and if the Bonds are sold on a negotiated basis, negotiate, execute and deliver a bond purchase contract in the form approved
by the Authorized Representative and such other agreements, certificates or sale documents as are necessary in connection therewith, or if the Bonds are sold on in a public competitive sale, approve the final form of and cause an Official Notice of Obligation Sale (the Notice of Sale ) for a competitive sale, substantially in the form approved by the Authorized Representative to be published electronically and award the successful bid or reject the bids for the Bonds; (f) Make any covenants necessary or desirable to obtain favorable financing terms on the Bonds, including any covenants with respect to the pledge of the City s full faith and credit to secure the Bonds; (g) Negotiate the terms of, and execute and deliver the Financing Documents; (h) Participate in the preparation of and authorize the distribution of preliminary and final official statements (the Official Statement ) relating to any series of Bonds, and deem final the preliminary Official Statement; (i) Provide for the authentication, registration, payment, exchange and transfer of the Bonds in the Financing Documents; (j) Obtain ratings on the Bonds if determined by the Authorized Representative to be in the best interest of the City and expend Bond proceeds to pay for the ratings; (k) Approve, execute and deliver any documents, agreements or certificates required to prepay the Refunded Obligations; (l) Approve the form of the Bonds and take actions necessary to qualify the Bonds for the book-entry system of The Depository Trust Company ( DTC ), and provide for the authentication, registration, payment, exchange and transfer of the Bond; (m) Approve, execute and deliver a Continuing Disclosure Certificate pursuant to the Securities and Exchange Commission Rule 15c2-12; (n) Approve, execute and deliver closing documents and certificates relating to the sale of the Bonds and the execution and delivery of the Bonds and the Financing Documents; (o) Enter into covenants regarding the use of the proceeds of the Bonds received by the City pursuant to the Financing Documents and the use of the Project; (p) Obtain credit enhancement for the Bonds and execute and deliver any related agreements or other documents; (q) Execute and deliver a certificate specifying the actions taken pursuant to this Resolution, and any other certificates, documents or agreements that an Authorized Representative determines are desirable to execute and deliver the Financing Documents, the Official Statement, and all other documents and agreements related to the Bonds and to sell, deliver or administer the Bonds.
Section 7. Procedure for Sale of the Bonds. Pursuant to Sections 2 and 6 hereof, the Authorized Representative shall establish the method of sale of the Bonds. If the Bonds are sold pursuant to a public competitive sale, the Authorized Representative shall cause the Notice of Sale, or a summary thereof, to be published electronically on the Internet prior to the sale date stated in the Notice of Sale. For a competitive sale, bids to purchase the Bonds shall be received and reviewed on the date specified by the Authorized Representative in the Notice or upon such later date determined by the Authorized Representative if the sale is postponed based on market or other conditions. The Authorized Representative is authorized, on behalf of the City, to accept or reject the bids for the Bonds. The Authorized Representative may postpone the sale of the Bonds to a later date, cancel the sale based upon market conditions or, alternatively, enter into a negotiated sale of the Bonds pursuant to terms determined and approved by the Authorized Representative and as authorized by this Resolution. Section 8. Defeasance. The City may defease the Bonds pursuant to the terms of the Financing Documents. Section 9. Appointment of Bond Counsel and Municipal Advisor. The City hereby appoints Orrick, Herrington & Sutcliffe LLP of Portland, Oregon, as bond counsel to the City with respect to the Bonds and PFM Financial Advisors LLC, as municipal advisor to the City with respect to the Bonds. Section 10. Resolution to Constitute Contract. In consideration of the purchase and acceptance of any or all of the Bonds by the owners of the Bonds (the Owners ), the provisions of this Resolution shall be part of the contract of the City with the Owners and shall be deemed to be and shall constitute a contract between the City and the Owners pursuant to ORS 287A.315 and ORS 287A.325, or any successor statute. The covenants, pledges, representations and warranties contained in this Resolution, or in the closing documents executed in connection with the Bonds, including without limitation the City s covenants and pledges contained in Section 3 of this Resolution, and the other covenants and agreements to be performed by or on behalf of the City shall be contracts for the equal benefit, protection and security of the Owners, all of which shall be of equal rank without preference, priority or distinction of any of such Bonds over any other thereof, except as expressly provided in or pursuant to this Resolution. Section 11. Effective Date of Resolution. This Resolution shall take effect immediately upon its adoption by the City Council and execution by the Mayor. [The remainder of the page intentionally blank]
Considered and adopted by the City Council of the City of Lake Oswego, Oregon, at a regular meeting held on the 7 th day of November 2017. AYES: NOES: EXCUSED: ABSTAIN: Kent Studebaker, Mayor ATTEST: By: Anne-Marie Simpson, City Recorder Approved as to Form: By: David Powell, City Attorney
ATTACHMENT 2 RESOLUTION 17-61 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LAKE OSWEGO ADJUSTING THE BUDGET FOR THE FISCAL YEAR COMMENCING JULY 1, 2017 APPROVING RESOURCES/REQUIREMENTS, AND MAKING APPROPRIATIONS WHEREAS, Certain conditions and situations have arisen since the initial preparation of the 2017-18 budget and necessitate changes in financial planning, now, therefore, BE IT RESOLVED by the City Council of the City of Lake Oswego that: Section 1. The City Council hereby adjusts the budget for fiscal year 2017-18 in the amount of $52,405,000. Section 2. The City Council hereby authorizes the appropriations of resources and approval of requirements listed below: Sewer Fund Adopted Revised Difference Resources: Other Financing Sources $ - $ 47,500,000 $ 47,500,000 Requirements: Sewer Department $ 9,215,000 $ 9,565,000 $ 350,000 Debt Service $ 6,363,000 $ 53,513,000 $ 47,150,000 $ 47,500,000 Explanation of Major Changes: To reflect the refinancing of the 2009 Full Faith & Credit Bonds. Water Fund Adopted Revised Difference Resources: Other Financing Sources $ - $ 3,645,000 $ 3,645,000 Requirements: Water Department $ 8,866,000 $ 8,916,000 $ 50,000 Debt Service $ 6,442,000 $ 10,037,000 $ 3,595,000 $ 3,645,000 Explanation of Major Changes: To reflect the refinancing of the 2007 Revenue Bonds. Stormwater Fund Adopted Revised Difference Resources: Other Financing Sources $ - $ 1,260,000 $ 1,260,000 Requirements: Stormwater Department $ 3,139,000 $ 3,169,000 $ 30,000 Debt Service $ 233,000 $ 1,463,000 $ 1,230,000 $ 1,260,000 Explanation of Major Changes: To reflect the refinancing of the 2005 Revenue Bonds. Considered and enacted at a regular meeting of the City Council held on the 7th day of November, 2017. Resolution 17-61 Page 1 of 2
AYES: NOES: ABSENT: Kent Studebaker, Mayor ATTEST: Anne-Marie Simpson, City Recorder APPROVED AS TO FORM: City Attorney's Office Resolution 17-61 Page 2 of 2