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Home My WebLink About13 WATER ENTERPRISEDocuSign Envelope ID: 63BOC69D-1BFD-4B3F-8FDF-D6C835E73DF6 Agenda Item 13 Reviewed: Ds AGENDA REPORT City Manager g Finance Director MEETING DATE: DECEMBER 5, 2023 TO: NICOLE BERNARD, ACTING CITY MANAGER FROM: JENNIFER KING, FINANCE DIRECTOR/CITY TREASURER SUBJECT: AUTHORIZING THE COMMENCEMENT OF PROCEEDINGS IN CONNECTION WITH THE PROPOSED ISSUANCE OF A PRIVATE PLACEMENT FINANCING TO FUND CERTAIN CAPITAL IMPROVEMENT PROJECTS OF THE TUSTIN WATER ENTERPRISE, CONFIRMING THE APPOINTMENT OF PROFESSIONAL SERVICES AND AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH SUMMARY: As part of the Tustin Water Enterprise's (Enterprise) annual review and its 2023 cost -of -service analysis, the City's consultants advised that the Enterprise needs additional resources to meet its ongoing infrastructure improvement obligations for the next three years. Staff has determined that the issuance of a private placement financing can provide the necessary capital funding. Staff is requesting the City Council's approval to authorize the initiation of proceedings to issue private placement financing of $4 million plus issuance costs to fund certain improvement projects that are outlined in the Enterprise's five-year capital plan. RECOMMENDATION: It is recommended that: • THE CITY COUNCIL ADOPTS CITY COUNCIL RESOLUTION 23-60 ENTITLED: RESOLUTION AUTHORIZING THE COMMENCEMENT OF PROCEEDINGS IN CONNECTION WITH THE PROPOSED ISSUANCE OF A PRIVATE PLACEMENT FINANCING TO FUND CERTAIN CAPITAL IMPROVEMENT PROJECTS OF THE TUSTIN WATER ENTERPRISE, CONFIRMING THE APPOINTMENT OF PROFESSIONAL SERVICES AND AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH. CORRELATION TO THE STRATEGIC PLAN: Correlates with the City's Strategic Plan Goal C: Financial Strength, Item 5, provide adequate financial resources for a well -maintained and reliable water system. FISCAL IMPACT: The financing will have no financial impact on the City's General Fund, as all payments of principal and interest on the financing will be paid solely from the net revenues of the Water Enterprise Fund. Staff anticipates the financing to have a 15-year term with a final maturity in calendar year 2039. DISCUSSION: DocuSign Envelope ID: 63BOC69D-1BFD-4B3F-8FDF-D6C835E73DF6 Authorization to Initiate Proceedings to Finance Capital Projects Page 2 of 2 The City, working with its municipal advisor, Fieldman Rolapp & Associates, Inc., and its water rate consultant, IB Consulting, has determined that additional funding is needed to fund the Enterprise's infrastructure projects that are planned for the next three years. These projects include Well Rehabilitation Program, John Lyttle Reservoir Rehabilitation, Newport Reservoir Replacement, 17th Street Electrical Replacement, and Main Line Replacement, etc. While the proposed water rate adjustment will improve the Enterprise's rate revenues over time, it is not sufficient in the near term to support ongoing operational and capital needs and meet the established reserve requirements at the same time. Therefore, an outside capital funding source is recommended. It is a common practice for a water utility to seek capital financing for water infrastructure projects. Capital Financing Process and Next Steps: It is anticipated that the financing will take approximately three months to complete. The key milestones to complete the financing are identified below: • City Council approves the initiation of proceedings to issue the financing and approve the engagement of the following professionals: (Tonight's Action) o Fieldman, Rolapp & Associates, Inc., municipal advisor; o Stifel Nicolaus & Company, Inc., placement agent; and o Quint & Thimmig LLP, bond counsel. • Professionals to develop the legal documents, bank request for bids, and negotiate sale (January 2024) • City Council approval of the financing and legal documents (February 6, 2024) • Close financing (February 2024) Jennifer King Finance Director/City Treasurer Attachment: Resolution No. 23-60 DocuSign Envelope ID: 63BOC69D-1BFD-4B3F-8FDF-D6C835E73DF6 RESOLUTION NO. 23-60 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA, AUTHORIZING THE COMMENCEMENT OF PROCEEDINGS IN CONNECTION WITH THE PROPOSED ISSUANCE OF A PRIVATE PLACEMENT FINANCING TO FUND CERTAIN CAPITAL IMPROVEMENT PROJECTS OF THE TUSTIN WATER ENTERPRISE, CONFIRMING THE APPOINTMENT OF PROFESSIONAL SERVICES AND AUTHORIZING CERTAIN OTHER ACTIONS IN CONNECTION THEREWITH WHEREAS, the City proposes to issue a private placement financing (the "Financing") to finance certain Tustin Water Enterprise capital improvement projects; and WHEREAS, it is appropriate that the City Council formally authorize commencement of proceedings, to appoint a municipal advisor, a bond counsel, and a placement agent, and to approve certain preliminary actions in connection with the authorization, and issuance of the Financing. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF TUSTIN DOES RESOLVE, DECLARE, DETERMINE, AND ORDER AS FOLLOWS: SECTION 1. The City Council authorizes appropriate officers and officials of the City to proceed with the preparation of the necessary documents in connection with the issuance of the Financing, subject to the final approval thereof by the City Council at a subsequent meeting. SECTION 2. The City Council hereby confirms the appointment of Fieldman, Rolapp & Associates, Inc. as municipal advisor to the City in connection with the authorization, and issuance of the Financing. SECTION 3. The City Council hereby confirms the appointment of Quint & Thimmig LLP as bond counsel in connection with the authorization, and issuance of the Financing. SECTION 4. The City Council hereby confirms the appointment of Stifel, Nicolaus & Company, Incorporated as placement agent in connection with the authorization, and issuance of the Financing. SECTION 5. All actions of the officers, agents, and employees of the City that are in conformity with the purposes and intent of this Resolution, whether taken before or after the adoption hereof, are hereby ratified, confirmed, and adopted. SECTION 6. The Mayor, the Acting City Manager, the Finance Director, and other appropriate officers and officials of the City are hereby authorized and directed to take Resolution 23-60 Page 1 of 3 DocuSign Envelope ID: 63BOC69D-1BFD-4B3F-8FDF-D6C835E73DF6 such action and to execute such documents as may be necessary or desirable to effectuate the intent of this resolution. SECTION 7. This Resolution shall be in full force and effect immediately upon its adoption. PASSED AND ADOPTED at a regular meeting of the City Council held on the 5tn day of December 2023. AUSTIN LUMBARD, Mayor ATTEST: ERICA N. YASUDA, City Clerk APPROVED AS TO FORM: DocuSigned by: - DA 37KENDIG, City Attorney Resolution 23-60 Page 2 of 3 DocuSign Envelope ID: 63BOC69D-1BFD-4B3F-8FDF-D6C835E73DF6 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) SS CITY OF TUSTIN ) I, Erica N. Yasuda, City Clerk and ex-officio Clerk of the City Council of the City of Tustin, California, 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. 23-60 was duly passed and adopted at a regular meeting of the Tustin City Council, held on the 51h day of December, 2023 by the following vote: COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAINED: COUNCILMEMBER ABSENT: COUNCILMEMBER RECUSED: ERICA N. YASUDA, City Clerk Resolution 23-60 Page 3 of 3