,From
Tannie Camarata, Cash & Debt Manager
Title
Water Wastewater Line of Credit Renewal
Presenter
Diana Ortiz, Chief Financial Officer
Recommend Action
Approve
Analysis
The City has a $2.5 million water wastewater line of credit with Bank of America. The line of credit expired on September 30, 2010 and needs to be renewed for another 3 year term. The line provides interim construction financing for water wastewater capital projects. Borrowings under the lines are eventually repaid with the proceeds of long term bond issues.
Currently the city has no debt outstanding under the water wastewater line of credit. The city's bond counsel Fulbright & Jaworski prepared the ordinance.
Financial Consideration
The terms of the line of credit include payment of interest expense on draws and a facility fee of 0.55% on undrawn balances. In fiscal 2010, the only expense was $9,973 for the fees on the undrawn balances.
Body
AN ORDINANCE authorizing the City of Grand Prairie, Texas, to enter into a Sixth Amendment to Waterworks/Wastewater Revenue Loan Agreement; providing for the payment of said agreement by the net revenues of the City's waterworks and wastewater system; and resolving matters incident and relating to the execution and delivery of said agreement and providing an effective date.
WHEREAS, the provisions of Chapter 1371, Texas Government Code, as amended (the "Act"), authorize public entities such as the City of Grand Prairie, Texas (the "City") to enter into, among other things, credit agreements to finance project costs of an eligible project, as defined in the Act;
WHEREAS, an eligible project includes the acquisition or construction of or an improvement, addition or extension to a public work;
WHEREAS, an eligible project also includes a project for which there exists authorized but unissued obligations approved by a majority of the voters of the City;
WHEREAS, in order to enable the City to finance project costs of an eligible project or eligible projects, as defined in the Act, the City and Bank of America, N.A. (the "Bank") entered into a certain Waterworks/Wastewater Revenue Loan Agreement (the "Loan Agreement") dated as of March 31, 1996, as amended by that certain First Amendment to Waterworks/Wastewater Revenue Loan Agreement (the "First Amendment") entered into as of June 30, 1997, as amended by that certain Second Amendment to Waterworks/Wastewater Revenue Loan Agreement (the "Second Amendment") entered into as of July 1, 1998, as amended by that certain Third Amendment to Waterworks/Wastewater Revenue Loan Agreement (the "Third Amendment") entered into as of July 1, 2001, as amended by that certain Fourth Amendment to Waterworks/Wastewater Revenue Loan Agreement (the "Fourth Amendment") entered into as of July 1, 2004, and as amended by that certain Fifth Amendment to Waterworks/Wastewater Revenue Loan Agreement (the "Fifth Amendment") entered into as of October 2, 2007;
WHEREAS, the City has requested that the Bank agree to extend the Advance Termination Date, in the Agreement, as hereinafter defined, and the maturity date and to further amend the Agreement as provided in a Sixth Amendment to Waterworks/Wastewater Revenue Loan Agreement dated as of October 1, 2010 (the "Sixth Amendment" and together with the Loan Agreement, the First Amendment, the Second Amendment, the Third Amendment, Fourth Amendment, and the Fifth Amendment, the "Agreement") between the City and the Bank;
WHEREAS, the City Council hereby reserves and retains the right to issue, in one or more series or installments, revenue bonds which finance eligible projects as defined in the Act, when, in the judgment of the City Council, funds are needed to accomplish the purposes for which such bonds are authorized to be issued;
WHEREAS, the City Council hereby further reserves the right elect to make a draw under the Agreement and use the proceeds received from the sale of the authorized bonds to repay the draw;
NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF GRAND PRAIRIE, TEXAS:
SECTION 1: Authorization. The City is hereby authorized to enter into the Sixth Amendment, substantially in the form and substance attached hereto as Exhibit A and which is incorporated herein for all purposes. The City Manager is hereby authorized to execute and deliver the Sixth Amendment and approve such changes as he shall deem appropriate, which approval shall be evidenced by his execution of the Sixth Amendment. The City Secretary is hereby authorized to attest the signature of the City Manager. Capitalized terms used herein, unless otherwise defined herein, shall have the meaning ascribed to them in the Agreement.
SECTION 2: Pledge. The City hereby covenants and agrees that the Net Revenues of the System and all amounts on deposit or required to be deposited to the Interest and Sinking Fund and the Reserve Fund are hereby pledged and committed irrevocably to the payment of the Outstanding Priority Bonds, any Additional Priority Bonds, the Agreement and any Additional Second Lien Bonds, including the principal at any time and from time to time advanced and outstanding under the Agreement, all interest to accrue thereon (including interest after default) and all expenses of providing for their full and timely payment as provided in the Agreement, and it is hereby ordained that the pledge of the Net Revenues to the payment of obligations under the Agreement is subordinate and junior to the pledge of the Net Revenues to the Outstanding Priority Bonds and any Additional Priority Bonds and shall be valid and binding without any physical delivery thereof or further act of the City.
