The URL can be used to link to this page

Home My WebLink About2009/11/05 Agenda Packet,t' r ~ ~~ ,.;,azure under penalty of perjury that I am ~:npioyed by the City of Chula Vista in the - Jffice of the City Clerk and that I posted th ~`~~~ ument on the bulletin board accordinc~ ~° Act requirements. ,`~~~-~ ~ ~ ~ .y a~ 9 ~ ~ ------ Si ned CITY OF /~ - VISTA Cheryl Cox, Mayor ~''~~,~~ Rudy Ramirez, Councilmember James D. Sandoval, City Manager Mitch Thompson, Interim Councilmember Bart Miesfeld, City Attorney Pamela Bensoussan, Councilmember Donna Norris, City Clerk Steve Castaneda, Councilmember CITY COUNCIL WORKSHOP November 5, 2009 4:00 p.m. Council Chambers City Hall 276 Fourth Avenue CALL TO ORDER ROLL CALL: Councilmembers Bensoussan, Castaneda, Ramirez, Thompson, and Mayor Cox PLEDGE OF ALLEGIANCE TO THE FLAG AND MOMENT OF SILENCE PUBLIC COMMENTS Persons speaking during Public Comments may address the Council on any subject matter within the Council's jurisdiction that is not listed as an item on the agenda. State law generally prohibits the Council from discussing or taking action on any issue not included on the agenda, but, if appropriate, the Council may schedule the topic for future discussion or refer the matter to staff Comments are limited to three minutes. ACTION ITEMS If you wish to speak on arty of the following items, please fall out a "Request to Speak" form (available in the lobby) and submit it to the City Clerk prior to the meeting. PRESENTATION ON THE STATUS OF UPDATES TO THE CITY'S FISCAL HEALTH PLAN CONSIDERATION OF THE QUARTERLY FINANCIAL REPORT ENDED SEPTEMBER 30, 2009 AND ADOPTION OF A RESOLUTION AMENDING THE 2009/2010 BUDGET Section 504 (f) of the City Charter requires quarterly financial reports to be filed by the Director of Finance through the City Manager. The report for the quarter ending September 30, 2009 is being presented to the Council. Council Policy 220-02, "Financial Reporting and Transfer Authority," was established in January 1996, and allows budget transfers to be completed. Adoption of the resolution amends the 2009/2010 budget. (Finance Director) Staff recommendation: Council accept the report and adopt the resolution: A. QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2009 B. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AMENDING FISCAL YEAR 2009/2010 BUDGET IN ACCORDANCE WITH THE COUNCIL POLICY ON FINANCIAL REPORTING AND TRANSFER AUTHORITY, AND APPROPRIATING AMOUNTS TO THE FIRE EQUIPMENT REPLACEMENT FUND AND FROM THE AVAILABLE FUND BALANCE IN THE POLICE GRANTS FUND (4/STHS VOTE REQUIRED) 2. UPDATE OF THE CITY'S FISCAL HEALTH PLAN RELATED TO DEBT RESTRUCTURING OPTIONS On January 20, 2009, the City Council endorsed the City Manager's "Fiscal Health Plan," which included the review of the outstanding debt obligations to ensure that the City continues to meet its debt obligations and minimize the impacts to City services. (Finance Director) Staff recommendation: Council consider the dept restructuring options as recommended under the Fiscal Health Plan. 3. CONSIDERATION OF APPROVAL OF AGREEMENTS FOR UNDERWRITING SERVICES AND BOND AND DISCLOSURE COUNSEL SERVICES As a result of the significant reduction in development-related fees currently being collected, the City is anticipating restructuring a portion of the debt related to its Public Facilities Development Impact Fees obligations. It is anticipated that this restructuring will enable the City to better meet its long-term financial goals. Adoption of the resolutions approves the agreements for bond underwriting services and bond counsel services. (Finance Director). Staff recommendation: Council adopt the following resolutions: A. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AGREEMENT WITH THE INVESTMENT BANKING FIRM OF E.J. DE LA ROSA & CO., INC. TO PROVIDE UNDERWRITING SERVICES FOR RESTRUCTURING OF CITY BONDED DEBT IF DEEMED ECONOMICALLY FEASIBLE Page 2 -Council Agenda http://www.chulavistaca.gov November 5, 2009 B. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA WAIVING THE FORMAL CONSULTANT SELECTION PROCESS AS IMPRACTICAL, AND APPROVING AN AGREEMENT WITH STRADLING, YOCCA, CARLSON & RAUTH FOR BOND AND DISCLOSURE COUNSEL SERVICES 4. RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA REPLACING THE GENERAL FUND RESERVE POLICY PER THE CITY'S FISCAL HEALTH PLAN On January 20, 2009, the City Council endorsed the City Manager's "Fiscal Health Plan". The Plan, which was created to address the City's immediate financial emergency as well as its long term fiscal sustainability, including an update of the General Fund Reserve Policy. The proposed draft policy will provide guidelines for the use of reserves as well as increased minimum reserve levels. (Finance Director) Staff recommendation: Council adopt the resolution. ADJOURNMENT to a Special Meeting on November 9, 2009 at 2:00 p.m., and thence to the Regular City Council Meeting on November 17, 2009, at 4:00 p.m., in the Council Chambers. (The November 10, 2009 meeting has been cancelled) Materials provided to the Ciry Council related to any open-session item on this agenda are available for public review at the City Clerk's Office, located in City Hall at 276 Fourth Avenue, Building 100, during normal business hours. In compliance wUh the AMERICANS WITH DISABILITIES ACT The City of Chula Vista requests individuals who require special accommodations to access, attend, and/or participate in a Ciry meeting, activity, or service, contact the City Clerk's Office at (619) 691-SOd1 at least forty-eight hours in advance of the meeting. Page 3 -Council Agenda http://www.chulavistaca.gov November 5, 2009 CITY COUNCIL AGENDA STATEMENT ~~~ CITY OF CHULA VISTA 11/05/2009, Item ITEM TITLE: QUARTERLY FINANCIAL REPORT FOR THE QUARTER ENDED SEPTEMBER 30, 2009 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AMENDING FISCAL YEAR 2009/2010 BUDGET IN ACCORDANCE WITH THE COUNCIL POLICY ON FINANCIAL REPORTING AND TRANSFER AUTHORITY AND APPROPRIATING AMOUNTS TO THE FIRE EQUIPMENT REPLACEMENT FUND AND FROM THE AVAILABLE FUND BALANCE IN THE POLICE GRANTS FUND SUBMITTED BY: DIRECTOR OF FIN CE/TREASURER~~ CITY MANAGER REVIEWED BY: ASSISTANT CIT MANAGER 4/STHS VOTE: YES ^X NO SUMMARY Section SOA (f) of the City Charter requires quarterly financial reports to be filed by the Director of Finance through the City Manager. For government entities, a budget creates a legal framework for spending during the fiscal year. After the budget is approved there are circumstances, which arise that could require adjustments to the approved budget. Council Policy 220-02 "Financial Reporting and Transfer Authority" was established in January of 1996 and allows for budget transfers to be completed. ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that filing of the quarterly financial status report is not a "Project" as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change to the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the actions proposed are not subject to CEQA. 1-1 November 5, 2009, Item Page 2 of 5 RECOMMENDATION 1. Council accepts the report. 2. Council approve the resolution. BOARDS/COMMISSION RECOMMENDATION Not Applicable DISCUSSION Attached for your consideration is the financial report for the first quarter of fiscal year 2009/10. The detailed financial report for the quarter ending September 30, 2009 (Attachment 1) discusses the financial outlook for the City's General Fund for the remainder of fiscal year 2009/10. The City's General Fund ended the fiscal year 2008/09 with an available balance of $9.3 million or 6.7 percent of the fiscal year 2009/10 operating budget. For fiscal year 2009/1Q, the worst recession since World War II appears to have bottomed-out but the effects are still being experienced in the City as housing prices remain at depressed levels and unemployment continues to cause reduced consumer spending in the City. The preliminary outlook for General Fund revenues is that downward adjustments of $3.4 million will have to be made to several revenue sources. Projected expenditure savings of $1.2 million partially offset the revenue shortfall leaving a deficit of $2.2 million. To mitigate this deficit, we anticipate a loan repayment from the Redevelopment Agency to the General Fund of $1.4 million. In addition, the City Manager has authorized an immediate hiring/promotional freeze and administrative freeze on all non-essential services that are anticipated to result in expenditure savings of $0.8 million. These actions will avoid impacts to reserves and continue to maintain a balanced budget for the current fiscal year per the first quarter analysis. Fiscal Year 2009/10 Budeet Transfer and Appropriation Requests For government entities, a budget creates a legal framework for spending during the fiscal year. After the budget is approved there are circumstances which arise that could require adjustments to the approved budget. Council Policy 220-02 "Financial Reporting and Transfer Authority" was established in January of 1996 and allows for budget transfers to be completed. The City Manager is authorized to complete budget transfer requests within departments that are $15,000 and below. City Council approval is required for budget transfers between departments and/or for amounts greater than $15,000. All recommended General Fund transfers can be done using existing appropriations. For fiscal year 2009/10, budget transfers and appropriations are requested for the Police and Fire departments. • K-9 Program -The Police Department is requesting to amend the budget for the K-9 Program to freeze one police officer position and restore overtime and supplies & services related to the program. This budget amendment reduces $20,547 in personnel services and increases $20,547 in supplies and services, resulting in no net fiscal impact to the General Fund. 1-2 November 5, 2009, Item Page 3 of 5 • Fire Department -Due to the timing of the side letter with IAFF regarding alternative cost saving measures for the Fire Department, the fiscal year 2010 Council Adopted budget reflects the brownout of the USAR vehicle which was incorporated into the Fire Department's budget as a reduction to the department's regular overtime budget. The Fire Department is requesting to amend the budget to incorporate the budget changes necessary to reflect the side letter with IAFF. These changes include various transfers within the Fire Department's Personnel Services category to reflect a 1% salary reduction for IAFF members, freezing a Deputy Fire Chief, transferring savings from compensatory time in lieu, eliminating the payment of uniform allowance, and increasing anticipated salary savings, the sum of these reductions is $793,000 which will be transferred to the Fire Department's overtime budget. Additional changes necessary to reflect the side letter with IAFF include: o Transferring $172,216 from the Transfer Out expense category to the Fire Department's Personnel Services category, this transfer reflects the elimination of the debt service payment for the defibrillators from the Fire Department's budget. o Transferring $35,000 from the Human Resources Department's Personnel Services Category to the Fire Department's Personnel Services Category to reflect the elimination of the IAFF professional enrichment budget for the current fiscal year. In total, $1.0 million will be restored to the Fire Department's constant minimum staffing overtime budget offset by committed savings in other expenditure categories. Finally, the proposed budget changes include the transfer of an Administrative Services Manager position from the Fire Department to the Finance Department. This change is being made in an effort to improve operational efficiencies and create an opportunity to share resources among the Public Safety departments. The Police Department's Administrative Services Manager, along with their budget analyst, will provide management and budget support to the Fire Department as well as the Police Department. The transfer of the Fire Department's Administrative Services Manager position to the Finance Department will help address some workload issues that have been created as a result of recent vacancies. In total, $87,452 will be transferred from the Fire Department's personnel services budget to the Finance Department's personnel services budget. • Police Grants -The Police Department is requesting to aypropriate additional funds to reflect grant savings from fiscal year 2008/2009 that were not carried over to the current fiscal year. This budget amendment increases $157,744 in personnel services, increases $12,900 in supplies and services, and decreases $21,764 in the capital category of the Police Grant Fund (fund 252). Grant funding in the amount of $148,880 will completely offset these appropriations, resulting in no net fiscal impact. Fire Equipment Replacement Fund -The Fire Department is requesting the establishment of a Fire Equipment Replacement Fund. This fund will account for the revenue received from AMR for the lease of the defibrillators. Earlier this year Council approved an amendment to the ambulance service agreement with AMR to incorporate the cost of the defibrillators in the ambulance fees. 1-3 November 5, 2009, Item Page 4 of 5 The appropriation of $172,216 to the newly established fund will be revenue offset resulting in no net impact to the Fire Equipment Replacement Fund. DECISION MAKER CONFLICT Staff has reviewed the decision contemplated by accepting this report and has determined that it is not site specific and consequently the 500 foot rule found in the California Code of Regulations section 18704.2(a)(I) is not applicable. FISCAL IMPACT The preliminary outlook for General Fund revenues is that downward adjustments of $3.4 million will have to be made to several revenue sources. "'°v "'3 ~~~ a.~ Revenues . • _ ~_ ~r~,~+ 5 ,~.~Yp2009/;10FP ~ ~ Butl eta Pao ected ? ~.r "I`Delta'~' Property Tax 27,199 26,613 (586) Sales Tax 18,707 18,408 (299) Sales Tax In Lieu (1/4%) 6,838 6,149 (689) Motor Vehicle License Fee 18,287 17,716 (571) Franchise Fees 10,033 8,446 (1,587) Utility Users Tax 8,169 8,669 500 Transient Occupancy Tax 2,602 2,352 (250) Business License Tax 1,190 1,190 0 Real Property Transfer Tax 841 860 19 Licenses and Permits 880 888 8 Fine, Forfeitures & Penalties 2,380 2,243 (137) Use of Money and Property 1,780 1,802 22 Other Agency Revenue 2,741 2,754 13 Charges for Services 7,546 7,538 (8) Other Revenues 11,438 11,651 213 Transfers From Other Funds 12,340 12,340 0 Total $132,971 $129,619 $ 3,352 Projected expenditure savings of $1.2 million partially offsets the revenue shortfall leaving a deficit of $2.2 million. To mitigate this deficit, we anticipate a loan repayment from the Redevelopment Agency to the General Fund of $1.4 million. In addition, the City Manager has authorized an immediate hiring/promotional freeze and administrative freeze on all non-essential services that are anticipated to result in expenditure savings of $0.8 million. These actions will avoid impacts to reserves and continue to maintain a balanced budget for the current fiscal year per the first quarter analysis. i ,~ ~1 T,~s~~ y { i.~~, rya ~t ~ d " " P ~ e a , . t ~e .r Gerferaf Und Reserve, ,,~ ,~ >i , _ ?;~` ~~ B~ ud e ' m l ons Reserves - July 1, 2009 $ 9.3 $ 9.3 Projected Revenues & Transfers In 133.0 129.7 Expenditures & Transfers Out (133.0) (131.9) Midyear A propriation - Contractin Initiative 0.1 Projected Deficit $ 0.1 $ 2.2 Mitigating Actions RDA Loan Repayment 1.4 Hiring/Promotional/Non Essential Spending Freeze 0.8 Subtotal 2.2 Revised Projected Deficit 0.0 Projected Fund Balance -June 30, 2010 $ 9.2 $ 9.3 Percents a of Operatin Bud et - 6.6% 6.7% November 5, 2009, ItemJ_ Page 5 of 5 The tables below outline the fiscal impact by fund and category for the budgetary transfer requests and appropriation requests. BUDGETARY TRANSFER RE UESTS r `~ r`~ g ` s. + o r'i ~ ei ' ., ~~ al '' und s,~ ~ Gene al _.-._..-.~..... .._ ~~...-._ ~ Resources+~ ~.,.~_......~..._ EFtnance ~.~.. _, ... ~.~.... + hce .~+u..,~~ ..,.ai " Ft ~ .,~,. ._. ,,~.. ,.h„ Tot - _.~.,.w_ Expense Personnel Costs $ (35,000) $ 87,452 $ (20,547) $ 119,764 $ 151,669 Supplies and Services $ - $ - $ 20,547 $ - $ 20,547 Capital $ - $ - $ - $ - $ _ Trausfers Out $ - $ - $ - $ (172,216 $ 172,216 Net Fiscal Im act $ (35,000) $ 87,452 $ - $ (52,452) $ - APPROPRIATION REQUESTS Othery>~ond_ s`w~~"~~{,,y4 ~ohceGran~ h~rnd- Fore Ei(arQ ReQlac„gment" Revenue Revenue from Other A encies $ 148,880 $ L72,216 Total Revenue Adjustments $ 148,880 $ 172,216 Expense Personnel Costs $ 157,744 $ - Supplies and Services $ 12,900 $ - Capital $ (21,764) $ - Transfers Out $ - $ 172,216 Total Ex ense Adjustments $ 148,880 $ 172,216 Net Fiscal Im act $ - $ - ATTACHMENTS Attachment 1 -Quarterly Financial Report Prepared by: Phillip Davis, Assistant Director of Finance, Finance Department 1-5 ~~1l~ ~r cnv of CHUL4 VISTA OVERVIEW This financial report summarizes the City's General Fund financial position for the fiscal year for July 1, 2009 through September 30, 2009. The purpose of his report is to provide the Ciry Council, Management and the Citizens of Chula Vista an update on the City's fiscal status based on the most recent financial information available. ECONOMIC UPDATE National News In its third quarterly report of 2009, the UCLA Anderson Forecast concludes that the worst recession in seven decades likely ended in the current quarter, but then states that the negative impact of the downturn will last well into the next decade. Simply put, the Forecast believes that the roots of the recession originated in consumer over-indebtedness and that consumer spending, necessary fora robust recovery, will be tempered both by the unwillingness of fnancial institutions to lend and by consumers unwillingness to borrow. In California, the UCLA Anderson Forecast tentatively asserts that the state will join the nation in its economic recovery, but the contraction of state and local government will dampen the impact of the national resurgence for at least the near future. On an annual basis, employment is forecast to contract -3.7% in 2009 and will barely grow at a 0.2% rate in 2010. The unemployment rate will grow to a high of 12.2% for 4th quarter 2009 and will average 11.6% for the year. Though the state economy will be growing by 2011, it will not produce enough jobs to get the unemployment rate below double digits until the end of that year. The University of San Diego's Index of Leading Economic Indicators far San Diego County rose 0.6 percent in August. As has been the case in the previous four months, a sharp gain in local consumer confidence led the move to the upside. Also advancing Quarterly Financial Report -General Fund First Quarter Ending September 30, 2009 November 5, 2009 solidly were local stock prices and the outlook for the national economy. These gains outpaced big negative moves in building permits and initial claims for unemployment insurance and a smaller drop in help wanted advertising to push the USD Index to its fifth straight increase. 