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HomeMy WebLinkAbout03 PROMISSORY NOTE BETWEEN THE CITY OF TUSTIN AND TUSTIN COMMUNITY REDEVELOPMENT AGENCY 12-02-08Agenda Item 3 Reviewed: AGENDA REPORT City Manager Finance Director MEETING DATE: TO: FROM: SUBJECT: DECEMBER 2, 2008 HONORABLE MAYOR AND MEMBERS OF CITY COUNCIL WILLIAM A. HUSTON, CITY MANAGER PROMISSORY NOTE BETWEEN THE CITY OF TUSTIN AND TUSTIN COMMUNITY REDEVELOPMENT AGENCY RECOMMENDATION: That the City Council adopt Resolution No. 08-83 which authorizes issuance of a Promissory Note in the principal amount of $18,881,750 to be purchased by the Tustin Community Redevelopment Agency (Agency). BACKGROUND: The City Council previously authorized acquisition of approximately 34 acres of land adjacent to the 55 freeway south of Edinger Avenue. The property is being acquired for new freeway ramps and extension of Newport Avenue. Property not needed for the Newport Avenue underpass project will be sold for private development. The City initially filed an eminent domain action to acquire the necessary right-of-way and later entered into a stipulation to purchase the entire 34-acre site owned by AAE Pacific Parks Associates (AAE). To date the City has paid AAE approximately $33.5 million for public rights-of-way and partial payment towards acquisition of the entire 34 acres. DISCUSSION: Pursuant to an order of the Superior Court, the City is required to increase the deposits paid by the City to date by an amount that is the difference between the deposits and the City's appraised value of the property. The additional deposit is $18,881,750 which would bring the total deposits paid by the City to $51,881,750. Next year a Superior Court trial will be held to determine if any additional amount is due AAE. Because of the turmoil in credit markets, it has been concluded that the most cost effective way to comply with the court order is through the issuance of a Promissory Note (Note). The Note will be issued by the City in the amount of $18,881,750 and purchased by the Agency as an investment. The final interest rate will be determined by market conditions at the closing date of the Note (time at which funds will be transferred). It will range from a minimum of 2.5% and a capped amount of 7.5%. The City's special bond counsel and financial advisors have assisted in structuring the Note as if it were a transaction placed through private credit markets. As indicated in the Note, this approach is authorized by the California Government Code. Under terms of the Note, the City will repay principal and interest on December 1, 2013 unless extended by the City and Agency. FISCAL IMPACT: The principal amount of the Note is $18,881,750. The total amount of interest paid will depend upon whether the City decides to accelerate repayment of the Note or pay interest per the current terms of the Note. It is anticipated the Note will be repaid from the proceeds of selling the portion of the 34 acres not required by public rights-of-way for the Newport Avenue extension project. RESOLUTION N0.08-83 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, AUTHORIZING THE ISSUANCE OF A PROMISSORY NOTE AND OTHER MATTERS RELATED THERETO WHEREAS, in order to acquire certain real property on which public improvements are to be constructed, the City of Tustin (the "City") commenced an action for condemnation of such real property in the Superior Court of California, County of Orange, such action being Case No. 030001932 (the "Condemnation Action"); WHEREAS, pursuant to an order of said Superior Court, entitled "Order on AAE's Ex Parte Application for an Order to Increase Deposit of Probable Compensation," dated September 30, 2008 (the "Order"), the City has been ordered to increase its deposit of probable compensation in the Condemnation Action by depositing with the State Treasurer the amount of $18,881,750 within 90 days of the Order; WHEREAS, the City's obligation to make such deposit constitutes an obligation imposed by law and the Order constitutes evidence of the indebtedness represented by such obligation; WHEREAS, the City is authorized pursuant to Articles 10 and 11 (commencing with Section 53570) of Chapter 3 of Division 2 of Title 5 of the California Government Code (the "Act") to issue bonds, warrants, notes or other evidence of indebtedness for the purpose of refunding any evidence of indebtedness of the City, whether due or not due; WHEREAS, in order to refund such indebtedness of the City evidenced by the Order, the City desires to issue, pursuant to the Act, its Promissory Note payable to the Tustin Community Redevelopment Agency (the "Agency") (such Promissory Note, in the form presented to this meeting, with such changes, insertions and omissions as are made pursuant to this Resolution, being referred to herein as the "Promissory Note"); WHEREAS, the Agency desires to invest in the Promissory Note by advancing to the City the principal amount thereof; WHEREAS, such advance will by used by the City to make all or a portion of said deposit with the State Treasurer; WHEREAS, a form of the Promissory Note has been prepared and submitted to this meeting; and WHEREAS, the City Council of the City (the "City Council") desires to authorize the issuance of the Promissory Note and the performance of such acts by or on behalf of the City as maybe necessary or desirable to effect the issuance of the Promissory Note; OHS West:260554048.1 42081-8 GHl NOW, THEREFORE, BE IT RESOLVED, by the City Council the City of Tustin, as follows: Section 1. The Promissory Note, in substantially the form submitted to this meeting and made a part hereof as though set forth herein, be and the same is hereby approved. The Mayor of the City, and such other members