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HomeMy WebLinkAboutSA Reso 2020-01 RESOLUTION SA 2020-01 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CATHEDRAL CITY IN ITS CAPACITY AS SUCCESSOR AGENCY TO THE FORMER REDEVELOPMENT AGENCY OF CATHEDRAL CITY ADOPTING A DEBT MANAGEMENT POLICY WHEREAS, California Senate Bill 1029 (2016) ("SB1029") was signed into law on September 12, 2016; and WHEREAS, SB1029 amends Section 8855 of the Government Code, requiring state and local agencies to adopt comprehensive debt management policies; and WHEREAS, SB1029 requires that a comprehensive debt management policy be adopted at least 30 days prior to issuing any new debt on or after January 21 , 2017; and WHEREAS, the City Council, in its capacity as Successor Agency to the former Redevelopment Agency of Cathedral City desires to comply with state law as it relates to debt issuance requirements established by SB1029. NOW, THEREFORE, BE IT RESOLVED that the City Council in its capacity as the Successor Agency to the former Redevelopment Agency of Cathedral City hereby adopts a Debt Management Policy, attached hereto as Exhibit A. PASSED AND ADOPTED by the City Council in its capacity as the Successor Agency to the former Redevelopment Agency of Cathedral City this 23rd day of September 2020. John Aguilar, Mayor ATTEST: APPROVED A TO FOR I racey R.'Martinez, Secreta Eric S. Vail, Successor Agency Attorney RESOLUTION SA 2020-01 I, TRACEY R. MARTINEZ, SECRETARY of the City Council of the City of Cathedral City in its capacity as Successor Agency to the former Redevelopment Agency of Cathedral City, do hereby certify that the foregoing Resolution was introduced and adopted at a regular meeting of City Council of the City of Cathedral City in its capacity as Successor Agency to the former Redevelopment Agency of Cathedral City held on the 23rd day of September, 2020 by the following vote: AYES: Councilmembers Lamb and Gutierrez; Mayor Pro Tem Gregory and Mayor Aguilar NOES: None ABSENT: Councilmember Carnevale ABSTAIN: None NL(] ,N .12i{'11.c' lei Tracey R.Martinez, Secretary EXHIBIT A CITY OF CATHEDRAL CITY CITY OF CATHEDRAL CITY AS SUCCESSOR AGENCY TO THE FORMER REDEVELOPMENT AGENCY CATHEDRAL CITY PUBLIC FINANCE AUTHORITY DEBT MANAGEMENT POLICY I. PURPOSE The purpose of this Debt Management Policy is to organize and formalize debt issuance and management related policies and procedures for the City of Cathedral City, CA (City), the City of Cathedral City as Successor Agency to the Former Redevelopment Agency, and the Cathedral City Public Finance Authority (references herein to the "City" are deemed to include the Successor Agency and Authority). The debt policies and procedures of the City are subject to and limited by applicable provisions of state and federal law and to prudent debt management principles. II. SCOPE This Debt Policy (Policy) is intended to comply with Government Code Section 8855(i), effective on January 1 , 2017, and will apply to all future debt considerations and issuances for which the City Council acts as the legislative body for the City, the Successor Agency and the Cathedral City Public Finance Authority (CCPFA). III. OBJECTIVE The primary objectives of the City's debt and financing related activities are to: - Maintain cost-effective access to the capital markets through prudent fiscal management policies and practices; - Ensure that judicious debt service commitments are made through effective planning and cash management; - Ensure compliance with all applicable federal and state securities laws; - Achieve the highest practical credit ratings within the context of the City's financing needs and financing capabilities; - Ensure that all debt is structured in order to protect both current and future taxpayers, ratepayers and constituents of the City; and - Ensure that the City's debt is consistent with the City's planning goals and objectives and capital improvement program or budget, as applicable. IV. ASSIGNMENT OF RESPONSIBILITY This Policy will govern the issuance and management of all future debt issued by the City, Successor Agency and CCPFA. This Policy will be reviewed and updated periodically as necessary. Any changes to the Policy will be approved by the City Council. The City Council is responsible for overall policy direction of this Policy, as well as the authorization of each debt financing. The Administrative Services Director or Finance Director is be responsible for implementation of the Policy, as well as its day-to-day administration. The City recognizes that, while this Policy provides guidance and structure for the decisions and management of the City's debt, changes in capital markets, city programs and other unforeseen circumstances may arise