Resolution No. 8713
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RESOLUTION NO. 8713
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF
VERNON AUTHORIZING THE ENTRY INTO ONE OR MORE
INTEREST RATE BASIS SWAP TRANSACTIONS AND CERTAIN
ACTIONS RELATING THERETO TO CONVERT SERIES 0
TAXABLE BONDS TO TAX-EXEMPT INDEXED RATE
WHEREAS, the City of Vernon (the "City") is a municipal
corporation and a chartered city of the State of California organized
and existing under its Charter and the Constitution of the State of
California; and
WHEREAS, the City is authorized pursuant to the provisions
of its Charter and the City of Vernon Municipal Facilities Revenue
Bond Law, cbnstituting Chapter 2, Article XI, of the Vernon City Code,
to issue bonds, notes and other obligations payable from the Net
Revenues of the Electric System (capitalized terms used herein and not
otherwise defined shall have the meanings given such terms in the
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Indenture mentioned below) to finance the Costs of improvements and
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additions to the Electric System and to refund such bonds, notes and
other obligations; and
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WHEREAS, this City Council has adopted a resolution (the
"Bond Resolution") authorizing the execution and delivery, in the name
of and on behalf of the City, of an Indenture of Trust (the "Master
Indenture"), dated as of December 1, 2004, between the City and The
Bank of New York Trust Company, N.A., as trustee (the "Trustee"),
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providing the terms of City of Vernon Electric System Revenue Bonds to
finance the Costs of improvements and additions to the Electric System
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or to refund any Outstanding Bond or Bonds; and
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WHEREAS, pursuant to the Master Indenture, as supplemented
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by the Fourth Supplemental Indenture of Trust, dated as of December 1,
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1 2004, between the City and the Trustee (the "Fourth Supplemental
2 Indenture" and, together with the Master Indenture, the "Indenture"),
3 the City has issued $90,150,000 aggregate principal amount of City of
4 Vernon Electric System Revenue Bonds, 2004 Series A (the "2004 Series
5 A Bonds") $83,575,000 aggregate principal amount of City of Vernon
6 Electric System Revenue Bonds, 2004 Series B (the "2004 Series B
7 Bonds") $39,875,000 aggregate principal amount of City of Vernon
8 Electric System Revenue Bonds, 2004 Series C and $69,100,000 aggregate
9 principal amount of City of Vernon Electric System Revenue Bonds, 2004
10 Taxable Series D (the "2004 Series D Bonds") to, among other things,
11 finance and refinance a portion of the costs of improvements and
12 additions to the City's Electric System; and
13 WHEREAS, the City and Morgan Stanley Capital Markets Inc.
14 ("Morgan Stanley") have entered into that certain ISDA Master
15 Agreement, as amended and supplemented by the Schedule and Credit
16 Support Annex attached thereto, each dated December 2, 2004
17 (collectively, the "Agreement") pursuant to which the City and Morgan
18 Stanley may enter transactions ("Transactions") which are to be
19 evidenced by confirmations ("Confirmations"); and
20 WHEREAS, pursuant to the Agreement the City and Morgan
21 Stanley have entered into interest rate swap Transactions with respect
22 to the 2004 Series A Bonds and the 2004 Series B Bonds; and
23 WHEREAS, there has been presented to the City Council a form
24 of confirmation (the "Initial Series D Confirmation") providing for an
25 interest rate swap Transaction under the Agreement with respect to the
26 2004 Series D Bonds; and
27 WHEREAS, this City Council desires to authorize certain
28 officers of the City to enter into the interest rate swap Transaction
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1 described in the Initial Series D Confirmation, and certain other
2 Transactions in connection with the 2004 Series D Bonds, as authorized
3 by law, including the City Charter and Section 5922 of the California
4 Government Code; and
5 WHEREAS, the Transaction described in the Initial Series D
6 Confirmation is to constitute a Subordinated Obligation under the
7 Master Indenture and the City's obligations under such Transaction
8 will be a special obligation payable solely from the Net Revenues of
9 the Electric System on a basis which is junior and subordinate to the
10 payment of Parity Obligations as provided in the Master Indenture.
11 NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE
12 CITY OF VERNON AS FOLLOWS:
13 SECTION 1: The City Council of the City of Vernon hereby
14 finds and determines that the recitals contained hereinabove are true
15 and correct.
