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Resolution No. 7147� f• 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 7147 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF VERNON APPROVING AMENDMENT NO. 1 TO THE JOINT POWERS AGREEMENT CREATING THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY AND PROVIDING OTHER MATTERS PROPERLY RELATING THERETO WHEREAS, the City of Vernon, together with certain other cities (collectively, the "Members"), entered into the Joint Powers Agreement Creating the Independent Cities Lease Finance Authority (the "Joint Powers Agreement") for the purpose of assisting public agencies to finance the acquisition, construction, installation and/or equipping of public capital improvements and to encourage and promote other joint and cooperative endeavors among such public agencies for their mutual l benefit; and WHEREAS, the Members desire to amend the Joint Powers Agreement to provide for the express purpose of the joint exercise of powers under part 5 of Division 31 (commencing with Section 52000) of the California Health and Safety Code, being the 1provisions of the Code which authorize the undertaking of home (mortgage financing programs (a "Home Mortgage Financing Program"); and WHEREAS, the Members desire also to amend the Joint Powers Agreement to provide for a new class of associate members (the "Associate Members") who will be able to participate in all of the financing programs of the Authority, including a Home Mortgage Financing Program, but who will not be entitled to be represented on the Board of Directors or be entitled to vote on any matter coming before the Board of Directors or the Authority. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19I 20II 21 22 23 24 25 26 27 28 w < NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF VERNON AS FOLLOWS: SECTION 1: The City Council of the City of Vernon hereby finds and determines that the recitals contained 1hereinabove are true and correct. SECTION 2: The City Council of the City of Vernon hereby approves Amendment No. 1 to the Joint Powers Agreement Creating the Independent Lease Finance Authority, a copy of which has been presented to the City Council concurrently with this resolution, and the City Council hereby orders said Amendment.to be received and filed by the City Clerk. SECTION 3: The Mayor is hereby directed to give the Authority notice of such approval in accordance with the notice requirements of Article 23 of the Joint Powers Agreement. SECTION 4: The City Clerk is hereby directed to send a certified copy of this resolution to: David N. Smith Program Administrator Independent Cities Lease Finance Authority 14156 Magnolia Boulevard, Suite 103 Sherman Oaks, California 91423 SECTION 5: The City Clerk of the City of Vernon shall certify to the passage of this resolution, and thereupon and thereafter the same shall be in full force and effect. APPROVED AND ADOPTED this 23rd day of June, 1998. ATTEST• BRUCE V. MALKENHORST, City Clerk -2- Y LEONIS C. MALOURG, Myor 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 STATE OF CALIFORNIA ) ) ss COUNTY OF LOS ANGELES ) I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do hereby certify that the foregoing Resolution, being Resolution No. 7147, was duly adopted by the City Council of the City of Vernon at an adjourned regular meeting of the City Council duly held on Tuesday, June 23, 1998, and thereafter was duly signed by the Mayor of the City of Vernon. BRUCE V. MALKENHORST, City Clerk (S EAL ) -3- 19027-02 JH:ACH:lsj 04/20/98 04/30/98 05/11/98 AMENDMENT NO.1 TO JOINT POWERS AGREEMENT CREATING THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY This Amendment No. 1 to Joint Powers Agreement Creating The Independent Cities Lease Finance Authority (the "Amendment") is the first amendment to the Joint Powers Agreement Creating The Independent Cities Lease Finance Authority (the "Joint Powers Agreement') and is executed in the State of California by an among those cities organized and existing under the constitution of the State of California which are parties to the Joint Powers Agreement as shown on ExhibitA to the Joint Powers Agreement (the "Members"). RECITALS WHEREAS, Articles 1 and 2, Chapter 5 Division 7, Title 1 of the California Government Code (Section 6500 et seq.) permits two or more public agencies by agreement to exercise jointly powers common to the contracting parties; WHEREAS, the Members entered into the Joint Powers Agreement for the purpose of assisting public agencies to finance the acquisition, construction, installation and/or equipping of public capital improvements and to encourage and promote other joint and cooperative endeavors among such public agencies for their mutual benefit; WHEREAS, the Members desire to amend the Joint Powers Agreement to provide for the express purpose of the joint exercise of powers under part 5 of Division 31 (commencing with Section 52000) of the California Health and Safety Code, being the provisions of the Code which authorize the undertaking of home mortgage financing programs ( a "Home Mortgage Financing Program"); and WHEREAS, the Members desire also to amend the Joint Powers Agreement to provide for a new class of associate members (the "Associate Members") who will be able to participate in all of the financing programs of the Authority, including a Home Mortgage Financing Program, but who will not be entitle to be represented on the Board of Directors or be entitled to vote on any matter coming before the Board of Directors or the Authority; NOW, THEREFORE, the parties agree as follows: Section 1. Amendments to Toint Powers Agreement. The Joint Powers Agreement is amended as follows: (a) A new definition is added to Article 1 of the Joint Powers Agreement to read as follows: ""Associate Member" shall mean any Local Agency that shall have duly executed and delivered to the Authority an Associate Membership Agreement in the form and as further provided in the Bylaws of the Authority." (b) A new definition is added to Article 1 of the Joint Powers Agreement to read as follows: ""Home Mortgage Financing Program" shall mean a program for financing home mortgages undertaken by the Authority pursuant to the provisions of Part 5 Me Division 31 (commencing with Section 52000) of the California Health and Safety Code with respect to those Members or Associate Members that are either a city or a county of the State of California." (c) A new subarticle (c) is added to Article 6 of the joint Powers Agreement to read as follows: "(c) In addition to the other powers provided herein, this Agreement is entered into for the express purpose of the joint exercise of powers under Part 5 of Division 31 (commencing with Section 52000) of the California Health and Safety Code." (d) Article 17 of the joint Powers Agreement is amended to read as follows: "ARTICLE 17 WITHDRAWAL A Member or an Associate Member may withdraw from membership in the Authority upon thirty (30) days advance written notice to the Authority. A Member must withdraw if it discontinues its membership in the Independent Cities Association. No such withdrawal, however, shall relieve such Member or such Associate Member form its obligations under any outstanding agreements relating to the Authority's bonds, certificates of participation or other obligations except in accordance with such agreements." (e) A new Article 27 is added to the joint Powers Agreement to read as follows: "ARTICLE 27 ASSOCIATE MEMBERS Any city or county within the State of California, may, with the approval of the Board of Directors, become an Associate Member of the Authority by executing and delivering to the Authority an Associate Membership Agreement in form and as further provided in the Bylaws. An Associate Member shall not be entitled to representation on the Board of Directors or to vote on any matter coming before the Board of Directors or the Authority. However, an Associate Member shall be entitled to participate in any Home Mortgage Financing Program of the Authority and in any other undertaking of the Authority, to finance the acquisition, construction, installation and/or equipping of public capital improvements." Section 2. Effective. This Amendment No. 1 shall be effective upon receipt by the Authority of notice of approval of this Amendment No. 1 by the City Councils of two-thirds of the Members, as further provided in Article 23 of the joint Powers Agreement. Section 3. Filing with Secretary of State. The Program Administrator of the Authority shall file a notice of this Amendment No. 1 with the office of the California Secretary of State within 30 days of its effective date, as required by California Government Code Section 6503.5. (END OF AMENDMENT NO. 11 -2- CITY COUNCIL LEONIS C. MALBURG Mayor THOMAS A. YBARRA Mayor Pro -Tern Wm. 'BILL" DAVIS Councilman H. "LARRY" GONZALES Councilman W. MICHAEL McCORMICK Councilman BRUCE V. MALKENHORST City Administrator/City Clerk FAX: (213) 581-7924 'n �, � DAVID B BREARLEY Water City Attorney �� 1 � o FAX: (818) 330-5818 S: KEVIN WILSON Director of Community Services & FAX: (213) 588-2761 KENNETH J. DeDARIO Director of Light & Power FAX: (213) 583-1983 DAVE TELFORD Fire Chief FAX: (213) 581-1385 CITY HALL 4W5 SAWA FE AVENUE, VERNON, CALIFORNIA 90058 TELEPHONE (213) 583-8811 June 25, 1998 Mr. David N. Smith, Program Administrator Independent Cities Lease Finance Authority 14156 Magnolia Boulevard, Suite 103 Sherman Oaks, California 91423 LOUIS ROSENKRANTZ Police Chief FAX: (213) 581-1178 Re: Notice of Approval of Amendments Nos. 1 and 2 to Joint Powers Agreement Dear Mr. Smith: Pursuant to Article 23 of the Joint Powers Agreement creating the Independent Cities Lease Financing Authority ("the Agreement"), please be advised that on June 23, 1998, the City Council of the City of Vernon approved Amendment Nos. 1 and 2 to the Agreement. Certified copies of the resolutions evidencing such approval are enclosed for your records. Very truly yours, CITY OF VERNON eonis C. Malburg Mayor LCM:rcw Enclosures cc: David B. Brearley, City Attorney Enclosure I U2 . A. CITY COUNCIL LEONIS C. MALBURG Mayor THOMAS A. YBARRA Mayor Pro-Tem Wm. 'BILL" DAVIS Councilman H. "LARRY" GONZALES Councilman W. MICHAEL McCORMICK Councilman BRUCE V. MALKENHORST City Administrator/City Clerk FAX: (213) 581-7924 CITY HALL 4305 SAWA FE AVENUE, VERNON, CALIFORNIA 90058 TELEPHONE (213) 583-8811 June 2, 1998 City Council City of Vernon Honorable Members: DAVID B. BREARLEY City Attorney FAX: (818) 330-5818 KEVIN WILSON Director of Community Services & Water FAX: (213) 588-2761 KENNETH J. DeDARIO Director of Light & Power FAX: (213) 583-1983 DAVE TELFORD Fire Chief FAX: (213) 581-1385 LOUIS ROSENKRANTZ Police Chief FAX: (213) 581-1178 The Board of Directors of the Independent Cities Lease Finance Authority (ICLFA), of which our city is a member, determined that the Joint Powers Agreement must be modified to: 1) accommodate an affordable home mortgage financing program; 2) provide for a new class of non -voting membership; and 3) provide for correcting potential difficulties relating to obtaining quorums. It is hereby recommended that the city approve the proposed amendments to the Joint Powers Agreement. BVM/gst enclosure Very truly yours, � Bruce V. Malkenhorst City Clerk U". INDEPENDENT CITIES LEASE FINANCE AUTHORITY 14156 MAGNOLIA BOULEVARD., SUITE 103, SHERMAN OAKS, CALIFORNIA 91423 (818) 906-0941 FAX (818) 784 1187 d4, May 28, 1998 ELM 0`4 Honorable W. Michael -McCormick 1 City of Vernon 4305 Santa Fe Avenue Vernon, California 90058 Dear Mike: On May 21, 1998, the Board of Directors of the Independent Cities Lease Finance Authority (ICLFA), of which your city is a member, unanimously determined that the Joint Powers Agreement must be modified to: 1) accommodate an affordable home mortgage financing program; 2) provide for a new class of non -voting membership; and 3) provide for correcting potential difficulties relating to obtaining quorums. To become effective, the proposed amendments must be adopted by the City Councils of two-thirds of the ICLFA member cities. The first amendment generally authorizes ICLFA to sponsor a home mortgage financing program and creates a non -voting associate membership category. The second amendment generally allows a city to change its status from a Member (voting) to Associate Member (non -voting) and allows the Authority to change the status of a Member from Member to Associate Member if the Member fails to attend ICLFA Board meetings on a regular basis, and provides that Associate Members do not have to maintain membership in the Independent Cities Association. That portion of the second amendment which allows the ICLFA Board to change the status of a current Member to Associate Member would be limited to cases wherein the member agency regularly does not have a voting member present at ICLFA Board meetings. Such absences potentially jeopardize the viability of the Joint Powers Authority because quorums may not be obtained to conduct business. financing program (cal as #:649rt from many cities, the ICLFA Board urges you to: 1) placeconsiderationof the amendments on your City Council agenda immediately; 2) adopt the enclosed resolutions amending the Joint Powers Agr 3) return signed/certified copies of both resolutio ,r -obaweam on this letterhead._ Enclosed is substantial backgrouni'e�x$titation including, but not limited to, a draft staff report for presenting the matter to your City Council prepared by ICLFA staff, legal documents effectuating the amendments to the Joint Powers Agreement, an ICLFA summary and detaileddescription of the Fresh Rate program, Banc One program summary and questions & answers, and the Joint Powers Agreement. MEMBER CITIES: Baldwin Park El Segundo Hermosa Beach Indio Manhattan Beach South Gate Claremont Hawthorne Huntington Park Lynwood San Fernando Vernon Compton Honorable W. Michael McCormick May 28, 1998 Page Two Thank you for your prompt attention to this important matter. Please understand that this program cannot be implemented in any city until the amendments to the Joint Powers Agreement are approved by the City Councils of two-thirds of the ICLFA member cities. If you have any questions, please call David Smith, ICLFA Program Administrator at (818) 906-0941; Mark Northcross, ICLFA Financial Advisor, at (415) 380-9746; or Wes Wolf, Banc One representative, at (949) 489-8036. Very truly yours, W. Michael McCormick President ds Enclosures: 1) Draft staff report to City Councils prepared by ICLFA staff-3 pages 2) Amendment No. 1 To Joint Powers Agreement Creating The Independent Cities Lease Finance Authority--2-pages 3) Resolution Of The City Council Of The City Of Approving Amendment No. 1 To Joint Powers Agreement Creating The Independent Cities Lease Finance Authority And Providing Other Matters Properly Relating Thereto--1 Page 4) Amendment No. 2 To Joint Powers Agreement Creating The Independent Cities Lease Finance Authority--2 Pages 5) Resolution Of The City Council Of The City Of Approving Amendment No. 2 To