2011 03 15 FA MinutesLA QUINTA FINANCING AUTHORITY
MINUTES
MARCH 15, 2011
A regular meeting of the La Quinta Financing Authority was called to order
by Chairman Adolph.
PRESENT: Board Members Evans, Franklin, Henderson, Sniff,
Chairman Adolph
ABSENT: None
PUBLIC COMMENT - None
CONFIRMATION OF AGENDA - Confirmed
APPROVAL OF MINUTES
MOTION - It was moved by Board Members Sniff /Evans to approve the
Financing Authority Minutes of February 15, 2011 as submitted. Motion
carried unanimously.
CONSENT CALENDAR
1. RECEIVE AND FILE TREASURER'S REPORT DATED JANUARY 31,
2011
2. RECEIVE: AND FILE REVENUE & EXPENDITURES REPORT DATED
JANUARY 31, 2011
3. ADOPTION OF A RESOLUTION AMENDING THE INVESTMENT
POLICY OF THE CITY OF LA QUINTA FOR FISCAL YEAR 2010 -2011
(RESOLUTION NO. 2011 -001)
MOTION - It was moved by Board Members Sniff /Franklin to approve
the Consent Calendar as recommended with Item No. 3 being
approved by Resolution No. 2011 -001. Motion carried unanimously.
BUSINESS SESSION - None
CHAIR AND BOARD MEMBERS' ITEMS - None
Financing Authority Minutes 2 March 15, 2011
PUBLIC HEARINGS
1. JOINT PUBLIC HEARING AMONG THE CITY BOARD OF THE CITY OF
LA QUINTA, THE LA QUINTA REDEVELOPMENT AGENCY AND THE
LA QUINTA FINANCING AUTHORITY TO CONSIDER RESOLUTIONS
REGARDING THE ISSUANCE OF REDEVELOPMENT PROJECT AREAS
1 AND 2 TAXABLE BONDS AND RELATED DOCUMENTS
Chairman Adolph opened the Financing Authority meeting.
Chairperson Henderson reconvened the Redevelopment Agency
meeting.
Finance Director Falconer presented the staff report.
In response to Board Member Sniff, Ms. Robin Thomas explained
Project Area No. 1 bond issues will expire in 2034 with Project Area
No. 2 expiring in 2039; confirmed new debt cannot be acquired during
the term of the bonds; explained there are four different bonds, two
for housing, one for Project Area No. 1 and one for Project Area No.
2; stated the rate is unknown for all four bonds at this time; and
stated the total amount for the new bond issues is $78 million.
Ms. Thomas further explained the tax increment has been calculated
with no growth the next year and it is customary to have a financing
coverage amount built in with $1.30 revenue for every dollar spent for
La Quinta.
Board Member Sniff asked how we pay these loans off if tax
increment money continues to be reduced. Ms. Thomas explained
there is enough built in the financing component the City can prorate
several more years of reduced assessed value before it becomes a
problem.
Board Member Sniff asked what the cost of bonds is. Ms. Thomas
stated the interest rate today is just under 3% on an A rating, and the
City may fall at an A+ rating with a low 1.5% rate. Finance Director
Falconer stated the cost is $998,000.
In response to Board Member Sniff, Ms. Thomas stated the life span
of the bonds for Project Area No. 1 goes to 2034 and Project Area
No. 2 to 2039; explained the payment of the annual cost for the
bonds come from tax increment funds; explained the City receives
$15 million in tax increment annually in Project Area No. 1, with a
Financing Authority Minutes 3 March 15, 2011
debt service of $12.8 million, and Project Area No. 2 generates $2.2
million with a debt service of $1.4 million; and explained according to
redevelopment law the City must have debt to receive tax increment
funds.
Board (Member Sniff asked what the cost is in total for the life of the
bond issues. Ms. Thomas explained the total for Project Area No. 1 is
$300,000,000, and to repay all debt and Project Area No. 2 is
$34,000,000.
Board Member Sniff stated there is a limitation to the amount of debt
the City should acquire; conveyed his concern on acquiring more than
the City can bear; and with tax increment going down continually,
there is a risk factor.
Ms. Thomas stated the issuance of bonds has been approached
conservatively with staff's input, and would not put the City at risk.
Board Member Franklin asked if how staff came to the amount of the
four bonds. Ms. Thomas explained staff tried to issue as much debt
as can obtain and still leave enough funding for administrative costs.
Board Member Franklin conveyed her concern of the amount of debt
issued and the little amount of funds left over.
Board Member Evans concurred with the concern of Board Member
Franklin; stated the City was built by taking risks; stated it may or
may not need to happen right away and by empowering the City
Manager will give flexibility to issuing the bonds; and stated she will
support the recommendation.
