Resolution No. 8149r
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RESOLUTION NO. 8149
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON APPROVING AN AMENDMENT TO THE CITY'S ANNUAL
STATEMENT OF INVESTMENT POLICY
WHEREAS, pursuant to California Government Code Section
53646(a)(2), the City Treasurer shall annually render to the City
Council an Annual Statement of Investment Policy which the City Council
shall consider at a public meeting; and
WHEREAS, pursuant to Resolution No. 7909, the City Council
approved the Annual Statement of Investment Policy (the "Investment
Policy"); and
WHEREAS, the City Council desires to amend the Investment
Policy with respect to the term of investment of certain moneys in the
Light and Power Department Fund.
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 hereinabove are true
and correct.
SECTION 2: Section 5.1 of the Investment Policy is hereby
amended by adding the following as a new paragraph to the end of
Section 5.1:
Notwithstanding anything contained in this
Investment Policy to the contrary, it is the policy
of the City to limit the investment of money in the
Light and Power Department Fund, including
operating, reserve and surplus funds, in an amount
up to one hundred million dollars, to .investments
otherwise permitted for such Fund under this
Investment Policy which mature no later than five
years from the time of such investment.
1 SECTION 3: The provisions of this Resolution and the change
2 in the Investment Policy effected hereby are subject to change by
3 resolution of the City Council of the City and is intended solely for
4 the benefit of the City. Accordingly the provisions of this
5 Resolution and the change in the Investment Policy effected hereby
6 shall not be, or be deemed to be, covenants, agreements or conditions
7 on the part of the City for purposes of any agreement, contract,
8 document, instrument or obligation, including any agreement, contract,
9 document, instrument or obligation relating to any power or
10 transmission resource project of the City or in which the City is a
11 participant, any power supply agreement, any transmission capability
12 agreement, any reimbursement agreement, any public finance contract,
13 any indenture of trust, lease installment sale agreement or any other
14 agreement relating to bonds, notes or other evidences of indebtedness
15 or certificates of participation in any thereof.
16 SECTION 4: Each of the Mayor, the City Administrator, the
17 City Clerk, the Director of Utilities, the Deputy Director of
18 Utilities, and any other proper officer of the City is hereby
19 authorized and directed, acting singly, to execute such agreements,
20 documents and certificates, and to take such actions, as may be
21 necessary or convenient to carry out this Resolution.
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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 19th day of February, 2003.
ATTEST:
BRUCE V. MALKENHORST, City Clerk
- 3 -
EONIS C. MALB G, Mayor
EXHIBIT
VA&
SUPPORTING
DOCUMENTS
CITY'COUNCIL
s
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 (323) 826-1438
City Council
Cit of Vernon
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
February 13, 2003
EDUARDO OLIVO
City Attorney
FAX: (562) 869-1883
KEVIN WILSON
Director of Communitv Services & Water
FAX: (323) 826-1435
KENNETH J. DeDARIO
Director of Utilities
FAX: (323) 826-1425
STEVEN E. PARKER
Fire Chief
FAX: (323) 826-1407
BRUCE W. OLSON
Police Chief
FAX: (323) 826-1481
Honorable Members: �„`N?'
At this time it is necessary to approve the issuance of bonds to
finance the acquisition and construction of the Malburg Generating
Station Project. The bond financing documents, bond swap agreement,
and the amendment to the City's existing Iinvestment Policy, set forth
the approval and authorization to issue the bonds in the principal sum
Of $165,000,000.00.
This has beer reviewed by the City Attorney, our Finance
Administrator, and the Director of Utilities. It is hereby
recommended that the bond financing documents, bond swap agreement and
the amendment to the City's existing Investment Policy be approved and
executed. Submitted herewith is the following documents:
1. Indenture of Trust
2. First Supplement Indenture of Trust.
3. Second Supplemental Indenture of Trust
a. Preliminary Official Statement
S. Bond Purchase Contract, Series A
6. Bond Purchase Contract, Series B
7. Reimbursement Agreement
8. Series A Bond Remarketing Agreement
Very tr.u.1y yours,
V ` /,4c� �C�Xf4
Bruce V. Malkenhorst
City Administrator/City Clerk
BVM/gm
l
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 (323) 581-7924
EDUARDO OLIVO
City Attorney
FAX: (562) 927-8722
V KEVIN WILSON
r of Community Services & Water
FAX: (323) 588-2761
'03
Oracle
CITY HALL
4305 SANTA FE AVENUE, VERNON, CALIFORNIA 90058
TELEPHONE (323) 583-8811
February 13, 2003
Mr. Bruce V. Malkenhorst
City Administrator
City Of Vernon
4305 Santa Fe Avenue
Vernon, California 90058
KENNETH J. DeDARIO
Director of Municipal Utilities
FAX: (323) 583-1983
STEVEN E. PARKER
Fire Chief
FAX: (323) 581-1385
BRUCE W. OLSON
Police Chief
FAX: (323) 583-5236
Re: Malburg Generating Station Project: Bond Financing
Documents for Approval by City Council
Dear Bruce:
The purpose of this letter is to recommend to you that the City
Council of the City of Vernon authorize the issuance of Bonds to
finance a portion of the cost of the acquisition and
construction of the Malburg Generating Station Project.
The bond financing documents and the resolutions approve the
issuance of the Bonds, the Bond Swap Agreement and revisions to
the City's existing Investment Policy. The City Council will
approve and authorize the issuance of Bonds in the principal sum
of $165 million pursuant to the financial structure outlined in
these documents. The structure of the proposed financing
represents the lowest cost available to the City given its
current credit ratings from Moody's (A2) and Standard & Poor's
(BBB+) .
The City will issue $50 million in Variable Rate Demand Note
(VRDN) obligations, or Series A Bonds, and $115 million in fixed
rate, or Series B Bonds. The VRDN obligations are very short-
term (7 days) tax-exempt notes that trade at an index rate (Bond
Mr. Bruce V. Malkenhorst
February 13, 2003
Page 2
Market Association or BMA) plus a margin. These VRDNs are
supported by a Letter of Credit by a rated bank, Bank of
America.
The City will also issue $115 million in long-term maturity
fixed rate bond obligations that will mature on the dates and in
the principal amounts to be established on the sale date of
those bonds which is currently scheduled for March 4, 2003.
Both the variable and fixed rate bonds will have a nominal
maturity of 30 years.
All of the City's bond obligations are supported by the Net
Revenues (Revenues minus Operation and Maintenance Expenses for
the period) of the City's Electric System. Net Revenues would
include all the gross income and revenue received or receivable
by the City from the ownership or operation of the Electric
System. In addition, the City promises or covenants in the
Indenture of Trust document to fix, prescribe and collect rates
and charges for the Electric Service of the Electric System
during each fiscal year which shall be at least sufficient to
yield sufficient Adjusted Revenues to cover Operation and
Maintenance Expenses; Adjusted Debt Service; and other payments,
including debt service coverage ratios and other charges.
The City has retained Banc of America Securities to underwrite
and remarket the Bond issue and is accepting credit being
granted to the City from Bank of America in the form of (1) a
Letter of Credit (to support the short-term variable rate debt);
and (2) a Bond Swap Agreement (to reduce the interest rate on
the fixed rate debt).
The various documents contained in the Agenda package, in
substantially the form presented at the meeting, include the
following:
1. Indenture of Trust;
2. First Supplemental Indenture of Trust;
3. Second Supplemental Indenture of Trust;
4. Preliminary Official Statement;
5. Bond Purchase Contract, Series A;
6. Bond Purchase Contract, Series B;
7. Reimbursement Agreement;
J
Mr.. Bruce V. Malkenhorst
February 13, 2003
Page 3
8. Series A Bonds Remarketing Agreement; and
9. Swap Agreement.
The appropriate resolutions have been prepared by the City's
bond counsel firm, Orrick, Herrington & Sutcliffe, and have been
reviewed by the City Attorney. These resolutions satisfy the
requirements of the Internal Revenue Code of 1986, as amended
for tax-exempt bond financings. The resolutions authorize the
issuance of the bonds, the structure of the financing and
fulfill some the credit promises the City must make in order to
receive the ratings on the bonds. One of these promises
concerns the commitment to limit to five (5) years the maturity
of securities the City invests in, in its Light & Power Fund.
his promise is accomplished by an amendment to the City's
Investment Policy. The bond swap resolution enables the City to
Lswap the interest rate on its Series B fixed rate bonds for a
lower variable rate debt service.
I look forward to discussing these matters with you at your
earliest convenience.
Sincerely,
Eric Fresch
Finance Administrator
EF: jl
cc: Eduardo Olivo, City Attorney
Ken DeDario, Director of Utilities