Joint Powers Agreement Creating The Independent Cities Lease Finance Authority And Providing Other Matters Properly. Relating Thereto--1 Page 6) Strike out/highlighted version of the Joint Powers Agreement Creating The Independent Cities Lease Finance Authority--14 pages 7) ICLFA Summary Of Fresh Rate Program--1 page 8) ICLFA Description Of Fresh Rate Program--4 pages 9) Banc One Program Summary And Questions & Answers --10 pages 10) Minutes of the May 21, 1998 ICLFA Board of Directors meeting--15 pages c: Bruce V. Malkenhorst, City Administrator (w/enclosures) DRAFT STAFF REPORT (FOR MEMBER CITIES) MEMORANDUM DATE: June , 1998 TO: Honorable Mayor and Members of the City Council FROM: Council Member Director, Independent Cities Lease Finance Authority (ICLFA) SUBJECT; Amendment Of ICLFA Joint Powers Agreement To Allow The Authority To Sponsor Home Mortgage Programs RECOMMENDATION• I recommend that the City Council approve Resolutions ( and ) amending the Joint Powers Agreement Creating The Independent Cities Lease Finance Authority (ICLFA) which will, in general terms: 1) authorize ICLFA to sponsor home mortgage programs; and 2) create an associate (non -voting) membership. This action should be taken immediately as the Authority may not issue bonds until the Joint Powers Agreement is amended. The proposed home mortgage program has the following benefits to our city: - The program makes home ownership in our city easier - The program meets the State's affordable housing requirements - The program supplements our existing affordable housing programs BACKGROUND: The City of has been a member of ICLFA for approximately ten years. The Authority, which was created as a spin-off of the Independent Cities Association (ICA), has sponsored successful lease finance programs for its members and other public entities since 1988. After six months of study, on May 21, 1998 the Board of Directors, which is comprised of one City Council Member (and an alternate) from each of the thirteen member cities, unanimously approved a home mortgage program (the Fresh Rate program) to be offered in all member cities. After review, many elected officials and local government housing experts have described the program as "almost too good to be true." In general terms, this program will provide 101t home mortgage financing through traditional lenders to families and individuals who can qualify for loans but do not have down payments to purchase a home. The member cities will not be required to pay any fees, expend any staff resources or assume any liability. No downside to this program has been identified. ICLFA -1- serves as a conduit issuer and assumes no liability on the bond issue or the individual home mortgages. The member cities assume no liability either. The Fresh Rate program is sponsored by Banc One, which assumes all liability for the program. ICLFA has selected a credible team of professionals to work with Banc One representatives to formulate, market and facilitate the program. They are: Independent Cities Association; Burke, Williams & Sorensen; Jones Hall; Project Finance Associates; and Ken Spiker And Associates, Inc. Banc One has implemented similar programs in the states of Arizona, Illinois and Oklahoma. Banc One is the only financial institution offering the program at this time. Banc One is a large AA rated financial institution headquartered in Columbus, Ohio with branches throughout the Midwest, South and Rocky Mountain Region. ICLFA is also in the process of developing a new lease pool which will be further discussed and refined by ICLFA after the Fresh Rate program is fully implemented. In order to sponsor the Fresh Rate program, which has elicited broad interest from many large and small cities in the Southern California area, the Joint Powers Agreement must be amended to specifically accommodate home mortgage programs. Since a change in the Joint Powers Agreement is required, this opportunity is being used to effectuate several additional changes, including the establishment of a non -voting associate membership. Amendments to the Joint Powers Agreement require that two-thirds of the cities that constitute the Joint Powers Authority adopt a resolution approving the modifications. The proposed amendments to the Joint Powers Agreement have absolutely no fiscal impact on our City. They simply clear the way for the home mortgage program which will cost our city nothing and make minor adjustments in operations that will enhance the functioning of the Authority. The proposed amendments are generally as follows: AMENDMENT NO. 1: (See attached amendments for specifics 1. PROVIDES THAT ICLFA MAY SPONSOR HOME MORTGAGE FINANCING PROGRAMS. This amendment is necessary because in order for ICLFA to offer home mortgage programs, the Joint Powers Agreement must contain specific provisions to that effect. 2. PROVIDES FOR A CLASS OF MEMBERSHIP ("ASSOCIATE MEMBER") WHICH DIFFERS FROM THE EXISTING MEMBERSHIP IN THAT ASSOCIATE MEMBERS MAY NOT VOTE, This amendment is necessary because it is anticipated that the Joint Powers Authority will grow in numbers as a result of the home mortgage financing program to the point where Board meetings would be unmanageable and quorums would be difficult, if not impossible, to obtain. A quorum requirement is over 50 -2- of all member cities. So far, over thirty cities have expressed an interest in the program and others are still in the process of considering joining the Authority. 3. PROVIDES THAT ASSOCIATE MEMBERS MAY MAINTAIN MEMBERSHIP IN ICLFA WITHOUT BEING A MEMBER OF THE INDEPENDENT CITIES ASSOCIATION (ICA). This amendment is necessary because it is anticipated that many cities, both in the immediate area and outside of it, will wish to participate in ICLFA programs without being members of ICA. AMENDMENT NO. 2: (See attached amendments for sAecifics): 1. PROVIDES THAT A MEMBER MAY VOLUNTARILY CHANGE ITS STATUS FROM MEMBER TO ASSOCIATE MEMBER AND THAT THE AUTHORITY MAY REQUIRE THE MEMBER TO CHANGE ITS STATUS FROM A MEMBER TO ASSOCIATE MEMBER IF A MEMBER IS NOT REPRESENTED AT THREE OR MORE SUCCESSIVE BOARD MEETINGS. This amendment is necessary so that: 1) existing members that - are no longer able to attend Board meetings but wish to maintain their membership in ICLFA can voluntarily change their status to Associate Member (non -voting) ; and 2) the ICLFA Board can change the status of a city from Member to Associate Member if the non-attendance of a city threatens the ability of ICLFA to obtain a quorum and thus conduct business. The amendments to the Joint Powers Agreement were prepared by Jones Hall (ICLFA Bond Counsel), reviewed by Burke, Williams & Sorensen (ICLFA General Legal Counsel) and have been reviewed by the City Attorney. They must be adopted without change. Enclosed with this staff report are the following documents: 1. Amendment No. 1 To Joint Powers Agreement Creating The Independent Cities Lease'Finance Authority. 2. Resolution Of The City Council Of The City Of Approving Amendment No. 1 To Joint Powers Agreement Creating The Independent Cities Lease Finance Authority And Providing Other Matters Properly Relating Thereto. 3. Amendment No. 2 To Joint Powers Agreement Creating The Independent Cities Lease Finance Authority. 4. Resolution Of The City Council Of The City Of Approving Amendment No. 2 To Joint Powers Agreement Creating The Independent Cities Lease Finance Authority And Providing Other Matters Properly Relating Thereto. 5. A copy of the Joint Powers Agreement Creating The Independent Cities Lease Finance Authority with the amendments proposed highlighted via strike out/highlight. 6. ICLFA Summary Of Fresh Rate Program. 7. ICLFA Description Of Fresh Rate Program. 8. Banc One Program Summary and Questions & Answers. 9.. Minutes of the May 21, 1998 ICLFA Board of Directors meeting. _1 -3- 19027-02 JH:ACH:Isj 04/20/98 04/30/98 03/11/98 AMENDMENT NO.1 TO JOINT POWERS AGREEMENT CREATING THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY This Amendment No. 1 to joint Powers Agreement Creating The Independent Cities Lease Finance Authority (the "Amendment") is the first amendment to the joint Powers Agreement Creating The Independent Cities Lease Finance Authority (the "Joint Powers Agreement") and is executed in the State of California by an among those cities organized and existing under the constitution of the State of California which are parties to the joint Powers Agreement as shown on Exhibit'A to the joint Powers Agreement (the "Members"). RECITALS WHEREAS, Articles 1 and 2, Chapter 5 Division 7, Title 1 of the California Government Code (Section 6500 et seq.) permits two or more public agencies by agreement to exercise jointly powers common to the contracting parties; WHEREAS, the Members entered into the joint Powers Agreement for the purpose of assisting public agencies to finance the acquisition, construction, installation and/or equipping of public capital improvements and to encourage and promote other joint and cooperative endeavors among such public agencies for their mutual benefit; WHEREAS, the Members desire to amend the joint Powers Agreement to provide for the express purpose of the joint exercise of powers under part 5 of Division 31 (commencing with Section 52000) of the California Health and Safety Code, being the provisions of the Code which authorize the undertaking of home mortgage financing programs ( a "Home Mortgage Financing Program"); and WHEREAS, the Members desire also to amend the joint Powers Agreement to provide for a new class of associate members (the "Associate Members") who will be able to participate in all of the financing programs of the Authority, including a Home Mortgage Financing Program, but who will not be entitle to be represented on the Board of Directors or be entitled to vote on any matter coming before the Board of Directors or the Authority; NOW, THEREFORE, the parties agree as follows: Section 1. Amendments to Toint Powers Agreement. The joint Powers Agreement is amended as follows: (a) A new definition is added to Article 1 of the joint Powers Agreement to read as follows: ""Associate Member shall mean any Local Agency that shall have duly executed and delivered to the Authority an Associate Membership Agreement in the form and as further provided in the Bylaws of the Authority." (b) A new definition is added to Article 1 of the Joint Powers Agreement to read as follows: ""Home Mortgage Financing Program" shall mean a program for financing home mortgages undertaken by the Authority pursuant to the provisions of Part 5 of Division 31 (commencing with Section 52000) of the California Health and Safety Code with respect to those Members or Associate Members that are either a city or a county of the State of California." (c) A new subarticle (c) is added to Article 6 of the Joint Powers Agreement to read as follows: "(c) In addition to the other powers provided herein, this Agreement is entered into for the express purpose of the joint exercise of powers under Part 5 of Division 31 (commencing with Section 52000) of the California Health and Safety Code." (d) Article 17 of the Joint Powers Agreement is amended to read as follows: "ARTICLE 17 WITHDRAWAL A Member or an Associate Member may withdraw from membership in the Authority upon thirty (30) days advance written notice to the Authority. A Member must withdraw if it discontinues its membership in the Independent Cities Association. No such withdrawal, however, shall relieve such Member or such Associate Member form its obligations under any outstanding agreements relating to the Authority's bonds, certificates of participation or other obligations except in accordance with such agreements." (e) A new Article 27 is added to the Joint Powers Agreement to read as follows: "ARTICLE 27 ASSOCIATE MEMBERS Any city or county within the State of California, may, with the approval of the Board of Directors, become an Associate Member of the Authority by executing and delivering to the Authority an Associate Membership Agreement in form and as further provided in the Bylaws. An Associate Member shall not be entitled to representation on the Board of Directors or to vote on any matter coming before the Board of Directors or the Authority. However, an Associate Member shall be entitled to participate in any Home Mortgage Financing Program of the Authority and in any other undertaking of the Authority, to finance the acquisition, construction, installation and/or equipping of public capital improvements." Section 2. Effective. This Amendment No. 1 shall be effective upon receipt by the Authority of notice of approval of this Amendment No. 1 by the City Councils of two-thirds of the Members, as further provided in Article 23 of the Joint Powers Agreement. Section 3. Filing with Secretary of State. The Program Administrator of the Authority shall file a notice of this Amendment No. 1 with the office of the California Secretary of State within 30 days of its effective date, as required by California Government Code Section 6503.5. [END OF AMENDMENT NO. 11 -2- 23103-01 JH:ACH:Isj 04/03/98 RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF APPROVING AMENDMENT NO.1 TO JOINT POWERS AGREEMENT CREATING THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY AND PROVIDING OTHER MATTERS PROPERLY RELATING THERETO WHEREAS, this City together with certain other Cities (collectively, the "Members"), entered into the Joint Powers Agreement Creating the Independent Cities Lease Finance Authority (the "Joint Powers Agreement") for the purpose of assisting public agencies to finance the acquisition, construction, installation and/or equipping of public capital improvements and to encourage and promote other joint and cooperative endeavors among such public agencies for their mutual benefit; WHEREAS, the Members desire to amend the joint Powers Agreement to provide for the express purpose of the joint exercise of powers under part 5 of Division 31 (commencing with Section 52000) of the California Health and Safety Code, being the provisions of the Code which authorize the undertaking of home mortgage financing programs ( a "Home Mortgage Financing Program"); and WHEREAS, the Members desire also to amend the joint Powers Agreement to provide for new class of associate members (the "Associate Members") who will be able to participate in all of the financing programs of the Authority, including a Home Mortgage Financing Program, but who will not be entitle to be represented on the Board of Directors or be entitled to vote on any matter coming before the Board of Directors or the Authority; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of , California, as follows: Section 1. Approval of Amendment No. 1. The City Council hereby approves Amendment No. 1 to the Joint Powers Agreement Creating the Independent Lease Finance Authority substantially in the form on file with the City Clerk Section 2. Notice of Approval. The City Mayor is hereby directed to give the Authority notice of such approval in accordance with the notice requirements of Article 23 of the Joint Powers Agreement. Section 3. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. PASSED, APPROVED AND ADOPTED this _ day of May, 1998. Attest: City Clerk Mayor 19027-02 JH:ACH:isj 05/11 /98 AMENDMENT NO.2 TO JOINT POWERS AGREEMENT CREATING THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY This Amendment No. 2 to Joint Powers Agreement Creating The Independent Cities Lease Finance Authority (the "Amendment") is the second amendment to the Joint Powers Agreement Creating The Independent Cities Lease Finance Authority (the "Joint Powers Agreement) and is executed in the State of California by an among those cities organized and existing under the constitution of the State of California which are parties to the Joint Powers Agreement as shown on Exhibit A to the Joint Powers Agreement (the "Members"). RECITALS WHEREAS, Articles 1 and 2, Chapter 5 Division 7, Title 1 of the California Government Code (Section 6500 et seq.) permits two or more public agencies by agreement to exercise jointly powers common to the contracting parties; WHEREAS, the Members entered into the Joint Powers Agreement for the purpose of assisting public agencies to finance the acquisition, construction, installation and/or equipping of public capital improvements and to encourage and promote other joint and cooperative endeavors among such public agencies for their mutual benefit; WHEREAS, the Members entered into Amendment No.1 to the Joint Powers Agreement to provide for the express purpose of authorizing the undertaking of home mortgage financing programs and to provide for a new class of associate members (the "Associate Members") who will be able to participate in all of the financing programs of the Authority, but who are not entitled to be represented on the Board of Directors or entitled to vote on any matter coming before the Board of Directors or the Authority; and WHEREAS, the Members desire to again amend the Joint Powers Agreement to provide that, under certain circumstances, a Member may become an Associate Member; NOW, THEREFORE, the parties agree as follows: Section 1. Amendment to Toint Powers Agreement. A new subarticle (d) is added to Article 15 of the Joint Powers Agreement to read as follows: "(d) If a Member shall give written notice to the Authority of its election to relinquish its status as a Member and instead become an Associate Member or if a Member shall fail to be represented at three (3) or more successive meetings of the Board of Directors, then such Member shall be deemed to be an Associate Member upon action of the Board of Directors duly adopted to such effect. Promptly following any such action by the Board of Directors, such Member shall promptly deliver to the Authority an executed Associate Membership Agreement in the form and as further provided in the Bylaws. Such Associate Member status shall not relieve such Member from its obligations under any outstanding agreements relating to the Authority's bonds, certificates of participation or other obligations except in accordance with such agreements." Section 2. Effective. This Amendment No. 2 shall be effective upon receipt by the Authority of notice of approval of this Amendment No. 2 by the City Councils of two-thirds of the Members, as further provided in Article 23 of the Joint Powers Agreement. Section 3. Filing with Secretary of State. The Program Administrator of the Authority shall file a notice of this Amendment No. 2 with the office of the California Secretary of State within 30 days of its effective date, as required by California Government Code Section 6503.5. [END OF AMENDMENT NO. 21 -2- 23103-01 JH:ACH:Isj 05/ 11/98 RESOLUTION NO. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF APPROVING AMENDMENT NO.2 TO JOINT POWERS AGREEMENT CREATING THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY AND PROVIDING OTHER MATTERS PROPERLY RELATING THERETO WHEREAS, this City together with certain other Cities (collectively, the "Members"), entered into the Joint Powers Agreement Creating the Independent Cities Lease Finance Authority (the "Joint Powers Agreement') for the purpose of assisting public agencies to finance the acquisition, construction, installation and/or equipping of public capital improvements and to encourage and promote other joint and cooperative endeavors among such public agencies for their mutual benefit; WHEREAS, the Members entered into Amendment No.1 to the Joint Powers Agreement to provide for the express purpose of authorizing the undertaking of home mortgage financing programs and to provide for home mortgage financing programs for a new class of associate members (the "Associate Members") who will be able to participate in all of the financing programs of the Authority, but who are not entitled to be represented on the Board of Directors or entitled to vote on any matter coming before the Board of Directors or the Authority; and WHEREAS, the Members desire to again amend the Joint Powers Agreement to provide that, under certain circumstances, a Member may become an Associate Member; NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of California, as follows: Section 1. Approval of Amendment No. 2. The City Council hereby approves Amendment No. 2 to the Joint Powers Agreement Creating the Independent Lease Finance Authority substantially in the form on file with the City Clerk. Section 2. Notice of Approval. The City Mayor is hereby directed to give the Authority notice of such approval in accordance with the notice requirements of Article 23 of the Joint Powers Agreement. Section 3. Effective Date. This Resolution shall take effect from and after the date of its passage and adoption. Attest: PASSED, APPROVED AND ADOPTED this _ day of June, 1998. City Clerk Mayor JOINT POWERS AGREEMENT CREATING THE INDEPENDENT CITIES LEASE FINANCE AUTHORITY This Agreement is executed in the State of California by and among those cities organized and existing under the Constitution of the State of California which are parties signatory to this Agreement. All such cities, hereinafter called Members, shall be listed in Appendix A, which shall be attached hereto and made a part hereof. RECITALS WHEREAS, Articles 1 and 2, Chapter 5, Division 7, Title 1 of the California Government Code (Section 6500 et seq.) permits two or more public agencies by agreement to exercise jointly powers common to the contracting parties; and WHEREAS, cities executing this Agreement desire to join together for the purpose of assisting public agencies to finance the acquisition, construction, installation and/or equipping of public capital improvements and to encourage and promote other joint and cooperative endeavors among such public agencies for their mutual benefit; NOW, THEREFORE, the parties agree as follows: ARTICLE 1 DEFINITIONS "Authority" shall mean the Independent Cities Lease Finance Authority created by this Agreement. "Board of Directors" or "Board" shall mean the governing body of the Authority. "Executive Committee" shall mean the Executive Committee of the Board of Directors of the Authority. "Fiscal Year" shall mean that period of twelve months which is established by the Board of Directors or the Bylaws as the fiscal year of the Authority. "Government Code" shall mean the California Government Code, as amended -1- "Joint Powers Law" shall mean Articles 1 and 2, Chapter 5, Division 7, Title 1 (commencing with Section 6500) of the Government Code. "Member shall mean any California city which has executed this Agreement and has become a member of the Authority. "Local Agency" shall have the meaning set forth in Section 6585(f) of the Government Code. ARTICLE 2 PURPOSES This Agreement is entered into by the Members in order that they may jointly develop programs to assist in the raising of capital to finance the capital improvement needs of Local Agencies, to provide a forum for discussion and study of problems common to the Members and to assist in the development and implementation of solutions to such problems. ARTICLE 3 PARTIES TO AGREEMENT Each Member, as a party to this Agreement, certifies that it intends to and does contract with all other Members as parties to this Agreement and, with such other cities as may later be added as parties to this Agreement. Each Member also certifies that the withdrawal of any party from this Agreement pursuant to Article 17 shall not affect this Agreement or the Members' obligations hereunder. ARTICLE 4 TERM This Agreement shall become effective when executed and returned to the Authority by at least four Members. The Authority shall promptly notify all Members in writing of such effective date. This Agreement shall continue in effect until terminated as provided herein; provided that the termination of this Agreement with respect to an individual Member upon its withdrawal from membership in the Authority shall not operate to terminate this Agreement with respect to the remaining Members. -2- ARTICLE 5 CREATION OF THE AUTHORITY Pursuant to the Joint Powers Law, there is hereby created a public entity separate and apart from the parties hereto, to be known as the "Independent Cities Lease Finance Authority," with such powers as are hereinafter set forth. ARTICLE 6 POWERS OF THE AUTHORITY (a) Powers. The Authority shall have all of the powers common to its Members and all additional powers set forth in the Joint Powers Law and other statutes applicable to the joint powers authority created hereby, and is hereby authorized to do all acts necessary for the exercise of said powers. Such powers include, but are not limited to, the following: (1) To make and enter into contracts. (2) To incur debts, liabilities, and obligations and to encumber real or personal property. (3) To acquire, hold, or dispose of real or personal property, contributions and donations of real or personal property, funds, services, and other forms of assistance from persons, firms, corporations, and government entities. (4) To sue and be sued in its own name, and to settle any claim against it. (5) To receive and use contributions and advances from Members as provided in Government Code Section 6504, including contributions or advances of personnel, equipment or property. (6) To invest any money in its treasury that is not required for its immediate necessities, pursuant to Government Code Section 6509.5 (7) To acquire, construct, manage, maintain or operate title to real or personal property or rights or any interest therein. (8) To employ agents and employees. (9) To receive, collect and disburse moneys. (10) To finance the acquisition, construction or installation of real or personal property for the benefit of one or more Local Agencies through the sale of its revenue bonds, certificates of participation or other obligations and to enter into any agreement -3- or instrument in connection with the execution, issuance, sale or delivery of such bonds, certificates of participation or other obligations. (11) To lease, sell, convey or otherwise transfer title or rights to or an interest in real or personal property, including, but not limited to, property financed by the Authority for the benefit of its Members or other Local Agencies, and to enter into any agreement or instrument in connection with any such lease, sale, conveyance or transfer. (12) To exercise all powers of entities, such as the Authority, created under the Joint Powers Law including, but not limited to, those powers enumerated under the Marks -Roos Local Bond Pooling Act of 1985, as amended. (13) To exercise other reasonable and necessary powers in furtherance or support of any purpose of the Authority or power granted by the Joint Powers Law, this Agreement or the Bylaws of the Authority. (b) Restrictions on Powers. Pursuant to and to the extent required by Government Code Section 6509, the Authority shall be restricted in the exercise of its powers in the same manner as the City of Manhattan Beach is restricted in its exercise of similar powers; provided that, if the City of Manhattan Beach shall cease to be a Member, then the Authority shall be restricted in the exercise of its power in the same manner as the City of Indio. ARTICLE 7 BOARD OF DIRECTORS (a) Composition of Board. The Authority shall be governed by the Board of Directors, which shall be composed of one director representing each Member. The City Council of each Member shall appoint a member of such City Council as a director to represent such Member on the Board of Directors. Such director shall serve at the pleasure of such City Council. The City Council of each Member shall also appoint an alternate director who shall have the authority to attend, participate in and vote at any meeting of the Board when the director is absent. Each alternate director shall be an official or staff person of the Member which such alternate director represents. Any vacancy in a director or alternate director position shall be filled by the appointing Member's City Council, subject to the provisions of this Article. Immediately upon admission of a new Member pursuant to Article 16, such Member shall be entitled and required to appoint a director and alternate director. -4- (b) Termination of Status as Director. A director and/or alternate director shall be removed from the Board of Directors upon the occurrence of any one of the following events: (1) the Authority receives written notice from the appointing Member of the removal of the director or alternate director, together with a certified copy of the resolution of the City Council of the Member effecting such removal; (2) the withdrawal of the Member from this Agreement; (3) the death or resignation of the director or alternate director; (4) the Authority receives written notice from the Member that the director or alternate director is no longer qualified as provided in the first paragraph of this Article. (c) Compensation. Directors and their alternates are not entitled to compensation. The Board of Directors may authorize reimbursement of expenses incurred by directors or their alternates. (d) Powers of Board. The Board of Directors shall have the following powers and functions. (1) Except as otherwise provided in this Agreement, the Board shall exercise all powers and conduct all business of the Authority, either directly or by delegation to other bodies or persons. (2) The Board may form an Executive Committee, as provided in Article 10. If an Executive Committee is established by the Board, the Executive Committee may exercise all powers or duties of the Board relating to the execution, issuance, sale or delivery of bonds, certificates of participation or other obligations of the Authority and the entering into by the Authority of all agreements, leases, indentures, conveyances, security documents and other instruments relating thereto or relating to the financing of capital improvements for the Members or other Local Agencies. If an Executive Committee is established by the Board, the Board may delegate to the Executive Committee and the Executive Committee may discharge any