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HomeMy WebLinkAbout07 PROMISSORY NOTE7DocuSign Envelope ID: B7942396-58B8-40D4-9676-9CE8832621FA DocuSign Envelope ID: B7942396-58B8-40D4-9676-9CE8832621FA 1762419.3 RESOLUTION NO. 23-14 A RESOLUTION OF THE CITY OF TUSTIN, CALIFORNIA, AUTHORIZING THE GENERAL FUND’S INVESTMENT IN A PROMISSORY NOTE OF THE TUSTIN WATER ENTERPRISE FUND AND AUTHORIZING THE EXECUTION OF THE PROMISSORY NOTE BY THE WATER ENTERPRISE FUND. WHEREAS, the City of Tustin Water Enterprise Fund (the “Water Enterprise”) currently has three Refunding Water Revenue Bonds dated 2016 and 2020 which were issued to refinance prior obligations which were issued to finance capital improvements to the water system (collectively, the “Refunding Water Revenue Bonds”); WHEREAS, the Refunding Water Revenue Bonds are subject to bond rate covenants requiring net revenues including other funds accumulated in the Fund which are lawfully available for payment of the debt service on the Bond to equal at least 120% of the total amounts payable for debt service during the Fiscal Year as stated in the Refunding Water Revenue Bonds Indenture; WHEREAS, the Water Enterprise is not projected to meet the covenants for fiscal year ending 6/30/2023, thus requiring a replenishment of cash in the Water Enterprise of $3,830,700; WHEREAS, the Water Enterprise’s obligation to meet such bond covenants constitutes an obligation to the bond holders; WHEREAS, the Water Enterprise 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 meeting the bond covenant; WHEREAS, in order to meet the bond covenants, the Water Enterprise desires to issue, pursuant to the Act, its Promissory Note, with an approximately seven-year term to maturity (the "Promissory Note") payable to the City of Tustin (the "City"); WHEREAS, Section 53601 of the California Government Code provides that, subject to the limitations specified therein, the legislative body of a local agency (including a local agency such as the City) having money in its treasury not required for the immediate needs of the local agency, may invest any portion of the money that it deems wise or expedient in bonds, notes, warrants or other evidences of indebtedness of any local agency within the State of California (including a local agency such as the Water Enterprise); DocuSign Envelope ID: B7942396-58B8-40D4-9676-9CE8832621FA 1762419.3 WHEREAS, the City desires to invest in the Promissory Note by advancing to the Water Enterprise the principal amount thereof; WHEREAS, such advance is to be used by the Water Enterprise to meet the bond covenants requirements; WHEREAS, a form of the Promissory Note has been submitted prior to this meeting of the City Council; and WHEREAS, the City Council desires to authorize the investment by the City of moneys in its treasury in the Promissory Note and the performance of such acts by or on behalf of the City as may be necessary or desirable to effect such investment; NOW, THEREFORE, BE IT RESOLVED, by the City Council of the City of Tustin, as follows: Section 1. The investment by the City of a portion of the money in its treasury in the Promissory Note is hereby authorized and approved; provided, however, that the principal amount of the Promissory Note shall not be greater than $3,830,700, the maturity date of the Promissory Note shall not be later than July 1, 2030 and the simple interest rate on the Promissory Note shall be 3.5% per annum. Section 2. The City Council hereby finds and determines that the City has money in its treasury not required for the immediate needs of the City in an amount at least equal to the maximum principal amount of the Promissory Note specified in Section 1. Section 3. The City Council hereby finds and determines that the investment of such money in the treasury of the City in the Promissory Note, as provided herein, is wise and expedient. Section 4. The officers and employees of the City, 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 investment of money in the City treasury in the Promissory Note and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution. Section 5. The officers and employees of the City and Water Enterprise, and each of them is, hereby authorized and directed, for and on behalf of the Water Enterprise, to do any and all things and to execute and deliver on behalf of the Water Enterprise the Promissory Note specified in Section 1, and any and all other documents which they or any of them deem necessary or advisable in order to consummate the investment of money in the City treasury in the Promissory Note and otherwise to carry out, give effect to and comply with the terms and intent of this Resolution. Section 6. All actions heretofore taken by the officers and employees of the City and Water Enterprise with respect to the investment of money in the City treasury in the DocuSign Envelope ID: B7942396-58B8-40D4-9676-9CE8832621FA 1762419.3 Promissory Note are hereby approved, confirmed and ratified. Section 7. This Resolution shall take effect immediately upon its adoption. APPROVED and ADOPTED at a meeting of the City Council of the City of Tustin on May 2, 2023. __________________________ AUSTIN LUMBARD, Mayor ATTEST: ________________ ERICA N.YASUDA, City Clerk STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF TUSTIN ) I, Erica N. Yasuda, City Clerk of the City of Tustin, do hereby certify that the whole number of the members of the City Council of the City of Tustin is five; that the above and foregoing Resolution No. 23-14 was duly passed and adopted at a regular meeting of the City of Tustin, held on the 2nd day of May, 2023, by the following vote: COUNCIL MEMBER AYES: ____________________________________________ COUNCIL MEMBER NOES: ___________________________________________ COUNCIL MEMBER ABSTAINED: ____________________________________________ COUNCIL MEMBER ABSENT: ____________________________________________ DocuSign Envelope ID: B7942396-58B8-40D4-9676-9CE8832621FA 1762419.3 ______________________ Erica N. Yasuda City Clerk DocuSign Envelope ID: B7942396-58B8-40D4-9676-9CE8832621FA 1762428.3 PROMISSORY NOTE Principal Amount: $3,830,700 Tustin, California Rate of Interest Maturity Date Dated Date 3.50% July 1, 2030 June 1, 2023 FOR VALUE RECEIVED, the Tustin Water Enterprise Fund (together with any and all of its successors, the "Water Enterprise") hereby promises to pay to the City of Tustin (together with any and all of its successors and assigns, the "City"), starting on July 1, 2024 and paid semiannually on July 1 and January 1 until July 1, 2030 (the “Maturity Date”) principal and interest, 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 City, the principal amount of $3,830,700, together with interest accrued thereon from June 1, 2023 to the Maturity Date at the simple interest rate of 3.5% per annum, commencing June 1, 2023 (each such date an “Interest Accrual Date") calculated on the basis of a 360-day year comprised of twelve 30-day months. 