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CITY OF SAN JOSE FINANCING AUTHORITY
RESOLUTION NO. _______
A RESOLUTION OF THE CITY OF SAN JOSE FINANCING
AUTHORITY AUTHORIZING THE ISSUANCE AND SALE
OF TAXABLE LEASE REVENUE BONDS, SERIES 2022A
(CONVENTION CENTER REFUNDING PROJECT) IN THE
PRINCIPAL AMOUNT NOT TO EXCEED $175,000,000 TO
REFINANCE CERTAIN PUBLIC CAPITAL
IMPROVEMENTS OF THE CITY, CONSISTING OF THE
EXPANSION AND RENOVATION OF THE SAN JOSE
MCENERY CONVENTION CENTER, APPROVING IN
SUBSTANTIALLY FINAL FORM THE OFFICIAL
STATEMENT, INDENTURE OF TRUST, BOND PURCHASE
AGREEMENT, LEASE AGREEMENT, SITE LEASE AND
PLEDGE AGREEMENT, AND AUTHORIZING THE
EXECUTIVE DIRECTOR AND OTHER AUTHORIZED
OFFICERS TO EXECUTE AND DELIVER SUCH
DOCUMENTS AND ANY OTHER RELATED DOCUMENTS
AS NECESSARY IN CONNECTION WITH THE ISSUANCE
AND SALE OF SUCH BONDS
WHEREAS, the City of San José (the “City”) and the Redevelopment Agency of the City of San José (the “Former Agency”) have heretofore entered into a Joint Exercise of Powers Agreement establishing the City of San José Financing Authority (the “Authority”) for the purpose, among others, of having the Authority issue its bonds to finance and refinance the acquisition, construction and improvement of certain public capital improvements and the Authority has heretofore determined to adopt and implement a program under which the Authority will provide financing for certain public capital improvements for the City; and
WHEREAS, the Former Agency, as of February 1, 2012, has been dissolved and the City has become the successor agency of the Former Agency pursuant to Part 1.85 of Division 24 of the California Health and Safety Code and per California Health and Safety Code Section 34178(b)(3), the joint exercise of powers agreement establishing the Authority remains in effect; and
WHEREAS, on August 26, 2008, the City Council of the City (the “City Council”) adopted Chapter 14.32 of the San José Municipal Code, entitled “Convention Center Facilities District Financing Procedures” (the “Chapter”), which Chapter incorporates by reference the Mello-Roos Community Facilities Act of 1982, as amended, Chapter 2.5 of Part 1 of Division 2 of Title 5 (commencing with Section 53311) of the California Government Code (the “Mello-Roos Act”); and
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WHEREAS, beginning in September 2008, the City Council undertook to form its “Convention Center Facilities District No. 2008-1, City of San José, County of Santa Clara, State of California” (the “Convention Center Facilities District”) pursuant to the Chapter for the purpose of financing the acquisition, reconstruction, rehabilitation, replacement or upgrade of the San José Convention Center (the “Facilities”), which convention center is now known as the San José McEnery Convention Center (the “Convention Center”); and
WHEREAS, on March 10, 2009, the City Council duly adopted Resolution No. 74826 (the “Resolution of Formation”), establishing the Convention Center Facilities District and authorizing the levy of a special tax by the City Council, as the legislative body of the Convention Center Facilities District, within the Convention Center Facilities District (the “Special Tax”) in accordance with the rate and method of apportionment of the Special Tax and providing for the levy of the Special Tax in an amount sufficient to, among other things, finance the Facilities, incidental expenses, the making of lease payments for facilities, and the payment of interest on and principal of Debt (as defined in the Chapter) issued to finance the acquisition and construction of the Facilities; and
WHEREAS, also on March 10, 2009, the City Council duly adopted Resolution No. 74827 (the “Resolution Deeming it Necessary to Incur Indebtedness”), authorizing the City Council to issue, over the life of the Convention Center Facilities District, bonds in the principal amount of not to exceed $750,000,000, and stating that the authorization to finance the acquisition and construction of the Facilities includes, among other things, the issuance of Debt; and
WHEREAS, under the Chapter the term “Debt” has the meaning given to such term in the Mello-Roos Act, and Section 53317(d) of the Mello-Roos Act defines such term to include, among other things, any binding obligation to pay or repay a sum of money, including obligations in the form of bonds, certificates of participation and long-term leases; and
WHEREAS, the City is authorized under Section 14.32.300 of the Chapter and Section 53313.5(g) of the Mello-Roos Act to use Special Taxes to make lease payments under leases; and
WHEREAS, also on March 10, 2009, the City Council adopted Resolution No. 74828 in which it appointed the City Clerk to be the official to conduct the election within the Convention Center Facilities District pursuant to Section 533327(b) of the Mello-Roos Act, prescribed the form of the ballot, set June 9, 2009 as election day, and provided for the election procedures; and
WHEREAS, at the election, the qualified electors of the Convention Center Facilities District duly authorized the Special Tax and the issuance of bonds in accordance with the NVF:RLT:KML