150 0 ' 1450 S 9~ b J"r :~ad~'~m~y ~r9~, ~i ~c A~dG~.~,.„ 140 0 bM~tipiM4M, +B .3 Re~7 ~ ~ ti~ ~~ r i ~~ ~,y3 135 0 ,wF'~1~.°. _ .,~ t _ v;~f' 'Y'o¢~}',1~-?~#•, . 1300 ~~ ''+,~Y'.~aii. `~ 1z6o 120 o i`"`.' - ~ 4 . ~,. ~'' " 11 s o ' " 110 0 .'~~ r r5 .:;» . 1os o '~~ "~`a" ~ ~~ ourca~ n Veraity-o a e o ~ ~ ^~~' 95 0 ~' . Jan-04 Jan-O5 Jan-O6 Jan-07 Jan-O6 Jan-09 San Diego Index of Leading Economic Indicators August's gain was the biggest monthly gain in the USD Index since March 2004. It reinforces the view projected since the Index first turned positive that the local economy is approaching a bottom. The breadth of the advance remains mixed, with the number of rising components matched by the number of decliners. The August numbers are encouraging in that the components that were negative were down by smaller amounts than have recently been the case. A key in the coming months will be whether the local economy can stabilize as the summer ends and we head into the slower fall and winter months. Back-to-school sales have already been classified as weak, and not much improvement is expected in the holiday buying season. As was indicated in previous reports, it looks like a bottom is more likely in the first half of 2010 than in the latter part of 2009 GENERAL FUND SUMMARY City Council Policy No 220-03 recommends the City maintain at least an 8 percent reserve level. As of June 1-6 QUARTERLY FINANCIAL REPORT FIRST QUARTER OF 2009-10 Page 2 of 4 30, 2009, the General Fund reserve level was at 6.7 percent (unaudited). - ~ >i ; .a rw ' °'~:"'x~Y a t: r. Am;,~,d~ed ' Projeteu , . . ; ~ . General Fund Reserve ~ .~ ~~..~< iBud e~ - . millions Reserves - July 1, 2009 $ 9.3 $ 9.3 Projected Revenues 8 Transfers In 133.0 129.7 ExpentliluresBTransfers Out (133.0) (131.9) Mid earA ro nation-Contractin Initiative 0.1 Projected DeOCIt $ 0.1 $ 2.2 Mitigating Actions RDA Loan Repayment 1.4 Hiring/Promotional/Non Essential Spending Freeze 0.8 Subtotal 2.2 Revised Projected Deficit 0.0 Protected FUnd Balance-June 30, 2010 $ 9.2 $ 9.3 Percents eof Operatln Bud et 6.6% 6.7% For fiscal year 2009/10, although the economy appears to have bottomed out the effects are still being experienced in the City as housing prices remain at depressed levels and unemployment continues to cause reduced consumer spending in the City. As a result, a General Fund deficit of $2.2 million is currently projected. Projected expenditure savings of $1.2 million partially offset the revenue shortfall leaving a deficit of $2.2 million. To mitigate this deficit, we anticipate a loan repayment from the Redevelopment Agency to the General Fund of $1.4 million. In addition, the City Manager has authorized an immediate hiring/promotional freeze and administrative freeze on all non-essential services that are anticipated to result in expenditure savings of $0.8 million. These actions will avoid impacts to reserves and continue to maintain a balanced budget for the current fiscal year per the first quarter analysis. Revenues Reilen ~ i ~, ~'x - Bi~'d eta P~'o'ectetl #s, Delta;„ Property Tax 27,199 26,613 (586) Sales Tax 18,707 18,408 (299) Sales Tax In Lieu (1/4%) 6,838 6,149 (689) Motor Vehicle License Fee 18,287 17,716 (571) Franchise Fees 10,033 8,446 (1,587) Utility Users Tax 8,169 8,669 500 Transient Occupancy Tax 2,602 2,352 (250) Business License Tax 1,190 1,190 0 Real Property Transfer Tax 841 860 19 Licenses and Permits 880 888 8 Fine, Forfeitures & Penalties 2,380 2,243 (137) Use of Money and Property 1,780 1,802 22 Other Agency Revenue 2,741 2,754 13 Charges for Services 7,546 7,538 (8) Other Revenues 11,438 11,651 213 Transfers From Other Funds 12,340 12,340 0 Total $ 132,971 $129,619 $ 3,352 Reflected in the chart are discretionary and departmental programmatic revenue adjustments that total $3.4 million. These adjustments are necessary due to recent information received from the County Assessors office, the City's sales tax consultant and information regarding the City's franchise fees and utility users tax. Property Taxes. The City of Chula Vista receives property tax revenue based upon a 1.0 percent levy on the assessed value of all real property. Property tax is the City's largest revenue source, representing 20.4 percent of General Fund budgeted revenue in fiscal year 2009/10. a~~gs,,.~,~,.e~,_.., The fiscal year 2009/10 Property Tax budget anticipated an 8.4 percent decrease. However since adoption of the budget the County Assessor has advised the City that there has been a further decline of 2 percent in assessed values from the decline initially reported to the City. The current projections for Property Tax are being adjusted downwards by $600,000 to reflect the final Assessors value of an overall -10.4 percent decline in the City's assessed value. The chart below compares the City's assessed values with the assessed values of all San Diego County. 25% 20% 15% 10% 5% 0% -5 -10 -15 -Chula Vista -County Overall Sales Tax. Sales tax is the City's second largest revenue source, representing 19.2 percent of fiscal year 2009/10 budgeted revenues. City staff met with the City's sales tax consultant, MuniServices, to review the most recent sales tax ~-~ QUARTERLY FINANCIAL REPORT FIRST QUARTER OF 2009-10 Page 3 of 4 revenues. They report that the change in sales tax receipts between second quarter 2009 and the second quarter 2008 decreased by 20.8 percent Statewide, by 19.9 percent in Southern California and 16.4 percent in Chula Vista. As seen in the revenue table, Sales Tax In-Lieu accounts for much of the adjustment in projected Sales Tax. The Sales Tax In Lieu represents the reimbursement by the State for 0.25 percent of the City's sales tax diverted by the "triple flip' and is actually reimbursed with property tax monies in lieu of sales tax. This account grows at the sales tax rate and not the property tax rate. The City has not been formally notified of the adjustment amount but we have learned that revenue from this source is likely to be $0.7 million below budget. The State has indicated that the City was "over advanced" for last year and that an adjustment by the State would be forthcoming. The City's per capita sales tax rate is shown in the chart below. $399 szsa sz9a 8150 $10° sso Del NOr CatlzbaE National BCapn Bcontlitlo La Meza San Gago Chula $264 $205 City $195 81]0 $148 $158 $131 Vista 898 ^ General Retail ^ Footl Protluds ^ Transportation ^Consiruction ^BUSiness bBusiness ®htiscellaneous Motor Vehicle License Fee (VLF). With the State Budget Act of 2004, the allocation of VLF revenues to cities and counties was substantially changed. For FY 2005/06 and beyond, the majority of VLF revenues for each city will grow essentially in proportion to the growth in the change in gross assessed valuation. Due to the new formula that relies on assessed valuations, the continued decline in automotive sales and the County Assessors additional adjustment of -2 percent in assessed values this revenue source has been adjusted downward by approximately $0.6 million. Franchise Fees. Franchise fee revenues are generated from public utility sources such as San Diego Gas & Electric (2% on gas and 1.25% on electricity), trash collection franchises (9.05% fee), and cable franchises (5% fee) conducting business within City limits. SDG&E is the single largest generator of franchise fees and accounts for approximately 35% of the total franchise revenues. SDG&E collects the franchise fee from Chula Vista customers and through a municipal surcharge imposed on the South Bay Power Plant based on their usage of natural gas. Due to the volatility of the price of natural gas and fluctuation in usage, this component is difficult to project. Trash franchise fees and cable fees are more predictable due to the fixed rates charged and the monthly and quarterly receipt of the revenues respectively. Revenue growth is projected based on population and inflation factors with the exception of the South Bay Power Plant, which is impacted by the cost of natural gas and the actual usage of the plant itself. The Franchise Fee revenue projection is being revised downward by $1.6 million based on two factors. Based on the most recent information on the price of natural gas, the price per unit has dropped by 51.2 percent ($7.69 Sept 08 vs. $3.75 Sept 09). In addition, the Public Utilities Commission recently ruled that only two of the power plant's four generators now have Reliability Must Run status which is also impacting projected revenues for the current fiscal year and on an on-going basis. $12.0 $10.0 $fi.0 $fi.0 $4.0 $2.0 $(z.q 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 ^ Trash/Cable ~ Energy -Consumer ®Energy -Power Plant Transient Occupancy Tax. It is too early in the fiscal year to predict how TOT will perform for fiscal year 2009-10. However, the two-month's receipts recorded so far this year show a decline of 21 percent from the prior year. The same two-month period in fscal year 2008-09 may be quite different than this year in that those months were just before the financial market meltdown and travelers may not have changed their travel plans at that point. The preliminary projection is that TOT will fall short of budget by $250,000. 1-8 QUARTERLY FINANCIAL REPORT FIRST QUARTER OF 2009-10 Page 4 of 4 Utility Users Tax (UUT). Revenues are budgeted at $8.2 million for fiscal year 2009/10. This revenue is projected to come in $0.5 million higher as a result of new UUT vendor collections. Expenditures y~~.t~~~ 5 De'artment. '~ xv. :~ °-Amended'"~!.< ' •Bud ek""-' rist Qtr, e, ~.xX ag+; t> b ~ACtua1 ;3V'.d'Ex ridedr. City Council $ 1,218,463 $ 196,620 16.1 Boards/Commissions 14,736 $ 1,880 12.8% City Clerk 1,165,554 $ 172,685 14.8% City Attorney 1,971,380 $ 321,402 16.3% Administration 1,727,479 $ 336,709 19.5% Information Technology 3,145,549 $ 863,756 2Z5% Human Resources 3,856,276 $ 1,354,706 35.1 Finance 3,164,019 $ 613,987 19.4% Non-Departmental 8,676,225 $ 4,760,274 54.9% General Services 2,403,505 $ 389,400 16.2% Planning&Building 4,107,525 $ 788,474 19.2% Police 44,039,025 $ 9,116,401 20.7% Fire 21,227,800 $ 4,652,430 21.9% Public Works 26,395,596 $ 5,194,416 19.7% Recreation 4,835,080 $ 1,154,521 23.9% Libra 5,136312 $ 1,162,005 22.6% Total $ 133,086,524 $ 31,079,666 23.4% The General Fund's Amended Budget reflects the Council adopted budget of $133.0 million and all mid- year appropriations ($120,500) approved by City Council. Actual expenditures to date are reflected in the chart above. It indicates that Departments have expended 23.4 percent of the General Fund budget after 25 percent of the fiscal year has elapsed. ~ De artment. ~. Amended w:x Bud et.N' ,~ Projected e °~' °'=t fdr i'e~r End. :Delta`=' Ciry Council $ 1,218,463 $ 1,157,702 $ 60,761 BoardslCommissions 14,736 14,736 - City Clerk 1,165,554 1,160,310 5,244 City Attorney 1,971,380 1,886,048 85,332 Administration 1,727,479 1,681,156 46,323 Information Technology 3,145,549 3,082,281 63,268 Human Resources 3,858,276 3,758,929 99,347 Finance 3,164,019 2,978,503 185,516 Non-Departmental 8,676,225 8,309,064 367,161 Animal Care Facility 2,403,505 2,236,982 166,523 Planning & Building 4,107,525 4,107,525 - Police 44,039,025 43,967,616 71,409 Fire 21,227,800 21,882,562 (654,762) Public Works 26,395,596 25,767,831 627,765 Recreation 4,617,080 4,567,810 49,270 `Nature Center 218,000 519,630 (301,630) Libra 5,136,312 4,780,287 356,025 Total $ 133,086,524 $ 131,858,971 $ 1,227,553 The table shows the General Fund departments with their amended budgets and the projected expenditures for the fiscal year. The projected expenditures anticipate savings of approximately $1.2 million. Mid-Year Budget Amendments Mid-year appropriations during the quarter totaled $120,500 with offsetting revenues of $6,500 for a net negative impact of $114,000. The appropriations were for a San Diego Police Foundation Grant for the purchase of a narcotics detection canine. The other two appropriations are related to an initiative for "Fair and Open Competition in Contracting Ordinance' to be placed on the June 8, 2010 General Municipal Election ballot. `µ ~µ_ .e Cy., 5 : K Y ~ a. c~ ~ ~ ~ im ~ y 4~,w~a 4' '~ ~ F N9L u m 1 .a~~ k- ndment9 r 6 ud at A . .. Revenue . Ez endtture s. 5ct 1 . SD Polica Fountlation Grant $6,500 $6,500 $0 Contracting Initiative Ballot Measure $0 $93,000 ($93,000) Coun of SD Re istrar of Voters $0 $21,000 $21,000 Total of lst Quarter Bud et Amendments $8500 $180,500 $114000 Budget Transfers There were three administrative budget transfers during the first quarter that totaled $9,196. -..Oeamnent ,L*-„'-Fmm ~ aTO. '.~-a,°' "::-04scd on Amount Flre Dept Personnel 585 AdjustmeMS to SBS BUtlget 7,314 Ciry Cwncil Ulilities 585 AtljustmeMS to 58S BUtlget 15d C Council Personnel 585 Communication Services 1 720 .$+'.- ~~ Tohl ofiat Quarter 6utl et Trans(en '--39196 1-9 RESOLUTION NO. 2009- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA AMENDING FISCAL YEAR 2009/2010 BUDGET 1N ACCORDANCE WITH THE COUNCIL POLICY ON FINANCIAL REPORTING AND TRANSFER AUTHORITY AND APPROPRIATING AMOUNTS TO THE FIRE EQUIPMENT REPLACEMENT FUND AND FROM THE AVAILABLE FUND BALANCE IN THE POLICE GRANTS FUND WHEREAS, the Council Policy established in January 1996 allows for budget transfers to be completed; and WHEREAS, the Police Department is requesting to amend the budget for the K-9 Program by freezing one police officer position and restoring overtime and supplies & services related to the program; and WHEREAS, this budget transfer reduces personnel services by $20,547 and increases supplies and services by $20,547, resulting in no net fiscal impact to the General Fund; and WHEREAS, the Fire Department is requesting to amend the budget to incorporate the budget changes necessary to reflect the side letter with IAFF; and WHEREAS, the budget transfers amend the Fire Department budget to include various transfers within the Fire Department's Personnel Services category to reflect a 1% salary reduction for IAFF members, freezing a Deputy Fire Chief, transferring savings from compensatory time in lieu, eliminating the payment of uniform allowance, and increasing anticipated salary savings; and WHEREAS, the additional changes necessary to reflect the side letter with IAFF include: Transferring $172,216 from the Transfer Out expense category to the Fire Department's Personnel Services category reelecting the elimination of the debt service payment for the defibrillators from the Fire Department's budget and transferring $35,000 from the Human Resources Department's Personnel Services Category to the Fire Department's Persomtel Services Category to reflect the elimination of the IAFF professional enrichment budget for the current fiscal year, and WHEREAS, total Fire Department transfers equal $1,000,216 and will be restored to the Fire Department's constant minimum staffing overtime budget offset by committed savings in other expenditure categories; and WHEREAS, the proposed budget changes include the transfer of an Administrative Services Manager position from the Fire Department to the Finance Department; and WHEREAS, in total, $87,452 will be transferred from the Fire Department's personnel services budget to the Finance Department's personnel services budget, and 1-10 Resolution No. 20 LO- Page 2 WHEREAS, the Police Department is requesting to appropriate additional funds to reflect grant savings from fiscal year 2008/2009 that were not carried over to the current fiscal year, and WHEREAS, this budget amendment increases $157,744 in personnel services, increases $12,900 in supplies and services, and decreases $21,764 in the capital category of the Police Grant Fund (fund 252), and WHEREAS, grant funding in the amount of $148,880 will completely offset these appropriations, resulting in no net fiscal impact to the Police Grant Fund, and WHEREAS, the Fire Department is requesting the establishment of a Fire Equipment Replacement Fund, and WHEREAS, this fund will account for the revenue received from AMR for the lease of the defibrillators, and WHEREAS, earlier this year Council approved an amendment to the ambulance service agreement with AMR to incorporate the cost of the defibrillators in the ambulance fees, and WHEREAS, the appropriation of $172,216 to the newly established fund will be revenue offset resulting in no net impact to the Fire Equipment Replacement Fund. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista amends the City's fiscal year 2009-2010 budget in accordance with the Council Policy on Financial Reporting and Transfer Authority and appropriates $148,880 from the available fund balance of the Police Grant Fund and appropriates $172,216 to the newly established Fire Equipment Replacement Fund. Presented by Approved as to form by Maria Kachadoorian Director of Finance/Treasurer 1(/a' 2 1-11 ITY COUNCIL STATEMENT ~~rii ~~ CITY OF CHULA VISTA NOVEMBER 5, 2009, Item ~ ITEM TITLE: UPDATE OF THE CITY'S FISCAL HEALTH PLAN RELATED TO DEBT RESTRUCTURING OPTIONS SUBMITTED BY: DIRECTOR OF FINANCE/TREASURER CITY MANAGER REVIEWED BY: ASSISTANT CITY MANAGER 4/STHS VOTE: YES ~ NO ^X SUMMARY On January 20, 2009, the City Council endorsed the City Manager's "Fiscal Health Plan" which included the review of the outstanding debt obligations to ensure that the City will continue to meet its debt obligations and minimize the impacts to City services. ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that contemplating the restructuring of the City's debt service is not a "Project" as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change to the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the actions proposed are not subject to CEQA. RECOMMENDATION That the City Council consider the debt restructuring options as recommended under the Fiscal Health Plan. BOARDS/COMMISSION RECOMMENDATION Not Applicable 2-1 NOVEMBER 5, 2009 Page 2 of 9 DISCUSSION Background Fiscal Health Plan In January 2009, the City Council endorsed the City Manager's "Chula Vista Fiscal Health Plan" which provided an outline to preserve City services, mitigate the current budget issues, and provide long-term financial stability for the City of Chula Vista. The Fiscal Health Plan is comprised of the following major components: 1. Reduce Operating Expenditures 2. Increase Revenues 3. Economic Development and Job Creation 4. Budget Reforms Since the development of the Fiscal Health Plan, the City has taken steps in implementing the plan and begins to put the City back on strong financial standing. As noted above, one of the components of the fiscal health plan was to implement budget reforms. Some of the specific actions recommended in the short term included implementation of a zero-based budget process, establishing cross departmental analyst support, updating the existing General Fund reserve policy, and restructuring current debt obligations. Evaluating the feasibility of restructuring the debt obligations is being recommended at this time because the significant slow down in development has created a cash flow issue in the Public Facilities Development Impact Fee (PFDIF) fund. If the restructuring of the PFDIF debt is not pursued the General Fund would need to assume the PFDIFs debt obligation. Over the last few years, Council has taken decisive actions to address the changing economic picture and the impact it has on the General Fund and the services the City is able to deliver to the community. Adding the PFDIF debt service to the General Fund would likely trigger additional program and service reductions. For this reason, staff is recommending pursuing other alternatives. PFDIF Program In 1991, the City Council approved the creation of the Public Facilities Development Impact Fee ("PFDIF") program which would generate funds paid by new development to fund the construction and acquisition of public facilities and equipment, using cash on hand, long-term debt fmancing, or a combination thereof. A total of $99 million has been spent from the PFDIF program funding fire stations, recreation centers, a library and related equipment on a cash basis. The City financed the construction of the new Corporation Yard and the Police Facility with the debt service payments split between the PFDIF program and the General Fund. As a result of the significant reduction in development-related fees currently being collected, the City is anticipating restructuring a portion of the debt related to its PFDIF obligations. The City anticipates that this modification will provide necessary cash flow relief to the PFDIF fund during this severe downturn in development as well as spare the General Fund from paying the PFDIF share of the debt. Additional information on the City's PFDIF program is included under Attachment A. 2-2 NOVEMBER 5, 2009 Page 3 of 9 The Public Facilities Development Impact Fee (PFDIF) fund's annual debt service requirement is approximately $5.2 million. The PFDIF fund met its debt service commitment m fiscal year 2008- 09 & 2009-10 through an interfund loan from the Transportation Development Impact Fee (TDIF) fund. Without the inter-fund loan the General Fund would be required to make the debt service payments on behalf of the PFDIF fund, which would have a significant impact on the City's General Fund. The interfund loans from the TDIF approved to date are not anticipated to impact capital project construction timing. A debt restructuring was not proposed at the time of the approval of the inter-fund loans due to the severe challenges surrounding the financial markets. Additional interfund loans are not recommended due to the potential to impact scheduled transportation projects. Due to the economic downturn over the past two years the General Fund budget has been reduced by more than $37 million. Any added costs would have a severe impact on the City's ability to maintain services. At this time, a modification of the PFDIF's debt is recommended with the objective of generating cash flow relief for approximately three years as well as reduced annual debt payments through fiscal year 2012-13 at which time the City's Pension Obligation Bonds (POB) debt is paid off and the 2002 COPS are eligible for refunding. Staff has worked with the City's Financial Advisor to review all outstanding PFDIF debt obligations and identify the bond issuances most appropriate for restructuring and/or refunding. Following this review, the debt related to the Corporation Yard (2000 COP), the Police Facility (2002 COP) and the potential to issue COPS to reimburse the PFDIF fund for expenses incurred related to the Civic Center have been identified as viable options to provide cash flow relief to the PFDIF fund. It should be emphasized that the intent of the restructuring is to provide the PFDIF fund with cash flow relief for the next three years, not a reduction in the total debt. This modification of existing debt is expected to increase the PFDIF's total debt service payments by approximately $27.6 million that includes $17.6 million in financing costs over the next 22 years. The net present value of the financing costs is $1.6 million. The debt will be structured to allow the City the opportunity to call bonds (payoff early) as development returns to minimize the overall debt to the PFDIF program through build out. Debt Restructuring Proposal Staff is working with the City's Financial Advisor to develop a financing plan that provides the desired cash flow relief to the PFDIF over the next three years (FY 2011 to FY 2013). The restructuring plan involves three steps: 1. Issue COPS to reimburse the PFDIF fund for cost incurred in completing the Civic Center Expansion. 2. Refund the 2000 COPs (Corporation Yard) which are currently callable and may generate annual debt service savings (cash flow savings) by extending the term of the debt out an additional 10 years. 2-3 NOVEMBER 5, 2009 Page 4 of 9 3. Review refinancing options related to the 2002 COPs (Police Facility) before call date of August 1, 2012. Staff is suggesting that the City implement athree-step process with the first two steps taking place in the current fiscal year. The final step will involve the refunding of the 2002 COP which the City may restructure after August of 2012, when the 2002 COPs can be called (i.e. refunded). This three-step process should both minimize the cost of restructuring and provide a clearer outlook as to how much the PFDIF fund will be able to afford in annual debt payments once the real estate market has recovered. These financing options are currently being reviewed by Bond Counsel to determine if they are in compliance with federal tax laws. Final recommendations will be presented for Council consideration and approval at a future City Council meeting along with final bond documents and legal opinions. Restructuring Summary The City is considering issuing two series of bonds: PFDIF Reimbursement COPS and Refunding COP Corporation Yard, which should provide the PFDIF fund with cash flow relief through FY 2012-2013. The cash flow analysis included under Attachment B provides an analysis of the cash flows for existing debt service obligations and the projected cash flows with the proposed restructuring. If the City is unable to issue the Reimbursement COPS, the 2002 COPs will be included as part of the restructuring proposal which will be more expensive as discussed below. Step 1. Civic Center COPS Reimbursement Under this option the City would "reimburse" the PFDIF fund for approximately $10 million in Phase III City Hall Improvements previously paid from PFDIF funds. The proceeds from the new money issue would be available to the PFDIF fund to enable it to make debt service payments. This option is the least costly since it allows the City to issue traditional current interest bonds with capitalized interest on a tax- exempt basis. The preliminary estimated additional debt service obligations to the PFDIF fund will be approximately $22.0 million that includes $12.0 million in financing costs. The net present value of the financing costs is $1.8 million. Step 2. 2000 Certificates of Participation -Corporation Yard In October 2000, the Chula Vista Public Financing Authority (Authority) issued $25,255,000 in 2000 Certificates of Participation Series A ("2000 COPS"), to provide funds to improve the City's 800 Megahertz emergency communications system, improve the City's Corporation Yard, finance a reserve account for the certificates, and pay the costs of issuance incurred in connection with the execution and delivery of the certificates. The 2000 COPs are backed by a pledge of the City's General Fund. 2-4 NOVEMBER 5, 2009 Page 5 of 9 The certificates mature in amounts ranging from $855,000 in 2001 to $1,790,000 in 2020. Interest is payable semi-annually on March 1 and September 1, at interest rates ranging from 4.25% to 5.25%. The certificates maturing after September 1, 2010, are subject to redemption at premiums ranging from zero to 2%. The outstanding balance at October 30, 2009 is approximately $15.64 million. Since the City needs to significantly reduce the PFDIF debt service payments over the next few years, the term of the bonds are proposed to be extended out an additional 10 years to provide the cash flow savings necessary to meet debt obligations. The preliminary estimated additional debt service obligations to the PFDIF fund of approximately $5.6 million at a net present value savings of $200,000. Step 3. Review Restructuring Option for 2002 Certificates of Participation -Police Facility In June 2002, the Chula Vista Public Financing Authority issued $60,145,000 in 2002 Certificates of Participation ("2002 COPS") to finance the construction of the City's Police Headquarters and an adjoining parking structure. The 2002 COPS are backed by a pledge of the City's General Fund. The certificates mature in amounts ranging from $1,125,000 in 2005 to $3,870,000 in 2032. Interest is payable semiannually on February 1 and August 1, at interest rates ranging from 4.50% to 5.0%. As of October 30, 2009 the outstanding balance is approximately $54.1 million. The 2002 COPs are not callable until 2012, but if the City is unable to issue a COP to reimburse for the Civic Center Phase III project the City may have to look at restructuring a series of 2002 COPs prior to the call date. The restructuring would include a "window" of time to include the principal and interest for the period 2/1/2010 to 8/1/2012. In order to create the required "window", the City will need to fund $10.9 million in scheduled payments over the next 6 debt service payments dates. In a new money bond issue, this is typically accomplished through the use of capitalized interest. However, the IRS effectively prohibits the use of capitalized interest on refunding bonds. Therefore, the City will have to issue taxable COPS with capitalized interest to pay debt service. The additional debt service obligations to the PFDIF fund under this option would be approximately $ 19.0 million at a net present value cost of $12.0 million. This option is more costly than seeking a reimbursement issuance for the Civic Center Phase III and should onl~be considered if absolutely necessary DECISION MAKER CONFLICT Staff has reviewed the property holdings of the City Council and has found a conflict exists, in that Council Member Castaneda has property holdings within 500 feet of the boundaries of the property, which is the subject of this action. CURRENT YEAR FISCAL IMPACT 2-5 NOVEMBER 5, 2009 Page 6 of 9 If the City successfully restructures the 2000 COPs by February 2010, the PFDIF fund can realize $384,000 in cash flow savings in the current fiscal year. All costs associated with the Financial Advisor, Bond Council, and Underwriter will be paid out of the bond issuance and not existing reserves. ONGOING FISCAL IMPACT The cost of restructuring the debt will largely depend on the market conditions, interest rates, credit rating, market demand, insurance coverage and actual structure achieved at the time the bonds are sold. At this time, based on assumptions regarding the market, the restructuring of the 2000 COPs will result in a net cost of $5.6 million over the term of the debt or a net present value savings of $200,000. The cost of issuing a COP to reimburse the PFDIF fund for the Civic Center Phase III project would result in a net cost of $12.0 million or a net present value of $1.8 million. The additional financing cost would also impact the PFDIF fee by approximately $375 per EDU. The actual impacts to the fee will be determined during the next fee update which will take into account other expenditure adjustments and changes to the planned development. Approval of this item authorizes the Finance Director to develop restructuring options as discussed in the report. Staff anticipates returning with financing documents requesting final City Council consideration seeking the restructuring of the debt by the end of the calendar year. Future restructurings may likely be necessary in order to level out the debt. If the City does not pursue the restructuring options or is unable to successfully restructure the debt, the General Fund will be obligated to begin making the debt service payments on behalf of the PFDIF fund beginning in fiscal year 2010-11 of approximately $5.2 million annually. Attachments A -PFDIF Program B -PFDIF Cash Flow Projections Prepared by.• Maria Kachadoorian , Director of Finance, Finance Department 2-6 NOVEMBER 5, 2009 Page 7 of 9 Attachment A -PFDIF Program The Public Facilities Development Impact Fee (PFDIF) program was established in 1991. The fee program is a cost spreading mechanism, ensuring that development mitigates its impacts on public facilities. All development projects in the City that generate additional demand for services are required to pay a PFDIF fee in conjunction with the building permit process. The PFDIF program then uses these fees to fmance the construction and acquisition of public facilities and equipment, using cash on hand, long-term debt financing, or a combination thereof. The fee program was last comprehensively updated in 2006. At that time, future program expenditures were estimated at $250.8 million. The future cost assumed in the 2006 PFDIF Update was a combination of debt service payments, direct project expenditures (cash on hand), capital equipment acquisitions, and program administration. The table below summarizes the future PFDIF expenditures included in the 2006 PFDIF Update by type. PFDIF Program Future Expenditures per 2006 Update (Millions) Debt Service Expenditures $ 132.6 CIP Projects $ 95.5 Non-CIP Expenditures $ 22.7 Total PFDIF Expenditures $ 250.8 The future program cost was spread over future anticipated development, including 27,320 residential units and 1,400 commercial and industrial acres. Over a 25 year period (fiscal year 2005-06 through buildout in fiscal year 2029-30) this equates to an average of over 1,000 residential units annually. Of the total $250 million in future expenditures included in the 2006 PFDIF Update, $132.6 million in costs were associated with debt repayments. At that time, the residential permits paying fees annually required to meet the PFDIF's debt obligation was estimated at approximately 600 units. In light of the historic levels of development in the City and the significant number of future units to be built in the City by fiscal year 2029-30, it was reasonable to consider this level of development would continue in the future. The City's historic residential permit activity is illustrated in the chart below. Annual Residential Permits IssuedX 4,000 3,500 3,000 _Ayg 1991-2005:_ - _ __ 2,500 ......1,710 Units __ Avg 2006-2009: 2,000 _ -735 Units. 1,500 10 ^ 0 ~~.~~.. 