Additionally, the City hereby pledges to the payment of the principal payment requirements of the Agreement the proceeds received from bonds issued by the City from revenue bonds issued as contemplated above or from future applicable voted authorizations and which have been set aside by the City for use in the payment of the principal payment requirements of the Agreement.
SECTION 3: Covenants to Maintain Tax-Exempt Status of Interest on the Agreement.
(a) Definitions. When used in this Section, the following terms shall have the following meanings:
"Closing Date" means the date on which the Agreement is first authenticated and delivered to the initial purchasers against payment therefor.
"Code" means the Internal Revenue Code of 1986, as amended by all legislation, if any, effective on or before the Closing Date.
"Computation Date" has the meaning set forth in Section 1.148-1(b) of the Regulations.
"Gross Proceeds" means any proceeds, as defined in Section 1.148-1(b) of the Regulations, and any replacement proceeds, as defined in Section 1.148-1(c) of the Regulations, of the Agreement.
"Investment" has the meaning set forth in Section 1.148-1(b) of the Regulations.
"Nonpurpose Investment" means any investment property, as defined in section 148(b) of the Code, in which Gross Proceeds of the Agreement are invested and which is not acquired to carry out the governmental purposes of the Agreement.
"Rebate Amount" has the meaning set forth in Section 1.148-1(b) of the Regulations.
"Regulations" means any proposed, temporary, or final Income Tax Regulations issued pursuant to Sections 103 and 141 through 150 of the Code, and 103 of the Internal Revenue Code of 1954, which are applicable to the Agreement. Any reference to any specific Regulation shall also mean, as appropriate, any proposed, temporary or final Income Tax Regulation designed to supplement, amend or replace the specific Regulation referenced.
"Yield" of
(1) any Investment has the meaning set forth in Section 1.148-5 of the Regulations; and
(2) the Agreement has the meaning set forth in Section 1.148-4 of the Regulations.
(b) Not to Cause Interest to Become Taxable. The City shall not use, permit the use of, or omit to use Gross Proceeds or any other amounts (or any property the acquisition, construction or improvement of which is to be financed directly or indirectly with Gross Proceeds) in a manner which if made or omitted, respectively, would cause the interest on any Agreement payment to become includable in the gross income, as defined in section 61 of the Code, of the owner thereof for federal income tax purposes. Without limiting the generality of the foregoing, unless and until the City receives a written opinion of counsel nationally recognized in the field of municipal bond law to the effect that failure to comply with such covenant will not adversely affect the exemption from federal income tax of the interest on any Agreement payment, the City shall comply with each of the specific covenants in this Section.
(c) No Private Use or Private Payments. Except as permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall at all times prior to the last Stated Maturity of the Agreement:
(1) exclusively own, operate and possess all property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with Gross Proceeds of the Agreement, and not use or permit the use of such Gross Proceeds (including all contractual arrangements with terms different than those applicable to the general public) or any property acquired, constructed or improved with such Gross Proceeds in any activity carried on by any person or entity (including the United States or any agency, department and instrumentality thereof) other than a state or local government, unless such use is solely as a member of the general public; and
(2) not directly or indirectly impose or accept any charge or other payment by any person or entity who is treated as using Gross Proceeds of the Agreement or any property the acquisition, construction or improvement of which is to be financed or refinanced directly or indirectly with such Gross Proceeds, other than taxes of general application within the City or interest earned on investments acquired with such Gross Proceeds pending application for their intended purposes.
(d) No Private Loan. Except to the extent permitted by section 141 of the Code and the Regulations and rulings thereunder, the City shall not use Gross Proceeds of the Agreement to make or finance loans to any person or entity other than a state or local government. For purposes of the foregoing covenant, such Gross Proceeds are considered to be "loaned" to a person or entity if: (1) property acquired, constructed or improved with such Gross Proceeds is sold or leased to such person or entity in a transaction which creates a debt for federal income tax purposes; (2) capacity in or service from such property is committed to such person or entity under a take or pay, output or similar contract or arrangement; or (3) indirect benefits, or burdens and benefits of ownership, of such Gross Proceeds or any property acquired, constructed or improved with such Gross Proceeds are otherwise transferred in a transaction which is the economic equivalent of a loan.
