September 18, 2024
City of Gonzales, California
Attention: Eric Scriven, City’s Financial Advisor, NHA | Advisors Via E-mail: [email protected]
RE: Response to Proposal Request for the Proposed Not to Exceed $7,600,000 Revolving Line of Credit Dear Mr. Scriven:
We are pleased to offer this financing proposal from Banner Bank (the “Bank”) in the form of a not to exceed $7,600,000 Revolving Line of Credit, Series 2024 (the “Facility”). Under this financing proposal, the City of Gonzales, CA (the “City”) anticipates drawing on a revolving line of credit Facility provided by the Bank under flexible draw and payment terms.
This proposal letter does not constitute a commitment by the Bank to issue the Facility but is for the purpose of substantially representing the terms and conditions, based upon information described in the Proposed Financing Terms, received September 3, 2024, from NHA|Advisors (the “Term Sheet”).
Upon the acceptance of the requirements described herein, the Bank will seek formal approval within the Bank to extend the Facility under the conditions, situation, and documents outlined in the Term Sheet. The bank’s final credit approval period would be approximately 15 or less working days. Rates and fees herein are firm until December 20, 2024. The Bank’s response is set forth in Exhibit A below.
The Bank values and offers a personalized approach to municipal banking services. During this time, the Bank’s counsel, relationship manager, and public finance officers will work with the City’s team on standard and customary due diligence items with a goal to close this transaction to meet the City’s timeline.
On behalf of Banner Bank, we sincerely thank you for the opportunity to partner with the City on financing its projects of important impact on the community we serve together. Should you wish to proceed with obtaining formal credit approval under the general terms and conditions outlined herein, please acknowledge the City’s acceptance by signing on the following page and returning one signed document.
Very truly yours,
Michael Kearl, Vice President Sr Commercial Banking
Office: (858) 754-6870
E-mail: [email protected]
The contents of this document are confidential and are not to be shared with outside third parties with the exception of the City’s accountants and attorneys unless required to do so by a public record request pursuant to the California Public Records Act.
City of Gonzales, CA
Response to Bid Requirements
ORAL AGREEMENTS OR ORAL COMMITMENTS TO LOAN MONEY, EXTEND CREDIT, OR TO FORBEAR FROM ENFORCING REPAYMENT OF A DEBT ARE NOT ENFORCEABLE UNDER CALIFORNIA LAW.
ACCEPTED BY:
City of Gonzales
By:
As:
City of Gonzales, CA
Response to Bid Requirements
Exhibit A
Banner Bank’s response to the Bid Requirements
Maximum
Facility
Amount:
$7,600,000
Facility
Purpose:
To provide working capital support and bridge loan draws due from the State of California Water Quality Resources Board State Revolving Loan Fund loan related to The City’s Industrial Wastewater System construction project (the “Project”).
Facility Tenor 2.5-year period with an option to renew for 6-month period subject to approval by the Bank.
Interest Rate,
Tax status, Bank
Expense:
Tax-exempt rate:
a. Fixed. 4.340%, fixed over tenor, or
b. FloaƟng. 1-month SOFR index + fixed spread of 1.50% subject to minimum floor rate of 3.00%. If the SOFR + fixed spread falls below the floor, the interest rate will sƟll be at the floor %-rate. Day count fracƟon of 30/360-day basis for all rates.
Bank fee: 0.25% of par ($19,000)
Default rate. +2.00% for each taxable and tax-exempt rate Interest payment frequency is flexible upon the needs of the City, semi-annual or more frequent.
Security: Pledge of (i) takeout from State of California Water Quality Resources Board State Revolving Loan Fund (“SRF”) loan commitment and (ii) net revenues of the City’s Wastewater System, such net revenue pledge on parity with SRF loan pledge.
Legal fees: The City is responsible for the Bank’s attorney fees not to exceed $15,000.00. On this Facility issue, the Bank is represented by attorney George Mardikes, Mardikes Law LLC.