additional powers or duties of the Board except adoption of the Authority's annual budget. Any additional powers and duties so delegated shall be specified in a resolution adopted by the Board. (3) The Board may form, as provided in Article 11, such other committees as it deems appropriate to conduct the business of the Authority or it may delegate such power to the Executive Committee in the Bylaws or by resolution of the Board. The membership of any such other committee may consist in whole or in part of persons who are not members of the Board; provided that the Board and the Executive Committee may delegate decision -making powers and duties only to a committee a majority of the members of which are Board members. Any committee a majority of the members of which are not Board members may function only in an advisory capacity. (4) The Board shall elect the officers of the Authority and shall appoint or employ necessary staff in accordance with Articles 9 and 12. -5- (5) The Board shall cause to be prepared, and shall review, modify as necessary, and adopt the annual operating budget of the Authority. Adoption of the budget may not be delegated. (6) The Board shall receive, review and act upon periodic reports and audits of the funds of the Authority, as required under Articles 13 and 14 of this Agreement. (7) The Board shall have such other powers and duties as are reasonably necessary to carry out the purposes of the Authority. ARTICLE 8 MEETINGS OF THE BOARD OF DIRECTORS (a) Regular Meetings. The Board of Directors shall hold at least one regular meeting each year. The Board of Directors shall fix by resolution or in the Bylaws the date upon which, and the hour and place at which, each regular meeting is to be held. (b) Ralph M. Brown Act. Each meeting of the Board of Directors, including without limitation regular, adjourned regular, and special meetings shall be called, noticed, held, and conducted in accordance with the Ralph M. Brown Act, Section 54950 et seq. of the Government Code. (c) Minutes. The Authority shall have minutes of regular, adjourned regular, and special meetings kept by the Secretary. As soon as practicable after each meeting, the Secretary shall forward to each Board member a copy of the minutes of such meeting. (d) Quorum. A majority of the members of the Board is a quorum for the transaction of business. However, less than a quorum may adjourn from time to time. A vote of the majority of a quorum at a meeting is sufficient to take action. (e) Voting. Each member of the Board shall have one vote. ARTICLE 9 OFFICERS The Board shall elect a President and Vice President from among the directors at its first meeting. Thereafter, except as may be otherwise provided in the Bylaws of the Authority, the Board shall elect a new President and Vice President, at the annual meeting in each succeeding alternating fiscal year. Each officer shall assume the duties of his office upon election. If either the President or Vice President ceases to be a member of the Board, the resulting vacancy shall be filled at the next regular meeting of the Board held after the vacancy occurs or at a special meeting of the Board called to fill such vacancy. In the absence or inability of the President to act, the Vice President shall act as President. The President shall preside at and conduct all meetings of the Board. The Board may appoint such other officers as it considers necessary. ARTICLE 10 EXECUTIVE COMMITTEE The Board may establish an Executive Committee of the Board which shall consist solely of members selected from the membership of the Board. If an Executive Committee is established by the Board, the terms of office of the members of the Executive Committee shall be as provided in the Bylaws of the Authority. If an Executive Committee is established by the Board the Executive Committee shall conduct the business of the Authority between meetings of the Board, exercising all those powers as provided for in Section (d)(2) of Article 7, or as otherwise delegated to it by the Board. ARTICLE 11 COMMITTEES The Board may establish committees, as it deems appropriate to conduct the business of the Authority or it may, in the Bylaws or by resolution, delegate such power to the Executive Committee. Members of Committees shall be appointed by the Board or the Executive Committee, as the case may be. Each Committee shall have those duties as determined by the Board or the Executive Committee, as the case may be, or as otherwise set forth in the Bylaws. Each Committee shall meet on the call of its chairperson, and shall report to the Executive Committee and the Board as directed by the Board or the Executive Committee, as the case may be. ARTICLE 12 STAFF (a) Principal Staff. The following staff members shall be appointed by and serve at the pleasure of the Board of Directors: (1) Program Administrator. The Program Administrator shall administer the affairs of the Authority, subject to the general supervision and policy direction of the Board and the Executive Committee; shall coordinate the activities of all consultants and staff of the Authority; shall be responsible for required filings by the Authority with the State of California; shall prepare all meeting notices, minutes and required correspondence of the Authority and shall maintain the records of the Authority; shall assist Local Agencies in the preparing and filing of applications for participation in the financing programs of the Authority and shall expedite the processing of such applications; and -7- shall perform such other duties as are assigned by the Board and Executive Committee. (2) Treasurer. The duties of the Treasurer are set forth in Articles 13 and 14 of this Agreement. The Treasurer shall be appointed by the Board of Directors and shall be eligible to serve as Treasurer as provided in the Joint Powers Law. (3) Auditor. The Auditor shall draw warrants to pay demands against the Authority when approved by the Treasurer. The Auditor shall be appointed by the Board of Directors and shall be a person eligible to serve as Auditor as provided in the Joint Powers Law. (b) Other Staff. The Board, Executive Committee or Program Administrator shall provide for the appointment of such other staff as may be necessary for the administration of the Authority. (c) Compensation. The Program Administrator, the Treasurer, the Auditor and any other members of the staff or employees of the Authority shall be compensated in such manner as shall be approved by the Board as permitted by applicable law. ARTICLE 13 ACCOUNTS AND RECORDS (a) Annual Budget. The Authority shall annually adopt an operating budget pursuant to Article 7 of this Agreement. The Treasurer, in cooperation with the Program Administrator, shall prepare the annual operating budget for review and approval by the Board of Directors as provided in Article 7 of this Agreement. (b) Funds and Accounts. The Auditor of the Authority shall establish and maintain such funds and accounts as may be required by good accounting practices and by the Board. Books and records of the Authority in the hands of the Auditor shall be open to inspection at all reasonable times by authorized representatives of the Members. The Authority shall adhere to the standard of strict accountability for funds set forth in the Joint Powers Law. (c) Auditor's Report. The Auditor, within one hundred and twenty (120) days after the close of each Fiscal Year, shall give a complete written report of all financial activities for such Fiscal Year to the Board and to each Member. (d) Annual Audit. If then required by the Joint Powers Law, the Authority shall either make or contract with a certified public accountant to make an annual Fiscal Year audit of all accounts and records of the Authority, conforming in all respects with the requirements of the Joint Powers Law. A report of the audit shall be filed, if then required by law, as a public record with each of the Members and with the county auditor of the county or counties in which each of the Members is located. Costs of the audit shall be considered a general expense of the Authority. ARTICLE 14 RESPONSIBILITIES FOR FUNDS AND PROPERTY (a) Custody of Authority Funds. The Treasurer shall have the custody of and disburse the Authority's funds. Proceeds of bonds, certificates of participation or other similar obligations of the Authority may be deposited with an indenture trustee, agent or other depositary and shall not be considered the Authority's funds for purposes of this Article. The Treasurer may delegate disbursing authority to such persons as may be authorized by the Board or the Executive Committee to perform that function, subject to the requirements of (b) below. (b) Duties of Treasurer. The Treasurer shall perform all functions then required to be performed by the Treasurer under the Joint Powers Law. The Treasurer shall review the financial statements and the annual audit of the Authority. (c) Authority Property. Pursuant to Government Code Section 6505.1, the Program Administrator, the Treasurer, and such other persons as the Board may designate shall have charge of, handle, and have access to the property of the Authority. The Authority shall secure and pay for a fidelity bond or bonds, in an amount or amounts and in form specified by the Board of Directors, covering all officers and staff of the Authority who are authorized to hold or disburse funds of the Authority and all officers and staff who are authorized to have charge of, handle and have access to property of the Authority. ARTICLE 15 MEMBER RESPONSIBILITIES Each Member shall have the following responsibilities. (a) To appoint its director and alternate director to or remove its director and alternate director from the Board as set forth in Article 7. (b) To consider proposed amendments to this Agreement as set forth in Article 23. (c) To make contributions in the form of annual membership assessments and fees, if any, determined by the Board for the purpose of defraying the costs of providing the annual benefits accruing directly to each party from this Agreement. -9- ARTICLE 16 NEW MEMBERS With the approval of two-thirds of the members of the Board, any qualified city may become a party to this Agreement. Membership is restricted to cities which are members of the Independent Cities Association. A city requesting membership shall apply by presenting to the Authority a resolution of the City Council of such city evidencing its approval of this Agreement. The date that the applying city will become a Member will be determined by the Board. ARTICLE 17 WITHDRAWAL A Member o ah Associate MeC may withdraw from membership in the Authority upon thirty (30) days advance written notice to the Authority. A Member must withdraw if it discontinues its membership in the Independent Cities Association. No such withdrawal, however, shall relieve such Member Cyr eu�Cb aar�ate Idler bed' from its obligations under any outstanding agreements relating to the Authority's bonds, certificates of participation or other obligations except in accordance with such agreements. ARTICLE 18 OBLIGATIONS OF AUTHORITY The debts, liabilities and obligations of the Authority shall not be the debts, liabilities and obligations of the Members. Any Member may separately contract for, or assume responsibility for, specific debts, liabilities or obligations of the Authority. ARTICLE 19 TERMINATION AND DISTRIBUTION OF ASSETS This Agreement may be terminated at any time that no bonds, certificates of -10- participation or other similar obligations of the Authority are outstanding with the approval of two-thirds of the Members. Upon termination of this Agreement, all assets of the Authority shall, after payment of all unpaid costs, expenses and charges incurred under this Agreement, be distributed among the parties hereto in accordance with the respective contributions of each of said parties. ARTICLE 20 LIABILITY OF BOARD OF DIRECTORS, OFFICERS AND COMMITTEE MEMBERS The members of the Board of Directors, officers and committee members of the Authority shall use ordinary care and reasonable diligence in the exercise of their powers and in the performance of their duties pursuant to this Agreement. They shall not be liable for any mistake of judgment or any other action made, taken or omitted by them in good faith, nor for any action taken or omitted by any agent, employee or independent contractor selected with reasonable care, nor for loss incurred through investment of Authority funds, or failure to invest. No director, officer or committee member shall be responsible for any action taken or omitted by any other director, officer or committee member. No director, officer or committee member shall be required to give a bond or other security to guarantee the faithful performance of his or her duties pursuant to this Agreement. The funds of the Authority shall be used to defend, indemnify and hold harmless the Authority for any director, officer or committee member for their actions taken within the scope of the authority of the Authority. Nothing herein shall limit the right of the Authority to purchase insurance to provide such coverage as hereinafter set forth. ARTICLE 21 BYLAWS The Board may adopt Bylaws consistent with this Agreement which shall provide for the administration and management of the Authority. ARTICLE 22 NOTICES The Authority shall address notices, billings and other communications to a Member as directed by such Member. Each Member shall provide the Authority with the address to which communications are to be sent. Members shall address notices and other communications to the Authority, at the office address of the Authority as set forth in the Bylaws. -11- ARTICLE 23 AMENDMENT This Agreement may be amended at any time by vote of two-thirds of the Members, acting through their City Councils. Any amendment of this Agreement shall become effective upon receipt by the Authority of notice of the approval of such amendment by the City Councils of two-thirds of the Members. ARTICLE 24 SEVERABILITY Should any portion, term, condition, or provision of this Agreement be decided by a court of competent jurisdiction to be illegal or in conflict with any law of the State of California, or be otherwise rendered unenforceable or ineffectual, the validity of the remaining portions, terms, conditions, and provisions shall not be affected thereby. ARTICLE 25 PROHIBITION AGAINST ASSIGNMENT No Member may assign any right, claim or interest it may have under this Agreement, and no creditor, assignee or third party beneficiary of any Member shall have any right, claim or title to any part, share, interest, fund or asset of the Authority. ARTICLE 26 -12- ARTICLE 27-2 FILING WITH SECRETARY OF STATE The Program Administrator of the Authority shall file a notice of this Agreement with the office of the California Secretary of State within thirty (30) days of its effective date, as required by Government Code Section 6503.5 and within seventy (70) days of its effective date as required by Government Code Section 53051. IN WITNESS WHEREOF, the undersigned party hereto has executed this Agreement on the date indicated below. DATE: Seal: ATTEST: CITY OF By: Its Amendment No. 1 Authorized for distribution to member cities for approval on May 21, 1998 Amendment No. 2 - Authorized for distribution to member cities for approval on May 21, 1998 Amendment No. 1 - Effective upon two-thirds of City Councils of member cities taking official action ( 1998) Amendment No. 2 - Effective upon two-thirds of City Councils of member cities taking official action ( , 1998) -13- APPENDIX A MEMBERS Baldwin Park Indio Claremont Lynwood Compton Manhattan Beach ElSegundo San Fernando Hawthorne South Gate Hermosa Beach Vernon Huntington Park INDEPENDENT CITIES LEASE FINANCE AUTHORITY SUMMARY OF FRESH RATE PROGRAM The Independent Cities Lease Finance Authority (ICLFA) is pleased to introduce its "Fresh Rate" Taxable GNMA Mortgage Bond Down Payment Assistance Program, providing a unique home ownership opportunity for low and moderate income home buyers. While a detailed description of the program is available, the key aspects are summarized as follows: 1. The purpose of the program is to provide assistance to a large but under -served segment of the prospective home buyer population --those families and individuals who, for whatever reason, have not been able to save all of the mortgage loan down payment and closing costs, but can qualify and make the payment for a market rate loan. 2. The program delivers 4% down payment and closing cost assistance for low and moderate income home buyers. In conventional home financing, the minimum down payment is 3% while closing costs average an additional 4%. Consequently, the cash required at closing is reduced by over one-half by the Fresh Rate program. 