(e) Not to Invest at Higher Yield. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not at any time prior to the final Stated Maturity of the Agreement directly or indirectly invest Gross Proceeds in any Investment (or use Gross Proceeds to replace money so invested), if as a result of such investment the Yield from the Closing Date of all Investments acquired with Gross Proceeds (or with money replaced thereby), whether then held or previously disposed of, exceeds the Yield of the Agreement.
(f) Not Federally Guaranteed. Except to the extent permitted by section 149(b) of the Code and the Regulations and rulings thereunder, the City shall not take or omit to take any action which would cause the Agreement to be federally guaranteed within the meaning of section 149(b) of the Code and the Regulations and rulings thereunder.
(g) Information Report. The City shall timely file the information required by section 149(e) of the Code with the Secretary of the Treasury on Form 8038-G or such other form and in such place as the Secretary may prescribe.
(h) Rebate of Arbitrage Profits. Except to the extent otherwise provided in section 148(f) of the Code and the Regulations and rulings thereunder:
(1) The City shall account for all Gross Proceeds (including all receipts, expenditures and investments thereof) on its books of account separately and apart from all other funds (and receipts, expenditures and investments thereof) and shall retain all records of accounting for at least six years after the day on which the last Outstanding Agreement payment is discharged. However, to the extent permitted by law, the City may commingle Gross Proceeds of the Agreement with other money of the City, provided that the City separately accounts for each receipt and expenditure of Gross Proceeds and the obligations acquired therewith.
(2) Not less frequently than each Computation Date, the City shall calculate the Rebate Amount in accordance with rules set forth in section 148(f) of the Code and the Regulations and rulings thereunder. The City shall maintain such calculations with its official transcript of proceedings relating to the issuance of the Agreement until six years after the final Computation Date.
(3) As additional consideration for the purchase of the Agreement obligations by the Bank and the loan of the money represented by the Agreement and in order to induce such purchase by measures designed to insure the excludability of the interest thereon from the gross income of the owners thereof for federal income tax purposes, the City shall pay to the United States out of the Interest and Sinking Fund or its general fund, as permitted by applicable Texas statute, regulation or opinion of the Attorney General of the State of Texas, the amount that when added to the future value of previous rebate payments made for the Agreement obligations equals (i) in the case of a Final Computation Date as defined in Section 1.148-3(e)(2) of the Regulations, one hundred percent (100%) of the Rebate Amount on such date; and (ii) in the case of any other Computation Date, ninety percent (90%) of the Rebate Amount on such date. In all cases, the rebate payments shall be made at the times, in the installments, to the place and in the manner as is or may be required by section 148(f) of the Code and the Regulations and rulings thereunder, and shall be accompanied by Form 8038-T or such other forms and information as is or may be required by Section 148(f) of the Code and the Regulations and rulings thereunder.
(4) The City shall exercise reasonable diligence to assure that no errors are made in the calculations and payments required by paragraphs (2) and (3), and if an error is made, to discover and promptly correct such error within a reasonable amount of time thereafter (and in all events within one hundred eighty (180) days after discovery of the error), including payment to the United States of America any additional Rebate Amount owed to it, interest thereon, and any penalty imposed under Section 1.148-3(h) of the Regulations.
(i) Not to Divert Arbitrage Profits. Except to the extent permitted by section 148 of the Code and the Regulations and rulings thereunder, the City shall not, at any time prior to the earlier of the Stated Maturity or final payment of the obligations under the Agreement; enter into any transaction that reduces the amount required to be paid to the United States pursuant to Subsection (h) of this Section because such transaction results in a smaller profit or a larger loss than would have resulted if the transaction had been at arm's length and had the Yield of the Agreement not been relevant to either party.
(j) Elections. The City hereby directs and authorizes the City Manager and Chief Financial Officer, either or any combination of them, to make elections permitted or required pursuant to the provisions of the Code or the Regulations, as they deem necessary or appropriate in connection with the Agreement, in the Certificate as to Tax Exemption or similar or other appropriate certificate, form or document.
SECTION 4: Incorporation of Findings and Determinations. The findings and determinations of the City Council contained in the preamble hereof are hereby incorporated by reference and made a part of this Ordinance for all purposes as if the same were restated in full in this Section.
SECTION 5: Public Meeting. It is officially found, determined, and declared that the meeting at which this Ordinance is adopted was open to the public and public notice of the time, place, and subject matter of the public business to be considered at such meeting, including this Ordinance, was given, all as required by Chapter 551, Government Code, as amended.
SECTION 6: Effective Date. This Ordinance shall be in full force and effect from and after its passage on the date shown below and it is so ordained.
PASSED AND ADOPTED, this 16th day of November, 2010.