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Resolution of Formation and the Resolution Deeming it Necessary to Incur Indebtedness by a 78% vote; and
WHEREAS, on March 30, 2010, the Santa Clara County Superior Court entered its Validation Default Judgment in case number 1-09-CV-148458 (the “Validation Default Judgment”) in which it ruled, among other things, that the Convention Center Facilities District was lawfully formed, that the landowner election was properly conducted, the Special Tax and the bonds and other related contracts authorized or contemplated by the City were properly authorized, and all persons are permanently enjoined from bringing any action to challenge any aspect of the Convention Center Facilities District; and
WHEREAS, the Validation Default Judgment was appealed, and on September 23, 2010, Court of Appeal for the Sixth Appellate District dismissed the appeal; and
WHEREAS, as of November 23, 2010, the Validation Default Judgment is final for all purposes; and
WHEREAS, the City previously issued its City of San José Special Hotel Tax Revenue Bonds, Series 2011 (Convention Center Expansion and Renovation Project) in the original aggregate principal amount of $107,425,000 (the “2011 CCFD Bonds”) for the purpose of financing a portion of the cost of the first phase of the expansion of and renovations to the Convention Center (the “Convention Center Expansion and Renovation Project”), which bonds are secured by a pledge of Special Taxes; and
WHEREAS, the Authority previously issued its City of San José Financing Authority Lease Revenue Bonds, Series 2011A (Convention Center Expansion and Renovation Project) in the original aggregate principal amount of $30,985,000 (the “2011A Lease Revenue Bonds”), for the purpose of financing a portion of the cost of the Convention Center Expansion and Renovation Project, which bonds are secured, in part, by a pledge of Special Taxes on a basis subordinate to the pledge thereof to the 2011 CCFD Bonds; and
WHEREAS, as a result of the issuance of the 2011 CCFD Bonds and the 2011A Lease Revenue Bonds, $611,590,000 principal amount of Debt remains authorized to be issued or incurred by the City under the Resolution Deeming it Necessary to Incur Indebtedness; and
WHEREAS, in 2013, the Authority issued its Tax-Exempt Lease Revenue Commercial Paper Notes in the aggregate principal amount of $10,000,000, to assist the City with financing a portion of the Convention Center Expansion and Renovation Project, which notes are no longer outstanding; and
WHEREAS, in 2017, the Authority issued its Taxable Lease Revenue Commercial Paper Notes in the aggregate principal amount of $15,000,000 (collectively, together with all NVF:RLT:KML
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Taxable Lease Revenue Commercial Paper Notes subsequently issued by the Authority to refinance such notes, the “Exhibit Hall Commercial Paper Notes”) to assist the City with financing, on an interim basis, certain public capital improvements of the City, consisting of lighting and ceiling upgrades to the exhibit hall of the Convention Center and certain related costs (the “Exhibit Hall Project”); and
WHEREAS, the Exhibit Hall Commercial Paper Notes are outstanding in the aggregate principal amount of $8,432,437; and
WHEREAS, in 2018, the Authority issued its Taxable Lease Revenue Commercial Paper Notes in the aggregate principal amount of $42,400,000 (collectively, together with all Taxable Lease Revenue Commercial Paper Notes subsequently issued by the Authority to refinance such notes, the “South Hall Commercial Paper Notes”) to assist the City with financing, on an interim basis, the purchase of certain real property in the City commonly known as the San José Convention Center South Hall and payment of certain related costs (the “South Hall Acquisition Project”); and
WHEREAS, the South Hall Commercial Paper Notes are outstanding in the aggregate principal amount of $42,400,000; and
WHEREAS, the Exhibit Hall Project and the South Hall Acquisition Project constitute Facilities; and
WHEREAS, the outstanding 2011 CCFD Bonds are subject to optional redemption in full on any date at a redemption price equal to the principal amount of 2011 CCFD Bonds to be redeemed plus accrued but unpaid interest to the redemption date, without premium, and the City wishes to refund the outstanding 2011 CCFD Bonds; and
WHEREAS, the outstanding 2011A Lease Revenue Bonds are subject to optional redemption on any date at a redemption price equal to the principal amount of 2011A Lease Revenues Bonds to be redeemed plus accrued but unpaid interest to the redemption date, without premium, and the City and the Authority wish to refund the outstanding 2011A Lease Revenue Bonds; and
WHEREAS, the City and the Authority wish to also refund the outstanding Exhibit Hall Commercial Paper Notes and the South Hall Commercial Paper Notes; and