3. Participating cities will be required to be a member of ICLFA but will not pay any fees or incur any liability or costs and will not be required to expend any staff resources. The program costs of 1 % will be paid by the originating lenders and loan servicer. Marketing will be performed by the originating lenders and ICLFA. 4. Eligible properties include new or existing single-family detached or attached homes, manufactured housing, condominiums and town homes which are owner occupied and located within the jurisdiction of any ICLFA member city. 5. The taxable bond issue will receive a "AAA" (GNMA Securities) rating from Standard & Poor's. 6. The home mortgage interest rates will be fixed for thirty years. The actual interest rate for the mortgages is set at the time mortgages are originated. Consequently, the program remains competitive in the market, regardless of market conditions at the time the bonds are issued. 7. Home buyers will be qualified under FHA and VA underwriting standards. 8. Home sale prices may not exceed FHA ($170,362) or VA ($203,000) mortgage loan limits. 9. Home buyer income may not exceed 120% of the State or Countywide area median (the current Statewide area median income is $52,600). 10. No State of California bond allocation is required as the mortgage bonds will be taxable. 05-98 INDEPENDENT CITIES LEASE FINANCE AUTHORITY DESCRIPTION OF FRESH RATE PROGRAM INTRODUCTION After six months of study and marketing, the Independent Cities Lease Finance Authority (ICLFA) approved a program that will benefit cities by providing 4% down payment assistance (101 % financing for single family mortgages). The preponderance of comments received from elected officials and city housing experts who have reviewed the program are that the program is "almost too good to be true." Banc One, an AA rated I institution headquartered in Columbus, Ohio, offers mortgage financing for single family homes (through its Fresh Rate Taxable Mortgage Bond Program) up to 101 % of appraised value through down payment and closing cost assistance. The mortgages must meet the Federal Housing Administration (FHA) qualifying criteria. The program requires the participation of public agencies to comply with the FHA criteria for down payment and closing cost assistance. The purpose of this document is to explain the program in detail and set forth the home price restrictions. FHA MORTGAGE CRITERIA FHA will insure mortgages from an originator in amounts up to $170,000 where the purchaser intends to use the home for their primary residence. FHA will currently fund mortgages up to 97% of appraised value. Banc One will effectively increase the finance amount to 101 % of appraised value through its Fresh Rate program. The cost to the borrower for this down payment and closing cost assistance is an extra 50 to 75 basis points (0.50% to 0.75%) on their loan rate. The FHA criteria does not place any affordability restrictions on borrowers or on resale in the secondary market, however, the State criteria does (see below). There is no restriction to first time homebuyers. The Banc One program is open to single family residences, as well as purchases of two, three and four unit structures so long as the borrower uses one of the units as their primary residence. The 4% of down payment assistance provided by Banc One is evidenced through a second lien which is forgiven over time. The 4% down payment assistance is -funded through a 4% premium that Banc One pays to buy the bonds at the time of issuance. The mortgages may be assumed by new owners on a resale. The Banc One Fresh Rate program is considered as down payment assistance under the FHA lending criteria. According to these criteria, only a blood relative or a public agency can provide down payment assistance. Consequently, Banc One needs the participation of a public agency, in this case ICLFA, as a conduit for the loans in order for the program to comply. -1- So far, five public agencies in the United States have participated in the program: two counties in Oklahoma, two counties in Arizona, and one area in Illinois. There are several other agencies outside of California in the process of structuring the program. HOW PUBLIC AGENCIES PARTICIPATE A public agency is needed to issue taxable bonds to fund the potential mortgages. Banc One purchases the bonds initially and invests the proceeds in a variable rate guaranteed investment contract (GIC). The variable interest rate on the bonds is determined by the interest rate on the GIC issue. Since the bonds are taxable, there are no arbitrage issues. As mortgages are originated, tranches of multiple mortgages are exchanged by the master mortgage servicer (a separate company from Banc One) for Government National Mortgage Association (GNMA) certificates. Tranches typically consist of about $2 million of aggregated mortgages. Essentially, the trustee on the bond issue is either holding cash for unfunded mortgages, or AAA GNMA's at all times. As each tranche of mortgages is set up, Banc One converts a corresponding amount of the bonds from variable to fixed rate. The fixed rate on the bonds is based on the current market rate for GNMA securities. Banc One withdraws its guarantee from these GNMA-backed bonds, since they are guaranteed by escrowed AAA GNMA's. At no time in the process is the public agency issuer at risk for the bonds. Even though the public agency takes no risk on the bond issue, the use of the public agency as a conduit issuer satisfies the FHA down payment assistance requirement for public agency participation. LEGAL AUTHORITY FOR SUCH A PROGRAM IN CALIFORNIA Since the bonds are taxable, none of the federal restrictions applicable to tax exempt single family mortgage revenue bonds apply. As discussed above, the FHA criteria limit mortgage amounts to $170,000 and borrowers to being residents, but otherwise there are no income or first time homebuyer restrictions. However, State law (applicable to cities) does require the mortgagor to certify his or her intention to occupy the home for a minimum of two years after receiving such a home mortgage. Jones Hall has researched the ability of city government in California to issue taxable single family mortgage revenue bonds for the Banc One program. City government needs a public purpose in order to issue the bonds. In California, the public purpose is the provision of affordable housing. Accordingly, use of the bond proceeds in California would be limited by the State's affordability criteria. These are as follows: New Construction All borrowers must have incomes less than or equal to 120% of the greater of the following: Statewide median household income; Countywide median household income; or the Department of Housing & Urban Development (HUD) median family income for the applicable area. The ICLFA program will utilize the Statewide median household income. No distinctions are made for family size. -2- Existing Homes (Resale Market) State law requires that 50% of the borrowers must have incomes less than or equal to 90% of the greater of the following: State median family income; County area median family income; or HUD median family income. The other50% of the borrowers can have incomes as high as 120% of the applicable median family income. As with new construction, no distinctions are made with respect to family size for determining affordability. In addition to these criteria, the State allows redevelopment agencies to issue bonds to fund mortgages for newly constructed market rate housing, without restriction, if such new units are located in a project area. IMPACT OF AFFORDABILITY CRITERIA IN LOS ANGELES COUNTY According to Jones Hall, the applicable Statewide median household income as determined by HUD for 1998 is $52,600. The area median family income figure for Los Angeles County is $49,800. It appears from this analysis that it is more advantageous to use the HUD Statewide figure. If it is assumed that the maximum home price that a borrower could afford is three times their income, the income restrictions have the following impacts: Maximum income at 120% of Statewide HUD median - $ 63,120 Maximum home price at 120% of Statewide HUD median - $189,360 Maximum income at 90% of Statewide HUD median - $ 47,340 Maximum home price at 90% of Statewide HUD median - $142,020 The maximum home price at 120% of median exceeds the FHA mortgage limit of $170,000. At the upper end of the income restrictions, it appears that the FHA criteria are more of a limit than the State income restrictions. HOW THE PROGRAM IS INITIATED Banc One sizes the taxable bond issue based on lenders, developers or other originators depositing 0.5% of the mortgage amount they wish to reserve. This amounts to $625 on a $125,000 mortgage. Banc One limits the cost of issuance to 1.25% of par value. The 0.5% deposit is applied to the costs of issuance. In addition to this money from potential originators, the master loan services pays a 0.75% fee at closing which covers the remainder of the 1.25% in costs of issuance. Since no costs of issuance are funded from bond proceeds, there are no non -asset bonds. The reservation deposits are not refunded directly to the originators as they originate mortgages. However, originators receive two points in origination fees as each mortgage is closed, resulting in a net gain of 1.5 points on each mortgage. In order to determine whether there are sufficient originators to justify a bond issue, meetings will be conducted by Banc One with potential originators in each of the cities, or groups of neighboring cities, that are considering the program. The minimum issue size is $50 million. This converts to about 400 mortgages. Research shows that in 1997 there were a minimum of 15,000 mortgages issued in the cities that expressed interest that would have qualified for the Fresh Rate program. -3- ADVANTAGES OF A JOINT POWERS AUTHORITY (JPA) For purposes of determining compliance with the State's affordability criteria, a JPA offers the advantage of being able to show compliance across the aggregate of each participant's mortgage originations. In other words, a city generating primarily 90% of median loans in the resale market can be paired with one generating primarily 120% of median loans in the resale market. The entire program will benefit from the participation of a large group of cities. There will be no cost to the participants to join the JPA. The expenses, such as an annual audit, are paid from program revenues. The ICLFA Board of Directors has approved this program. ICLFA, which currently has thirteen member cities, was sponsored by the Independent Cities Association (ICA), which is a nonprofit, public benefit, tax exempt corporation comprised of 50 cities in the Southern California area. There will be no limit on the number of cities that can participate. ICLFA is an excellent choice to serve as the JPA for this program. ADVANTAGES TO A PARTICIPATING CITY In the view of many loan originators, coming up with a down payment and the closing costs is the largest obstacle to putting families into their own homes. This program addresses that problem. So far, in Banc One's experience, a family can move into their own home for the equivalent of one extra month's mortgage. The program has the potential of being a very effective way to increase the percentage of homeowners in a community. The second advantage is that no financial assistance from public agencies is required. No pledge or other use of housing set -aside funds is required. If a redevelopment agency wishes to use its housing set -aside funds to support the program, it could do so in one of two ways. It could purchase mortgage reservations at 0.5% of the loan amount, or it could buy down the 50 basis point interest rate surcharge. However, if it did so, each residential unit so financed would be subject to the 15 year affordability covenant mandated by the State statutes. Otherwise, there is no affordability covenant associated with this program. NEXT STEPS The ICLFA Board has indicated that all ICLFA cities will be participants in the program. Associate memberships are being offered to other cities. Materials to facilitate those memberships are being distributed to interested cities. Meetings with lenders and realtors in participating cities will be initiated in July and August. If you have any questions, please call David Smith, ICLFA Program Administrator, at (818) 906-0941; Mark Northcross, ICLFA Financial Advisor, at (415) 380-9746; or Wes Wolf, Banc One representative, at (949) 489-8036. 