16 SECTION 2: The Initial Series D Confirmation, in
17 substantially the form submitted to this meeting and made a part
18 thereof as though set forth in full herein, is hereby approved. Each
19 of the Mayor and the City Administrator (each an "Authorized
20 Officer"), acting singly, is hereby authorized, in the name of and on
21 behalf of the City, to enter into an interest rate swap Transaction
22 under the Agreement on substantially the terms described in the
23 Initial Series D Transaction and to execute the Initial Series D
24 Confirmation in the name of and on behalf of the City and to deliver
25 the executed Initial Series D Confirmation to Morgan Stanley in
26 substantially the form submitted to this meeting with such changes,
27 insertions and deletions as may be consistent with this Resolution and
28 the determinations made pursuant hereto and as may be approved by the
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1 officer executing the Initial Series D Confirmation, said execution
2 being conclusive evidence of such approval, and the City ~lerk of the
3 City of Vernon (the "City Clerk") is hereby authorized to attest
4 thereto. In connection with changes to the Initial Series D
5 Confirmation, neither a change in the trade date or the effective
6 date, nor an increase of up to 25 basis points in the amount payable
7 by the City, shall be considered substantial change.
8 SECTION 3: In addition to the Transaction described in the
9 Initial Series D Confirmation, when determined by an Authorized
10 Officer to be in the best interests of the City in managing the City's
11 interest rate position under the Transactions entered into under the
12 Swap Agreement with respect to the 2004 Series D Bonds on an ongoing
13 basis, each of the Authorized Officers, acting singly, is hereby
14 authorized to enter into one or more Transactions and to accept,
15 execute and deliver (and the City Clerk is hereby authorized to
16 attest) the Confirmation describing each such Transaction; provided,
17 however, that the following limitations (and not the limitations in
18 subsection (a) of this Section) shall be applicable to each such
19 Confirmation and Transaction: (i) the term of the Transaction shall
20 not exceed the final maturity of the 2004 Series D Bonds; (ii) the
21 aggregate notional amount of all Transactions then in effect (and not
22 economically reversed with another Transaction) shall not exceed the
23 principal amount of the outstanding 2004 Series D Bonds; (iii) the
24 rate payable by the City at any time under any such Transaction shall
25 not exceed twenty percent (20%) per annum; and (iv) all payment
26 obligations of the City under the Confirmation and the Transaction
27 shall be special obligations of the City payable as provided in the
28 Indenture solely from the Net Revenues.
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SECTION 4:
This City Council hereby finds and determines
2 that the Transactions authorized hereby are designed to reduce the
3 amount of interest cost to the City with respect to the 2004 Series D
4 Bonds.
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SECTION 5:
Each of the Mayor, the City Administrator, the
6 City Clerk and any other proper officer of the City is hereby
7 authorized and directed, acting singly, to execute such other
8 agreements, documents and certificates, and to take such actions as
9 may be necessary or convenient to carry out the City's obligations
10 under and to effect the purposes of the Agreement, each Transaction,
11 each Confirmation, this Resolution and the transactions herein
12 authorized.
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SECTION 6:
All actions heretofore taken by any committee of
14 the City Council, or any officer, representative or agent of the City
15 in connection with the Transaction relating to the Initial
16 Confirmation and the performance of the Transactions and the other
17 actions contemplated by this Resolution, is hereby ratified, approved
18 and confirmed.
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SECTION 7:
The City Clerk of the City of Vernon shall
20 certify to the passage of this resolution, and thereupon and
21 thereafter the same shall be in full force and effect.
22 APPROVED AND ADOPTED this 13th day of April, 2005.
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ATTEST:
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./" EON~S C. MA~BU G, Ma or
27 BRUCE V. MALKENHORST, City Clerk
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1 STATE OF CALIFORNIA
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4 I, BRUCE V. MALKENHORST, City Clerk of the City of Vernon, do
ss
COUNTY OF LOS ANGELES
5 hereby certify that the foregoing Resolution, being Resolution No.
6 8713, was duly adopted by the City Council of the City of Vernon at a
7 special meeting of the City Council duly held on Wednesday, April 13,
thereafter was duly signed by the Mayor of the City of
8 2005, and
9 Vernon.
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13 ( SEAL)
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BRUCE V. MALKENHORST, City Clerk
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MorganStanley
Municipal Capital Markets
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Date:
[TBD]
CWT DRAFT l-APR-2005 -
PRELIMINARY, SUBJECT TO
CHANGE
To:
City of Vernon
From:
Morgan Stanley Capital Services Inc.
Attn:
Eric T. Fresch, City Attorney
Contact:
Municipal Derivatives Support
Fax:
323-826-1439
Fax:
212-507-5885
Tel:
323-583-8811, ext. 175
Tel:
914-225-0211
Re: Interest Rate Swap MSCS Ref. No. L-]
The purpose of this letter agreement is to confirm the terms and conditions of the Swap
Transaction entered into between us on the Trade Date specified below (the "Transaction"). This letter agreement
constitutes a "Confirmation" as referred to in the ISDA Master Agreement below.
The definitions and provisions contained in the 2000 ISDA Definitions (as published by the
International Swaps and Derivatives Association, Inc.) (the "Definitions") are incorporated into this Confirmation.
