RESOLUTION NO. 2022-XXX
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF FULLERTON, CALIFORNIA, AUTHORIZING THE ISSUANCE OF BONDS TO REFUND CERTAIN PENSION OBLIGATIONS OF THE CITY, APPROVING THE FORM AND AUTHORIZING THE EXECUTION OF A TRUST AGREEMENT AND PURCHASE CONTRACT, AUTHORIZING JUDICIAL VALIDATION PROCEEDINGS RELATING TO THE ISSUANCE OF SUCH BONDS AND APPROVING ADDITIONAL ACTIONS RELATED THERETO WHEREAS, the City of Fullerton (the “City”) has previously adopted a retirement plan pursuant to the Public Employees’ Retirement Law, commencing with California Government Code Section 20000, as amended (the “Retirement Law”), and elected to become a contracting member of the California Public Employees’ Retirement System (“PERS”).
WHEREAS, the Retirement Law and the contract (the “PERS Contract”) effective July 1, 1946, between the Board of Administration of PERS and the City Council of the City (the “City Council”) obligate the City to (i) make contributions to PERS to fund pension benefits for certain City employees, (ii) make payments towards the unfunded actuarial liability with respect to such pension benefits under the Retirement Law and the PERS Contract (the “Unfunded Liability”) and (iii) appropriate funds for the foregoing purposes.
WHEREAS, the City desires to authorize the issuance of its City of Fullerton Taxable Pension Obligation Bonds (the “Bonds”) in one or more series, from time to time, pursuant to the provisions of California Government Code Articles 10 and 11 of Chapter 3 of Part 1 of Division 2 of Title 5, commencing with Sections 53570 and 53580 of said Code (the “Bond Law”), in a maximum principal amount not to exceed that required to refund the Unfunded Liability, to prepay all or a portion of the City’s annual required retirement contribution due and payable to PERS within 18 months of the issuance of the Bonds (the “Current Obligation”), to pay capitalized interest on the Bonds and to pay the costs of issuance of such Bonds, including the underwriter’s discount and any original issue discount on such Bonds.
WHEREAS, the City expects that the need may arise in the future to issue additional refunding bonds (the “Additional Bonds”) pursuant to the Bond Law to refinance all or a portion of the then outstanding Unfunded Liability and to fund the Current Obligation.
WHEREAS, the City will issue Bonds under and secured by a Trust Agreement (such Trust Agreement, in the form presented to this meeting, with such changes, insertions and omissions as made pursuant to this Resolution, referred to herein as the “Trust Agreement”).
WHEREAS, the City has determined the advisability of filing an action to determine the validity of the Bonds, the Additional Bonds, the Trust Agreement and the Additional Trust Agreements (as such term is defined below) and the actions proposed to be taken in connection therewith.
WHEREAS, the Bonds and the Additional Bonds comply with the City’s Debt Management Policy adopted in accordance with California Government Code Section 8855(i).
WHEREAS, in compliance with SB 450, the City has obtained from its Municipal Advisor the required good faith estimates and disclosed such estimates and set forth in Exhibit A attached hereto.
WHEREAS, all acts, conditions and things required by the laws of the State of California to exist, to have happened and to have been performed precedent to and in connection with the consummation of the financing authorized hereby do exist, have happened and have been performed in regular and due time, form and manner as required by law and the City is now duly authorized and empowered, pursuant to each and every requirement of law, to consummate such financing for the purpose, in the manner and upon the terms herein provided.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF FULLERTON RESOLVES, AS FOLLOWS:
Recitals. City Council does hereby find and declare that the above recitals are true and correct.
Authorization for Issuance of Bonds. City Council authorizes and approves the issuance of the Bonds on the terms and conditions set forth in, and subject to, the limitations specified in the Trust Agreement. The Bonds shall be dated, shall bear interest at the rates, shall mature on the dates, shall be issued in the form and shall have terms as provided in the Trust Agreement, as the same shall be completed in accordance with this Resolution. The title of the Bonds may be changed to reflect the year in which the Bonds are issued, as directed by the City Manager of the City or the Director of Administrative Services.
Trust Agreement. City Council approves the Trust Agreement, in substantially the form submitted to this meeting and made a part hereof as though set forth in full herein. The Mayor of the City, the Mayor Pro Tem of the City, the City Manager of the City and the Director of Administrative Services, or their written designees (each an “Authorized Officer” and collectively, the “Authorized Officers”), are, and each of them is, hereby authorized and directed, for and in the name of the City, to execute and deliver the Trust Agreement in the form presented to this meeting, with such changes, insertions and omissions as the Authorized Officer executing the same may require or approve, such requirement or approval to be conclusively evidenced by the execution of the Trust Agreement by such Authorized Officer. City Council authorizes and directs the City Clerk of the City to attest the Trust Agreement for and in the name and on behalf of the City.