05-98 -4- 1" 7 Qw-WL Wit-W. '101, , " FEA, FRESHRATE'rm TAXABLE MORTGAGE REVENUE BOND PROGRAM PROGRAM TYPE GNMA mortgage -backed securities program. The participating Lenders will originate mortgage loans. A Lender will sell the mortgage loans to the Servicer. It shall be the obligation of the Servicer to pool the mortgage loans originated into GNMA securities and in turn sell the GNMA securities to the Bond Trustee. LENDERS Subject to approval by the Authority, any lender which (i) a FHANA mortgagee, (ii) has an operating office in the state which will be operative throughout the origination period of the Program, and (iii) is organized or existing under the laws of the program state, another state or the United States, and is qualified to do business in the program state. Lenders will have an obligation to undertake a minimum participation of $500,000. Participating Lenders may reserve up to half of their allocation to one or more Builders or Realtors and collect a corresponding percentage of the commitment fee for such a reservation. All of the terms and conditions pertaining to the Lender's allocation follow the Builder and Realtors reservations. PROGRAM SERVICER It shall be the Servicer's responsibility to review each mortgage loan for compliance with the Authority Program Requirements prior to loan closing, and it will also have responsibility for any and all proposed assumptions of mortgage loans. PROGRAM AREA The combined jurisdictions of all ICLFA member cities. FRESHRATETM PROGRAM The mortgage loan rate will be on each Commitment Lot of $2 million. The rate is set based upon GNMA rates. When the lenders have received enough loan applications to fill the Commitment Lot, then a new Lot is started at a fresh interest rate for the next $2 million. 1 B NC_ ONE. 1 MORTGAGE LOAN TERM 30-year fixed level payment, FHA insured or VA guaranteed. MORTGAGE RATE The rate is based upon GNMA market yield at the time the Commitment Lot is priced and the rate is fixed for the life of the loan. The formula for the rate is: True Coupon GNMA plus 124 basis points. Thus, the rate will vary and stay market fresh since it is set on each individual Commitment Lot of $2 million. (Example: Rate 8.00% on 12/18/97 and 7.875% on 1/5/98). DOWN PAYMENT ASSISTANCE From the proceeds of the Bonds, an amount equal to 4.0% of such proceeds will be set aside to cover homeowner down payment assistance in accordance with the Authority's Program Requirements. This Down Payment and Closing Cost Assistance is subject to recapture by the Authority if the Borrower sells his house and the loan is not assumed by a Qualified Buyer or if the Borrower voluntarily refinances it. The Down Payment Assistance is evidenced by a second lien note and mortgage which is forgiven over a ten year period following the closing of the loan. The recapture schedule is as follows: 0% Interest 0 to five year closing 100% 5 years, one day to six year from closing 80% 6 years, one day to seven years from closing 60% 7 years, one day to eight years from closing 40% 8 years, one day to ten years from closing 20% The Borrower/Seller is to pay a Down Payment Assistance fee of $75.00 which is remitted to the Servicer. A $75.00 Compliance fee is collected by the Lender from the Borrower and paid to the Compliance Agent. PROGRAM FEES A) Lender Commitment Fees will be .50% of the requested allocation amount, and will be used to pay minimal costs of issuance. Commitment Fees are due upon submission of the Lender's application. B) Fees from Home Buyer/Seller (Paid to Lender on Loan Closing) C) Other Fees Servicer will purchase Mortgage Loans from Lenders for 105% of outstanding principal balance. Lenders net 1.50% per loan. BANC=ONE. a-0.C..WC.W.." 2 ORIGINATION PERIOD 36 months to originate, process and sell loans to the Servicer. It is expected that the Origination Period will begin on or before January 1, 1998. There may be an extension of the delivery period to originate loans at the discretion of the Issuer, but in no case will the origination period exceed 42 months from the date of issuance of the Bonds. RECOMMENDED ALLOCATION PROCEDURE A) Subject to the applicable reservations, allocations will be available on a first -come, first -serve basis to the general public. B) The Issuer will allocate the funds for the purchase of GNMA securities on the basis of Lenders' requests, their origination and servicing experience and their prior performance in previous single family mortgage revenue bond programs on an equitable basis. C) Lenders may, solely with the prior written approval of the Issuer, purchase each others' allocations in the Program by reimbursement of commitment fees. ELIGIBILITY REQUIREMENTS A) For state law purposes, a Borrower's adjusted annual income, at the time of the origination of the loan may not exceed the amount specified by the Issuer: (i) For state law purposes, a Borrower's adjusted annual income at time of the origination of the loan may not exceed 120 % of the state median income as determined by the state department authorized to set such income limits. ELIGIBLE PROPERTIES A) Single-family, owner -occupied residential dwellings, including (as limited below) manufactured housing, condominiums and townhouses. Units in Condominium Developments or Planned Unit Developments are subject to the following restrictions (unless the project qualified as "de minimis" PUD): (i) The project must be approved by FHA or VA; and (ii) Prior to issuing Lender's commitment to finance a unit in any such project, Lender must complete the appropriate form and file it with the Master Servicer to assure compliance with item (i) above. B) Dwelling must be occupied by Borrower as Borrower's principal residence within 60 days of the closing of the Borrower's mortgage loan, and may not be used, except for incidental purposes, in a trade business. MAXIMUM PURCHASE PRICE FOR ELIGIBLE RESIDENCES Home sale prices may not exceed FHA or VA mortgage loan limits. BANC=ONE. B_0_CW"C-M_ 3 PREPAYMENT RIGHTS Mortgage Loans may be prepaid, in whole or in part, any time, without penalty. However, prepayment in connection with a sale or other disposition of a residence may subject the Borrower to the Down Payment Recapture described above. ASSUMPTION RIGHTS Mortgage loans may be assumed at any time without penalty. The prospective purchaser of the residence who assumes the mortgage loan must meet the then current income limitations, principal residence requirement, prohibited mortgages requirement, and any other requirement prescribed by State law, including the Down Payment Assistance described above. GUARArrroRS Lenders are permitted to accept cosigners and guarantors on behalf of Eligible Borrowers, provided: (i) such cosigner/guarantor is acting in such capacity solely for the purpose of providing additional security for the Mortgage Loan, (ii) such cosigner/guarantor has no other financial interest in the Residence, (iii) such cosigner/guarantor will not occupy the Residence as a permanent resident, and (iv) the Eligible borrower has sufficient income to satisfy the underwriting criteria of the FHA or VA. INTEREST RATE BUY DOWNS Will not be permitted. THESE PROGRAM TERMS ARE FOR DISCUSSION PURPOSES ONLY THE AUTHORITY'S ABILITY TO ISSUE BONDS TO FINANCE THE ACQUISITION OF SINGLE FAMILY MORTGAGE LOANS IS DEPENDENT UPON A NUMBER OF FACTORS, INCLUDING PREVAILING INTEREST RATES IN THE CREDIT MARKETS. THE AUTHORITY RESERVES THE RIGHT TO MODIFY TERMS AT ANY TIME PRIOR TO THE SALE, ISSUANCE AND DELIVERY OF THE BONDS. 8MC_ ONE. 9-0-c*wc 4 Q1. WHAT IS UNIQUE ABOUT THIS PROGRAM? A. There are five unique factors to this program. 1. Fresh Rate TM 2. Down Payment Assistance For those who have a good income but insufficient savings for a down payment 3. No First Time Home Buyer Restriction 4. Income Limits Are Generally Higher Than Those Established For Similar II Programs. 5. No State Cap Is Required — Money Is Continually Available Q2. WHAT IS FRESH RATE ? A. After the Issue has closed, the mortgage rates offered under the Fresh Rate TM Program are set on each Commitment Lot of $2 million based upon an index set at bond closing. When the Lenders have received enough loan applications to fill the Commitment Lot, a new Lot is started at a fresh interest rate for the next $2 million. This refreshing of the rate is repeated until all the money is loaned. 1. A Commitment Lot of $2 million is made available for Lender reservations. 2. When the Commitment Lot is made available to the Lenders for reservations, it is assigned a mortgage rate, which is based on the formula set at bond closing. 3. The Lenders then collectively work on a first -come, first -serve basis to place reservations on that $2 million Commitment Lot. 4. When the Commitment Lot of $2 million has been fully reserved, another $2 million Commitment Lot is made available to the Lenders. The new Commitment Lot is assigned a new mortgage rate based on the same formula as before. This process is repeated until the entire issue amount has been loaned. 5. Having the Lenders work collectively to reserve funds keeps the rate market fresh and assists the Lenders in staying competitive with other programs. Q3. WHAT WILL THE MORTGAGE RATE BE? A. The rate is based upon GNMA market yield at the time the Commitment Lot is priced and the rate is fixed for the life of the loan. The formula for the rate is: True Coupon GNMA plus 124 basis points. Thus, the rate will vary and stay market fresh since it is set on each individual Commitment Lot of $2 million. (Example: Rate 8.00% on 12/18/97 and 7.875% on 1/5/98) Q4. HOW WILL I KNOW WHAT THE RATE WILL BE ON EACH NEW COMMITMENT LOT? A. Each time a Commitment Lot is made available to the Lenders the Servicer will contact the participating office and inform them of the new rate. Q5. WHAT TYPE OF MORTGAGES ARE ACCEPTED UNDER THE FRESH RATET"i PROGRAM? A. Mortgage Terms are defined below: 1. FHA insured, VA guaranteed or RHS guaranteed 30-year fixed rate mortgage loans. 2. No First Time Home Buyer Requirement. 3. Income Limits are set by the Issuer and are generally higher than IRS restrictions. The Income Limit for your Issue is 120% of Statewide median income of $52,600. 4. Home sale prices may not exceed FHA or VA mortgage loan limits. Q6. ARE THERE ANY DISCOUNT POINTS? A. No Q7. WHAT TYPE OF DOWN PAYMENT ASSISTANCE IS BEING OFFERED? A. The Fresh Rate TM Program offers 4% Down Payment and Closing Cost Assistance and is subject to recapture if the borrower sells his house and the loan is not assumed by a Qualified Buyer or if the Borrower voluntarily refinances. The Down Payment Assistance is evidenced by a second lien note and mortgage which is forgiven over a ten year period following the closing of the loan. The recapture schedule is as follows: 0% Interest 0 to five years rom closing 100% 5 years, one day to six year from closing 80% 6 years, one day seven years from closing 60% 7 years, one day eight years from closing 40% 8 years, one day to ten years from closing 20% Q8. WHAT FEES ARE THE BORROWER/SELLER REQUIRED TO PAY? A. As follows: 1. A one -percent (1.00%) Origination Fee from Borrower/Seller is paid at Loan I) Closing. 2. The Borrower/Seller is to pay a Down Payment Assistance Fee of $75.00 which is remitted to the Servicer. 3. A $75.00 Compliance Fee is to be collected by the Lender from the Borrower and paid to the Compliance Agent. Q9. WHAT DOES THE LENDER NET? A. As follows: 1. The Lender pays a 0.50% Commitment Fee on the amount of its requested allocation. 2. The Lender collects 1.00% Origination Fee at loan closing. 3. The Lender collects 1.00% Service Release Fee at loan sale to the Servicer. 4. The Lender Nets 1.50% Q10. WHAT IS THE LENDER COMMITMENT FEE? A. The Lender Commitment Fee is 0.50% of the allocation amount requested by the Lender. The minimum amount a Lender can request is, $500,000. _There is not a restriction on the maximum amount a Lender may request. - -- Example: If the amount of allocation requested is $2,500,000, the Lender would multiply it by .50% and attach a check for the -total amount with the Offer to Originate page (which is located in the Invitation to Participate document). [$2,500,000 X .50% = $12,500]. Q11. IS THE LENDER COMMITMENT FEE REFUNDABLE? A. Yes and No. If you request an allocation amount of $10 million and pay the Lender Commitment Fee of $50,000 for your allocation, but are only awarded an allocation amount of $8 million, the difference between the Lender Commitment Fee for $10 million and $8 million would be refunded to you. This example is the only type of circumstance in which the Lender Commitment Fee would be refunded. Q12. HOW IS THE ALLOCATION PROCESS HANDLED? A. Each Lender located within the program area will receive a packet of information about the Fresh Rate TM program, generally seven to ten days before the issue is set to close. This packet will contain the following items: 1. Lender Instruction Letter (this letter will explain which documents need to be completed, signed and returned in order to participate in the program). 2. Program Summary (this document gives a brief synopsis of. the Fresh Rate TM program). 3. Invitation to Participate (this document contains details about the program such as the Program Area, State Law Reservations, Commitment Procedures, etc.) 4. Origination and Servicing Agreement (this document concisely outlines the program, the Lenders Responsibilities, the Servicer's Responsibilities, details on the GNMA Certificates, etc.) NOTE: The Exhibits to the Origination and Servicing Agreement are the same documents you will receive in camera- ready form after the closing in order to make mortgage reservations. Once you have received this packet, it is imperative that you read through all the documents enclosed, paying close attention to the Instruction Letter. The Instruction Letter will state when the Documentation Deadline Date is and where you will need to send your participation documents. Then decide how much allocation you will be requesting, complete the documents listed on the Instruction Letter and return them with your check to the office listed, by the Documentation Deadline Date. After all participation documents are received and evaluated, we will calculate the amount of your allocation. You will be notified by phone as to the amount of the allocation you have been awarded. Once the closing has occurred, you will be contacted and informed of the rate on the first Commitment Lot. After receiving this information you will be able to take applications and make reservations immediately. Q13. WHY SHOULD I PARTICIPATE IN THE FRESH RATE PROGRAM? A. There are three important reasons you should participate in the Fresh Rate TM program. 1. You can make home -ownership a reality for families who have enough income to make payments but just have not been able to set aside enough money for the down payment, closing costs, and escrows. 2. This program is designed to be constantly available so that you can build it into your marketing and training plans. 