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 *1991 through 1997 data is per calendar year; 1998 through 2009 data is per fiscal year. 2-7 NOVEMBER 5, 2009 Page8of9 For those projects which had already been constructed, the program reflects the actual cash expenditures or debt service obligations. For facilities not yet constructed in 2006, construction and financing costs were estimated. Overall, the PFDIF's funding priorities are to first meet external debt obligations, then internal debt obligations, and finally to construct new facilities and acquire additional capital equipment. In total, the PFDIF program reflects tax exempt financing (debt issuance) for the construction and/or acquisition of eight facilities: 1. Corporation Yard - 2000 COP A 2. Police Facility - 2002 COP 3. 800 Megahertz Radio System - 2003 Refunding COP 4. CAD (Computer Aided Dispatch) System - 2003 Refunding COP 5. Fiscal System - 2003 Refunding COP 6. Civic Center - Adamo Property Acquisition 7. Civic Center -Phase I 8. Civic Center -Phase II 9. Civic Center -Phase III (actually funded on a cash basis) All other projects (either previously constructed or planned for construction) have been financed using cash on hand. The future major facilities to be constructed were prioritized in the 2006 Update in the following order: 1. Rancho del Rey Library 2. EUC Fire Station 3. EUC Library 4. Otay Ranch Village 4 Recreation Facility 5. Otay Ranch Village 4 Aquatic Facility In order to meet its current debt obligation, the PFDIF must collect fees from approximately 700 residential units annually. As a result of the recent downturn in the development market, the City has not issued sufficient permits to meet this annual debt obligation since fiscal year 2006-07. Development is not anticipated to return to the levels necessary to meet the debt obligation for possibly several years. It is therefore necessary to restructure existing PFDIF debt to reduce the annual external debt payments in the short term, allowing time for development to recover. An analysis showing projected cash flow for the PFDIF with and without the proposed restructuring is included as Attachment B. 2-8 NOVEMBER 5, 2009 Page 9 of 9 Attachment B -PFDIF Cash Flows - NO DEBT Beginning Cash Balance (2,280,529) (1,559,692) (5,742,751) (11,148,577) Revenues Loan from TDIF 5,300,581 - - - Projected DIF Fee Revenue* 695,794 1,000,000 1,250,000 1,500,000 Total Revenues 5,996,375 1,000,000 1,250,000 1,500,000 Expenditures External Debt Service (5,275,538) (5,183,059) (5,185,826) (5,186,023) Repay TDIF Loan' - - (1,470,000) (1,428,000) CIP & Non-CIP Exp. - - - - Total Expenditures (5,275,538) (5,183,059) (6,655,826) (6,614,023) Ending Cash Balance (1,559,692) (5,742,751) (11,148,577) (16,262,600) - RECOMMENDED DEBT RESTRUCTURIN Beginning Cash Balance $ (2,280,529) $ (1,175,201) $ - $ - Revenues Loan from TDIF $ 5,300,581 $ - $ - $ - Projected DIF Fee Revenue* $ 695,794 $ 1,000,000 $ 1,250,000 $ 1,500,000 Civic Center Phase III ReimbZ $ - $ 4,268,555 $ 4,321,973 $ 1,409,472 Total Revenues $ 5,996,375 $ 5,268,555 $ 5,571,973 $ 2,909,472 Expenditures External Debt Service $ (4,891,047) $ (4,093,354) $ (4,101,973) $ (4,101,443) Repay TDIF Loan' $ - $ - $ (1,470,000) $ (1,428,000) CIP & Non-CIP Exp. $ - $ - $ - $ - Total Expenditures $ (4,891,047) $ (4,093,354) $ (5,571,973) $ (5,529,443) Ending Cash Balance $ (1,175,201) $ - $ - $ (2,619,971) *Projected fee paying multi family units 85 120 1 SO 180 1. Annual inter-fund loan repayments from the PFDIF fund to TDIF fund are projected at $1.4 million atmually beginning in fiscal year 2011-12. 2. Projected Civic Center Phase III reimbursements total $10 million. The actual reimbursement amount per year may vary from the above estimate. All reimbursement monies will be applied to existing debt service payments through fiscal year 2012-13 NOTES: Cash flow relief of approxunately $13.6 million (represents 3 years of bonded debt payments) is projected to result from the restructuring. Cash flows reflect the City's Fee Deferral Program which is expected to expire in December 31, 2010. The exception is the EUC which is eligible to defer their DIF obligations for their entire project but payable upon occupancy. The final debt payment for the City's Pension Obligation Bonds (POBs) will occur in fiscal year 2011-12. After this period, approximately $2.6 million may be available to pay the PFDIF's share of debt payments without impacting the City's General Fund. This option will be evaluated at the tune of the bond restructuring anticipated in fiscal year 2012- 13. 2-9 CITY COUNCIL AGENDA STATEMENT J ~~~ cnv of CHULAVISTA NOVEMBER 5, 2009, Item 3 ITEM TITLE: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AGREEMENT WITH THE INVESTMENT BANKING FIRM OF E.J. DE LA ROSA & CO., INC. TO PROVIDE UNDERWRITING SERVICES FOR RESTRUCTURING OF CITY BONDED DEBT IF DEEMED ECONOMICALLY FEASIBLE RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA WAIVING THE FORMAL CONSULTANT SELECTION PROCESS AS IMPRACTICAL AND APPROVING AN AGREEMENT WITH STRADLING, YOCCA, CARLSON & RAUTH FOR BOND AND DISCLOSURE COUNSEL SERVICES SUBMITTED BY DIRECTOR OF FIN N REASURER~ CITY MANAGER~N~ REVIEWED BY: ASSISTANT CITY ANAGER 4/STHS VOTE: YES ~ NO SUMMARY As a result of the significant reduction in development-related fees currently being collected, the City is anticipating restructuring a portion of the debt related to its Public Facilities Development Impact Fees ("PFDIF") obligations. The City will consider options to restructure the 2000 - Corporation Yard Certificates of Participation (COP) and 2002 -Police Facility COP and issuing new money to reimburse the Public Facilities Development Impact Fee fund for expenditures for Phase III of the Civic Center project. The City anticipates that this restmcturing will enable it to better meet its long-term financial goals. A Request for Proposal (RFP) was issued on September 2, 2009 for investment banking and bond- underwriting services anticipating the possible restructuring of City bonded debt. The RFP closed on September 21, 2009 and yielded thirteen proposals. ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that approving the agreements 3-1 NOVEMBER 5, 2009, Item ~ Page 2 of 4 aze not a "Project" as defined under Section 15378 of the State CEQA Guidelines because it will not result in a physical change to the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the actions proposed are not subject to CEQA. RECOMMENDATION Council adopts the resolutions. BOARDS/COMMISSION RECOMMENDATION: Not applicable. DISCUSSION On September 2, 2009, the City issued a Request for Proposal (RFP) for investment banking and underwriting services for restructuring the 2000 -Corporation Yard Certificate of Participation (COP) and 2002 -Police Facility COP. The RFP was advertised in the Star News, a local publication as well as through the Internet on Planet Bids. Additionally many underwriting firms were contacted and invited to participate in this process. In total, thirteen proposals from national and regional municipal investment banking and underwriting firms were received. A five-member Selection Committee consisting of the City's Director of Finance, Assistant Director of Finance, Treasury Manager, Fiscal and Management Analyst and the City's Financial Advisor was created for the selection process. After reviewing all thirteen proposals, the panel selected four firms to interview. The four firms interviewed were: • Bank of America/Merrill Lynch • E. J. De La Rosa & Co., Inc. • Southwest Securities • Royal Bank of Canada Capital Markets The selection criteria was based on: • Experience with restructuring municipal bonded indebtedness • Proposed restructuring approach for the City's Public Facilities Development Impact Fee debt obligations • Proposed Marketing Plan for selling the bonds to investors • Professional qualifications of key personnel assigned to the City • Proposed credit and rating agency strategy • Cost of services based on the dollar cost per $1,000 of bonds issued The top four rated proposers were interviewed by the Selection Committee. Following this process, the Committee unanimously agreed to recommend the selection of De La Rosa & Co., Inc. (DLR). 3-2 NOVEMBER 5, 2009, Item 3 Page 3 of 4 DLR has significant experience as an investment banker having underwritten 60 lease revenue/Certificates of Participation financings since 2006 having an aggregate par amount of $3.2 billion. Although all four finalists are capable of handling any contemplated debt restructuring, the Committee felt that DLR was more focused on the City's goals to minimize the costs of restructuring. Furthermore, DLR is very familiar with the City of Chula Vista having worked on previous bond issuances for the City as well as the County and City of San Diego, the San Diego Association of Governments, the San Diego Unified School District and the San Diego Community College District. DLR was also impressive in presenting their mazketing approach and distribution plan for selling the bonds. DLR's mazketing plan expects the City will receive strong demand from a balanced mix of retail and institutional investors. DLR's marketing approach is designed to expand the investor base for the City's bonds and engage investors early to maximize retail participation. This will be accomplished by: • Early distribution of the preliminary official statement • Employing a local marketing plan and education campaign to maximize local retail demand • Holding a retail order period • Tazgeting high net worth investors and money managers • Targeting top institutional investors • Committing to underwrite (purchasing) unsold bonds In addition, DLR offered the second lowest pricing at $7.36 per $1,000 issued. This compared favorably to Bank of America ($9.36) and Southwest Securities ($8.23). The Royal Bank of Canada had the lowest cost of the four finalists at $4.90. DLR was chosen based on their proposal, responses during the interview process and favorable pricing structure. The following paragraphs provide a brief overview of the firm and results of the Redevelopment Agency s most recent bond issuance with DLR. De La Rosa & Co. is a California-based investment banking services firm with full-service offices in Los Angeles and San Francisco. The firm is a top ranking municipal bond underwriter in California. De La Rosa & Co. is the only major firm serving California municipal issuers that focuses exclusively on the California municipal bond market. The firm has over 20 years of investment banking experience in bond underwriting, transportation financings, and redevelopment and land-secured projects. In July 2008, DLR served the RDA as Senior Manager on its 2008 Tax Allocation Bond restructuring. DLR assisted the RDA in obtaining an underlying credit rating up rg ade from Standard & Poors (from A- to A) and securing an insurance commitment from FSA, which allowed the City to generate cash flow and budgetary savings to the General Fund. DLR aggressively priced the City's bonds during a tumultuous time in the market, underwriting (DLR used their capital to purchase the unsold bonds) $11 million of unsold bonds on the day of pricing to achieve a 4.93% TIC (true interest cost) for the bonds issued. 3-3 NOVEMBER 5, 2009, Item 3 Page 4 of 4 Stradling, Yocca, Carlson & Rauth Agreement for Bond and Disclosure Counsel Services The law firm of Stradling, Yocca, Carlson and Rauth has served as the City's bond counsel for the City's Certificates of Participation and Tax Allocation Bond refundings and restructurings since 1997. Bond counsel has also served as disclosure counsel to the City assisting in the preparation of the Official Statements for the financings. Bond counsel has also provided various post-issuance services at the request of the City. Most recently Bond counsel represented the City before the Internal Revenue Service for the audit of the bond proceeds from the 2004 Certificates of Participation -Civic Center Phase 1. The audit concluded favorably to the City in all respects. Waiving the consultant selection process for bond counsel makes sense for the following reasons. First, in connection with the proposed restructuring, Bond counsel has intimate knowledge of how the original financings were structured and this historical information puts them in a unique position to advise the City on the most optimal restructuring alternatives. Second, retaining Bond counsel will provide continuity for the City in legal advice for the preparation of Official Statements. In recent years, the Securities and Exchange Commission has emphasized the importance of municipal disclosure. Bond counsel is a very experienced firm on disclosure matters ranking first in California and second in the country last year in the disclosure counsel rankings. Third, Bond counsel has provided excellent service to the City throughout the term of its contract always meeting deadlines and supporting staff throughout the financing process. DECISION MAKER CONFLICT Staff has reviewed the property holdings of the City Council and has found a conflict exists, in that Council Member Castaneda has property holdings within 500 feet of the boundaries of the property, which is the subject of this action. CURRENT YEAR FISCAL IMPACT There is no direct fiscal impact to the General Fund as a result of the recommended action. The fiscal impact upon future debt issues will vary depending on the size and type of the issue. All costs to be incurred will be paid solely from the proceeds of each particular transaction and therefore become part of the long-term debt cost of issuance. ONGOING FISCAL IMPACT There is no anticipated ongoing fiscal impact by approving this action. Prepared by Phillip Davis, Assistant Director, Finance Department 3-4 RESOLUTION NO.2009- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA APPROVING AN AGREEMENT WITH THE INVESTMENT BANKING FIRM OF E.J. DE LA ROSA & CO., INC. TO PROVIDE UNDERWRITING SERVICES FOR RESTRUCTURING OF CITY BONDED DEBT, IF DEEMED ECONOMICALLY FEASIBLE WHEREAS, as a result of the significant reduction in development-related fees currently being collected, the City is anticipating restructuring a portion of the debt related to its Public Facilities Development Impact Fees ("PFDIF") obligations; and WHEREAS, the City anticipates that this restructuring will enable it to better meet its long-term financial goals; and WHEREAS, a Request for Proposal (RFP) was issued on September 2, 2009 for investment banking and bond underwriting services anticipating the possible restructuring of City bonded debt; and WHEREAS, the RFP closed on September 21, 2009 and yielded proposals from thirteen municipal investment banking and underwriting firms; and WHEREAS, afive-member Selection Committee consisting of the City's Director of Finance, Assistant Director of Finance, Treasury Manager, Fiscal and Management Analyst and the City's Financial Advisor was created for the selection process; and WHEREAS, the Committee selected four of the thirteen firms to interview and unanimously agreed to recommend the selection of E.J. De La Rosa & Co., Inc. (DLR); and WHEREAS, DLR has significant experience as an investment banker having underwritten 60 lease revenue/Certificates of Participation financings since 2006 having an aggregate par amount of $3.2 billion; and WHEREAS, the Committee felt that DLR was more focused on the City's needs based on their business philosophy of dealing only in California public finance; and WHEREAS, DLR is very familiar with the City of Chula Vista having worked on previous bond issuances for the City as well as the County and City of San Diego, the San Diego Association of Governments, the San Diego Unified School District and the San Diego Community College District; and WHEREAS, DLR offered the second lowest pricing at $7.36 per $1,000 issued; and WHEREAS, DLR is a California-based investment banking services firm with full- service offices in Los Angeles and San Francisco; and WHEREAS, the firm is a top ranking municipal bond underwriter in California; and 3-5 Resolution No. 2009- Page 2 WHEREAS, DLR is the only major firm serving California municipal issuers that focuses exclusively on the California municipal bond market; and WHEREAS, the firm has over 20 years of investment banking experience in bond underwriting, transportation financings, and redevelopment and land-secured projects; and WHEREAS, in July 2008, DLR served the City as Senior Manager on its 2008 Tax Allocation Bond restructuring; and WHEREAS, DLR assisted the City in obtaining an underlying credit rating u rade from Standard & Poors (from A- to A) and securing an insurance commitment from FSA, which allowed the City to generate cash flow and budgetary savings to the General Fund; and WHEREAS, DLR aggressively priced the City's bonds during a tumultuous time in the market, underwriting $11 million of unsold bonds (DLR used their capital to purchase the unsold bonds) on the day of pricing to achieve a 4.93% TIC (true interest cost) for the bonds issued; and WHEREAS, the City Council has found that DLR was selected in accordance with the requirements of Chula Vista Municipal Code section 2.56.110. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista approves an Agreement with the investment banking firm of E.J. De La Rosa & Co., to provide underwriting services for restructuring of City bonded debt, if deemed economically feasible, a copy of which is on file in the office of the City Clerk. Presented by Maria Kachadoorian Director of Finance/Treasurer Approved as to form 3-6 2 RESOLUTION N0.2009- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA WAIVING THE FORMAL CONSULTANT SELECTION PROCESS AS IMPRACTICAL AND APPROVING AN AGREEMENT WITH STRADLING, YOCCA, CARLSON & RAUTH FOR BOND AND DISCLOSURE COUNSEL SERVICES WHEREAS, as a result of the significant reduction in development-related fees currently being collected, the City is anticipating restructuring a portion of the debt related to its Public Facilities Development Impact Fees ("PFDIF") obligations; and WHEREAS, the City anticipates that this restructuring will enable it to better meet its long-term financial goals; and WHEREAS, a Request for Proposal (RFP) was issued on September 2, 2009 for investment banking and bond underwriting services anticipating the possible restructuring of City bonded debt; and WHEREAS, the law firm of Stradling, Yocca, Carlson and Routh ("SYCR") has served as the City's bond counsel for the City's Certificates of Participation and Tax Allocation Bond refunding and restructuring since 1997; and WHEREAS, SYCR has also served as disclosure counsel to the City assisting in the preparation of the Official Statements for the financings and has provided various post-issuance services at the request of the City; and WHEREAS, most recently SYCR represented the City before the Internal Revenue Service for the audit of the bond proceeds from the 2004 Certificates of Participation -Civic Center Phase 1 and the audit concluded favorably to the City in all respects; and WHEREAS, in connection with the proposed restructuring, SYCR has intimate knowledge of how the original financings were structured and this historical information puts them in a unique position to advise the City on the most optimal restructuring alternatives; and WHEREAS, retaining SYCR will provide continuity for the City in legal advice for the preparation of Official Statements; and WHEREAS, in recent years, the Securities and Exchange Commission has emphasized the importance of municipal disclosure; and WHEREAS, SYCR is very experienced on disclosure matters ranking first in California and second in the country last year in the disclosure counsel rankings; and WHEREAS, SYCR has provided excellent service to the City throughout the term of its contract always meeting deadlines and supporting staff throughout the financing process. 3-7 Resolution No. 2009- Page 2 NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Chula Vista waives the formal consultant selection process as impractical and approving an Agreement with Stradling, Yocca, Cazlson & Rauth for bond and disclosure counsel services. Presented by Approved as to form Mazia Kachadoorian Director of Finance/Treasurer 3-8 THE ATTACHED AGREEMENT HAS BEEN REVIEWED AND APPROVED AS TO FORM BY THE CITY ATTORNEY'S OFFICE AND WILL BE FORMALLY SIGNED UPON APPROVAL BY THE CITY COUNCIL \~I . 1t~I' j (l CeLt) ~rt C. iesfeld . City Attorney Dated: \ I~ fJCJ AGREEMENT BETWEEN THE CITY OF CHULA VISTA AND PUBLIC FINANCING AUTHORITY OF THE CITY OF CHULA VISTA AND E.J. DE LA ROSA & CO., INC. Parties and Recital Page(s) Agreement bctween City ofChula Vista and Public Financing Authority of the City ofChula Vista and E. J. De La Rosa & Co., Inc. for Bond Underwriting Services related to (a) refunding the 2000 and 2002 Certificates of Participation, (b) refunding of any other outstanding 2010 and 2011 maturities, and (c) issuancc of new money Certificates of Participation, Bond Anticipation Notes or other ncw money financing vehicles any or all of which may be issued to meet the City's desired debt restructuring objectives. This agreement ("Agreement"), dated November 5, 2009 for the purposes of reference only, and effective as of the date last executed unless another date is otherwise specified in Exhibit A, Paragraph I, is between the City-related entity as is indicated on Exhibit A, Paragraph 2, as such ("City"), whose business fonn is sct forth on Exhibit A, Paragraph 3, and the entity indicated all the attached Exhibit A, Paragraph 4, as Consultant, whose business form is set forth on Exhibit A, Paragraph 5, and whose place of business and telephone numbers are set forth on Exhibit A, Paragraph 6 ("Consultant"), and is made ~Nith reference to the following facts: Recitals Whereas, E. J. De La Rosa & Co., Inc. hereafter referred to as "Consultant", possesscs the requisite expertise and knowledge to assist the city in providing requisite underwriting services and, Whereas, the City of Chula Vista and the Public Financing Authority of the City of Chula Vista hereaftcr referred to as ''City'' is desirous of taking advantage of said knowledge and expertise and, Whereas, Consultant warrants and represents that it is expcrienccd and staffed in a manncr such that it can prepare and deliver the services required of Consultant to City within the timc frames herein provided all in accordance with the tcnns and conditions of this Agreement; (End of Recitals. Next Page starts Obligatory Provisions.) Page 1 Obligatory Provisions Pages NOW, THEREFORE, BE IT RESOLVED that the City and Consultant do hereby mutually agree as follows: I. Consultant's Duties A. General Duties Consultant shall perform all of the services described on the attachcd Exhibit A, Paragraph 7, entitled "General Duties"; and, B. Scope of Work and Schedule In the process of performing and delivering said "General Duties", Consultant shall also perform all of the services described in Exhibit A, Paragraph 8, entitled "Scope of Work and Schedule", not inconsistent with the Gcneral Duties, according to, and within thc time frames set forth in Exhibit A, Paragraph 8, and deliver to City such Deliverables as are identified in Exhibit A, Paragraph 8, within the time frames set forth therein, time being of the essence of this agreement. The General Duties and the work and deliverables required in the Scope of Work and Schedule shall be herein referred to as the "Defined Services". Failure to complete the Defined Services by the times indicated does not, except at the option of the City, operate to terminate this Agreement. C. Reductions in Scope of Work City may independently, or upon request from Consultant, ii-om time to time reduce the Detined Services to be performed by the Consultant under this Agreement. Upon doing so, City and Consultant agree to meet in good faith and confer for the purposc of negotiating a corresponding reduction in the compensation associated with said reduction. D. Additional Services In addition to performing the Defined Services herein set forth, City may requirc Consultant to perform additional consulting services related to the Defined Services ("Additional Services"), and upon doing so in writing, if they are within the scope of services offered by Consultant, Consultant shall perform same on a time and materials basis at the rates set forth in the "Rate Schedule" in Exhibit A, Paragraph IO(C), unless a separate fixed fee is otherwise agreed upon. All compensation for Additional Services shall be paid monthly as billed or as otherwise mutually agreed. E. Standard of Care Consultant, in performing any Services under this agreement, whether Defined Services or Additional Services, shall perform in a manner consistent with that level of care and skill Page 2 ordinarily exercised by members of the profession currently practicing under similar conditions and in similar locations. F. Insurance Consultant must procure insurance against claims for injuries to persons or damagcs to property that may arise from or in connection with the performance of the work under the contract and the results of that work by the Consultant, his agents, representatives, employees or subcontractors and provide documentation of same prior to commcncement of work. The insurance must be maintained for the duration of the contract. Minimum Scope of Insurance Coverage must be at least as broad as: (I) Insurance Services Office Commcrcial General Liability coverage (occurrence Form CGOOOI). (2) Insurance Services Office Form Number CA 000 I covering Automobile Liability, Code I (any auto). (3) Workers' Compensation insurance as required by the State of California and Employer's Liability Insurance. (4) Professional Liability or Errors & Omissions Liability insurance appropriate to the Consultant's profession. Architects' and Engineers' coverage is to be endorsed to include contractual liability. Minimum Limits of Insurance Contractor must maintain limits no less than: I. General Liability: (Including operations, products and completed operations, as applicable) 2. Automobile Liability: 3. Workers' Compcnsation Employer's Liability: 4. Professional Liability or Errors & Omissions $1,000,000 per occurrence Jor bodily injury, personal injury and property damage. If Commercial General Liability insurance with a general aggregate limit is uscd, either the general aggregate limit must apply separately to this project/location or the general aggregate limit must bc twice thc required occurrence limit. $1,000,000 per accidcnt for bodily injury and property damage. Statutory $1,000,000 each accident $1,000,000 disease-policy limit $ I ,000,000 disease-each employec $ J ,000,000 each occurrencc Page 3 Liability: DeductibJes and Self-Insured Retentions Any deductibles or self-insured retentions must be declared to and approved by the City. At the option of the City, either the insurer will reduce or eliminate such deductibles or selt~insurcd retentions as they pertain to the City, its officers, ofticials, employees and volunteers; or the Consultant will provide a financial guarantee satisfactory to the City guaranteeing payment of losses and related investigations, claim administration, and defense expenses. Other Insurance Provisions The general liability, automobile liability, and wherc appropriate, the worker's compensation policies are to contain, or be endorsed to contain, the following provisions: (I) The City of Chula Vista, its officers, officials, employees, agents, and volunteers are to be named as additional insureds with respect to liability arising out of automobiles owned, leased, hired or borrowed by or on behalf of the Consultant, where applicable, and, with respect to liability arising out of work or operations performed by or on behalf of the Consultant, including providing materials, parts or equipment furnished in connection with such work or operations. The general liability additional insured coverage must be provided in the form of an endorsement to the contractor's insurance using ISO CG 20 I 0 (11/85) or its equivalent. Specifically, the endorsement must not exclude Products/Completed Operations coveragc. (2) The Consultant's General Liability insurance coverage must be primary insurance as it pertains to the City, its officers, officials, employees, agents, and volunteers. Any insurance or sell~insurance maintained by the City, its officers, ofticials, employees, or volunteers is wholly separate from the insurance of the contractor and in no way relieves the contractor from its responsibility to provide insurance. (3) The insurance policy required by this clause must be endorsed to state that coverage will not be canceled by either party, except after thirty (30) days' prior written notice to the City by certified mail, return receipt requested. (4) Coverage shall not extend to any indemnity coverage lor the aetivc negligencc of the additional insured in any case whcre an agreement to indemnify the additional insured would be invalid under Subdivision (b) of Section 2782 of the Civil Code. (5) Consultant's insurer will provide a Waiver of Subrogation in favor of the City lor each required policy providing coverage during the life of this contract. If General Liability, Pollution and/or Asbestos Pollution Liability and/or Errors & Omissions coverage are written on a claims-made torm: Page 4 (I) The "Retro Date" must be shown, and must be before the date of the contract or the beginning of the contract work. (2) Insurance must be maintained and evidence of insurance must bc pmvidcd for at least five (5) years after completion of the contract work. (3) If coverage is canceled or non-renewed, and not replaced with another claims-made policy form with a "Retro Date" prior to the contract effective date, the Consultant must purchase "extended reporting" coverage for a minimum of five (5) years after completion of contract work. (4) A copy of the claims reporting requirements must be submitted to the City for review. Acceptability of Insurers Insurance is to be placed with licensed insurers admitted to transact business in the State of California with a current A.M. Best's rating of no less than A V. If insurance is placed with a surplus lincs insurer, insurer must be listed on the State of Calilornia List of Eligible Surplus Lines Insurers ("LESLI") with a current A.M. Best's rating of no less than A X. Exception may be made for the State Compensation Fund when not specifically rated. Verification of Coverage Consultant shall furnish the City with original certificates and amendatory endorscments effecting coverage required by this clause. The endorsements should be on insurance industry fornls, provided those endorsements or policies eonlorm to the contract requirements. All certificates and endorsements are to be rcceived and approved by the City before work commences. The City reserves the right to require, at any time, complete, certified copies of all required insurance policies, including endorsements evidencing the coverage required by these specifications. Subcontractors Consultants must include all subeonsultants as insureds under its policies or furnish separate eerti ticates and endorsements for each subconsultant. All coverage for subeonsultants arc subject to all of the requirements included in these specifications. G. Security for Performance ( I) Performance Bond In the event that Exhibit A, at Paragraph 18, indicates the need for Consultant to providc a Performance Bond (indicated by a check mark in the parenthetical space immediately preceding the subparagraph entitled "Perfomlance Bond"), then Consultant shall provide to the City a performance bond in the form prescribed by the City and by such sureties which are authorized to transact such business in the State of California, listed as approved by the United States Department of Treasury Circular 570, hltP:l/www.lins.treas.gov/e570. and whose Page 5 underwriting limitation is sufficient to issue bonds in the amount required by the agreement, and which also satisfy the requirements stated in Section 995.660 of the Code of Civil Procedure, except as provided otherwise by laws or regulations. All bonds signed by an agent must be accompanied by a certified copy of such agent's authority to act. Surety companies must be duly licensed or authorized in the jurisdiction in which the Projcct is locatcd to issue bonds for thc limits so required. Form must be satisfactory to the Risk Manager or City Attorney which amount is indicated in the space adjacent to the term, "Performance Bond", in said Exhibit A, Paragraph 18. (2) Letter of Credit In the event that Exhibit A, at Paragraph 18, indicates the need for Consultant to provide a Letter of Credit (indicated by a check mark in the parenthetical space immediately preceding the subparagraph entitled "Letter of Credit"), then Consultant shall provide to the City an irrevocable letter of credit callable by the City at their unfettered discretion by submitting to the bank a letter, signcd by thc City Manager, stating that the Consultant is in breach of the temlS of this Agreement. The letter of credit shall be issued by a bank, and be in a I~)rm and amount satisfactory to the Risk Manager or City Attorney which amount is indicated in the space adjacent to the term, "Letter of Credit", in said Exhibit A, Paragraph 18. (3) Other Security In the event that Exhibit A, at Paragraph 18, indicates the need for Consultant to provide security other than a Performance Bond or a Letter of Credit (indicated by a check mark in the parenthetical space immediately preceding the subparagraph entitled "Other Security"), then Consultant shall provide to the City such other security therein listed in a form and amount satisfactory to the Risk Manager or City Attorney. H. Business License Consultant agrees to obtain a business license from the City and to otherwise comply with Title 5 of the Chula Vista Municipal Code. 2. Duties of the City A. Consultation and Cooperation City shall regularly consult the Consultant for the purpose of reviewing the progress of the Detined Services and Schedule therein contained, and to provide direction and guidance to achieve the objectives of this agreement. The City shall permit access to its ortice facilities, files and records by Consultant throughout the term of the agreement. In addition thereto, City agrees to provide the information, data, items and materials set forth on Exhibit A, Paragraph 9, and with the further understanding that delay in the provision of these materials beyond thirty (30) days after authorization to proceed, shall constitute a basis for the justifiable delay in the Consultant's perfommnee of this agreement. B. Compensation Page 6 Upon receipt of a properly prepared billing from Consultant submitted to the City periodically as indicated in Exhibit A, Paragraph] 7, but in no event more frequently than monthly, on the day of the periou indiealed in Exhibit A, Paragraph 17, City shall compensate Consultant for all services rendered by Consultant according to the terms and conditions set forth in Exhibit A, Paragraph] 0, adjacent to the governing compensation relationship indicated by a "checkmark" next to the appropriate arrangement, subject to the requirements for retention set forth in Paragraph 18 of Exhibit A, and shall compensate Consultant for out of pocket expenses as provided in Exhibit A, Paragraph I]. All billings submitted by Consultant shall contain sufficient information as to the propriety of the billing to pemlit the City to evaluate that the amount due and payable thereunder is proper, and shall specifically contain the City's account number indicated on Exhibit A, Paragraph 17(C) to be charged upon making such payment. 