of the City Council as the Mayor may designate, the City Manager of the City and the Finance Director of the City, and such other officers of the City as the City Manager may designate (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 Promissory Note in the form submitted 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 Promissory Note by such Authorized Officer; provided, however, that such changes, insertions and omissions shall not authorize the principal amount of the Promissory Note to be greater than $18,881,750, shall not result in the maturity date of the Promissory Note being later than December 1, 2013 and shall not result in the interest rate on the Promissory Note being greater than 7.5% per annum. Section 2. The officers and employees of the City are, and each of them is, hereby authorized and directed, for and in the name of the City, to do any and all things and to execute and deliver any and all documents which they or any of them deem necessary or advisable in order to consummate the issuance of the Promissory Note and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution. Section 3. All actions heretofore taken by the officers and employees of the City with respect to the issuance of the Promissory Note are hereby approved, confirmed and ratified. Section 4. This Resolution shall take effect immediately upon its adoption. APPROVED and ADOPTED by the City Council of the City of Tustin on December 2, 2008. Mayor ATTEST: Pamela Stoker, City Clerk OHS West:260554048.1 42081-8 GH1 2 CLERK'S CERTIFICATE STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF TUSTIN ) I, Pamela Stoker, City Clerk of the City of Tustin, California hereby certify that the foregoing is a full, true and correct copy of a Resolution duly adopted at a regular meeting of the City Council of said City duly and regularly held at the regular meeting place thereof on December 2, 2008, of which meeting all of the members of said City Council had due notice and at which a majority thereof were present; and that at said meeting said Resolution was adopted by the following vote: AYES: COUNCIL MEMBERS: NOES: COUNCIL MEMBERS: ABSENT: COUNCIL MEMBERS: An agenda of said meeting was posted at least 72 hours before said meeting at 300 Centennial Way, Tustin, California, a location freely accessible to members of the public, and a brief general description of said Resolution appeared on said agenda. I further certify that I have carefully compared the same with the original minutes of said meeting on file and of record in my office; that the foregoing Resolution is a full, true and correct copy of the original Resolution adopted at said meeting and entered in said minutes; and that said Resolution has not been amended, modified or rescinded since the date of its adoption, and the same is now in full force and effect. Dated: , 2008 Pamela Stoker, City Clerk OHS West:260554048.1 42081-8 GHI PROMISSORY NOTE Initial Principal Amount: $18,881,750.00 Tustin, California Accreted Value at Maturity: $ 22,894,121.88 December 31, 2008 FOR VALUE RECEIVED, the City of Tustin ((together with any and all of its successors, the "City") hereby promises to pay to the Tustin Community Redevelopment Agency (together with any and all of its successors and assigns, the "Agency"), on December 1, 2013 (the "Maturity Date"), in lawful money of the United States of America, at 300 Centennial Way, Tustin, California, or at such other address as may be specified by the Agency, the principal amount of $18,881,750.00, together with interest accrued thereon from December 30, 2008 to the Maturity Date at the rate of 4.25% per annum, compounded semiannually on June 1 and December 1 in each year, commencing June 1, 2009 (each such date an "Interest Accrual Date") (with straight line interpolations between Interest Accrual Dates) calculated on the basis of a 360-day year comprised of twelve 30-day months (the "Accreted Value'. This Promissory Note, and any renewals or extensions hereof and as the same may be amended, restated or supplemented from time to time, is referred to herein as this "Note." Section 1. Authority; Nature of Oblitation. Pursuant to an order of the Superior Court of California, County of Orange, entitled "Order on AAE's Ex Parte Application for an Order to Increase Deposit of Probable Compensation," dated September 30, 2008 (the "Order"), in connection with Case No. 030001932, the City has been ordered to increase its deposit of probable compensation by depositing with the State Treasurer the amount of $18,881,750.00 within 90 days of the Order. The City's obligation to make such deposit constitutes an obligation imposed by law and the Order constitutes evidence of the indebtedness represented by such obligation. The City is authorized pursuant to Articles 10 and 11 (commencing with Section 53570) of Chapter 3 of Division 2 of Title 5 of the California Govenlment Code (the "AcY~ to issue bonds, warrants, notes or other evidence of indebtedness for the purpose of refunding any evidence of indebtedness of the City, whether due or not due. This Note is issued pursuant to the Act in order to refund such indebtedness of the City evidenced by the Order. The obligations of the City under this Note, including the obligation to make all payments of the Accreted Value hereof when due or upon prepayment hereof, are obligations of the City imposed by law and are absolute and unconditional, without any right of set-off or counterclaim. This Note does not constitute an obligation of the City for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation, and neither this Note nor the obligation of the City to make payment of the Accreted Value hereof constitutes an indebtedness of the City or the State of California, or