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10.01 2018 Refunding Bonds1. SUBJECT Resolution No. SAORA -029 — A Resolution of the Governing Board of the Successor Agency to the Orange Redevelopment Agency authorizing the Successor Agency's issuance of tax allocation refunding bonds (the "2018 Refunding Bonds ") and taking related actions. 2. SUMMARY To finance redevelopment projects, the former Orange Redevelopment Agency (the "Former Agency ") issued the Orange Merged and Amended Redevelopment Project Area 2008 Tax Allocation Bonds, Series A (the "2008A Bonds "). The remaining unpaid principal balance of the Outstanding Bonds is $26,205,000. Staff has been working with Urban Futures, Inc. ( "UFI ") to analyze and evaluate the refinancing opportunity for the 2008A Bonds. Based on market rates provided by Morgan Stanley & Co. LLC, the proposed underwriter, as of 3/16/2018, UFI estimates that a refunding of the 2008A Bonds could - generate $3.7 million in total gross cash flow savings, or approximately $170,000 annually from 9/1/2019 through 9/1/2037. This equates to $2.6 million in net present value savings, or 10.29% of the refunded principal amount. 3. RECOMMENDATION 1. Adopt Resolution No. SAORA -029. 2. Approve agreements and authorize the Mayor and City Clerk to execute on behalf of the Successor Agency. 4. FISCAL IMPACT The projected savings realized by the issuance of the 2018A Bonds will be in the form of lower principal and interest payments. 5. STRATEGIC PLAN GOAL(S) 2. Be a fiscally healthy community a. Expend fiscal resources responsibly 6. GENERAL PLAN IMPLEMENTATION Not applicable. 7. DISCUSSION and BACKGROUND Background To finance and refinance redevelopment projects, the Former Agency issued multiple series of bonds, some of which were outstanding when the Former Agency was dissolved in February 2012. Pursuant to Health and Safety Code ( "HSC ") Section 34177.5(a), the Successor Agency is authorized to issue bonds to refund outstanding bonds to provide savings, if: (i) the total interest cost to maturity on the refunding bonds plus the principal amount of the refunding bonds will not exceed the total remaining interest cost to maturity on the refunded bonds, plus the remaining principal of the refunded bonds to be refunded, and (ii) the principal amount of the refunding bonds will not exceed the amount required to defease the refunded bonds, to establish customary debt service reserves and pay related costs of issuance. The Successor Agency successfully issued bonds in 2014 to refund bonds issued by the Former Agency in 1997 and 2003. The 2014 refunding did not include the 2008A Bonds. According to their terms, the 2008A Bonds are not subject to be called until September 1, 2018, at which time, the 2008A Bonds maturing on September 1, 2018 will be paid, and the 2008A Bonds maturing after September 1, 2018 may be redeemed at par (without prepayment premium). Staff issued a Request for Proposal to engage a municipal advisor to guide the Successor Agency through the process of refinancing the 2008A Bonds. Based on both their experience with tax allocation bonds, and their positive references, staff selected UFI as its municipal advisor for this transaction. UFI is an independent municipal advisor registered with the U.S. Securities and Exchange Commission and the Municipal Securities Rulemaking Board. UFI then assisted the Successor Agency with the selection of its bond counsel, disclosure counsel, and underwriter. Interested firms submitted proposals to UFI, who then made recommendations to staff. The law firms of Richards Watson & Gershon ( "RWG ") and Quint & Thimmig will serve as bond counsel and disclosure counsel, respectively, for this refunding. RWG served as bond counsel for SAORA ITEM 2 4/10/18 the Former Agency's issuance of the 2008A Bonds and for the Successor Agency's issuance of the 2014 Bonds. RWG has also served as special counsel for other Successor Agency matters. Quint & Thimmig served as disclosure counsel for the 2008A Bonds and the 2014 Bonds. Morgan Stanley & Co. LLC is proposed to be the bond underwriter. Discussion As shown in UFI's Savings Report, the gross debt service savings — based on information known as of March 16, 2018 — is estimated to be $3.7 million, or $170,000 annually from 9/1/2019 through 9/1/2037. This equates to $2.6 