3. Administration of Contract Each party designates the individuals ("Contract Administrators") indicated on Exhibit A, Paragraph 12, as said party's contract administrator who is authorized by said party to represent them in the routine administration of this agreement. 4. Term This Agreement shall terminate when the Parties have complied with all executory provisions hereof. 5. Liquidated Damages The provisions of this section apply if a Liquidated Damages Rate is provided in Exhibit A, Paragraph 13. It is acknowledged by both parties that time is of the essence in the completion of this Agreement. It is difficult to estimate the amount of damages resulting trom delay in performance. The parties have used their judgment to arrive at a reasonable amount to compensate for delay. Failure to complete the Del1ned Services within the allotted time period specified in this Agreement shall result in the following penalty: For each consecutive calendar day in excess of the time speeitied for the completion of the respective work assignment or Deliverable, the Consultant shall pay to the City, or have withheld from monies due, the sum of Liquidated Damages Rate provided in Exhibit A, Paragraph] 3 ("Liquidated Damages Rate"). Time extensions lor delays beyond the Consultant's control, other than delays caused by the City, shall be requested in writing to the City's Contract Administrator, or designee, prior to the expiration of the specified time. Extensions of time, when granted, will be based upon the effect of delays to the work and will not be granted for delays to minor portions of work unless it call be shown that such delays did or will delay the progress of the work. Page 7 6. Financial Interests of Consultant A. Consultant is Dcsignated as an FPPC Filer If Consultant is designated on Exhibit A, Paragraph 14, as an "FPPC filer", Consultant is deemed to be a "Consultant" for the purposes of the Political Reform Act conflict of inter cst and diselosure provisions, and shall report economic intercsts to thc City Clcrk on thc requircd Statement of Economic Intercsts in such reporting categories as are spccilied in Paragraph 14 of Exhibit A, or if none arc specified, then as determined by the City Attorney. 13. Decline to Participate Regardless of whether Consultant is designated as an FPPC Filer, Consultant shall not make, or participate in making or in any way attempt to use Consultant's position to influence a governmental decision in which Consultant knows or has reason to know Consultant has a financial interest other than the compensation promised by this Agreement. C. Search to Determine Economic Interests Regardless of whether Consultant is designated as an FPPC Filer, Consultant warrants and represents that Consultant has diligently conducted a search and inventory of Consultant's economic interests, as the term is used in the regulations promulgated by the Fair Political Practices Commission, and has determined that Consultant does not, to the best of Consultant's knowledge, have an economic intercst which would conflict with Consultant's duties under this agreement. D. Promise Not to Acquire Conflicting Interests Regardless ofwhcther Consultant is designated as an FPPC Filcr, Consultant furthcr warrants and represents that Consultant will not acquire, obtain, or assume an economic interest during the teml of this Agreement which would constitute a conflict of inter cst as prohibited by the Fair Political Practiccs Act. E. Duty to Advise ofConllicting Interests Regardless of whether Consultant is designated as an FPPC Filer, Consultant furthcr warrants and represents that Consultant will immcdiately advise the City Attorney of City if Consultant learns of an economic interest of Consultant's that may result in a conflict of interest for the purposc ofthc Fair Political Practices Act, and regulations promulgated thereundcr. F. Specific Warranties Against Economic Interests Consultant warrants and represents that neithcr Consultant, nor Consullant's immediat", family members, nor Consultant's employees or agents ("Consultant Associates") presently have any interest, directly or indirectly, whatsoever in any property which may be the subject matter of the Defined Services, or in any property within 2 radial milcs from the extcrior boundaries of Page R any property which may be the subject matter of the Delined Services, ("Prohibited Interest"), other than as listed in Exhibit A, Paragraph 14. Consultant further warrants and represents that no promise of future employment, remuneration, consideration, gratuity or other reward or gain has been made to Consultant or Consultant Assoeiates in connection with Consultant's performance of this Agreement. Consultant promises to advise City of any such promise that may bc made during the Term of this Agreement, or for twelve months thereaftcr. Consultant agrees that Consultant Associates shall not acquire any such Prohibited Interest within the Term of this Agreement, or for twelve months atier the expiration of this Agreement, exeept with the written permission of City. Consultant may not conduct or solicit any business (Dr any party to this Agreement, or for any third party that may be in conflict with Consultant's responsibilities under this Agreement, except with the written pcrmission of City. 7. Hold Harmless (I) Indemnifieation and Hold Harmless Agreement With respect to any liability, including but not limited to claims asserted or costs, losses, attorneys' fecs, or payments IDr injury to any person or property caused or claimed 10 be caused by the acts or omissions of the Consultant, or Consultant's employees, agents, and otlicers, arising out of any services perfDrmed involving this project, except liability for Professional Services covered under Section 7.2, the Consultant agrees to defend, indemnity, protect, and hold harmless the City, its agents, officers, or employees from and against all liability. Also covered is liability arising from, connected with, caused by, or claimed to be caused by the active or passive negligent acts or omissions of the City, its agents, officers, or employees whieh may be in combination with the active or passive negligent acts or omissions of the Consultant, its employees, agents or officers, or any third party. The Consultant's duty to indemnify, protect and hold harmless shall not include any claims or liabilities arising from the sole negligence or sole willful misconduct of the City, its agents, officers or employees. This section in no way altcrs, affccts or modities the Consultant's obligation and duties under Exhibit A to this Agreement. (2) Indemnitieation for Professional Services. As to the Consultant's professional obligation, work or services involving this Project, the Consultant agrees to indemnity, defend and hold hannless the City, its agents, officers and employees from and against any and all liability, claims, costs, and damages, including but not limited to, attorneys fees', that arise out of, or pertain to, or relate to the negligence, recklessness or willful misconduct of Consultant and its agents in the performance of services under Ihis agreement, but this indemnity does not apply liability fDr damages IDr death or bodily injury to persons, injury to property, or other loss, arising from the sole negligence, sole willful misconduct or defects in design by City or the agents. servants, or independent contractors who are directly responsible to City, or arising from the active negligence of City. Page 9 8. Termination of Agreement for Cause If, through any cause, Consultant shall fail to fulfill in a timely and proper manner Consultant's obligations under this Agreement, or if Consultant shall violate any of the covenants, agreements or stipulations of this Agreement, City shall have the right to terminak this Agreement by giving written notice to Consultant of such termination and speci fying the effective date thereof at least five (5) days before the effective dale of such termination. In that event, all finished or unfinished documents, data, studies, surveys, drawings, maps, reports and other materials prepared by Consultant shall, at the option of the City, become the property orthe City, and Consultant shall be entitled to receive just and equitable compensation for any work satisfactorily completed on such documents and other materials up to the efl\::ctive date of Notice of Termination, not to exceed the amounts payable hereunder, and less any damages caused City by Consultant's breaeh. 9. Errors and Omissions In the event that the City Administrator reasonably determines that the Consultants' negligence, errors, or omissions in the performance of work under this Agreement has resulted in expense to City greater than would have resulted if there were no such negligence, errors, omissions, Consultant shall reimburse City for any reasonable additional expenses incurred by the City. Nothing herein is intended to limit City's rights under other provisions of this agreement. 10. Termination of Agreement for Convenience of City City may terminate this Agreement at any time and for any reason, by giving speci fie written notice to Consultant of such tennination and specifying the effective date thereoj~ at least thirty (30) days before the effective date of such termination. In that event, all finished and unlinishcd documents and other materials described hereinabove shall, at the option of the City, becomc City's sole and exclusive property. )fthe Agreement is terminated by City as provided in this paragraph, Consultam shall be entitled to receive just and equitable compensation for any satisfactory work completed on such documents and other materials to the effective dale of such termination. Consultant hereby expressly waives any and all claims for damages or compensation arising under this Agreement except as set forth herein. I ] . Assignability The services of Consultant are personal to the City, and Consultant shall not assign any interest in this Agreement, and shall not transfer any interest in the same (whether by assignment or notation), without prior written consent of City. City hereby consents to the assignment of the portions of the Defined Services identified in Exhibit A, Paragraph 16 to the subconsultants identified thereat as "Pcnnilled Subeonsultants". 12. Ownership, Publication, Reproduction and Use of Material Page 10 All reports, studies, information, data, statistics, fom1s, designs, plans, procedures, systems and any other materials or properties produced under this Agreement shall be the sole and exclusive property of City. No such materials or properties produced in whole or in part under this Agreement shall be subject to private use, copyrights or patent rights by Consultant in the Unitcd States or in any other country without the express written consent of City. City shall have unrestricted authority to publish, disclose (except as may be limited by the provisions of the Public Records Act). distribute, and otherwise use, copyright or patent, in whole or in part, any such reports, studies, data, statistics, fomls or other materials or properties produced under this Agreement. 13. Independent Contractor City is interested only in the results obtained and Consultant shall perform as an independent contractor with sole control of the manner and means of performing the services required under this Agreement. City maintains the right only to reject or accept Consultant's work products. Consultant and any of the Consultant's agents, employecs or representatives arc, for all purposes under this Agreement, an independcnt contractor and shall not be deemcd to be an cmployee of City, and none of them shall be entitled to any benefits to which City employees are entitled including but not limited to, overtime, retirement benefits, worker's compensation benefits, injury leave or other leave benefits. Therefore, City will not withhold state or federal income tax, social security tax or any other payroll tax, and Consultant shall be solely responsible for the payment of same and shall hold the City harmless with regard thereto. 14. Administrative Claims Requirements and Procedures No suit or arbitration shall be ~rought arising out of this agreement, against the City unless a claim has first been presented in writing and filed with the City and acted upon by the City in accordance with the procedures set forth in Chaptcr 1.34 of the Chula Vista Municipal Code, as same may from time to time be amended, the provisions of which are incorporated by this reference as if fully sct forth herein, and such policies and procedures used by the City in the implementation of same. Upon request by City, Consultant shall meet and confer in good faith with City for the purpose of resolving any dispute over the terms of this Agreement. 15. Attorney's Fees Should a dispute arising out of this Agreement result in litigation, it is agreed that the prevailing party shall be entitled to a judgment against the other till' an amount equal to reasonable attorney's fees and court costs incurrcd. The "prevailing party" shall bc dccmed to be the party who is awarded substantially the relief sought. 16. Statement of Costs In the event that Consultant prepares a rcport or document, or participates in the preparation of a report or document in perfon11ing the Defined Services, Consultant shall inelude, or causc Page J I the inclusion ot~ in said report or documcnt, a statement of the numbers and cost in dollm- amounts of all contracts and subcontracts relating to the preparation of the report or document. 17. Miscellaneous A. Consultant not authorized to Represent City Unless specifically authorized in writing by City, Consultant shall have no authority to act as City's agent to bind City to any contractual agreements whatsoever. B. Consultant is Real Estate Broker and/or Salesman If thc box on Exhibit A, Paragraph 15 is marked, the Consultant and/or their principals is/are licensed with the State of California or some other state as a licensed real estate broker or salesperson. Otherwise, Consultant reprcsents that neither Consultant, nor their principals are licensed real estate brokers or salespersons. C. Notices All notices, demands or requests provided for or permitted to be given pursuant to this Agreement must be in writing. All notices, demands and requests to be sent to any party shall be deemed to have been properly given or served if personally served or deposited in the Unitcd States mail, addressed to such party, postage prepaid, registered or certitied, with return rcccipt requested, at the addresses identified herein as the places of business for each of the designated parties. D. Entire Agreement This Agreement, together with any other written document referred to or contemplated herein, embody the entire Agreemcnt and understanding between the parties relating to the subject matter hereof. Neither this Agreement nor any provision hereof may be amended, modified, waived or discharged cxcept by an instrument in writing executed by the party against which enforcement of such amendment. waiver or discharge is sought. E. Capacity of Parties Each signatory and party hereto hereby warrants and represents to the other party that it has legal authority and capacity and direction from its principal to enter into this Agreement, and that all resolutions or other actions have been taken so as to enable it to enter into this Agreemcnt. F. Governing Law/Venuc This Agreement shall be governed by and construed in accordance with the laws of the State of California. Any action arising under or relating to this Agreement shall bc brought only in the federal or state courts located in San Diego County, State of California, and if applicable, the City ofChula Vista, or as close thereto as possible. Venue for this Agrccmcnt. and pcrformancc hereunder, shall be the City ofChula Vista. Page 12 Signature Page to Agreement between City ofChula Vista and Public Financing Authority of the City ofChula Vista and E. J. De La Rosa and Company for Bond Underwriting Services related to refunding the 2000 and 2002 Certificales of Panieipation IN WITNESS WHEREOF, City and Consultant have executed this Agreement thereby indicating that Ihey havc read and understood samc, and indicate thcir full and complete conscnt to its tcmlS: Dated: City ofChula Vista By: Cheryl Cox, Mayor Attest: Donna Norris, City Clcrk Approved as to form: Bart Miesfeld, City Attorney Dated: E. J. De La Rosa & Company, Inc. By: p~_ Raul Amezcua, rincipal Exhibit List to Agrecmcnt ( X) Exhibit A. Page 14 Exhibit A to Agreement between City ofChula Vista and Public Financing Authority of the City ofChula Vista and E. J. De La Rosa & Co., Inc. I. Effective Date of Agreement: November 5, 2009 2. City-Related Entity: (X) City ofChula Vista, a municipal chartered corporation of the State of California ( ) Redevelopment Agency of the City ofChula Vista, a political subdivision of the State of Cal i fomia ( ) Industrial Development Authority of the City ofChula Vista, a ( X) Public Financing Authority ajoint powers authority. ("City") 3. Place of Business for City: City ofChula Vista 276 Fourth Avenue Chula Vista. CA 91910 4. Consultant: E. .I. De La Rosa & Co., Inc. 5. Business Form of Consultant: ( ) Solc Proprietorship ( ) Partnership ( X ) Corporation 6. Place of Business, Telephone and Fax Number of Consultant: 10866 Wilshire Boulevard, Suite 1650 Los Angeles, California 90024 V oice Phone: (3 (0) 207-1975 Fax Phone: (310) 207-1995 Page 15 7. General Duties: Consultant shall provide investmcnt banking services to evaluatc flnancial alternatives, conduct due diligence and underwrite bonds to bc issued by thc Public Financing Authority in connection with (a) refunding the 2000 and 2002 Ccrtificates of Participation, (b) rcfunding of any other outstanding 2010 and 2011 maturities, and (c) issuance of new money Certificates of Participation, Bond Anticipation Notes or other new moncy linancing vehicles any or all of which may be issued to meet the City's desired debt restructuring objectives.. In their capacity as the City's investment banker, Consultant shall be acting as a principal in the anticipated purchase of municipal bonds from the City and not as an advisor or othcr I1duciary of thc City. Consultant shall assist the City in developing, evaluating and implcmenting a rcfunding plan for the City's 2000 Certificates of Participation. In addition the Consultant shall assist the City in developing, evaluating and implementing a refunding plan if decmed economically feasible in anticipation of the 2002 Certificates of Participation call date on or beforc August 1,2012. 