any of its political subdivisions, in contravention of any constitutional or statutory debt limitation or restriction. Section 2. Prepayment. The City may voluntarily prepay this Note, in whole or in part, on any date, by paying to the Agency, in lawful money of the United States of America, at 300 Centennial Way, Tustin, California, or at such other address as may be specified by the Agency, an amount equal to all or a portion of the Accreted Value hereof as of such prepayment date. Upon any such prepayment, the Accreted Value hereof as of the date of such prepayment, shall, ipso facto, be reduced by an amount equal to the amount of such prepayment and, as of such prepayment date, interest shall accrue on such reduced Accreted Value, and shall be compounded, as describe above. The City shall give the Agency written notice of its intention to prepay all or a portion of this Note not less than ten days prior to the applicable prepayment date. Section 3. Events of Default and Remedies. The failure of the City to pay the Accreted Value hereof, as and when due, shall constitute an event of default under this Note (an "Event of Default"). If an Event of Default shall occur and be continuing, the Agency may, at its option, without prior notice or demand, and is hereby authorized and empowered by the City to, at any time and from time to time, exercise all or any one or more of the rights, powers or other remedies available to the Agency against the City under applicable law. Upon the occurrence and during the continuance of an Event of Default, interest shall accrue on the Accreted Value hereof at the rate of % per annum, and shall be compounded, as described above. Section 4. Costs and Expenses of Enforcement. Upon the occurrence an during the continuance of an Event of Default, the City agrees to pay to the Agency on demand all costs and expenses incurred by the Agency in seeking to collect this Note or to enforce any of the Agency's rights and remedies hereunder, including court costs and reasonable attorneys' fees and expenses, whether or not suit is filed hereon, or whether in connection with bankruptcy, insolvency or appeal. Section 5. Certain Provisions Regarding Payments. All payments made under this Note shall be made without offset, demand, counterclaim, deduction or recoupment (each of which is hereby waived) and shall be accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. Acceptance by the Agency of any payment in an amount less than the amount then due shall be deemed an acceptance on account only, notwithstanding any notation on or accompanying such partial payment to the contrary, and shall not in any way (a) waive or excuse the existence of an Event of Default, (b) waive, impair or extinguish any right or remedy available to the Agency hereunder, or (c) waive the requirement of punctual payment and performance or constitute a novation in any respect. Section 6. General Provisions. Time is of the essence with respect to the City's obligations under this Note. To the extent permitted by applicable law, the City hereby (a) waives demand, presentment for payment, notice of dishonor and of nonpayment, protest, notice of protest and all other notices, filing of suit and diligence in collecting this Note, (b) agrees that the Agency shall not be required first to institute suit or exhaust its remedies hereon against the City, and (c) consents to any extensions or postponements of time of payment of this Note for any period or periods of time and to any partial payments, before or after maturity, and to any other indulgences with respect hereto, without notice thereof. A determination that any provision of this Note is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of this Note to any person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other persons or circumstances. This Note may not be amended except in a writing specifically intended for such purpose and executed by the party against whom enforcement of the amendment is sought. Captions and headings in this Note are for convenience only and shall be disregarded in construing it. OHS West:260542329.1 42081-8 GH1 2 Section 7. Notices. All written notices, statements, demands, consents, approvals, authorizations, offers, designations, requests or other communications hereunder shall be given to the party entitled thereto at its address set forth below, or at such other address as such party may provide to the other parties in writing from time to time, namely: If to the City: City of Tustin 300 Centennial Way Tustin, California 92680 Attention: Finance Director If to the Agency: Tustin Community Redevelopment Agency 300 Centennial Way Tustin, California 92680 Attention: Executive Director Each such notice, statement, demand, consent, approval, authorization, offer, designation, request or other communication hereunder shall be deemed delivered to the party to whom it is addressed (a) if given by courier or delivery service or if personally served or delivered, upon delivery, (b) if given by telecopier, upon the sender's receipt of an appropriate answerback or other written acknowledgment, (c) if given by registered or certified mail, return receipt requested, deposited with the United States mail postage prepaid, 72 hours after such notice is deposited with the United States mail, or (d) if given by any other means, upon delivery at the address specified in this Section. Section 8. Governing Law. In all respects, including matters of construction, validity and performance, this Note and the obligations arising hereunder shall be governed by, and construed in accordance with, the laws of the State of California. IN WITNESS WHEREOF, the City has duly executed this Note as of the date first above written.