WHEREAS, to refund the outstanding 2011 CCFD Bonds, 2011A Lease Revenue Bonds, Exhibit Hall Commercial Paper Notes and South Hall Commercial Paper Notes, the City has proposed to lease to the Authority certain real property and improvements, initially consisting of the Convention Center (but excluding the South Hall Acquisition Project) (the “Leased Property”), under a Site Lease, by and between the City and the Authority in consideration of the payment by the Authority of an upfront rental payment which is sufficient to provide funds for the refunding of the outstanding 2011 CCFD Bonds, 2011A NVF:RLT:KML
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Lease Revenue Bonds, Exhibit Hall Commercial Paper Notes and South Hall Commercial Paper Notes; and
WHEREAS, in order to raise funds for such purposes, the Authority proposes to issue its City of San José Financing Authority Taxable Lease Revenue Bonds, Series 2022A (Convention Center Refunding Project) (the “2022A Bonds”) under Article 4 of Chapter 5, Division 7, Title 1 of the Government Code of the State of California, commencing with Section 6584 of said Code (the “Bond Law”); and
WHEREAS, in order to provide revenues that are sufficient to enable the Authority to pay debt service on the 2022A Bonds, the Authority proposes to lease the Leased Property back to the City under a Lease Agreement (the “Lease Agreement”), under which the City agrees to pay semiannual lease payments as the rental for the Leased Property, and the Authority will assign substantially all of its rights under the Lease Agreement to Wilmington Trust, National Association, as trustee (the “Trustee”) for the 2022A Bonds; and
WHEREAS, the City Council is the legislative body of the Convention Center Facilities District; and
WHEREAS, under Chapter 5.5 (commencing with Section 5450) of Division 6 of Title 1 of the California Government Code, a pledge of collateral by any public body to secure, directly or indirectly, the payment of the principal or redemption price of, or interest on, any bonds shall be valid and binding in accordance with the terms of the pledge document from the time the pledge is made for the benefit of the pledgees and successors thereto; and
WHEREAS, in order to further secure the 2022A Bonds, the City, for and on behalf of the Convention Center Facilities District, and the Authority propose to enter into a Pledge Agreement (the “Pledge Agreement”) pursuant to which the City, for and on behalf of the Convention Center Facilities District, will agree to, among other things, levy and collect Special Taxes to make lease payments required to be paid by the City to the Authority under the Lease Agreement, as permitted under to Section 14.32.300 of the Chapter and Section 53313.5(g) of the Mello-Roos Act, and will pledge a lien and security interest in the Special Taxes that are collected by the City to the payment of such lease payments under Section 5451 of the California Government Code to the extent provided in the Pledge Agreement; and
WHEREAS, the Authority and the City propose to sell the 2022A Bonds to Morgan Stanley & Co. LLC, Stifel, Nicolaus & Company, Incorporated and Jefferies LLC (collectively, the “Underwriters”), pursuant to a Bond Purchase Agreement (the “Bond Purchase Agreement”) among the Authority, the City and Morgan Stanley & Co. LLC, on behalf of itself and as representative of the Underwriters; and
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WHEREAS, pursuant to Section 5852.1 of the California Government Code, certain financial information relating to the 2022A Bonds is attached hereto as Appendix A, and such information has been disclosed and made public; and
WHEREAS, the Governing Board of the Authority (the “Board”) has duly considered such transactions and wishes at this time to approve said transactions in the public interest of the Authority;
NOW, THEREFORE, BE IT RESOLVED, by the Governing Board of the City of San José Financing Authority as follows:
Section 1. Issuance and Sale of 2022A Bonds. The Board hereby approves the sale of the 2022A Bonds under the Bond Law in the principal amount not to exceed $175,000,000, by negotiation with the Underwriters. The proposed form of Bond Purchase Agreement in substantially the form posted to the agenda webpage for this meeting is hereby approved, and any of the Executive Director of the Authority, the Treasurer of the Authority (the “Treasurer”), or their authorized designees which may include representatives of the City (each an “Authorized Officer” and, collectively, the “Authorized Officers”), acting alone, are hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver the Bond Purchase Agreement in substantially said form, with any additions thereto (including the insertion of the maturity dates, principal amounts and interest rates of the 2022A Bonds) and changes therein as any of the Authorized Officers shall deem necessary, desirable or appropriate upon consultation with the City Attorney, as counsel to the Authority, the execution of which by an Authorized Officer shall be conclusive evidence of the approval of any such additions and changes, provided that the amount of Underwriters’ discount for the 2022A Bonds shall not exceed 0.30% of the par amount thereof. The Board hereby authorizes the performance by the Authority of its obligations under the Bond Purchase Agreement. It is the intent of the Authority that interest on the 2022A Bonds be subject to all applicable federal income taxation.