million in net present value savings, or 10.29% of the refunded principal amount. Based on such estimates, the potential receipt by the City will be $518,000 from Redevelopment Property Tax Trust Fund ( "RPTTF ") residual disbursements. The savings will become moneys available for the Successor Agency's enforceable obligations, as approved on the Recognized Obligation Payment Schedules ( "ROPS ") or, if not needed for ROPS- approved obligations, for disbursement to taxing entities (including the City) as RPTTF residuals through the semi - annual RPTTF distribution process. Pursuant to Government Code Section 5852.1 (which became effective January 1, 2018), the following good faith estimates (as obtained by the issuer from an underwriter, financial adviser, or private lender) must be disclosed at a public meeting before the governing body's authorization of the issuance of bonds with a term greater than 13 months: Estimates for the 2018 Refunding Bonds, per Information to be disclosed per Government Code Section 5852.1: U estimates True interest cost of the bonds (the rate necessary to discount the 3.50% amounts payable on the respective principal and interest payment dates to the purchase price received for the new issue of bonds) Finance charge of the bonds (the sum of fees and charges paid to $487,829 plus an annual third parties) trustee fee of $2,200 Amount of proceeds received by the public body from the sale of $25.9 million the bonds, less the finance charge of the bonds and any reserves or capitalized interest paid or funded with proceeds of the bonds The total payment amount (the sum total of all debt service $37.3 million plus an payments on the bonds, plus the finance charge of the bonds not annual trustee fee of paid from bond proceeds) $2,200 The 2018 Refunding Bonds will be issued pursuant to an Indenture of Trust, as originally executed by the Former Agency in 1997, as previously amended and supplemented by four supplements, as to be further supplemented by the Fifth Supplement to the Indenture of Trust. SAORA ITEM 3 4/10/18 The steps necessary to issue the 2018 Refunding Bonds will include the following: • Successor Agency Board's adoption of the attached Resolution approving the issuance of the 2018 Refunding Bonds; • Oversight Board's adoption of a resolution approving the issuance of the 2018 Refunding Bonds; • California Department of Finance's (DOF) approval of the Oversight Board resolution; • Successor Agency Board's adoption of a follow -up resolution authorizing forms of additional documents required for the issuance and sale of the 2018 Refunding Bonds, including an escrow agreement, a preliminary official statement and a bond purchase agreement; • Initiating the credit and rating process for the 2018 Refunding Bonds and, based on market conditions, decision regarding the purchase of bond insurance; • Execution and delivery of the bond purchase agreement to finalize the pricing terms (including the principal amount and interest rates) for the sale of the 2018 Refunding Bonds; and • Closing of the refunding transaction and redemption of the Outstanding Bonds. The Oversight Board will consider a resolution to approve the 2018 Refunding Bonds at its upcoming April 12, 2018 meeting. After the Oversight Board's action, Staff will submit the Oversight Board resolution to the DOF. By law, the DOF will have an initial 5 business day review period, during which the DOF will have the option to (and will likely) extend its review by another 60 days. Based on the current financing schedule, it is expected that the DOF's approval of the Oversight Board resolution will be received during the middle of June 2018, and the sale and closing of the Refunding Bonds could be completed in the summer of 2018. 