HomeMy WebLinkAboutAgenda Statement 1983/10/25 Item 11a-c COUNCIL AGENDA STATEMENT
Item lla,b,c
Meeting Date 10/25/83
ITEM TITLE: a) Resolution Amending Resolution No. 10807 pertaining
to the criteria for the issuance of Industrial Development
Bonds
b) Resolution // 7/I Approving an agreement with Jones Hall
Hill & White for bond counsel services in connection with Bay
General Hospital financing
c) Resolution /7 w7 Selling $9,000,000 Hospital Revenue Notes,
approving related documents and official statement, and
authorizing official action
SUBMITTED BY: Community Development Director; /5ths Vote: Yes No X )
REVIEWED BY: City Manager f
On August 30, 1983, the City Council approved the second reading of Ordinance
No. 2044 which provided for City sponsorship of revenue anticipation notes.
The ordinance is now effective. Bay General Hospital is requesting that the
City sponsor the sale of $9,000,000 in Notes. At the September 27, 1983
meeting of the City Council, Bay General' s request for City sponsorship was
discussed with the following resultant actions:
1 . Bay General 's program for public benefit in exchange for City sponsorship
was approved pending certain modifications.
2. Restrictive criteria will be added to the City's policy for sponsorship of
Industrial Development Bonds.
3. Based on the above, the Council agreed to accept the application of Bay
General for revenue anticipation notes.
RECOMMENDATION: That the Council approve Resolutions:
A) amending Resolution 10807 to provide for additional eligibility criteria
for revenue anticipation notes,
B) providing for an agreement for bond counsel services with Jones Hall Hill
& White, and
C) providing for the issuance of $9 million in 1983 hospital revenue notes.
BOARDS/COMMISSIONS RECOMMENDATION: Not applicable.
Page 2, Item 11,a ,b c
Meeting Date 10/25/g'3
DISCUSSION:
The amendment (Resolution "A") to the City's criteria for the issuance of
industrial development bonds/notes will limit the City's sponsorship to those
institutions that are eligible under Internal Revenue Service Rule No.
501(c) (3) . Furthermore, the institution must be a health care facility as
recognized by the State of California and must have a credit rating that is
considered investment grade or BBB or better by a nationally recognized rating
service. With this criteria added to previously approved eligibility
standards, City sponsorship will be limited to one or possibly two other
institutions within the City.
Resolution "B" provides for an agreement for bond counsel services with the
law firm of Jones Hall Hill & White. This law firm has provided bond counsel
to the City over the past five years. It is the opinion of the City Attorney
and the Community Development Director that the firm represents the City in a
most professional manner, provides legal advice to the City from partners
rather than subordinate personnel , and charges fees that are commensurate with
other firms of similar stature. Jones Hall Hill & White is recognized by the
Security Exchange Commission and the State of California for providing legal
services associated with the issuance of municipal debt and/or sponsorship of
such indebtedness. The firm lists many municipalities and redevelopment
agencies from throughout the State as its clients.
Resolution "C" will provide for the actual selling of $9 million in revenue
anticipation notes for Bay General Hospital. The term of the note agreement
will be for three years. The loan agreement is provided as attachment #1 and
is the basic document that exempts the City from any liability. In Section
6.2, p.27, "Release and Indemnification Covenants," the City's liability is
discussed in detail. For example, paragraph b states, "It is the intention of
the parties hereto that the City shall not incur any pecuniary liability by
reason of the terms of this agreement or the undertakings required of the City
hereunder. .. ." Furthermore, in the same paragraph, ". . .the City is held
harmless against all claims by or on behalf of any person, firm, or
corporation, or other legal entity, etc. ," furthermore, ". . .the borrower
(hospital ) shall defend the City in any such action or proceeding."
By approving the Indenture of Trust, attachment #2, the City appoints First
Interstate Bank as the administrator for all funds with regard to this issue.