In the event of any inconsistency between the Definitions and this Confirmation, this Confirmation will govern.
1. This Confirmation supplements, forms part of, and is subject to, the ISDA Master
Agreement dated as of December 2, 2004, as amended and supplemented from time to time (the "Agreement")
between you and us. All provisions contained in the Agreement govern this Confirmation except as expressly
modified below.
2.
The terms of the particular Transaction to which this Confirmation relates are as follows:
Party A:
Morgan Stanley Capital Services Inc.
Party B:
City of Vernon
Trade Date:
[TBD]
Notional Amount:
USD[65,325,000] amortizing according to Schedule 1
Effective Date:
[April 1, 2005] NB Cannot meet this date
Termination Date:
[April 18, 2018]
Related Bonds:
City of Vernon Electric System Revenue Bonds, 2004 Taxable
Series ;wQ4D
Floating Amounts 1:
Floating Rate 1 Payer:
Party B
Floating Rate 1 Payer Payment Dates:
The first calendar day of each month, commencing on [May 1,
2005], up to and including the Termination Date, subject to
adjustment in accordance with the Following Business Day
Convention.
NYLIB5 827352,6
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MorganStanley
Municipal Capital Markets
Floating Rate 1 Payer Period End Dates:
Floating Rate 1 Option:
Floating Rate 1 Reset Dates:
Floating Rate 1 Day Count Fraction:
Floating Rate 1 Method of Averaging:
Floating Amounts 2:
Floating Rate 2 Payer:
Floating Rate 2 Payer Payment Dates:
Floating Rate 2 Payer Period End Dates:
Floating Rate 2 Option:
Floating Rate 2 Designated Maturity:
Floating Rate 2 Reset Dates:
Floating Rate 2 Day Count Fraction:
Floating Rate 2 Method of Averaging:
Compounding:
Business Days:
Calculation Agent:
NYLIB5 827352.6
The first calendar day of each month, commencing on [May 1,
2005], up to and including the Termination Date, with No
Adjustment.
[132.3%] [(one hundred thirty-two and three-tenths percent)] of
USD-BMA Municipal Swap Index
The Effective Date, and thereafter weekly, every Thursday (or any
other day specified by The Bond Market Association as the reset
date for the USD-BMA Municipal Swap Index), with No
Adjustment.
ActuaV Actual
Weighted
Party A
The first calendar day of each month, commencing on [May 1,
2005], up to and including the Termination Date, subject to
adjustment in accordance with the Following Business Day
Convention.
The first calendar day of each month, commencing on [May 1,
2005], up to and including the Termination Date, with No
Adjustment.
100% (one hundred percent) ofUSD-LffiOR-BBA, provided that
the words "on the day that is two London Banking Days preceding
that Reset Date" contained in the defmitions ofUSD-LffiOR-BBA
and USD-LIBOR-Reference Banks in Section 7.1 of the
Definitions shall be replaced with "on the first day preceding that
Floating Rate 2 Reset Date that is a London Banking Day".
[Three months]
The Effective Date and thereafter each Thursday up to and
including the Termination Date, with No Adjustment.
ActuaV Actual
Weighted
Inapplicable
New York
Party A
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MorganStanley
Municipal Capital Markets
3.
Account Details.
Payments to Party A:
Citibank, New York
ABA No. 021000089
For: Morgan Stanley Capital Services Inc.
Account No. 4072 4601
Payments to Party B:
The Bank of New York
ABA No. 021000018
Credit: The Bank of New York
Acct No. GLAlll-565
Reference: Custody Escrow account T AS#800452
Party A Operations Contact:
Jean Barnum
Tel: 212-761-4662
Fax: 410-534-1426
Party B Operations Contact:
Eric T. Fresch, City Attorney
Tel: 323-583-8811, ext. 175
Fax: 323-826-1439
4. Modification of the Agreement. Until the termination of this Transaction, the following
provisions shall be in effect:
(a) Security and Source of Payment. [Party All agrees that, notwithstanding not with
standing anything to the contrary in Part 4(e) of the Schedule to the Agreement, Party A'S#S obligations under this
Transaction are, and until the termination of this Transaction pursuant to the terms hereof, shall remain,
Subordinated Obligations under the Covered Agreement payable solely from the Net Revenues on a basis which is
iunior and subordinate to the payment of Parity Obligations (as dermed in the Covered Agreement). The provisions
of subsection (b) of Section 2.08 of the Covered Agreement are hereby incorporated by reference as if set forth in
full herein with the references to Subordinated Obligations in said subsection (b) being considered for purposes of
this Conrrrmnation to be references to Party B's obligations under this Transaction. Party B hereby and pursuant to
the Covered Agreement grants a lien on, security interest in and pledge of the Net Revenues to secure its payment
obligations under this Transaction. Such lien, security interest and pledge granted to secure the obligations under
this Transaction are subordinate solc::ly to the lien, security interest and pledge gmnted to secure Parity Obligations.]