3. Banc One works through the concept of teamwork. We will make ourselves accessible to you and do our best to answer any questions or help find solutions to any problems you may encounter. ------------ 1 Banc One FreshRateT"�l Mortgage Revenue Bond Program � I_ Flow Chart of Operations and Financial Considerations _1 Total of Lender Commitment Amounts determines the Bond Issue size. Issuer approves FreshRateTM Mortgage Revenue Bond Program Banc One with assistance from the Issuer, conducts Lender meetings to roll out the FreshRateTM Program. Lenders submit Commitment amounts and pay 1/2 point Commitment Fee to the Trustee when they complete the Application to Participate in the FreshRateTM Program r Bond Issue is closed and the 1st Commitment Lot of $2MM is issued. The FreshRateTM rate is then reset each time a subsequent Commitment Lot is issued. Lender obtains loan applications from borrowers. During borrower application process, Lender faxes Loan Registration to Servicer and obtains rate lock and forwards executed compliance forms to the Services Loan(s) are Processed, underwritten to FHANA guidelines and approved by the FHANA Lender. There are only 7 additional compliance and Lender forms required for the FreshRatem Program Servicer will accept Lender defined stacking order at delivery. See Exhibit 1. Lender approves loan and schedules loan for closing. Collects 1 point from borrower at Begin process with closing . Lender funds loan at 104% of Par using own warehouse credit lines. new $2MM Borrower receives loan amount with 4 Points of Down Payment Assistance. Lender Commitment Lot. sells loan to Servicer at 105% of Par. Fee Stricture Basis Points Fee Name Paid By Paid To .50 BPS Commitment Fee Lender Trustee 100 BPS Closing Points (included in loan) Borrower Lender 400 BPS Down Payment Assistance Lender Borrower 500 BPS Sale + SRP Servicer Lender Borrower = 400 BPS Down Payment Assistance Lender = 150 BPS (+ 100 BPS Closing Points + 100 BPS SRP - .50 BPS Commitment Fee) 1 SUNG ONE. Banc Our capiuil Conwradon UNAPPROVED INDEPENDENT CITIES LEASE FINANCE AUTHORITY BOARD OF DIRECTORS MEETING, MAY 21, 1998 MINUTES The meeting of the Board of Directors of the Independent Cities Lease Finance Authority (ICLFA) was called to order at The Daily Planet Restaurant in South Gate on May 21, 1998 at 12:15 p.m. by President Mike McCormick. Members Of The Board Of Directors/Alternates Present (Votin W. Michael McCormick Vernon Donald Jeffers Huntington Park Susan Hartman Claremont Steve Klotzsche San Fernando Kelly McDowell El Segundo Teri Muse Baldwin Park Sam Nassar South Gate Alternate Members Of The Board Of Directors Present (Non Voting) Eunice Kramer The cities of Compton, Hawthorne, Hermosa Beach, Indio, Lynwood and Manhattan Beach were not represented by a voting member. Guests Present Andy Hall Wayne Mittleider Ed Schilling Wes Wolf Neil Yeager Staff Present Greg Spiker David Smith Debbie Smith Jones Hall Commonwealth Mortgage Assurance Co. Stone & Youngberg Wolf & Company Burke, Williams & Sorensen Ken Spiker And Associates, Inc. Independent Cities Association Ken Spiker And Associates, Inc. President McCormick conducted the business of the Authority as follows: I. APPROVAL OF MINUTES OF THE DECEMBER 11, 1997 BOARD OF DIRECTORS MEETING. It was moved by Teri Muse, seconded by Susan Hartman, and unanimously carried that the minutes of the December 11, 1997 Board of Directors meeting be approved as submitted. INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 2 II. COMMENTS FROM THE PUBLIC REGARDING ANY MATTER. None. III. APPROVAL OF AUDIT REPORT FOR YEAR ENDED JUNE 30, 1997. It was moved by Steve Klotzsche, seconded by Teri Muse, and unanimously carried that the audit report for year ended June 30, 1997 be approved as presented and be distributed to member cities. IV. APPROVAL OF THE ESTABLISHMENT OF AN EXECUTIVE COMMITTEE AND APPOINTMENT OF MEMBERS THERETO PURSUANT TO THE JOINT POWERS AGREEMENT AND BYLAWS. Staff reported generally as follows: The process of facilitating two relatively complex programs already approved in concept by the Board will require several Board meetings over the next few months. The meetings will be required to review and approve documents associated with •the programs and facilitation of the programs. Any glitch in meeting schedules could jeopardize or delay implementation. In anticipation of an overwhelming schedule of events in getting programs off the ground, the Joint Powers Agreement and Bylaws of the Authority were developed so that virtually all functions of the Authority, except approval of budgets and election of Officers every other year, can be delegated to a five member Executive Committee. The ICLFA General Legal Counsel has indicated that the creation of an Executive Committee is clearly provided for in the Joint Powers Agreement and Bylaws, and further that all program documents and agreements will be reviewed by General Legal Counsel, as well as staff, before any actions are taken by the Executive Committee. The Joint Powers Agreement and Bylaws require that the Executive Committee include five members. The President (Mike McCormick) and Vice President (Jessica Maes), with the President serving as Chairperson, are specified as members of the Executive Committee. Three other Board Members (not alternate members) are to be appointed by the Board so that appropriate member representation is maintained. All Executive Committee members serve for two-year terms. All Executive Committee Members may be represented by their alternates at Executive Committee meetings, just as Board Members may be represented by Alternates at Board meetings. INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 3 In response to a question, an attendance sheet for recent Board meetings was distributed. The sheet revealed that for the last five meetings, the minimum number of voting Board Members to constitute a quorum (seven) were present four times, while one meeting was attended by eight voting members. Obtaining quorums is definitely difficult. Following a brief discussion of the functionality of the Executive Committee and the fact that conditions may be applied to the operation of the Executive Committee, President McCormick recommended that the Executive Committee be subject to conditions that would generally ensure that all Board Members know what is being considered by the Executive Committee before the Committee meetings; that all Board Members be invited to attend all Executive Committee meetings; that a summary of all actions of the Executive Committee be distributed to all Board Members and Alternates within five days of Executive Committee meetings; that three Board Members be authorized to call a Board meeting to review any action of the Executive Committee; and that a meeting of the entire Board be scheduled at least annually. Following a brief discussion of the pros and cons of empowering a five member Board of elected officials who serve as ICLFA Board Members to act on behalf of the entire Board, it was agreed that the Executive Committee option will improve the probability that ICLFA programs are facilitated and, with the conditions outlined by President McCormick, alleviate all concerns expressed by Board Members. It was moved by Don Jeffers, seconded by Teri Muse, and unanimously carried: That an Executive Committee consisting of President McCormick, Vice President Jessica Maes, Louis Byrd, Doude Wysbeek and Henry Gonzales, be created to take any and all actions on and implement the home mortgage and other financial programs under the purview of the Authority, including those programs that have heretofore been discussed and conceptually approved by the Board, subject to the following conditions: 1. That all agendas of the Executive Committee be distributed to all Board Members at the same time they are distributed to the Executive Committee thus facilitating Board Members attending Executive Committee meetings if they desire to do so. 2. That all actions of the Executive Committee be reported to the Board within five working days of the action; 3. That any three members of the Board of Directors may request that a Board meeting be called to review any action of the Executive Committee; and 4. That regular Board meetings should be conducted at least annually. INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 4 In response to a question, it was stated by the General Legal Counsel that nothing in the above conditions stays any Executive Committee action for review by the entire Board. Actions of the Executive Committee will be valid actions of ICLFA and are final, unless modified or reversed by a subsequent Executive Committee or Board action. V. APPROVAL OF MODIFICATIONS TO THE JOINT POWERS AGREEMENT AND BYLAWS, APPROVAL OF DISTRIBUTION OF THE JOINT POWERS AGREEMENT TO MEMBER CITIES FOR INDIVIDUAL CITY COUNCIL ACTIONS, AND DISTRIBUTION OF RESOLUTIONS FOLLOWING JOINING THE AUTHORITY SUBJECT TO THE JOINT POWERS AGREEMENT BEING CHANGED BY THE INDIVIDUAL MEMBER CITIES. Staff referred those present to: 1) a complete set of final documents approved by the ICLFA General Legal Counsel making changes to the Joint Powers Agreement and Bylaws; and 2) to a set of documents facilitating associate membership of interested cities in ICLFA, which were contained in the agenda packet. Staff reported generally as follows: The Joint Powers Agreement and Bylaws of the Authority must be amended to accommodate the mortgage program. In addition, it is proposed that an associate membership be provided which will allow the Authority to accept public entities as non -voting members of ICLFA for purposes of participating in its home mortgage and other finance programs. Also, it is proposed that a member city be authorized to voluntarily change its membership from a full voting membership to an associate membership and that the ICLFA Board be authorized to change a city's membership from full membership to associate membership if the city's voting representatives do not attend meetings thus jeopardizing the very viability of the Joint Powers Authority. The Bylaws may be changed by a simple Board action. Changes in the Joint Powers Agreement require affirmative actions by the City Councils of two-thirds of the ICLFA member cities. It is proposed that the changes in the Bylaws be via two separate resolutions: 1) authorizing ICLFA to be involved in home mortgage programs and to create associate memberships; and 2) to handle the balance of the proposed modifications which include empowering the Board to change a city's status from Member to Associate Member if a city does not regularly have a member present at Board meetings. Both the resolutions the member cities must adopt changing the Joint Powers Agreement and the resolutions cities must adopt to become Associate Members will be distributed as soon as possible. INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 5 The Associate Member resolutions, upon adoption by potential member cities (cities not currently a Member of ICLFA), will become effective upon approval of the Joint Powers Agreement modifications. It was suggested that staff provide a draft staff report or bullets to be used to prepare staff reports for City Council action for both the amendments to the Joint Powers Agreement and associate memberships. In response to a question, it was noted that a Member has voting privileges and an Associate Member does not. There are no other differences. It was noted that if all of the potential new Associate Members were Members, the Authority could potentially reach 50-60 Members, thereby requiring 26-31 individuals for a quorum. This would be unmanageable. In response to another question, it was stated that several existing member cities that are seldom represented by a voting member could voluntarily convert their membership to Associate Member. It was moved by Teri Muse, seconded by Kelly McDowell, and unanimously carried as follows: 1. That the modifications to the ICLFA Joint Powers Agreement and Bylaws be approved; 2. That staff be directed to distribute the proposed modifications to the Joint Powers Agreement to the City Councils of existing member cities, complete with background information, urging them to adopt same; and 3. That staff be directed to distribute associate membership resolutions to interested non-member cities for adoption to be effective upon approval of the Joint Powers Agreement modifications by the existing membership. VI. STATUS REPORT ON PROGRESS OF THE FRESH RATE PROGRAM. Staff referred those present to the detailed Fresh Rate materials included in the agenda packet and reported generally as follows: In December the ICLFA Board reviewed the Banc One Fresh Rate program and authorized staff to take actions necessary to determine if there was interest in the program. Materials were developed and distributed to Board Members, Alternate Board Members and city managers. The Fresh Rate program, described in detail in the documents included in this agenda packet, in oversimplified terms, provides 101% mortgage financing through a taxable bond issue for qualified INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 6 buyers subject to specified guidelines through traditional lenders. In order for the program to be offered in a given jurisdiction, the jurisdiction must be a member of the Joint Powers Authority (JPA) as down payment assistance can only be borrowed from a blood relative or a governmental entity. Therefore, the program will be offered in all existing ICLFA member cities, as well as those that join the Authority to participate in this program. Participating cities will not be required to pay any fees, commit any staff resources and will have no liability. They will be required to be a member or associate member of ICLFA. Following the December Board meeting, staff and the project consultants discussed the program with many cities, conducted a meeting with interested city staffers and made hundreds of telephone calls regarding the program. To date, eighteen non-ICLFA member cities have expressed an interest in the program and many others are still considering the question. All thirteen ICLFA member cities would automatically be eligible. A list of interested cities was distributed. Cities that are members of ICLFA and are automatically eligible are as follows: Baldwin Park Hermosa Beach San Fernando Claremont Huntington Park South Gate Compton Indio Vernon E1 Segundo Lynwood Hawthorne Manhattan Beach Non-ICLFA members cities that have expressed an interest in the program are as follows: Carson Lancaster Paramount Colton Long Beach Pomona Duarte Los Angeles Redondo Beach Gardena Monrovia Rialto Glendora Montebello West Covina Hawaiian Gardens Norwalk Whittier To expedite the program, the Board has just approve necessary modifications to the ICLFA Joint Powers Agreement and Bylaws; has authorized distribution of the amendments to the Joint Powers Agreement which are needed to accommodate the program to individual member cities for individual City Council actions; will, under another agenda item, approve consulting agreements to facilitate the program; will conduct informational meetings with INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 7 the lenders and realtors in interested cities in July; will determine the amount of funds that are desired by the lending institutions; will size the issue; will issue bonds; and finally will put the program on line. The following is an anticipated time frame for implementing the program Board authorizes distribution of resolutions to member cities modifying the Joint Powers Agreement to accommodate the home mortgage program May 21, 1998 Board authorizes distribution of resolutions to non-ICLFA cities to facilitate their associate membership May 21, 