Board Member Henderson stated the bond consulting firm technically
has a fiduciary responsibility to the City. Thomas confirmed, and
stated the success of her firm and competitors is to provide excellent
customer service.
Board Member Henderson stated the City has previously insured
bonds. IVIs. Thomas confirmed and explained the current insurer filed
bankruptcy two months ago, but was required to set aside reserves to
cover the bonds insured. Board Member Henderson asked if the
holders of the bond issues would get paid. Ms. Thomas confirmed.
Board Member Henderson asked if the City continues to maintain
insurance on the Transient Occupation Tax (TOT). Finance Director
Financing Authority Minutes 4 March 15, 2011
Falconer explained the City continues to carry catastrophic insurance
for the La Quinta Hotel.
Board Member Henderson stated she does not believe the market will
recover in five years but will take longer; stated the resetting of the
mortgages will put homes back on the market and there is no formula
for moving forward; understands why the City must protect these
funds; and stated there is a need to have operating costs established
and feels staff has done the best job they can at this time.
Mayor Adolph agreed with the comments made by the Board
Members; the housing market was at its peak in 2006 and 2007; and
asked if it is necessary move forward on the housing bonds and hold
on the other bond issues depending on the governor's actions.
Finance Director Falconer explained there is $2.3 million of estimated
excess in Project Area No. 1 and $1.4 in Project Area No. 2, and an
estimated amount of $3.7 million excess for housing; explained the
$78 million in bond issue will substitute the $40 million used to pay-
off the General Fund.
Mayor Adolph stated that all we are dong is protecting ourselves.
Finance Director Falconer stated staff will set aside 10% for debt
service and the Treasurer will maintain the $7.8 million as a reserve in
case of a short fall.
City Manager Genovese stated in light of the concern of the margin,
staff can run numbers at 135 coverage or 140 coverage ratio; and
stated the Authority currently have bond insurance on a couple of
current bond issues, can the City be selective on which debt service it
pays. Ms. Thomas stated the City cannot be selective and the bonds
are written where the City must meet a parody tax which makes all
the bonds equal.
Board Member Sniff asked what the legal risk in issuing the bonds is
and will it be challenged by the State. City Attorney Jenson stated she
does not see a basis for the State to challenge the bond issue; does
think the State recognizes the existing bonded indebtedness; there will
be issues and if the legislation goes through, and the sale had not
been done, the City would not be able to proceed. Ms. Thomas
explained the bond contract has a cancelation clause if the bond does
not go through, the City can cancel at no cost.
City Attorney Jenson stated the only thing that is pledged is the tax
increment, no other funding sources can be taken.
Financing Authority Minutes 5 March 15, 2011
Board Member Franklin asked where the $7.8 million would be placed.
Finance Director Falconer explained the funds will be invested with US
Bank Trustee and on a parity basis will invest in Treasury Bonds with a
five year maximum to have quick access to the funds.
Board Member Henderson asked if the interest will be reinvested into
the account. Ms. Thomas explained usually interest earnings get
transferred into an interest account to reduce the next debt service
payment.
The Mayor /Chairman Adolph, and Chairperson Henderson declared the
PUBLIC HEARING OPEN at 7:49 p.m. There being no requests to
speak, the Mayor /Chairman and Chairperson declared the PUBLIC
HEARING CLOSED at 7:49 p.m.
RESOLUTION NO. FA 2011 -002
A RESOLUTION OF THE FINANCING AUTHORITY OF THE CITY OF
LA QUANTA, CALIFORNIA, AUTHORIZING THE ISSUANCE OF LOCAL
AGENCY TAXABLE REVENUE BONDS, 2011 SERIES A, IN AN
AGGREGATE PRINCIPAL AMOUNT NOT TO EXCEED TWENTY -EIGHT
MILLION EIGHT HUNDRED FIFTY THOUSAND DOLLARS
($28,850,000), APPROVING THE EXECUTION OF AN INDENTURE OF
TRUST, SECOND SUPPLEMENTAL LOAN AGREEMENT, PURCHASE
CONTRACT, OFFICIAL STATEMENT AND PROVIDING OTHER
MATTERS PROPERLY RELATING THERETO
It was moved by Board Members Henderson /Franklin to adopt
Resolution No. FA 2011 -002 as submitted. Motion carried by a vote
of 4 -1, with Board Member Sniff dissenting.
ADJOURNMEN
There being no further business, it was moved by Board Members
Sniff /Evans to adjourn. Motion carried unanimously.
Respect Ily submitted,
VERONICA J,,fi NTECINO, Secretary
City of La Quinta, California