CITY OF GLENDALE, CALIFORNIA REPORT TO THE:

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1 CITY OF GLENDALE, CALIFORNIA REPORT TO THE: Joint IZ] City Council IZl Housing Authority D Successor Agency 1Zl Oversight Board D April 12, 2013 AGENDA ITEM Report: Refunding of Glendale Redevelopment Agency Bond Issues from 2002 and ) Successor Agency Resolution requesting the Glendale Oversight Board to direct the Successor Agency to refund the 2002, 2003 and 2010 Bond issues. COUNCIL ACTION Public Hearing D Ordinance D Consent Calendar D Action Item 1Zl Report Only D Approved for April 23, 2013 calendar ADMINISTRATIVE ACTION Submitte~ by: Prepared by: Philip S. Lanzafame, Exec. Officer- Econ. Dev. & Asset Management ~ F.~-+---.L Approved by: Scott Ochoa, City Manager Reviewed by: Michael J. Garcia, City Attorney Robert Elliot, Finance Director,2 I

2 RECOMMENDATION It is recommended that the Glendale Successor Agency to the former Glendale Redevelopment Agency, approve a resolution requesting the Oversight Board to direct the Successor Agency to undertake proceedings for the refunding of the 2002 and 2003 Tax Allocation Bonds. The 2010 Tax Allocation Bonds are also being included in the initial package in order to further study the benefit of incorporating them in the overall refunding. If conditions do not warrant including them in the refunding, they will be deleted from the package. BACKGROUND/ANALYSIS The California Supreme Court's upholding of Assembly Bill x1 26 (ABx1 26) on December 29, 2011 resulted in the deliberate statutory demise of all redevelopment agencies active in the State of California. This legislation enabled the formation of Successor Agencies (SAs), which have the responsibility to wind down outstanding obligations of the former redevelopment agencies. One primary obligation of the SA is to ensure that outstanding bond payments are made in a timely manner until associated debt is paid off. Successor Agencies are also charged with the divesting of other assets that the SA may control. Assembly Bill 1484 (AB 1484) is a follow-on legislative act that was passed on June 27, 2012 by the State Legislature to clarify and better organize certain procedures created by ABx1 26. AB 1484 permits Successor Agencies to refund outstanding bonds or other obligations of a former redevelopment agency under circumstances outlined in Health & Safety Code Section (a) (1 ): "For the purpose of issuing bonds or incurring other indebtedness to refund the bonds or other indebtedness of its former redevelopment agency or of the successor agency to provide savings to the successor agency, provided that (A) the total interest cost to maturity on the refunding bonds or other indebtedness plus the principal amount of the refunding bonds or other indebtedness shall not exceed the total remaining interest cost to maturity on the bonds or other indebtedness to be refunded plus the remaining principal of the bonds or other indebtedness to be refunded, and (B) the principal amount of the refunding bonds or other indebtedness shall not exceed the amount required to defease the refunded bonds or other indebtedness, to establish customary debt service reserves, and to pay related costs of issuance." In other words, the SA may not issue bonds that would increase the overall cost of the bond or take additional proceeds even if it could do so under the cap on overall cost. The former redevelopment agency issued $48,015,000 in 2002 Tax Allocation Bonds (2002 Bonds) to fund, among other things, public improvements relating to the Americana project. The Agency also issued $58,880,000 in 2003 Tax Allocation Refunding Bonds (2003 Bonds) to refinance bonds issued in Both series of bonds are callable on December 1, Working with the Agency's Financial Advisor for those two issues (Harrell & Associates), staff estimates that refinancing the 2002 Bonds and 2003 Bonds will reduce debt service by approximately $875,000 annually through These savings will increase the amount of "residual" property tax (or tax increment) available to be redistributed to other taxing agencies under Section or be used under Section of the Health & Safety Code; this is the section that provides for repayment of city loans to redevelopment agencies. The proposed action will adopt a resolution which requests the Oversight Board to direct the Successor Agency to undertake the process of refunding as provided for in AB