8. Scope of Work and Schedule: A. Detailed Scope of Work: I. Consultant shall work with City staff and outside professionals to dcvelop a refinancing plan for the 2000 Certificates of Participation. 2. Consultant shall work with City staff and outside professionals to develop a retinaneing plan for the 2002 Certificates of Participation to understand whether the refinancing is economically feasible on or before the August 1,20] 2 call date ofthc bonds. 3. Consultant shall work with City staff and outside professionals to dcvelop a rcfinaneing plan to refund any other outstanding 20 I 0 and 20 II maturities, 4. Consultant shall work with City staff and outside professionals to devclop a Ilnancing plan for the issuance of new money Certiticates of Participation, Bond Anticipation Notes or other new money tinancing vehicles any or all of which may be issued to meet thc City's desired debt restructuring objectives 5. Consultant shall review and comment on the preliminary and final official statements. 6. Consultant shall assist the City in preparing materials for revicw by credit rating agencies, bond insurance companies and investors as appropriate. 7. Consultant shall conduct such bond marketing activitics as thc city and Consultant agree arc necessary or desirable in marketing the bond issue. 8. Consultant sball assist in the preparation an documentation necessary to timcly close each bond issue and shall timely deliver the necessary funds to purchasc each bond issue in accordancc with the terms of the respectivc Bond Purchase Agreemcnts. Pagc 16 9. Consultant shall meet with the City at its request to discuss economic, environmental, financial or other conditions atTecting the successful completion of the retlnancing. 8. Date for Commcneement of Consultant Services: ( X ) Same as Effective Date of Agreement ( ) Other: C. Dates or Time Limits for Delivery of Deliverables: Deliverable No. I: Deliverable No.2: Deliverable No.3: D. Date for completion of all Consultant services: The earlier of December 31, 2012 or termination of agreement by 30 -day written notice from either party Page 17 9. Materials Required to be Supplied by City to Consultant: The City agrees to make available to Consultant without cost sufficient copies of any applicable reports, agreements, contracts, resolutions and other relevant documents regarding the issuance of the securities as reasonably may be required from time to time for the prompt and efficient performance by Consultant of its obligations pursuant to this agreement. 10. Compensation: A. (X) Single Fixed Fee Arrangement. For pert'om1ance of all of the Defined Services by Consultant as herein required, City shall pay a single fixed fee in the amounts and at the times or milestones or for the Deliverables scl forth below: Single Fixed Fee Amount: Not to excced 1.0 percent of the par amount of the bond issuance payable at closing of Bond Sale. Milestone or Event or Deliverable Amount or Percent of Fixed Fee ( ) I. Interim Monthly Advances. The City shall make interim monthly advances against the compensation due for each phase on a percentage of completion basis l'or caeh given phase such that, at the end of each phase only the compensation for thai phase has been paid. Any payments madc hereunder shall be considered as interest free loans that must be returned to the City if the Phase is not satisfactorily completed. Ifthe Phase is satisfactorily completed, the City shall receive credit against the compensation due for that phase. The retention amount or percentage set l'orth in Paragraph 19 is to be applied to eaeh interim payment such that, at the end of the phase, the full retention has been held back from the compensation due for that phase. Percentage of completion of a phase shall bc assessed in the sole and unfettered discretion by the Contracts Administrator designated herein by the City, or such other person as the City Manager shall designate, but only upon such proo!' demanded by the City that has been provided, but in no event shall such interim advance payment be made unless the Contractor shall have represented in writing that said percentage of completion of the phase has been performed by the Contractor. The practice of making interim monthly advances shall not convert this agreement to a time and materials basis of payment. B. ( ) Phased Fixed Fee Arrangement. For the pert'ormance of each phase or portion of the Defined Services by Consultant as are separately identitied below, City shall pay the fixed fee associated with each phase of Services, Page 1 R in the amounts and at the times or milestones or Dcliverables set forth. Consultant shall not commence Services under any Phase, and shall not be entitled to the compensation for a Phase, unless City shall have issued a notice to proceed to ConsulWnt as to said Phase. Phase 1. 2. Fee for Said Phase , J. $ $ $ ( ) 1. Interim Monthly Advances. The City shall make interim monthly advances against the compensation due for each phase on a percentage of completion hasis lor each given phase such that, at the end of each phase only the compensation lor that phase has bcen paid. Any payments made hereunder shall be considered as interest ti'ee loans that must be returned to the City if the Phase is not satisfactorily completed. If the Phase is satisfactorily completed, the City shall receive credit against the compensation due for that phase. The retention amount or percentagc sct forth in Paragraph 19 is to be applied to each interim payment such that, at the end of the phase, the full retention has been held back from the compensation due lor that phase. Percentage of completion of a phase shall be assessed in the sole and unfettered discretion by the Contracts Administrator designated herein by the City, or such other person as the City Manager shall designate, but only upon such proof demanded by the City that has been provided, but in no event shall such interim advance payment be made unless the Contractor shall have represented in writing that said percentage of completion of the phase has been performed by the Contractor. The practice of making interim monthly advances shall not convert this agrecment to a time and materials basis of payment. C. ( ) Hourly Rate Arrangement For performance of the Dclined Services by Consultant as herein required, City shall pay Consultant for the productive hours of time spent by Consultant in the performance of said Services, at the rates or amounts set forth in the Rate Schedule herein below according to the following terms and conditions: (I) ( ) Not-to-Exeeed Limitation on Time and Materials Arrangement Notwithstanding the expenditure by Consultant of time and materials in excess of said Maximum Compensation amount, Consultant agrecs that Consultant will pcrform all of the Defined Services herein rcquired of Consultant for $ including all Materials, and other "reimbursables" ("Maximum Compensation"). (2) ( ) Limitation without Further Authorization on Time and Materials Arrangement Page 19 A I such time as Consultant shall havc incurred time and materials equal to ("Authorization Limit"), Consultant shall not bc entitled to any additional compensation without further authorization issued in writing and approved by the City. Nothing herein shall preclude Consultant from providing additional Services at ConsultanCs own cost and expense. Category of Employee Rate Schedule Name of Consultant Hourly Rate $ $ $ $ $ ( ) Hourly rates may increase by 6% for services rendered after [month], 20_, if dclay in providing services is caused by City. II. Materials Reimbursement Arrangement For the cost of out of pocket expenses incurred by Consultant in the performance of services herein requircd, City shall pay Consultant at thc rates or amounts set forth below: ( X ) None, the compensation includes all costs. Cost or Rate $ $ $ $ $ $ $ $- $ $- () Reports, not to excced $ () Copies, not to exceed $ () Travel, not to exceed $ () Printing, not to exceed $ () Postage, not to exceed $ () Del i very, not to exceed $ () Long Distance Telephone Charges, not to exceed $ () Othcr Actualldentitiable Dircct Costs: , not to cxceed $ , not to cxceed $ 12. Contract Administrators: City: Maria Kachadoorian, Dircctor of Finance 276 Fourth Ave Chula Vista, CA 919]0 Pagc 20 Consultant: Raul Amezcua, Principal E..I. De La Rosa & Co., Inc. 10866 Wilshire Blvd, Suite 1650 Los Angeles, CA 90024 13. Liquidated Damages Rate: ( ) $ per day. ( X ) Other: None 14. Statement of Economic Interests, Consultant Reporting Categories, per Conflict of Interest Code: ( X ) Not Applicable. Not an FPPC Filer. ( ) FPPC Filer ( ) Category No. I. Investments and sources of income. ( ) Category No.2. Interests in real property. ( ) Category No.3. Investments, interest in real property and sources of income subject to the regulatory, permit or licensing authority of the department. ( ) Category No.4. Investments in business entities and sources of incomc that engage in land development, construction or the acquisition or sale of real property. ( ) Category No.5. Investments in business entities and sources of income of the type which, within the past two years, have contracted with the City ofChula Vista (Redevelopment Agency) to provide services, supplies, materials, machinery or equipment. ( ) Category NO.6. Investments in business entities and sources of income of the type which, within the past two years, have contracted with the designated employee's departmcnt to provide services, supplies. materials, machinery or equipment. ( ) Category No.7. Business positions. ( ) List "Consultant Associates" interests in real property within 2 radial miles of Project Property, if any: Page 2 I 15. ( ) Consultant is Real Estate Broker and/or Salesman 16. Permitted Subconsultants: After consultation with thc City, Consultant may select and retain legal eounsclto provide legal advice related to structuring and marketing of securities, subject to City approval. 17. Bill Processing: A. Consultant's Billing to be submitted for the following period of time: ( ) Monthly ( ) Quarter I y ( X ) Other: Consultant fee is payable at bond closing from the bond proeccus. B. Day of the Periou for submission of Consultant's Billing: ( ) First of the Month ( ) 15th Day of each Month ( ) End of the Month ( ) Other: C. City's Account Number: 18. Security for Performance ( ) Perfonnance Bond, $ ( ) Letter of Credit, $ ( ) Other Security: Type: Amount: $ ( ) Retention. If this space is checked, then notwithstanding other provisions to thc contrary requiring the payment of compensation to the Consultant sooner, the City shall be cntitled to retain, at their option, either the following "Retention Percentage" or "Retention Amount" until the City detem1ines that the Retention Release Event, listed belo\\', has oee urred: ( ) Retention Percentage: ( ) Retention Amount: $ % Page 22 CITY COUNCIL AGENDA STATEMENT P-----. _.i~ ~ ,,- wry ~~ CITY OF CHULAVISfA November 5, 2009 Item ITEM TITLE: RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA REPLACING THE GENERAL FUND RESERVE POLICY PER THE CITY'S FISCAL HEALTH PLAN SUBMITTED BY: DIRECTOR OF FINANCE/TREASURER `-~ REVIEWED BY: CITY MANAGER S T -Fa ~ 7- S ASSISTANT CITY MANAGER ~j~ 4/STAS VOTE: YES ~ NO ~X SUMMARY On January 20, 2009, the City Council endorsed the City Managers "Fiscal Health Plan". The Plan, which was created to address the City's immediate financial emergency as well as its long- term fiscal sustainability, includes an update of the General Fund Reserve Policy. The proposed draft policy will provide guidelines for the use of reserves as well as an increased minimum reserve levels. ENVIRONMENTAL REVIEW The Environmental Review Coordinator has reviewed the proposed action for compliance with the California Environmental Quality Act (CEQA) and has detemuned that the activity is not a "Project" as defined under Section 15378 of the State CEQA Guidelines because the action only involves fiscal issues which do not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment; therefore, pursuant to Section 15060(c)(3) of the State CEQA Guidelines the activity is not subject to CEQA. RECOMMENDATION That the City Council adopt the resolution amending the General Fund Reserve Policy to include the following distinct reserve categories: • General Fund Operating Reserves -minimum 15% • Economic Contingency Reserves -minimum 5% • Catastrophic Event Reserves - 3% 4-1 NOVEMBER 5, 2009, Item Page 2 of 4 BOARDS/COMMISSION RECOMMENDATION Not Applicable DISCUSSION On July 9, 1996, the City Council approved the establishment of a targeted minimum reserve level for the General Fund at 8% of the operating budget. The reserves policy was established to protect the fiscal solvency of the City by mitigating the impact of economic fluctuations on revenues, to fund unforeseen expenditure requirements, to provide minimum levels of cash investment interest revenue, and to avoid the need to borrow for cash management purposes. Public entities accumulate and maintain reserves to help ensure both financial stability and the continued ability to provide core services. Sufficient reserves creates financial stability resulting in increased credit quality and allows the public entity to weather times of uncertainty and the impacts of negative events, both major and minor. Properly Funded reserves allow for the continued maintenance of property and payment of expenses beyond the amount of the funds available for a single fiscal year. The major reserve category used by all cities is the General Fund Operating Reserve. General Fund Operating Reserve (Recommend minimum of I S% of Operating Budgetl The General Fund Operating Reserves represent unrestricted resources available for appropriations by the City Council to address extraordinary needs of an emergency nature. The General Fund Reserve policy is established to provide a policy to see that the City's finances aze managed in a manner which will (1) continue to provide for the delivery of quality services, (2) maintain and enhance service delivery as the community grows in accordance with the General Plan, (3) minimize or eliminate the need to raise taxes and fees because of temporary revenue shortfalls, and (4) establish the reserves necessary to meet known and unknown future obligations and ability to respond to unexpected opportunities. Over the past ten years, several cities have added separate reserve categories to provide for greater distinction, increased security and accountability in the use of reserves. The following are two additional reserve categories proposed which would provide long-term financial stability to the City and its ability to provide services during economic downturns or as a result of catastrophic events. Economic Contingency Reserves (Recommend minimum of 5% of Operating Bud¢et) The Economic Contingency Reserve represents monies set aside to mitigate service impacts during a significant downturn in the economy which impacts City revenues such as sales tax, property tax, business License tax etc. Several of the City's major revenue sources, such as Sales Tax, Property Tax, Motor Vehicle License Fees and Transient Occupancy Tax aze sensitive to the economic climate of the region. As we have seen with the current economic downturn, the volatility of these revenue streams 4-2 NOVEMBER 5, 2009, Item Page 3 of 4 have a significant impact on the City's ability to continue providing services without interruptions unless healthy reserve levels axe available to provide some stability. Catastrophic Event Reserve (Recommend 3% of Operating Budget) The Catastrophic Event Reserves are monies set aside to fund unanticipated expenses related to a major natural disaster in the City. These reserves are associated with the City's Disaster Preparedness Program. The City is susceptible to earthquakes, fires, floods and terrorist threats. In the event that the City Council or their designee proclaims a local emergency, the Catastrophic Event Reserves can be utilized to fund recovery costs until reimbursements from Federal and/or State agencies can be recovered. The City has experienced two major natural disasters in the past 6 years which required the use of reserves. Fortunately, the City did not experience any structural damages and the Finance Department, along with the participating Departments, was able to work with FEMA and State agencies to obtain the reimbursements avoiding impacts to reserves or cash flows during the fiscal yeaz. If a major event were to occur where structural damage occurred or if the billing and reimbursement process crossed fiscal years, there could be an impact to the City's reserves. Establishing a separate reserve at reasonable levels would provide the City some flexibility and time to recover the funds without having a significant impact to operations or cash flows. Cash Flows Since the establishment of the reserve policy in 1996, the City's cash flow receipts for major revenue sources such as Sales Taxes and Motor Vehicle Fees received have changed as a result of the State's revenue shifts causing reductions in the City's monthly cash flow receipts. Since there is a close correlation between reserve level and cash balance, it is generally true that the higher the reserve level, the larger the cash balance. Adequate cash balances are important for two reasons; generating investment interest returns in support of operations, and avoiding the potential cost of having to borrow money on a short-term basis. As the reserve levels dropped the City has participated in short term borrowing through the issuance of Tax and Revenue Anticipation Notes (TRANS) over the past two years as it did in the early 1990's. Although the issuance of TRANS has been relatively inexpensive due to favorable market conditions, this is changing as the investment community is shying away from California investments. It is estimated that the minimum cash balance required at the beginning of the fiscal year in order to avoid borrowing additional money for ashort-term is approximately $25 million, which further supports the total recommended reserve level of 23%. DECISION MAKER CONFLICT Staff has reviewed the decision contemplated by this action and has determined that it is not site specific and consequently the 500 foot rule found in California Code of Regulations section 18704.2(a)(1) is not applicable to this decision. 