The trustee is authorized to transfer, exchange notes, deliver proceeds, etc. ,
and relieves the City of all such administrative responsibility.
The final document is an Official Statement, attachment #3. An Official
Statement represents a summary of the latter two documents plus an analysis of
the institution so as to inform the prospective purchaser of securities of the
potential opportunities and risks of the investment.
Originally, $7-$7.5 million was requested by the hospital for a term of three
years. The hospital is now requesting $9 million for the same period. $1-1/2
million to $2 million increase is due to the addition of subordinated
Page 3, Item 11, a,b,c
Meeting Date 10/25/83
capital-related notes from the original purchase which has a current balance
of $860,000 and a 9% interest rate. Another $769,000 has been added to the
issue in order to establish a bond debt reserve at the suggestion of the
underwriters. The notes will be repaid at the end of the three-year period
through the issuance of a debt restructuring in conjunction with hospital
expansion. If the hospital expansion is not carried out, then the hospital is
capable of obtaining new financing through this method or financing through
conventional methods as they have done in the past.
In summary, the City is being asked by Bay General Hospital to sponsor revenue
anticipation notes that are tax exempt and, thus, less costly to the hospital.
The hospital has demonstrated that this issue has the concurrence of the
financial community. A comprehensive community benefit program is proposed
(Exhibit A) in exchange for City sponsorship. The San Diego Regional
Employers' Health Cost Coalition will act as monitor of the programs on behalf
of the City. The hospital has agreed to provide a two-year rather than one
year health education program including a start-up period to the City of Chula
Vista employees as stated in point #3 on Exhibit "A." In addition, the health
screenings as conducted by the hospital will be continued and expanded as
shown on the same exhibit.
To the best of our knowledge and that of the underwriter, Miller & Schroeder,
and bond counsel, this is the first such sponsorship by a City. It is their
opinion that this issue is precedent- setting, and our requirement for public
benefit for sponsorship is not only innovative but will most likely be
imitated by other entities. Because of the newness of this undertaking,
special precautions have been taken by the underwriter. Laventhol and
Horwath, nationally known institutional accountants, have conducted an
evaluation of the hospital accounting procedures. Their report is favorable
to Bay General Hospital. The firm has a worldwide reputation in the field of
institutional accounting and auditing. In addition, the nationally recognized
securities law firm of Kutak, Rock & Huie has been obtained by the underwriter
in order to provide additional review on the part of potential investors.
FISCAL IMPACT: A bond issuance fee in the amount of $11 ,250 will be
forthcoming to the City for sponsorship. (The fee is calculated at 1/8 of 1%
of the total issue in accordance with City policy.)
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R-11 X17
COUNCIL AGENDA STATEMENT
Item 11a,b,c
Meeting Date 10/25/83
ITEM TITLE: a) Resolution /2-i/,/ .7 Amending Resolution No. 10807 pertaining
to the criteria for the issuance of Industrial Development
Bonds ,/ �/
b) Resolution /i /�" Approving an agreement with Jones Hall
Hill & White for bond counsel services in connection with Bay
General Hospital financing
c) Resolution 0/ 7//( Selling $9,000,000 Hospital Revenue Notes,
approving related documents and official statement, and
authorizing official action
SUBMITTED BY: Community Development Director; /5ths Vote: Yes No X )
REVIEWED BY: City Manager
On August 30, 1983, the City Council approved the second reading of Ordinance
No. 2044 which provided for City sponsorship of revenue anticipation notes.
The ordinance is now effective. Bay General Hospital is requesting that the
City sponsor the sale of $9,000,000 in Notes. At the September 27, 1983
meeting of the City Council, Bay General's request for City sponsorship was
discussed with the following resultant actions:
1. Bay General 's program for public benefit in exchange for City sponsorship
was approved pending certain modifications.
2. Restrictive criteria will be added to the City's policy for sponsorship of
Industrial Development Bonds.
3. Based on the above, the Council agreed to accept the application of Ba/
General for revenue anticipation notes.