3 The current outstanding amount of the 2002 Bonds is $27,180,000, and they bear interest at an average rate of 5.0%. The current outstanding amount of the 2003 Bonds is $34,820,000, and they bear interest at an average rate of 4.3%. Both series of bonds mature in If the Successor Agency took advantage of the provisions of Section (a)(1) and refinanced the 2002 and 2003 Bonds, it is anticipated that the refunding bonds would bear interest at an effective rate of 2.7%, reducing the annual debt service on the 2002 Bonds by $450,000 and on the 2003 Bonds by $425,000. After the refinancing, the Successor Agency would reduce the requested RPTTF for debt service by $875,000 annually, generating more residual balance available to the City and to other taxing entities in furtherance of the goals of redevelopment agency dissolution. In December 2010, the Redevelopment Agency also issued $26,970,000 Tax Allocation Bonds (201 0 Bonds) for several public facility and infrastructure improvements including the Adult Recreation Center, the Central Library Renovation, the Brand Blvd. Paseo to Central Park/Lot 10 Parking Lot Rehab and the reconstruction of Central Avenue. There is still $26,970,000 outstanding in principal balance as a principal payment was not due until Dec Because of differing maturity dates, call dates and interest rates on several series in the bond, the overall savings in refunding these bonds is not as apparent as the earlier issues. However, it may save an additional $50,000 per year until Savings may go as high as $250,000 per year in the final three years until maturity in For this reason, staff is requesting these bonds be included as part of an initial package for refunding. This will allow staff time to further study the benefit of incorporating them in the overall refunding. If conditions indicate the savings would not be worthwhile, we will delete those bonds from the refunding issue. The action requested by the Successor Agency to the Oversight Board complies with Section (a)(1). The benefits of making the req uest to the Oversight Board to cjirect the Successor Agency to refinance the bonds are: (a) it allows the Successor Agency to recover its entire staff costs related to the refunding, and (b) it shortens the Department of Finance (DOF) approval period to 40 days. Refunding the bonds and reducing the cost of debt service is consistent with the goals and objectives of the Dissolution Act. It has the effect of: Reducing the costs of the Successor Agency; Retiring enforceable obligations (City loan to the Redevelopment Agency) more quickly; and Generating additional funds to all the taxing entities immediately. Upon adoption of the resolution, staff will prepare a resolution for consideration by the Oversight Board to direct the Successor Agency to refinance the 2002, 2003 and 2010 Bonds. This will be presented to the Oversight Board at their May 1, 2013 meeting. The process for refinancing is expected to take approximately 6 months. This includes the scheduling of future Successor Agency actions, related Oversight Board approvals of the financing documents and the maximum review periods by the DOF for such approvals. This schedule would have staff returning to the Successor Agency in July for document approval with a sale projected in September and a closing in October. The 2002 and 2003 bonds would be retired at their call date of December 1. The 2010 Bonds would be called in

4 FISCAL IMPACT The increase in the residual property tax (or tax increment) that gets distributed to all the taxing entities (including the City) will increase by approximately $7.9 million over the remaining 9 years that the 2002 and 2003 Bonds are outstanding. If the 2010 bonds can be refunded under similar conditions, another $1.2 million could be saved over the remaining life of those bonds. If the Successor Agency is successful in reinstating its loan to the City, half of the increase in the residual will be available to repay such loan, and the remaining 50% would be distributed to taxing agencies, including the City, on a bi-annual basis. ALTERNATIVES Alternative 1: Adopt the resolution requesting the Oversight Board to direct the Successor Agency to undertake proceedings for the refunding of the 2002, 2003 and 2010 Tax Allocation Bonds. This will lower the debt service on the bonds by approximately $850,000 thus increasing a like amount of residual property tax (tax increment) available for distribution to all the taxing entities. Alternative 2: Reject the resolutions requesting the Oversight Board to direct the Successor Agency to refund the 2002, 2003 and 2010 bonds. This would keep the status quo and result in no increase of funds available to either repay the City loan or distribute to other taxing entities. Alternative 3: The Successor Agency may consider any other alternative not proposed by staff. CAMPAIGN DISCLOSURE Not applicable to this action. EXHIBITS None 4