Authorization for Issuance of Additional Bonds. The City hereby authorizes and approves the issuance of Additional Bonds pursuant to the Bond Law, as authorized by the Trust Agreement, from time to time, to refund all or a portion of the Unfunded Liability and fund the Current Obligation, provided that the City Manager, or designee, or the Director of Administrative Services, or designee, first certifies to City Council in writing that such actions will result in cost savings to the City. The City authorizes any one of the Authorized Officers, or designees, to execute and deliver one or more other trust agreements and/or one or more supplemental agreements supplementing or amending the Trust Agreement and providing for the issuance of Additional Bonds (each an “Additional Trust Agreement”); provided, however, that (i) each series of Additional Bonds shall be in a principal amount not to exceed the sum of the Unfunded Liability of the City to PERS under the PERS Contract and the Public Employees Retirement Law remaining unpaid on the date of issuance of such Additional Bonds, the Current Obligation and the costs of issuing the Additional Bonds, (ii) the issuance of each series of Additional Bonds results in net present value savings to the City as determined by an Authorized Officer at the time that each series of such Additional Bonds are issued and (iii) the Additional Bonds shall not mature later than the last date through which PERS has determined for the amortization of the Unfunded Liability of the City in accordance with its current procedures.
Each Unfunded Liability refunded and Current Obligation funded by the Bonds and each series of Additional Bonds pursuant to the Trust Agreement and each Additional Trust Agreement constitutes an obligation imposed by law, pursuant to the Constitution and laws of the State of California and an obligation of the City not limited as to payment from any special source of funds. The Unfunded Liability refunded and Current Obligation funded by the Bonds pursuant to the Trust Agreement and each series of Additional Bonds pursuant to an Additional Trust Agreement shall not, however, constitute an obligation of the City for which the City is obligated or permitted to levy or pledge any form of taxation or for which the City has levied or pledged or will levy or pledge any form of taxation.
Approval of Bond Purchase Agreement. The form of the Bond Purchase Agreement (the “Purchase Contract”) by and between the City and an underwriter to be selected by the Authorized Officers (the “Underwriter”) presented to this meeting and on file with the City Clerk and the sale of the Bonds to the Underwriter pursuant thereto upon the terms and conditions set forth therein, and subject to such approval and subject to the provisions hereof, the Authorized Officers, acting alone, are each hereby authorized and directed to evidence the City’s acceptance of the offers made by the Purchase Contract by executing and delivering the Purchase Contract in substantially said form, with any additions thereto (including the insertion of the maturity dates, principal amounts, interest rates and redemption provisions of the Bonds) and changes therein as any of the Authorized Officers executing the same may approve and such matters as are authorized by this Resolution, such approval to be conclusively evidenced by the execution and delivery thereof by any one of the Authorized Officers.
City Manager or Director of Administrative Services to Establish Final Terms of Issuance. City Council authorizes the City Manager of the City and the Director of Administrative Services, and their designees, on behalf of the City, to establish and determine (i) the final principal amount of the Bonds, provided the aggregate initial principal amount of the Bonds shall not be greater than the lesser of (a) $285,250,000 or (b) the sum of the City’s Unfunded Liability and Current Obligation as calculated by PERS or other actuary selected by the Authorized Officer, together with the costs of issuing the Bonds as approved by such Authorized Officer, (ii) the final interest rates on various maturities of the Bonds, provided that the issuance of the Bonds results in net present value savings to the City as determined by an Authorized Officer at the time that the Bonds are sold and that the maturity date of the Bonds shall not be later than the last date through which PERS has determined for the amortization of the Unfunded Liability of the City in accordance with its current procedures, and (iii) the Underwriter’s discount for the purchase of the Bonds.
Municipal Bond Insurance Policy. City Council authorizes the Authorized Officers to negotiate and execute an insurance policy and debt service reserve fund insurance policy for the Bonds (and such other agreements that the insurer may require in connection therewith) if it is determined that the policies will result in interest rate savings for the City, and to pay the insurance premium of such policies from the proceeds of the issuance and sale of the Bonds.
The Trustee. City Council appoints U.S. Bank Trust Company, National Association to act as trustee under the Trust Agreement, provided that the City Manager or Director of Administrative Services are hereby authorized to select a different trustee prior to issuance of the Bonds.
Appointment of Professionals. City Council authorizes the Authorized Officers to execute contracts with Stradling Yocca Carlson & Rauth, a Professional Corporation, to act as Bond Counsel to the City, with Jones Hall, A Professional Law Corporation, to act as Disclosure Counsel to the City and with Urban Futures, Incorporated, to serve as Municipal Advisor to the City, which contracts shall be in substantially the form on file with the City Clerk, together with such changes as approved by the City Manager and the Director of Administrative Services, or their designee, which changes shall be deemed approved by the execution and delivery of such contract by the City Manager or Director of Administrative Services. City Council authorizes the Authorized Officers to select an Underwriter for the Bonds and such other consultants as they deem appropriate, and to execute on behalf of the City such contracts as the Authorized Officers determine appropriate to engage the Underwriter and such consultants; provided payment of fees to the Underwriter or such other consultants shall be contingent on the issuance of bonds unless otherwise directed by City Council.