1998 Resolutions adopted by two-thirds of ICLFA member cities modifying the Joint Powers Agreement are returned to ICLFA July 2, 1998 Resolutions joining ICLFA as associate members are returned to ICLFA by non- ICLFA member cities July 2, 1998 Meetings with lenders and realtors are conducted by Banc One July 1998 Commitments are forwarded to Banc One by lenders July 1998 Final documents are approved and issue sized by Board or -Executive Committee July/August 1998 Issuance Immediately fol- lowing Board or Executive Commit- tee meeting ap- proving documents and sizing issue Draw downs Ongoing The Board unanimously issued the following directives: 1. That the Fresh Rate program be offered in all ICLFA member cities and other cities that effectuate an associate membership. INDEPENDENT CITIES LEASEFINANCEAUTHORITY Board of Directors Meeting, May 21, 1998 Page 8 2. That staff move the program forward as rapidly as possible and assist member cities in getting the resolutions amending the Joint Powers Agreement scheduled and passed, and assist potential member cities in getting their Associate Member resolutions passed; and 3. That Banc One expeditiously conduct realtors in ICLFA member cities and an interest in the program so facilitated as soon as two-thirds adopted resolutions changing the meetings with lenders and cities that have expressed that the program can be of the member cities have Joint Powers Agreement to accommodate the home mortgage program. VII. APPROVAL OF PROFESSIONAL SERVICES AGREEMENT FOR THE FRESH RATE (101% MORTGAGE FINANCING) PROGRAM. Staff referred those present to the final professional service agreements prepared by General Legal Counsel and included in the agenda packet and reported generally as follows: The five year professional service agreements will be effective only if Fresh Rate program bonds are issued. If no bonds are issued, ICLFA will incur no financial liability to any of the consultants noted. CONSULTANTS: Program Administrator It is proposed that Ken Spiker And Associates, Inc. (KSA) serve as Program Administrator for the Fresh Rate program. KSA, in the person of David Smith, facilitated the creation of ICLFA at the direction of the ICA Board, has staffed ICLFA programs since the inception of the Joint Powers Authority in 1988 and, as was the case with all ICLFA consultants, received a fee each time a lease was drawn down. KSA has voluntarily accepted the responsibility (pro bono)'of keeping ICLFA operational following the termination of draw downs of ELVIS funds several years ago. Those responsibilities have included scheduling necessary meetings, facilitating Board meetings, preparing agendas and minutes, administering FPPC programs, and facilitating annual audits and rebate calculations. In addition, KSA has taken a lead in marketing the Fresh Rate program to cities; in setting up necessary business meetings; in scheduling and arranging for the staff informational meeting, including written notifications and hundreds of personal telephone calls. To date, KSA has expended several hundred hours on the program and expects to expend many more prior to issuance in marketing the program and in convincing many cities to join the Authority so that the program can be offered in multiple jurisdictions. INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 9 Assuming a $50 million issue, it is proposed that KSA receive $40,000 at issuance for its part in program development and marketing. In addition, it is proposed that KSA receive a one- time fee of $10,000 at issuance for ongoing work, including additional marketing, scheduling of meetings, preparation of agendas and minutes and other required Program Administrator work. If the issue is larger than increased based on the schedule for the fee structure). General Leggal Counsel $50 million, the fees will be in the agreement (see agreement It is proposed that Burke, Williams & Sorensen serve as General Legal Counsel. In that capacity, the firm will be working with ICA and ICLFA on the Authority's programs. Burke, Williams & Sorensen serves as the ICA General Legal Counsel. It- is only reasonable that Burke, Williams & Sorensen serve as the ICLFA General Legal Counsel also. Burke, Williams & Sorensen has developed all professional service agreements for the Fresh Rate program, will review all legal documents relating thereto, will provide the Authority with legal advice prior to and during issuance, will provide assurance to potentialmember cities that the program presents no liability exposure to them, will assist in the preparation of modifications to the Authority's legal documents to accommodate the mortgage program and to make other necessary changes thereto. Assuming a $50 million issue, it is proposed that Burke, Williams & Sorensen receive $15,000 at issuance for its legal assistance and service. In addition, it is proposed that Burke, Williams & Sorensen receive a one-time fee of $5,000 at issuance for providing ongoing legal assistance and advice and reimbursement for out-of-pocket expenses. If the issue is larger than increased based on the schedule for the fee structure). Bond Counsel $50 million, the fees will be in the agreement (see agreement It is proposed that Jones Hall serve as Bond Counsel. The firm of Jones Hall has considerable experience in the bonding area, is knowledgeable regarding housing finance programs and is a firm that is acceptable to both ICLFA and Banc One. Jones Hall will provide all documents and legal assurances required to facilitate the Fresh Rate program. INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 10 It is proposed that Jones Hall receive $40,000 at issuance plus normal out-of-pocket expenses (see agreement for the fee structure) . Financial Advisor It is proposed that Project Finance Associates serve as Financial Advisor. Mark Northcross, formerly of Kelling,_Northcross & Nobriga, now a principle of Project Finance Associates, has served as Financial Advisor for ICLFA since its inception in 1988 and, as was the case with all consultants, received a fee each time a lease was drawn down. Project Finance Associates brought the Fresh Rate program to ICLFA and will assist in marketing the program. Assuming a $50 million issue, it is proposed that Project Finance Associates receive $40,000 at issuance for its part in program development. In addition, it is proposed that Project Finance Associates receive a one-time fee of $5,000 at issuance for ongoing work, including additional marketing and attendance at necessary meetings. If the issue is larger than $50 million, the fees will be increased based on the schedule in the agreement (see agreement for the fee structure). Program Development/Marketing Independent Cities Association staff has spent, and is spending, considerable time on the program. That organization should be appropriately compensated. Assuming a $50 million issue, it is proposed that the Independent Cities Association receive $5,000 at issuance and $5,000 as soon as fees are available from the ten basis point surcharge. PROPOSED FEES - TOTAL: The proposed fees for the entire program assuming a $50 million issue are as follows:: Funds Available To Pay ICLFA Consultants $160,000(1)(2) Banc One Fees (Underwriter, Underwriter's $340,000 Counsel, Project Consultant, Rating Agency and Advertising) TOTAL $500,000 INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 11 Source of Funds- 0 50% from lenders 0.50t from Servicer 1.00t x $50 million - $500,000 (1) The $160,000 issuance fee does not include a 10 basis point fee that will accrue to ICLFA. ICLFA will receive 10 basis points on all mortgages originated. The fee will continue as long as the mortgages are outstanding, but will decrease in amount as principle is paid off. (2) For an issue size above $50 million, a factor of $1,400 per million will be used for funds available to ICLFA. A second issue or a new issue will be paid at the same rate as the first issue. PROPOSED FEES - ICLFA: It is proposed that the $160,000 of fees that would accrue to ICLFA at issuance, assuming a $50 million issue, will be distributed as follows: Direct Pay To Consultants At Issuance: Function Firm Fee For Issuance work «a Fee For Post Issuance Work (" General Legal Counsel Burke, Williams & Sorensen $ 15,000 $ 5,000 Bond Counsel Jones Hall $ 40,000 $ -0- Financial Advisor Project Finance Associates $ 40,000 $ 5,000 Program Administrator Ken Spiker And Associates $ 40,000 $ 10,000 Program Development/ Marketing Independent Cities Assoc. $ 5,000 $ 5,000f21 TOTAL FEES $160,000 Notes- (1) The above fees do not include an ongoing ten basis point fee. to ICLFA generated from the loan rate. ICLFA will receive 10 basis points on all mortgages originated. The fee will continue as long as the mortgages are outstanding, but will decrease in amount as principle is paid off. It is anticipated that the 10 basis point fee will pay all necessary costs of the program over time. (2) ICA will be paid $5,000 at issuance and $5,000 from the ten basis points fee as soon as those funds are available. INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 12 (3) In addition to the fees noted above, Bond Counsel and General Legal counsel will be paid up to $5,000 each for actual out- of-pocket expenses. An additional Fresh Rate issue of $50 million would generate fees equivalent to those of the first issue The financial aspects of the Fresh Rate program should be evaluated after it has been in place 1-2 years. If program revenues that are not needed for operations are generated through the ten basis point fee, they could be used for any qualifying ICLFA purpose. The Board should not give any participants any indication that excess funds will be rebated to them for two reasons. First, there may not be any excess funds available; and second, there may be more advantageous ways to spend excess funds should they exist. The qualifications of each member of the proposed team were discussed, as well as the ability of the team members to work together and effectively and efficiently facilitate the program. Staff commended Banc One representatives (Bernie Hall and Wes Wolf) and Andy Hall (Jones Hall) on their timely and comprehensive responses to staff's inquiries during the planning and marketing phase of the program. It was moved by Steve Klotzsche, seconded by Susan Hartman, and unanimously carried: 1. That the professional service agreements, which are contained in the agenda packet in final form, including specified fees, be approved with the following consultants and that the ICLFA President be authorized to execute the agreements: - Ken Spiker And Associates, Inc. (Program Administrator) Burke, Williams & Sorensen (General Legal Counsel) - Jones Hall (Bond Counsel) - Project Finance Associates (Financial Advisor) - Independent Cities Association (Program Development/ Marketing) 2. That no commitments be made at this time regarding possible excess funds from the program. 3. That no financial liabilities will be incurred by ICLFA until bonds are issued. INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 13 VIII. REPORT ON STATUS OF THE LEASE FINANCE PROGRAM AND AUTHORIZATION TO MARKET THE PROGRAM. Staff stated that the recommendations contained in the agenda packet have been re-evaluated and revised. Staff has concluded that ICLFA has too many irons in the fire. At this moment, the Authority is attempting to: 1) change the Joint Powers Agreement to authorize involvement in home mortgages and create a second category of membership; 2) modify its Bylaws; 3) create an Executive Committee; and 4) market the Fresh Rate (1011i mortgage) program. Staff believes that marketing the lease pool to cities concurrently with all of the other activities underway could very well jeopardize the anticipated success of the Fresh Rate program and adversely impact the planned lease pool. Staff, therefore, requests that the Board approve the following recommendations in lieu of those contained in the agenda packet previously distributed. 1. That the following potential consultants be tentatively approved and that formal agreements, including compensation, be prepared by the General Legal Counsel only if, and when, the Board formally decides to proceed with the program: Function Firm Issuer Independent Cities Association Program Administrator Ken Spiker And Associates, Inc. Underwriter/Remarketing Agent Stone & Youngberg LLC — Underwriter's Counsel To be determined Bond Counsel Jones Hall Financial Advisor & Credit Project Finance Associates Review Agent Letter -of -Credit Bank La Salle Banks - Letter -of -Credit Counsel To be determined Trustee First Trust National Association General Legal Counsel Burke, Williams & Sorensen Auditor Not yet selected Rebate Calculations Not yet selected Printing --- Rating Fees --- 2. That the following fees be tentatively approved as maximums and that the consultants assure the Board before the program is ultimately approved that the proposed fee structure will fully support ongoing operations of the Authority as it relates to the lease pool: Assuming a $35 million issue, the caps are as follows: INDEPENDENT CITIES LEASE FINANCE AUTHORITY Board of Directors Meeting, May 21, 1998 Page 14 Closing Costs $470,000 Annual ICLFA operational Fees 47.5 basis points on outstanding loan balances ICLFA Take Down Fees $10,000 for lease up to $1 million $12,500 for lease up to $2 million $15,000 for lease up to $3 million $17,500 for lease up to $4 million $20,000 for lease over $5 million M In addition, each borrower will need to provide for preparation of their own legal documents by their own bond counsel and a credit review package by staff or a financial advisor. The amount of fees for these services will be determined solely by the borrower. The ICLFA financing team will perform these tasks for an amount not to exceed: Amount of lease $1 million lease $2 million lease $3 million lease $4 million lease $5 million lease Bond Counsel $10,000 $12,500 $15,000 $20,000 $25, 000 Structuring Acrent $ 5,000 $ 7,500 $10,000 $15,,000 $15,000 The fee caps will provide assurance to potential clients of maximum fees. That the potential consultants, under the direction of the Financial Advisor, develop a term sheet, including maximum fees, which clearly outlines all aspects of the proposed lease program and any proposed peripheral programs. It must be understood that since the term sheet will be utilized in marketing, the specifics cannot change when final documents are prepared. That the draft demand survey be refined and finalized for approval by Bond Counsel with the Financial Advisor taking the lead. That marketing materials be prepared by the potential consultants with the Program Administrator taking the lead. That a limited number of meetings (4-6) be conducted with representative city managers to obtain their views on: 1) whether there is a demand for this type of lease program; and 2) whether the program and marketing materials are appropriately prepared/presented. 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