5 A RESOLUTION OF THE GLENDALE SUCCESSOR AGENCY TO THE FORMER REDEVELOPMENT AGENCY OF THE CITY OF GLENDALE, CALIFORNIA, TO REQUEST THE OVERSIGHT BOARD TO DIRECT THE SUCCESSOR AGENCY TO UNDERTAKE PROCEEDINGS FOR THE REFUNDING OF THE 2002 TAX ALLOCATION BONDS, 2003 TAX ALLOCATION REFUNDING BONDS AND TAX ALLOCATION BONDS AS PERMITTED BY THE DISSOLUTION ACT WHEREAS, pursuant to California Health and Safety Code ("HSC") (a), the Glendale Redevelopment Agency ("Former Agency") was dissolved on February 1, 2012, and no longer exists as a public body, corporate and politic, and pursuant to HSC 34173, the City of Glendale elected to become the successor agency to the Former Agency (the "Successor Agency"); and WHEREAS, pursuant to HSC 34179, an oversight board (the "Oversight Board") has been established for the Successor Agency; and WHEREAS, prior to its dissolution, the Former Agency issued 2002 Tax Allocation Bonds in the principal amount of $48,015,000 ("2002 Bonds") for the purpose of financing redevelopment activities; and WHEREAS, prior to its dissolution, the Former Agency also issued 2003 Tax Allocation Refunding Bonds in the principal amount of $58,550,000 ("2003 Bonds") for the purpose of refinancing bonds issued in 1993 to finance redevelopment activities; and WHEREAS, prior to its dissolution, the Former Agency also issued 2010 Tax Allocation Bonds in the principal amount of $26,970,000 ("201 0 Bonds") for the purpose of financing several public facility and infrastructure improvements including the Adult Recreation Center, the Central Library Renovation, the Brand Boulevard Paseo to Central Park/Lot 10 Parking Lot Rehabilitation Project and the reconstruction of Central Avenue; and WHEREAS, the 2002 Bonds and 2003 Bonds are outstanding in the principal amount of $27,180,000 and $34,820,000, respectively, and they mature in 2021, and the 2010 Bonds are outstanding in the principal amount of $26,970,000 and mature in 2024; and WHEREAS, HSC authorizes the Successor Agency to undertake proceedings for the refunding of outstanding bonds and other obligations of the Former Agency, subject to the conditions precedent contained in ; and WHEREAS, the Successor Agency has caused a review to be conducted of the bond refunding and has determined that such a refunding is in the best interest of the Successor Agency; that the statutory prerequisites for such refunding can be met, and has therefore resolved to request the Oversight Board direct the Successor Agency to undertake such refunding proceedings, it being understood that such direction by the Oversight Board will enable the Successor Agency to recover its related costs in connection with the refunding proceedings, as authorized by (f). j:\files\docfiles\successor agency\staff reports- motions - resos\sa reso- bond refinancing docx.doc.2 I

6 NOW, THEREFORE, the Successor Agency to the former Glendale Redevelopment Agency does hereby find, determine and resolve as follows: Section 1. The Successor Agency hereby finds that all of the above recitals are true and correct and are incorporated herein by reference. Section 2. The Successor Agency, has determined that there are significant factors which compel the refunding of the 2002 Bonds, 2003 Bonds and 2010 Bonds, including: (a) The increase in residual fund balance available to other taxing agencies in furtherance of redevelopment agency dissolution. (b) Combining the refunding of the three series of bonds creates efficiencies which maximize savings for such an issuance, further increasing the residual fund balance available for other taxing agencies. Section 3. The Oversight Board hereby is requested to direct the Successor Agency to undertake the refunding of the 2002 Bonds, the 2003 Bonds and the 2010 Bonds. Upon receipt of the direction of the Oversight Board, the Successor Agency will cause the preparation of appropriate proceedings for the issuance of appropriate instruments to refund the 2002 Bonds, 2003 Bonds and 2010 Bonds and will submit such proceedings to the Oversight Board for approval in accordance with the provisions of and Successor Agency Chair ATTEST: Secretary j:\files\docfiles\successor agency\staff reports- motions- resos\sa reso- bond refinancing docx.doc

7 STATE OF CALIFORNIA COUNTY OF LOS ANGELES ss I, ARDASHES KASSAKHIAN, Secretary to the Glendale Successor Agency to the former Redevelopment Agency of the City of Glendale, certify that the foregoing Resolution No. was adopted by the Glendale Successor Agency, Glendale, California, at regular meeting held on the day of, 2013, and that same was adopted by the following vote: Ayes: Noes: Absent: Abstain: Secretary j:\files\docfiles\successor agency\staff reports - motions- resos\sa reso- bond refinancing docx.doc