RECOMMENDATION: That the Council approve Resolutions:
A) amending Resolution 10807 to provide for additional eligibility criteria
for revenue anticipation notes,
B) providing for an agreement for bond counsel services with Jones Hall Hill
& White, and
C) providing for the issuance of $9 million in 1983 hospital revenue notes.
BOARDS/COMMISSIONS RECOMMENDATION: Not applicable.
Page 2, Item 11,a,b c
Meeting Date 10/23/$3
DISCUSSION:
The amendment (Resolution "A") to the City's criteria for the issuance of
industrial development bonds/notes will limit the City's sponsorship to those
institutions that are eligible under Internal Revenue Service Rule No.
501(c) (3) . Furthermore, the institution must be a health care facility as
recognized by the State of California and must have a credit rating that is
considered investment grade or BBB or better by a nationally recognized rating
service. With this criteria added to previously approved eligibility
standards, City sponsorship will be limited to one or possibly two other
institutions within the City.
Resolution "B" provides for an agreement for bond counsel services with the
law firm of Jones Hall Hill & White. This law firm has provided bond counsel
to the City over the past five years. It is the opinion of the City Attorney
and the Community Development Director that the firm represents the City in a
most professional manner, provides legal advice to the City from partners
rather than subordinate personnel , and charges fees that are commensurate with
other firms of similar stature. Jones Hall Hill & White is recognized by the
Security Exchange Commission and the State of California for providing legal
services associated with the issuance of municipal debt and/or sponsorship of
such indebtedness. The firm lists many municipalities and redevelopment
agencies from throughout the State as its clients.
Resolution "C" will provide for the actual selling of $9 million in revenue
anticipation notes for Bay General Hospital. The term of the note agreement
will be for three years. The loan agreement is provided as attachment #1 and
is the basic document that exempts the City from any liability. In Section
6.2, p.27, "Release and Indemnification Covenants," the City's liability is
discussed in detail. For example, paragraph b states, "It is the intention of
the parties hereto that the City shall not incur any pecuniary liability by
reason of the terms of this agreement or the undertakings required of the City
hereunder... ." Furthermore, in the same paragraph, ". ..the City is held
harmless against all claims by or on behalf of any person, firm, or
corporation, or other legal entity, etc. ," furthermore, ". . .the borrower
(hospital) shall defend the City in any such action or proceeding."
By approving the Indenture of Trust, attachment #2, the City appoints First
Interstate Bank as the administrator for all funds with regard to this issue.
The trustee is authorized to transfer, exchange notes, deliver proceeds, etc.,
and relieves the City of all such administrative responsibility.
The final document is an Official Statement, attachment #3. An Official
Statement represents a summary of the latter two documents plus an analysis of
the institution so as to inform the prospective purchaser of securities of the
potential opportunities and risks of the investment.
Originally, $7-$7.5 million was requested by the hospital for a term of three
years. The hospital is now requesting $9 million for the same period. $1-1/2
million to $2 million increase is due to the addition of subordinated
- // /�
Page 3, Item 11, a,b,c
Meeting Date 10/25/83
capital-related notes from the original purchase which has a current balance
of $860,000 and a 9% interest rate. Another $769,000 has been added to the
issue in order to establish a bond debt reserve at the suggestion of the
underwriters. The notes will be repaid at the end of the three-year period
through the issuance of a debt restructuring in conjunction with hospital
expansion. If the hospital expansion is not carried out, then the hospital is
capable of obtaining new financing through this method or financing through
conventional methods as they have done in the past.
In summary, the City is being asked by Bay General Hospital to sponsor revenue
anticipation notes that are tax exempt and, thus, less costly to the hospital.