8. ATTACHMENTS • Resolution No. SAORA -029 • Fifth Supplement to Indenture of Trust • Debt Servings Savings Analysis, prepared by Urban Futures, Inc. • Urban Futures, Inc. agreement for municipal advisor services • Richards, Watson & Gershon agreement for bond counsel services • Quint & Thimmig LLP agreement for disclosure counsel services SAORA ITEM 4 4/10/18 RESOLUTION NO. SAORA -029 A RESOLUTION OF THE GOVERNING BOARD OF THE SUCCESSOR AGENCY TO THE ORANGE REDEVELOPMENT AGENCY AUTHORIZING THE SUCCESSOR AGENCY'S ISSUANCE OF TAX ALLOCATION REFUNDING BONDS AND TAKING RELATED ACTIONS WHEREAS, the Orange Redevelopment Agency (the "Former Agency ") was a redevelopment agency duly formed pursuant to the Community Redevelopment Law, set forth in Part I of Division 24 of the Health and Safety Code of the State of California ( "HSC "); and WHEREAS, pursuant to AB X1 26 (enacted in June 2011) and the California Supreme Court's decision in California Redevelopment Association, et al. v. Ana Matosantos, et al., 53 Cal. 4th 231 (2011), the Former Agency was dissolved as of February 1, 2012; the Successor Agency to the Orange Redevelopment Agency (the "Successor Agency ") was constituted as the successor to the Former Agency; and an Oversight Board to the Successor Agency (the "Oversight Board ") was established; and WHEREAS, pursuant to HSC Section 34173, the City Council of the City of Orange (the "City ") adopted Resolution No. 10625 on January 10, 2012, electing for the City to serve as the Successor Agency (provided, pursuant to HSC Section 34173(g), the City and the Successor Agency are separate public entities and the two entities do not merge); and WHEREAS, the City Council serves as the Governing Board of the Successor Agency; and WHEREAS, before dissolution, the Former Agency issued multiple series of bonds under a Trust Indenture, dated as of May 1, 1997 (the "Master Indenture "), as amended and supplemented by a First Supplement to Indenture of Trust, dated as of September 1, 2003 (the "First Supplement "), a Second Supplement to Indenture of Trust (the "Second Supplement ") and a Third Supplement to Indenture of Trust (the "Third Supplement "), each dated May 1, 2008; and WHEREAS, such bonds issued by the Former Agency included the Former Agency's Orange Merged and Amended Redevelopment Project Area 2008 Tax Allocation Bonds, Series A (the "2008A Bonds "); and WHEREAS, after the Former Agency's dissolution, the Successor Agency issued a series of refunding bonds in 2014, pursuant to the Master Indenture, as previously amended and supplemented, and further amended and supplemented by a Fourth Supplement to Indenture of Trust, dated as of December 1, 2014 (the "Fourth Supplement "), by and between the Successor Agency and U.S. Bank National Association, as trustee (the "Trustee "); and WHEREAS, the Master Indenture, as amended and supplemented by the First Supplement, the Second Supplement, the Third Supplement and the Fourth Supplement, is referred to herein as the "Indenture "; and 12817 - 0001 \216680M.doc CITY COUNCIL MINUTES APRIL 10, 2018 10. ITEMS RELATING TO THE SUCCESSOR AGENCY OF THE ORANGE REDEVELOPMENT AGENCY 10.1 Authorization of issuance of tax allocation refunding bonds (the "2018 Refunding Bonds ") and taking related actions. Resolution No. SAORA -029. (SA1000.0) A Resolution of the Governing Board of the Successor Agency to the Orange Redevelopment Agency authorizing the Successor Agency's issuance of tax allocation refunding bonds (the "2018 Refunding Bonds ") and taking related actions. MOTION — Whitaker SECOND — Murphy AYES — Alvarez, Whitaker, Smith, Murphy, Nichols Moved to approve Resolution No. SAORA -029; and approve agreements and authorize the Mayor and City Clerk to execute on behalf of the Successor Agency. 11. PUBLIC HEARINGS 11.1 FY 2018 -19 Community Development Block Grant (CDBG) Program and HOME Investment Partnerships (HOME) Program. (A2100.0; AGR- 3218.S, AGR- 3987.S) Time set for public hearing to consider the allocation of CDBG funds and HOME funds. The U.S. Department of Housing and Urban Development (HUD) has not yet notified the City of its FY 2018 -19 CDBG and HOME allocations. Funding recommendations are based on estimated allocations. CDBG Program The City's proposed CDBG Program budget is $1,294,944. This total includes the estimated FY 2018 -19 grant amount of $1,144,944 and unexpended prior year CDBG funds in the amount of $150,000 that would be re- budgeted for FY 2018 -19. Staff has conducted the FY 2018 -19 CDBG funding process in conjunction with the CDBG Program Committee. THE MAYOR OPENED THE PUBLIC HEARING. Public Speakers: Charlotte Vaughn, Assistance League — thanked the CDBG Committee, staff, and Council for the many years supporting the Assistance League. Raul Fernandez, HOMES, Inc. — thanked Council and the CDBG Committee for supporting their efforts. THE MAYOR CLOSED THE PUBLIC HEARING. PAGE 13