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 Obligation. Pursuant to the 2016 and 2020 Refunding Water Revenue Bonds Indenture, the Water Enterprise Fund shall yield annual net revenues, including other funds accumulated in the Fund which are lawfully available for payment of the debt service on the Bonds, at least equal to one hundred twenty percent (120%) of the amounts payable during the Fiscal Year. The Water Enterprise Fund will not meet that 120% bond covenants for fiscal year ending 6/30/2023. To meet the bond covenants as of 6/30/2023 the Water Enterprise needs an inflow of cash totaling $3,830,700. The funds provided from the General Fund as consideration for this Promissory Note will provide the cash necessary to meet the bond covenant. The obligations of the Water Enterprise under this Note, including the obligation to make all payments of the Note when due or upon prepayment hereof, are obligations of the Water Enterprise 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 Water Enterprise for which the Water Enterprise is obligated to levy or pledge any form of taxation or for which the Water Enterprise has levied or pledged any form of taxation, and neither this Note nor the obligation of the Water Enterprise to make payment of the Note constitutes an indebtedness of the Water Enterprise 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 Water Enterprise may voluntarily prepay this Note prior to maturity, in whole or in part, on any date, by paying to the City, 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 City, an amount equal to all or a portion of the 1762428.3 then-outstanding principal amount hereof plus interest accrued to the prepayment date without premium. Upon any such partial prepayment, the principal amount of the Note shall be redeemed in any order selected by the Water Enterprise. The Water Enterprise shall endeavor to give the City 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; provided that any prepayment shall be valid as of the actual date of such prepayment even if such notice is given late. The City Manager is authorized to exercise the right to voluntarily prepay this Note prior to maturity as specified herein on behalf of the Water Enterprise. Section 3. Events of Default and Remedies. The failure of the Water Enterprise to pay the principal and/or interest payments 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 City may, at its option, without prior notice or demand, and is hereby authorized and empowered by the Water Enterprise, 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 City against the Water Enterprise under applicable law. Upon the occurrence and during the continuance of an Event of Default, interest shall accrue on the then-outstanding principal amount hereof at the simple interest rate of 3.5% per annum as described above. Section 4. Costs and Expenses of Enforcement. Upon the occurrence and during the continuance of an Event of Default, the Water Enterprise agrees to pay to the City on demand all costs and expenses incurred by the City in seeking to collect this Note or to enforce any of the City’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 City 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 City, or (c) waive the requirement of punctual payment and performance or constitute novation in any respect. Section 6. General Provisions. Time is of the essence with respect to the Water Enterprise’s obligations under this Note. To the extent permitted by applicable law, the Water Enterprise 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 City shall not be required first to institute suit or exhaust its remedies hereon against the Water Enterprise, 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 1762428.3 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. 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 Water Enterprise: Water Enterprise Fund City of Tustin 300 Centennial Way Tustin, California 92680 Attention: Finance Director If to the City: City of Tustin 300 Centennial Way Tustin, California 92680 Attention: Finance 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. 1762428.3 IN WITNESS WHEREOF, the Water Enterprise has duly executed this Note as of the date first above written. TUSTIN WATER ENTERPRISE FUND By: ____________________________ Note Amount 3,830,700$ Note Issuance Date 6/1/2023 Interest Rate (annual) 3.50% Terms (years) 7 First Interest Payment 7/1/2024 First Principal Payment 7/1/2026 Payment No. Debt Service (FY) Payment Date Principal Interest Total Payment Note Balance Note Issuance at 6/1/2023 3,830,700.00$ 1 2024-25 7/1/2024 -$ 145,247.38$ 145,247.38$ 3,830,700.00 2 2024-25 1/1/2025 - 67,037.25 67,037.25 3,830,700.00 3 2025-26 7/1/2025 - 67,037.25 67,037.25 3,830,700.00 4 2025-26 1/1/2026 - 67,037.25 67,037.25 3,830,700.00 5 2026-27 7/1/2026 714,400.00 67,037.25 781,437.25 3,116,300.00 6 2026-27 1/1/2027 - 54,535.25 54,535.25 3,116,300.00 7 2027-28 7/1/2027 739,400.00 54,535.25 793,935.25 2,376,900.00 8 2027-28 1/1/2028 - 41,595.75 41,595.75 2,376,900.00 9 2028-29 7/1/2028 765,200.00 41,595.75 806,795.75 1,611,700.00 10 2028-29 1/1/2028 - 28,204.75 28,204.75 1,611,700.00 11 2029-30 7/1/2029 792,000.00 28,204.75 820,204.75 819,700.00 12 2029-30 1/1/2030 - 14,344.75 14,344.75 819,700.00 13 2030-31 7/1/2030 819,700.00 14,344.75 834,044.75 - Total 3,830,700.00$ 690,757.38$ 4,521,457.38$ Amortization Schedule PROMISSORY NOTE AMORTIZATION SCHEDULE General Fund Loan to the Water Enterprise Fund DocuSign Envelope ID: B7942396-58B8-40D4-9676-9CE8832621FA