that are not addressed in this Policy. In these cases, management flexibility is appropriate, and modifications or exceptions may be necessary to achieve the City's goals. V. DEBT ISSUANCE 1. Purpose of Debt Issuance The City's debt management program will consider debt issuance in cases where public policy, generational equity and economic efficiency provide a benefit to the residents of Cathedral City. The City will utilize debt obligations and will give due consideration to all available funding sources, including available cash reserves, available current revenues, potential future revenue sources, potential grants, and all other financing sources legally available to be used for such purposes. Expenditure of bond proceeds are expected to fund major, non-recurring expenditures/expenses, including but not limited to: the financing of costs related to capital project planning and design, environmental, land acquisition, real property, and equipment acquisition; the construction or renovation of buildings and permanent structures; financing costs related to the debt issuance, capitalized interest, necessary or financially prudent debt service reserves; or other costs as permitted by law. Refunding or refinancing existing debt obligations are acceptable uses of bond proceeds. 2. Types of Debt The City will evaluate the use of appropriate financial alternatives available as permitted by the State Constitution and applicable State statutes. These alternatives will be considered in order to secure the most cost advantageous financing alternative available while limiting the City's risk exposure. Types of debt may include, but are not limited to: - Lease revenue bonds - Certificate of Participation - Revenue bonds - Land-secured financing, such as special tax bonds and assessment bonds - General obligation bonds - Tax increment financing - Conduit financing, such as financing for affordable rental housing and qualified 501(c)(3) organizations - Refunding/refinancing existing debt obligations - General Obligation Bonds 2 Short term notes - Lease-purchase transactions - Letters of Credit and revolving credit The City will also consider the advantages of a negotiated or competitive bond sale and recognizes that a standard, all-purpose approach to debt financing does not serve the best interest of the City. The City will consider the unique combination of factors such as the type of debt needed, funding stream, market conditions and City programs to structure each debt issuance. The City may choose to maintain an Interfund Loan Practice to provide guidance for internal financing between City funds. 3. Debt Structuring Practices The maximum term of any debt issuance will not exceed the useful life of the assets funded from the financing. Capitalized interest and deferral of principal may be considered but not required during construction of a debt-funded project. Fixed rate debt is preferred, but the City may consider the appropriateness of variable rate debt when considering financial market conditions and risk factors. 4. Financing Options In general, debt may be issued to fund new projects or to refinance existing debt. - New Debt New debt issuances are used to generate funding for capital projects. These funds will be used for necessary land acquisitions, capital construction, equipment, related financing costs, and other necessary expenses that would deliver a project for the City. - Refinancing Existing Debt A periodic review of the City's outstanding debt will be undertaken by the Finance Department to determine refunding opportunities. Refunding bonds are issued to retire all or a portion of an outstanding bond issue, typically to secure lower interest rates and to reduce overall debt service. Alternatively, some refunding's are undertaken for reasons other than to achieve cost savings, such as to restructure debt service payments, shorten maturities and to change the type of debt instruments being used, or to eliminate undesirable covenants. 3 A present value savings analysis will be prepared to identify the economic effects of any refunding being considered by the City. The savings from any particular refunding candidate shall generally be at least 3% of the refunded principle amount, net of all transaction expenses. This 3% savings target may be waived by the City upon a finding that such a refunding is in the City's best overall financial interest and shall not be applicable for refunding transactions that are not solely undertaken to achieve cost savings. 