Section 2. Approval of Related Financing Agreements. The Board hereby approves each of the following agreements required for the issuance and sale of the 2022A Bonds, in substantially the respective forms posted to the agenda webpage for this meeting, and each Authorized Officer, acting alone, is hereby authorized and directed, for and in the name and on behalf of the Authority, to execute and deliver, and the Secretary is hereby authorized and directed to attest, as applicable, the following agreements in substantially said forms, with any additions thereto and changes therein as any of the Authorized Officers shall deem necessary, desirable or appropriate upon consultation with the City Attorney, as counsel to the Authority, the execution of which by an Authorized Officer shall be conclusive evidence of the approval of any such additions and changes:
Indenture of Trust, between the Authority and the Trustee, setting forth the terms and provisions relating to the 2022A Bonds.
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Site Lease, between the City, as lessor, and the Authority, as lessee, under which the City leases the Leased Property to the Authority in consideration of the payment of an amount which will be applied to refund the outstanding 2011 CCFD Bonds, 2011A Lease Revenue Bonds, Exhibit Hall Commercial Paper Notes and South Hall Commercial Paper Notes.
Lease Agreement, between the Authority, as lessor, and the City, as lessee, under which the Authority leases the Leased Property back to the City and the City agrees to pay semiannual lease payments which are sufficient to provide revenues with which to pay principal of and interest on the 2022A Bonds when due.
Pledge Agreement, between the City, for and on behalf of the Convention Center Facilities District, and the Authority, under which, among other things, the City, for and on behalf of the Convention Center Facilities District, agrees to levy and collect Special Taxes to make lease payments required to be paid by the City to the Authority under the Lease Agreement, as permitted under to Section 14.32.300 of the Chapter and Section 53313.5(g) of the Mello-Roos Act, and pledges a lien and security interest in Special Taxes that are collected by the City to the payment of such lease payments for the benefit of the Authority under Section 5451 of the California Government Code to the extent provided in the Pledge Agreement.
Section 3. Official Statement. The Board hereby approves the proposed form of preliminary official statement with respect to the 2022A Bonds (the “Preliminary Official Statement”) in substantially the form posted to the agenda webpage for this meeting with such additions thereto or changes therein as any of the Authorized Officers, acting alone, shall deem necessary, desirable or appropriate upon consultation with the City Attorney, as counsel to the Authority. The Authorized Officers are hereby authorized and directed, for and on behalf of the Authority, to execute all certificates necessary to deem final the Preliminary Official Statement as of its date, with the exception of certain final pricing and related information. The Preliminary Official Statement with such changes therein relating to the sale of the 2022A Bonds as any of the Authorized Officers shall deem necessary, desirable or appropriate upon consultation with the City Attorney, as counsel to the Authority, shall hereinafter be referred to as the “Official Statement.” The Authorized Officers are hereby authorized and directed, each acting alone for and on behalf of the Authority, to execute and deliver the Official Statement with such additions thereto or changes therein. The use and distribution of said Preliminary Official Statement and use and distribution of the Official Statement in connection with the sale of the 2022A Bonds is hereby ratified and approved. The execution of the Official Statement by an Authorized NVF:RLT:KML
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Officer shall be conclusive evidence of the approval of any such additions and changes to such document.