The hospital has demonstrated that this issue has the concurrence of the
financial community. A comprehensive community benefit program is proposed
(Exhibit A) in exchange for City sponsorship. The San Diego Regional
Employers' Health Cost Coalition will act as monitor of the programs on behalf
of the City. The hospital has agreed to provide a two-year rather than one
year health education program including a start-up period to the City of Chula
Vista employees as stated in point #3 on Exhibit "A." In addition, the health
screenings as conducted by the hospital will be continued and expanded as
shown on the same exhibit.
To the best of our knowledge and that of the underwriter, Miller & Schroeder,
and bond counsel, this is the first such sponsorship by a City. It is their
opinion that this issue is precedent- setting, and our requirement for public
benefit for sponsorship is not only innovative but will most likely be
imitated by other entities. Because of the newness of this undertaking,
special precautions have been taken by the underwriter. Laventhol and
Horwath, nationally known institutional accountants, have conducted an
evaluation of the hospital accounting procedures. Their report is favorable
to Bay General Hospital. The firm has a worldwide reputation in the field of
institutional accounting and auditing. In addition, the nationally recognized
securities law firm of Kutak, Rock & Huie has been obtained by the underwriter
in order to provide additional review on the part of potential investors.
FISCAL IMPACT: A bond issuance fee in the amount of $11,250 will be
forthcoming to the City for sponsorship. (The fee is calculated at 1/8 of 1%
of the total issue in accordance with City policy.)
PGD:nr
WPC 0851H
g-//V/i
COUNCIL AGENDA STATEMENT
Item 11a,b,c
Meeting Date 10/25/83
ITEM TITLE: a) Resolution //,4,47 Amending Resolution No. 10807 pertaining
to the criteria for the issuance of Industrial Development
Bonds
b) Resolution Ii ,4/1 Approving an agreement with Jones Hall
Hill & White for bond counsel services in connection with Bay
General Hospital financing
c) Resolution /t / Selling $9',000,000 Hospital Revenue Notes,
approving related documents and official statement, and
authorizing official action
SUBMITTED BY: Community Development Director; /5ths Vote: Yes No X )
REVIEWED BY: City Manager g
On August 30, 1983, the City Council approved the second reading of Ordinance
No. 2044 which provided for City sponsorship of revenue anticipation notes.
The ordinance is now effectiv-.y. Real Hospital is requesting that the
City sponsor the sale of : ,:;C! in Notes. At the September 27, 1983
meeting of the City Council, Bay General' s request for City sponsorship was
discussed with the following resultant actions:
1 . Bay General 's program for public benefit in exchange for City sponsorship
was approved pending certain modifications.
2. Restrictive criteria will be added to the City's policy for sponsorship of
Industrial Development Bonds.
3. Based on the above, the Council agreed to accept the application of Bay
General for revenue anticipation notes.
RECOMMENDATION: That the Council approve Resolutions:
A) amending Resolution 10807 to provide for additional eligibility criteria
for revenue anticipation notes,
B) providing for an agreement for bond counsel services with Jones Hall Hill
& White, and
C) providing for the issuance of $9 million in 1983 hospital revenue notes.
BOARDS/COMMISSIONS RECOMMENDATION: Not applicable.
/L— /Pit?
Page 2, Item 11,a ,b c
Meeting Date 10/25/83
DISCUSSION:
The amendment (Resolution "A") to the City's criteria for the issuance of
industrial development bonds/notes will limit the City's sponsorship to those
institutions that are eligible under Internal Revenue Service Rule No.
501(c) (3) . Furthermore, the institution must be a health care facility as
recognized by the State of California and must have a credit rating that is
considered investment grade or BBB or better by a nationally recognized rating
service. With this criteria added to previously approved eligibility
standards, City sponsorship will be limited to one or possibly two other
institutions within the City.