5. Integration with City Capital Improvement Plan and Budgets The City is committed to long-term financial planning, maintaining appropriate reserves levels and employing prudent practices in governance, management and budget administration. In addition, the City maintains a General Plan as well as a multi-year Capital Improvement Program (CIP) to establish and monitor priorities for projects. The City strives to integrate its debt issuances with the goals of the CIP by timing the issuance of debt to ensure that projects are available when needed in furtherance of the City's public purposes and in a timely manner to avoid having to make unplanned expenditures for capital improvements or equipment from its general fund budget. The City intends to issue debt for the purposes stated in this Policy and to implement policy decisions incorporated both in the City's annual operations budget as well as the CIP. 6. Policy Goals The City is committed to long-term financial planning, maintaining appropriate reserves levels and employing prudent practices in governance, management and budget administration. It is a policy goal of the City to protect taxpayers, ratepayers and constituents by utilizing conservative financing methods and techniques so as to obtain the highest practical credit ratings (if applicable) and the lowest practical borrowing costs. The City will comply with applicable state and federal law as it pertains to the maximum term of debt and the procedures for levying and imposing any related taxes, assessments, rates and charges. When refinancing debt, it shall be the policy goal of the City to realize, whenever possible, and subject to any overriding non-financial policy considerations, (i) minimum net present value debt service savings equal to or greater than 3.0% of the refunded principal amount, and (ii) present value debt service savings equal to or greater than 100% of any escrow fund negative arbitrage. 4 7. Consultants The City will, when appropriate and given the specific requirements of the financing, secure the services of independent financial advisors, underwriters, disclosure council, bond council, appraisal services and other service providers. 8. Investment of Bond Proceeds Bond proceeds will be invested according to the City-adopted Investment Policy or the Bond Fiscal Agreement, if applicable. The City will not use derivatives unless the City adopts a separate comprehensive Derivatives Policy. 9. Ongoing Administration and Internal Controls When issuing debt, in addition to complying with the terms of this Debt Policy, the City will comply with any other applicable policies regarding initial bond disclosure, continuing disclosure, post-issuance compliance, and investment of bond proceeds. The City will accurately account for all debt-related activity. These records will be designed to ensure that the City maintains compliance with all debt covenants, as well as state and federal laws. The City will maintain a system of reporting interest earnings that relates to and complies with Internal Revenue Code requirements relating to rebate, yield limits and arbitrage. 10. Compliance a. Initial Disclosure In accordance with Senate Bill 1029 (2016) ("SB1029"), the City will submit a report of final sale to the California Debt and Investment Advisory Commission, not later than 21 days following the sale of the debt. A copy of the final Official Statement shall accompany the report of final sale. In the event that the Official Statement has not yet been finalized, the City will provide documentation to satisfy the requirements of SB1029, as necessary. b. Ongoing Disclosure The City will maintain compliance with the regulations set forth in Government Code Section 8855(i), Rule 15(c)2-12 — Securities and Exchange Commission Rule 15(c)2-12, Continuing Disclosure ("Rule 15(c)2-12") and SB 1029. 5 Section 8855(i), Rule 15(c)2-12 — The City will file an annual report and annual financial information with the Municipal Securities Rulemaking Board's Electronic Municipal Market Access System (EMMA). The reports will be made timely and in accordance with Rule 15(c)2-12 as amended. SB 1029 — The City will submit an annual report for any issue of debt whose final sale occurred on or after January 21, 2017. The annual report will cover the reporting period July through June 30 and will be submitted no later than seven months following the end of the reporting period. 11. Adoption by Legislative Body In accordance with SB1029, the City and the Cathedral City Public Finance Authority will adopt this policy. In implementing this policy from time to time, interpretations and variations may be made at the discretion of the City's Manager or Chief Financial Officer, without approval of the Council, as determined by such person to be in the best interests of the City or its citizens, and/or for purposes of administrative efficiency or convenience or to comply with new applicable federal, state, or local law. 6