(b) Negative Pledge. Party B shall not pledge or grant a security interest in any of its
revenues or other assets to secure its obligations under any interest rate swap or other derivative transaction entered
into after the Trade Date of this Transaction without Party A's prior written consent; provided that such written
consent shall not be required if Party B concurrently grants a pledge or security interest to Party A to secure Party
B's obligations under this Transaction, which pledge or security interest is on parity with or senior to the pledge or
security interest granted for the benefit of such other interest rate swap or derivative transaction.
(c) NB:Repeat paragraph 4 from the December. 2004 Confirmations here.
NYLIB5 827352,6
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MorganStanley
Municipal Capital Markets
Please confirm that the foregoing correctly sets forth the terms of our agreement MSCS Ref.
No. r ] by executing this Confirmation and returning it to us promptly.
Weare delighted to have entered into this Transaction with you and look forward to serving you
further in the future.
Best regards,
MORGAN STANLEY CAPITAL SERVICES INC.
By:
Name:
Title:
ACKNOWLEDGED AND AGREED as of the date first written:
CITY OF VERNON
By:
Name:
Title:
NYLffi5 827352,6
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MorganStanley
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Municipal Capital Markets
SCHEDULE 1
to Confirmation (MSCS Ref"No. [ D,
dated [DATE],
between Morgan Stanley Capital Services Inc.
and City of Vemon
Amortizations shall occur on the Floating Rate Payer Period End Date
corresponding to each related date, below.
FROM (and including)
Effective Date
I-Apr-2006
l-Apr-2007
l-Apr-2008
l-Apr-2009
l-Apr-201O
l-Apr-2011
l-Apr-2012
l-Apr-2013
l-Apr-2014
l-Apr-2015
l-Apr-2016
l-Apr-2017
NYLIB5 827352,6
TO (but excluding)
l-Apr-2006
l-Apr-2007
l-Apr-2008
l-Apr-2009
l-Apr-2010
l-Apr-2011
l-Apr-2012
l-Apr-2013
l-Apr-2014
l-Apr-2015
l-Apr-2016
l-Apr-2017
Termination Date
1-1
NOTIONAL AMOUNT
USD 65,325,000
61,525,000
57,550,000
53,375,000
49,025,000
44,475,000
39,700,000
34,925,000
29,700,000
24,525,000
18,800,000
12,800,000
6,525,000
CITY COUNCIL JOHN KARNS
LEONIS C.MALBURG Karns&Karabian
Mayor General Counsel
THOMAS A.YBARRA KEVIN WILSON
Mayor Pro—Tern Director of Community Services&Water
WM."BILL"DAVIS
Councilman STEVEN E.PARKER
H. "LARRY"GONZALES Fire Chief
Councilman
W.MICHAEL McCORMICK SOL BENUDIZ
Councilman Police Chief
BRUCE V.MALKENHORST LEWIS J.POZZEBON
City Administrator/City Clerk Director of Environmental Health
Chief Executive Officer of CITY HALL
Light&Power RORY BURNETT
ERIC T.FRESCH 4305 SANTA FE AVENUE,VERNON,CALIFORNIA 90058 Gursey,Schneider&Co.LLP
City Attorney TELEPHONE(323)583-8811 City Accountant
April 4, 2005
City Council
City of Vernon
Honorable Members:
It is hereby recommended that the City enter into one or more Interest
Rate Basis Swap Transactions and other actions . The Basis Swap will
allow the City to convert 2004 Series D taxable bonds to a tax-exempt
indexed rate, which will convert the taxable rate to an indexed rate
linked to the Bond Market Association (BMA) . This has been reviewed by
the City Attorney.
Very truly yours,
rem l/
Bruce V. Malkenhorst
City Administrator/City Clerk
BVM/ke
"Exclusively Industrial"
CITY ATTORNEY'S OFFICE
INTER-DEPARTMENT MEMORANDUM
DATE: March 23, 2005
TO: Bruce V. Malkenhorst, City Administrator/City Clerk
FROM: Eric T. Fresch, City Attorney
RE: Basis Swap to Convert 2004 Series D Taxable Bonds to Tax-
Exempt Indexed Rate
I recommend that the City enter into one or more Interest Rate Basis
Swap Transactions and other actions . The basis swap will allow the
City to convert 2004 Series D taxable bonds to tax-exempt indexed rate.
The effect of which will be the conversion of the taxable rate to an
indexed rate linked to BMA. (90VIA V clr�e{
I look forward to discussing this .matter with you at your earliest
convenience.
EF:bvmjr
cc: Judy Lehr