Resolution "B" provides for an agreement for bond counsel services with the
law firm of Jones Hall Hill & White. This law firm has provided bond counsel
to the City over the past five years. It is the opinion of the City Attorney
and the Community Development Director that the firm represents the City in a
most professional manner, provides legal advice to the City from partners
rather than subordinate personnel , and charges fees that are commensurate with
other firms of similar stature. Jones Hall Hill & White is recognized by the
Security Exchange Commission and the State of California for providing legal
services associated with the issuance of municipal debt and/or sponsorship of
such indebtedness. The firm lists many municipalities and redevelopment
agencies from throughout the State as its clients.
Resolution "C" will provide for the actual selling of $9 million in revenue
anticipation notes for Bay General Hospital. The term of the note agreement
will be for three years. The loan agreement is provided as attachment #1 and
is the basic document that exempts the City from any liability. In Section
6.2, p.27, "Release and Indemnification Covenants," the City's liability is
discussed in detail. For example, paragraph b states, "It is the intention of
the parties hereto that the City shall not incur any pecuniary liability by
reason of the terms of this agreement or the undertakings required of the City
hereunder. .. ." Furthermore, in the same paragraph, ". ..the City is held
harmless against all claims by or on behalf of any person, firm, or
corporation, or other legal entity, etc. ," furthermore, ".. .the borrower
(hospital ) shall defend the City in any such action or proceeding."
By approving the Indenture of Trust, attachment #2, the City appoints First
Interstate Bank as the administrator for all funds with regard to this issue.
The trustee is authorized to transfer, exchange notes, deliver proceeds, etc. ,
and relieves the City of all such administrative responsibility.
The final document is an Official Statement, attachment #3. An Official
Statement represents a summary of the latter two documents plus an analysis of
the institution so as to inform the prospective purchaser of securities of the
potential opportunities and risks of the investment.
Originally, $7-$7.5 million was requested by the hospital for a term of three
years. The hospital is now requesting $9 million for the same period. $1-1/2
million to $2 million increase is due to the addition of subordinated
Page 3, Item 11, a,b,c
Meeting Date 10/25/83
capital-related notes from the original purchase which has a current balance
of $860,000 and a 9% interest rate. Another $769,000 has been added to the
issue in order to establish a bond debt reserve at the suggestion of the
underwriters. The notes will be repaid at the end of the three-year period
through the issuance of a debt restructuring in conjunction with hospital
expansion. If the hospital expansion is not carried out, then the hospital is
capable of obtaining new financing through this method or financing through
conventional methods as they have done in the past.
In summary, the City is being asked by Bay General Hospital to sponsor revenue
anticipation notes that are tax exempt and, thus, less costly to the hospital.
The hospital has demonstrated that this issue has the concurrence of the
financial community. A comprehensive community benefit program is proposed
(Exhibit A) in exchange for City sponsorship. The San Diego Regional
Employers' Health Cost Coalition will act as monitor of the programs on behalf
of the City. The hospital has agreed to provide a two-year rather than one
year health education program including a start-up period to the City of Chula
Vista employees as stated in point #3 on Exhibit "A." In addition, the health
screenings as conducted by the hospital will be continued and expanded as
shown on the same exhibit.
To the best of our knowledge and that of the underwriter, Miller & Schroeder,
and bond counsel, this is the first such sponsorship by a City. It is their
opinion that this issue is precedent- setting, and our requirement for public
benefit for sponsorship is not only innovative but will most likely be
imitated by other entities. Because of the newness of this undertaking,
special precautions have been taken by the underwriter. Laventhol and
Horwath, nationally known institutional accountants, have conducted an
evaluation of the hospital accounting procedures. Their report is favorable
to Bay General Hospital. The firm has a worldwide reputation in the field of
institutional accounting and auditing. In addition, the nationally recognized
securities law firm of Kutak, Rock & Huie has been obtained by the underwriter
in order to provide additional review on the part of potential investors.
FISCAL IMPACT: A bond issuance fee in the amount of $11,250 will be
forthcoming to the City for sponsorship. (The fee is calculated at 1/8 of 1%
of the total issue in accordance with City policy. )
PGD:nr
WPC 0851H
/41-gJ _. �L'� � a-
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