Judicial Validation of Bonds. In order to determine the validity of the Bonds, the Additional Bonds, the Trust Agreement and the Additional Trust Agreements and the actions authorized hereby to be taken in connection therewith, City Council hereby authorizes Stradling Yocca Carlson & Rauth, Bond Counsel, in consultation with the City Attorney, to prepare and cause to be filed and prosecuted to completion all proceedings required for the judicial validation of the Bonds, the Additional Bonds, the Trust Agreement and the Additional Trust Agreements in the Superior Court of Orange County, under and pursuant to the provisions of the California Code of Civil Procedure Sections 860 et seq. City Council further authorizes the Authorized Officers and all other officers, employees and agents of the City to take any and all actions, including the execution and delivery or appropriate documentation, as required to conclude such judicial validation proceedings.
Preliminary Official Statement and Official Statement. City Council authorizes and directs the Authorized Officers, the City Clerk of the City and all other officers of the City to prepare an Official Statement (and a Preliminary Official Statement) for City Council approval at a future meeting for use in connection with the offering and sale of the Bonds.
Good Faith Estimates. City Council acknowledges that Exhibit A, attached hereto, contains the good faith estimates required by California Government Code Section 5852.1 and are available to the public at the meeting at which City Council approved this Resolution. City Council hereby finds that the City has satisfied the requirements of Section 5852.1.
Other Actions. City Council authorizes and directs the Authorized Officers, the City Clerk of the City and all other officers of the City to execute and deliver any and all documents and instruments and to do and cause to be done any and all acts and things necessary or proper for carrying out the transactions contemplated hereby, including, but not limited to, the execution and delivery of a continuing disclosure undertaking and the execution and delivery of any documents required by PERS in order to complete the issuance of the Bonds.
Previous Actions. City Council approves, confirms and ratifies all actions heretofore taken by Authorized Officers and by any other officers, employees or agents of the City with respect to the issuance of the Bonds, or in connection with or related to any of the agreements or documents referenced herein.
Effect. This Resolution shall take effect from and after its date of adoption.
Certification. The City Clerk shall certify to the adoption of this Resolution.
ADOPTED BY THE FULLERTON CITY COUNCIL ON MARCH 15, 2022. ____________________________
Fred Jung
Mayor
ATTEST:
___________________________
Lucinda Williams, MMC
City Clerk
___________________________
Date
Attachments:
Attachment 1 – Good Faith Estimates
EXHIBIT A
SB 450 GOOD FAITH ESTIMATES
The good faith estimates set forth herein are provided with respect to the Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the City by Urban Futures, Incorporated, the City’s Municipal Advisor (the “Municipal Advisor”).
Principal Amount. The Municipal Advisor has informed the City that, based on the City’s financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the Bonds to be sold is $285,250,000 (the “Estimated Principal Amounts”).
True Interest Cost of the Bonds. The Municipal Advisor has informed the City that, assuming that the respective Estimated Principal Amounts of the Bonds are sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the true interest cost of the Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Bonds, is 4.28%.
Finance Charge of the Bonds. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amounts of the Bonds are sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the finance charge for the Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Bonds), is $1,849,555.
Amount of Proceeds to be Received. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amounts of the Bonds are sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the amount of proceeds expected to be received by the City for sale of the Bonds, less the finance charge of the Bonds, as estimated above, and any capitalized interest on the Bonds paid or funded with proceeds of the Bonds, is $283,400,445.
Total Payment Amount. The Municipal Advisor has informed the City that, assuming that the Estimated Principal Amounts of the Bonds are sold, and based on market interest rates prevailing at the time of preparation of such estimate, its good faith estimate of the total payment amount, which means the sum total of all payments the City will make to pay debt service on the Bonds, plus the finance charge for the Bonds, as described above, not paid with the respective proceeds of the Bonds, calculated to the final maturity of the Bonds, is $433,234,723.
The foregoing estimates constitute good faith estimates only and are based on market conditions prevailing at the time of preparation of such estimates on February 28, 2022. The actual principal amount of the Bonds issued and sold, the true interest cost thereof, the finance charges thereof, the amount of proceeds received therefrom and total payment amount with respect thereto may differ from such good faith estimates due to (a) the actual date of the sale of the Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of Bonds sold being different from the respective Estimated Principal Amounts, (c) the actual amortization of the Bonds being different than the amortization assumed for purposes of such estimates, (d) the actual market interest rates at the time of sale of the Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the City’s financing plan, or a combination of such factors. The actual date of sale of the Bonds and the actual principal amount of Bonds sold will be determined by the City based on various factors. The actual interest rates borne by the Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the Bonds will also depend, in part, on market interest rates at the time of sale thereof. Market interest rates are affected by economic and other factors beyond the control of the City.
Resolution No. 2022-XXX