Section 4. Municipal Bond Insurance. The Authorized Officers, each acting alone, are hereby authorized to take such actions as are necessary or advisable to obtain a municipal bond insurance policy and debt service reserve policy for the 2022A Bonds if it is determined, upon consultation with the Underwriters and the municipal advisor to the City, that such municipal bond insurance policy and/or debt service reserve policy will reduce the true interest costs with respect to the 2022A Bonds or otherwise facilitate the issuance of the 2022A Bonds.
Section 5. Official Actions. The Authorized Officers are each hereby authorized, acting alone, for and in the name of and on behalf of the Authority, to do any and all things and take any and all actions, including execution and delivery of any and all documents, assignments, certificates, requisitions, agreements, notices, consents, instruments of conveyance, warrants and documents, which they, or any of them, may deem necessary or advisable in order to consummate the lawful issuance and sale of the 2022A Bonds, the refunding of the outstanding 2011 CCFD Bonds, 2011A Lease Revenue Bonds, Exhibit Hall Commercial Paper Notes and South Hall Commercial Paper Notes , and the consummation of the transactions as described herein, including without limitation, such documents, assignments, refunding instructions, certificates, termination agreements, escrow agreements, and other agreements as may be required by the Indenture, the Lease Agreement, the Bond Purchase Agreement, the Pledge Agreement, or any other document executed in connection with the issuance and delivery of the 2022A Bonds.
Any authority delegated under this Resolution to a specified official (including officials acting in these positions on an interim basis) may also be exercised by the specified official’s authorized designee.
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ADOPTED this ____ day of _______, 2022, by the following vote:
AYES:
NOES:
ABSENT:
DISQUALIFIED:
SAM LICCARDO
Chair, City of San José Financing Authority
ATTEST:
TONI J. TABER, CMC
Secretary, City of San José Financing Authority
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APPENDIX A
REQUIRED DISCLOSURES PURSUANT TO
GOVERNMENT CODE SECTION 5852.1
The good faith estimates set forth herein are provided with respect to the 2022A Bonds in accordance with California Government Code Section 5852.1. Such good faith estimates have been provided to the Authority by PFM Financial Advisors LLC, the Authority’s Municipal Advisor, in consultation with Morgan Stanley & Co. LLC, Stifel, Nicolaus & Company, Incorporated and Jefferies LLC, the Underwriters of the 2022A Bonds.
Principal Amount. The Municipal Advisor has informed the Authority that, based on the financing plan and current market conditions, its good faith estimate of the aggregate principal amount of the 2022A Bonds to be sold is $165,715,000 (the “Estimated Principal Amount”).
True Interest Cost of the 2022A Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the 2022A Bonds is sold, and based on market interest rates prevailing at the time of preparation of such estimate plus 0.50 percentage point, its good faith estimate of the true interest cost of the 2022A 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 2022A Bonds, is 3.98%.
Finance Charge of the 2022A Bonds. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the 2022A Bonds is 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 2022A Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the 2022A Bonds), is $1,107,836. Such fees and charges include fees for bond and disclosure counsel, municipal advisor, rating agencies, title insurance, printing, and underwriting.
Amount of Proceeds to be Received. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the 2022A Bonds is 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 from the sale of the 2022A Bonds, less the finance charge of the 2022A Bonds, as estimated above, is $164,607,164.
Total Payment Amount. The Municipal Advisor has informed the Authority that, assuming that the Estimated Principal Amount of the 2022A Bonds is 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 to pay NVF:RLT:KML
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debt service on the 2022A Bonds, plus the finance charge for the 2022A Bonds, as described above, not paid with the proceeds of the 2022A Bonds, calculated to the final maturity of the 2022A Bonds, is $271,288,294.
The foregoing estimates constitute good faith estimates only. The actual principal amount of the 2022A 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 2022A Bonds being different than the date assumed for purposes of such estimates, (b) the actual principal amount of 2022A Bonds sold being different from the Estimated Principal Amount, (c) the actual amortization of the 2022A 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 2022A Bonds being different than those estimated for purposes of such estimates, (e) other market conditions, or (f) alterations in the financing plan, delays in the financing, or a combination of such factors. The actual date of sale of the 2022A Bonds and the actual principal amount of 2022A Bonds sold will be determined by the City and the Authority based on the timing of the need for proceeds of the 2022A Bonds and other factors. The actual interest rates borne by the 2022A Bonds will depend on market interest rates at the time of sale thereof. The actual amortization of the 2022A 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 and the Authority.