The City is responsible for its bond counsel fees and other costs of issuance.
Construction
Fund:
A Construction Fund is to be established with the Bank. Any proceeds from the State of California Water Quality Resources Board State Revolving Loan Fund (SRF) loan commitment shall be first deposited to the Construction Fund, and immediately used to repay any outstanding balance on the Facility.
Disbursements from the Construction Fund shall be made by the Bank upon receipt of draw request certificate. Procedure for disbursement and certifications based on standard and customary procedures for the character and nature of these type of transaction and financing, including draw provisions describe below.
City of Gonzales, CA
Response to Bid Requirements
Draw
Provisions:
Conditions must be met to draw on the Facility mirror those of the SWRCB program, including
Draw requests shall be in same form as SWRCB draw requests, including supporting documents;
A third-party engineer certifies inspection and compliance with agreed scope of work, project standards, and work progressing in line with the project schedule;
City demonstrates that work adheres to budget. If there are budget overruns, the City must either secure additional funding or modify the project scope with approval from the SRF program;
Compliance with environmental regulations, insurance, bonding in place in accordance with SWRCB program.
Draws requested as needed will be available from the date of closing through maturity.
Multiple monthly draws are permitted. Draws generally will be deposited on the same day requested to a specified Banner Bank account.
This facility is a revolving credit facility; amounts that are borrowed and repaid may be borrowed again, subject to the approval and limitations acceptable to the Bank at its own discretion.
Amounts outstanding under the Facility must not exceed the remaining amounts due from State of California Water Quality Resources Board State Revolving Loan Fund loan related to the Project.
Prepayment
and
Termination
Provisions:
Notice of termination or extension, shall be given by the City not less than 30 days prior to the maturity date.
Interest will be calculated on the outstanding balance of the Facility based on the 30/360-day count basis.
Any outstanding principal and interest balance will be due in full at Maturity, unless renewed or extended by the Bank and Borrower prior to maturity. All payments (including but not limited to debt service payments, prepayments, etc.) shall be first applied to interest and then to principal as of the date actually received.
Upon default, standard and customary termination covenants for this type of Facility and financing transaction of this nature apply.
Credit
Approval:
The Bank requires no other requirements necessary beyond the standard and customary due diligence material for this type of Facility and financing transactions of this nature.
Reporting
Requirements:
The Bank requires no other reporting requirements beyond the standard and customary reporting standards for this type of Facility and financing transactions of this nature.
City of Gonzales, CA
Response to Bid Requirements
Other
Conditions or
Material Terms:
The Bank requires no other covenants beyond the standard and customary covenants for this type of Facility and financing transactions of this nature. In the event of default, the Bank shall be entitled to all remedies under the financing documents.
Upon the occurrence of an event of default under this Facility, the financing documents will provide remedies to the Bank customary for transactions of this nature, exercise rights and remedies under law, equity or under the terms of the financing agreement and other legal documents associated with this Facility.
Documentation: Final form Facility documentation to be prepared by City’s bond counsel and subject to review and acceptance by the Bank and the Bank’s legal counsel. Bank shall receive a legal opinion from the City’s bond counsel, satisfactory to the Bank, (1) stating that the City’s bond indebtedness and all the terms and conditions of applicable Issue documents and transactions described therein are in full compliance with California State and Federal Law, are binding upon and enforceable against the City and do not violate the City’s formation or constituent documents, or any applicable law;
(2) stating that the indebtedness being incurred is a legal and valid obligation of the City;
(3) if applicable, stating the interest income to the Bank is excluded from federal income tax pursuant Section 103 of the United States IRS Code; (4) confirming the authority of the City to incur the indebtedness and issue the Facility; and
(5) confirming that the City’s Facility Resolution authorizing this indebtedness and irrevocably pledging the security for repayment of this indebtedness is valid and authorized.