4-3 NOVEMBER 5, 2009, Item 7 Page 4 of 4 CURRENT YEAR FISCAL IMPACT There is no current year fiscal impact to approving this updated General Fund Reserve Policy. The reserves discussed in this report would likely be built over a 10-year period as the City recovers from the recent significant downturn in the economy impacting all the major discretionary revenues. The Finance Department is in the process of updating the 5-year financial outlook which will likely reflect continued financial challenges as the economy is expected to recover at very moderate levels. The financial forecast is anticipated to be extended out to a ten year outlook following the initial forecast at which time projections will be provided reflecting the anticipated funding available to rebuild the reserves with the goal of achieving the prudent level of reserves as recommended in this report. ONGOING FISCAL IMPACT Estimated current General Fund Operating reserves are projected at 6.7% (unaudited). Given the economic conditions the City has faced over the past three years, the proposal to increase the General Fund reserves would likely occur over time at very moderate rates. General Fund Reserves Overview Current Poli Projected Reserves FY 2009 Recommended' ?Policy Additional Set Aside Future Years General Fund Operating Reserve Economic Contingency Reserve Emergency Service Reserves 8% 0% 0% 6.7% 0.0% 0 0% '15% 'S% 3% 8% 6% 3° % Total % Reserves 8% 6.7% - Q3% ° 16 /° *rotal Tar eted Reserves $ 11,096,162 $ 9,293,036 x.31 901 467 $ 22,608,431 *Caiculated applying the fiscal year 2009-10 adopted operating budget. Prepared by: Marra Kachadoorian, Director oJFinance, Finance Department 4-4 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: General Fund Reserves -Fiscal Health POLICY EFFECTIVE Plan NUMBER DATE PAGE 220-03 1 of 4 ADOPTED BY: (Resolution No.) DATED: November 5, 2009 AMENDED BY: Resolution No. (date of resolution) PURPOSE: Public entities purposely accumulate and then maintain adequate reserves to help ensure both financial stability and the continued ability to provide core services in difficult times. Sufficient reserves create financial stability resulting in increased credit quality and allows the public entity to better weather downturns in the economy and the impacts of negative events, both major and minor. Properly funded reserves allow for the continued maintenance of property, the replenishment of vehicles and equipment, and payment of expenses beyond the amount of the funds available for a single fiscal year. BACKGROUND: The General Fund Reserve policy is established to ensure that the City's finances are managed in a manner which will (1) continue to provide for the delivery of quality services, (2) maintain and enhance service delivery as the community grows in accordance with the General Plan, (3) minimize or eliminate the need to raise taxes and fees because of temporary revenue shortfalls, and (4) establish the reserves necessary to meet known and unknown future obligations and ability to respond to unexpected opportunities. Fiscal stability is an important factor in operating a City. Establishing certain financial reserves would protect the City against unexpected interruptions in revenues, vulnerability to Federal or State actions, adverse economic conditions, unpredictable one-time costs, and exposure to natural disasters and emergencies. There are additional benefits to establishing a minimum General Fund reserve. Credit rating agencies carefully monitor levels of reserves in a government's General Fund to evaluate a government's continued creditworthiness. A higher credit rating results in savings to the taxpayer when the City issues debt or participates in short-term borrowing. Finally, reserve levels are a crucial consideration in long-term financial planning. The Government Finance Officers Association (GFOA), an international organization that promotes the professional financial management of governments for the public interest, recommends maintaining a minimum unreserved fund balance (reserves) in the General Fund of no less than 5% to 15% of general fund operating revenues, or no less than one to two months of regular general fund operating expenditures. A government's particulaz situation may require levels of unreserved fund balance in the general fund significantly in excess of these recommended minimum levels. Cities with higher reserve levels aze better positioned to protect public services during economic downturns. 4-5 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: General Fund Reserves -Fiscal Health POLICY EFFECTIVE Plan NUMBER DATE PAGE 220-03 2 of 4 ADOPTED BY: (Resolution No.) DATED: November 5, 2009 AMENDED BY: Resolution No. (date of resolution) GFOA recommends that in establishing a policy governing the level of unreserved fund balance in the general fund, a government should consider a variety of factors, including: The predictability of its revenues and the volatility of its expenditures (i.e. higher levels of unreserved fund balance may be needed if significant revenue sources aze subject to unpredictable fluctuations or if operating expenditures aze highly volatile.) The availability of resources in other funds as well as the potential drain upon general fund resources from other funds (i.e. the availability of resources in other funds may reduce the amount of reserves needed in the general fund, just as deficits in other funds may require that a higher level of reserves be maintained in the general fund). Liquidity (i.e., a disparity between when financial resources actually become available to make payments and the average maturity of related liabilities may require that a higher level of resources be maintained). Designations (i.e. governments may wish to maintain higher levels of unreserved fund balance to compensate for any portion of unreserved fund balance already designated for a specific purpose). POLICY: This Policy establishes three (3) distinct General Fund Reserves: 1. General Fund Operating Reserves -minimum 15% 2. Economic Contingency Reserves -minimum 5% 3. Catastrophic Event Reserves - 3% The total recommended minimum reserve level for the three categories combined is 23%. i l F d (~ R ' eaervee nn nerat ng C enera The General Fund Operating Reserves represent unrestricted resources available for appropriations by the City Council to address extraordinary needs of an emergency nature. The City shall maintain General Fund Operating Reserve levels of no less than 15% of the annual operating budget. This level of reserves represents approximately 1.8 months of General Fund operating expenditures. The reserves may be used to provide temporary financing for unanticipated 4-6 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: General Fund Reserves -Fiscal Health POLICY EFFECTIVE Plan NUMBER DATE PAGE 220-03 3 of 4 ADOPTED BY: (Resolution No.) DATED: November 5, 2009 AMENDED BY: Resolution No. (date of resolution) extraordinary needs of an emergency nature, such as major storm drain repairs, litigation or settlement costs or an unexpected liability created by Federal or State legislative action. If funds are appropriated (spent) from the operating reserves due to unanticipated needs, the funds should be replenished in the budget process during the subsequent fiscal year to maintain the minimum reserve balance. If the magnitude of the event caused the General Fund Operating Reserves to be deeply reduced, the City Manager and Finance Director shall provide the City Council with a plan to incrementally replenish the reserves to the minimum 15% level. Authorized use (mid-year appropriations) of the General Fund Operating Reserves will require approval by four/fifths (4/5) vote of the City Council. Reserve ntin ene i C F g ~ c~nnm c o The Economic Contingency Reserve represents monies set aside to mitigate service impacts during a significant downturn in the economy which impacts City revenues such as sales tax, property tax, business license tax etc. The City shall maintain General Fund Economic Contingency Reserve levels of no less than 5% of the annual operating budget to provide for unexpected financial impacts related to a significant economic slowdown. Funds may be appropriated from the Economic Contingency Reserves only after the City Manager and the Finance Director have prepared an analysis providing sufficient evidence that the remaining reserves are adequate to offset potential downturns in revenue sources and provide sufficient cash balance for the daily financial needs of the City for the remainder of the fiscal year. Once the analysis has been presented to the City Council, action to appropriate from the reserves will require a declaration that a fiscal emergency or extraordinary need exists through an affirmative vote by 4/Sths of the City Council. If the Economic Contingency Reserves should ever drop below the minimum reserve level, the City Manager and Finance Director will develop a plan to replenish the reserves. The plan will be included in the adoption of the City's annual operating budget and Long-Term Financial Plan. Fvent Reserves tastr hic C' . a on The Catastrophic Event Reserves are monies set aside to fund unanticipated expenses related to a major natural disaster in the City. 4-7 COUNCIL POLICY CITY OF CHULA VISTA SUBJECT: General Fund Reserves -Fiscal Health POLICY EFFECTIVE Plan NUMBER DATE PAGE 220-03 4 of 4 ADOPTED BY: (Resolution No.) DATED: November 5, 2009 AMENDED BY: Resolution No. (date of resolution) A reserve level of 3% of the General Fund operating budget should be maintained as Catastrophic Event Reserves. These funds are associated with the City's Disaster Preparedness Program. The City is susceptible to earthquakes, fires, floods and terrorist threats. In the event that the City Council proclaims a local emergency, the Catastrophic Event Reserves can be utilized to fund recovery costs until reimbursements from federal and/or state agencies can be recovered. Authorized use of the Catastrophic Event Reserves will require a Proclamation of a Local Emergency by the City Council or Director of Emergency Services. In addition, authorized use (mid-year appropriations) of the Catastrophic Event Reserves will require approval by four/fifths (4/5) vote of the City Council. f R C' l l i eserves a cn at nn o The reserves will be calculated using the following year's Adopted General Fund budgeted operating expenditures. Reserves will be evaluated annually in conjunction with the development of the City's 10 Year Financial Forecast and Annual Operating Budget process. There is no maximum reserve level as any additional reserves would provide a greater level of fiscal security. 4-8 RESOLUTION NO. 2009- RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHULA VISTA REPLACING THE GENERAL FUND RESERVE POLICY PER THE CITY'S FISCAL HEALTH PLAN WHEREAS, on July 9, 1996, the City Council approved the establishment of a targeted minimum reserve level for the General Fund at 8% of the operating budget; and WHEREAS, the reserves policy was established to protect the fiscal solvency of the City by mitigating the impact of economic fluctuations on revenues, to fund unforeseen expenditure requirements, to provide minimum levels of cash investment interest revenue, and to avoid the need to borrow for cash management purposes; and WHEREAS, public entities accumulate and maintain reserves to help ensure both financial stability and the continued ability to provide core services; and WHEREAS, sufficient reserves creates financial stability resulting in increased credit quality and allows the public entity to weather times of uncertainty and the impacts of negative events, both major and minor; and WHEREAS, properly-funded reserves allow for the continued maintenance of property and payment of expenses beyond the amount of the funds available for a single fiscal year; and WHEREAS, the General Fund Operating Reserves represent unrestricted resources available for appropriations by the City Council to address extraordinary needs of an emergency nature; and WHEREAS, on January 20, 2009, the City Council endorsed the City Manager's "Fiscal Health Plan" (the "Plan") that was created to address the City's immediate financial emergency as well as its long-term fiscal sustainability, including an update of the General Fund Reserve Policy; and WHEREAS, the proposed policy will provide guidelines for the use of reserves as well as increased minimum reserve levels so that the City's finances are managed in a manner which will: (1) continue to provide for the delivery of quality services; (2) maintain and enhance service delivery as the community grows in accordance with the General Plan; (3) minimize or eliminate the need to raise taxes and fees because of temporazy revenue shortfalls; and (4) establish the reserves necessary to meet known and unknown future obligations and ability to respond to unexpected opportunities; and WHEREAS, the new policy proposes separate reserve categories to provide for greater distinction and increased security and accountability in the use of reserves, including: (i) General Fund Operating Reserves -minimum 15%; (ii) Economic Contingency Reserves -minimum 5% and (iii) Catastrophic Event Reserves - 3%; and 4-9 Resolution No. 2009- Page 2 WHEREAS, the Economic Contingency Reserve represents monies set aside to mitigate service impacts during a significant downturn in the economy which impacts City revenues such as sales taxes, property taxes, business license taxes, etc.; and WHEREAS, the Catastrophic Event Reserves are monies set aside to fund unanticipated expenses related to a major natural disaster in the City and are associated with the City's Disaster Preparedness Program; and WHEREAS, in the event that the City Council or its designee proclaims a local emergency, the Catastrophic Event Reserves can be utilized to fund recovery costs until reimbursements from Federal and/or State agencies can be recovered; and WHEREAS, if a major event were to occur where structural damage occurred or if the billing and reimbursement process crossed fiscal years, there could be an impact to the City's reserves; and WHEREAS, establishing a separate reserve at reasonable levels would provide the City some flexibility and time to recover the funds without having a significant impact to operations or cash flows; and WHEREAS, since the establishment of the reserve policy in 1996, the City's cash flow receipts for major revenue sources such as Sales Taxes and Motor Vehicle Fees received have changed as a result of the State's revenue shifts causing reductions in the City's monthly cash flow receipts; and WHEREAS, since there is a close correlation between reserve level and cash balance, it is generally true that the higher the reserve level, the larger the cash balance; and WHEREAS, adequate cash balances aze important for two reasons: generating investment interest returns in support of operations, and avoiding the potential cost of having to borrow money on a short-term basis; and WHEREAS, as the reserve levels dropped the City has participated in short term borrowing through the issuance of Tax and Revenue Anticipation Notes (TRANS) over the past two yeazs as it did in the early 1990's; and WHEREAS, although the issuance of TRANS has been relatively inexpensive due to favorable market conditions, this is changing as the investment community is shying away from California investments; and WHEREAS, it is estimated that the minimum cash balance required at the beginning of the fiscal year in order to avoid borrowing additional money for ashort-term is approximately $25 million, which further supports the total recommended reserve level of 23%. 4-10 2 Resolution No. 2009- Page 3 NOW, THEREFORE, BE IT RESOLVED that, in accordance with the City's previously- approved Fiscal Health Plan, the City Council of the City of Chula Vista replaces the City's existing General Fund Reserve Policy with a new General Fund Reserve Policy, a copy of which is on file in the office of the City Clerk. Presented by Approved as to form by Maria Kachadoorian Bart Miesfeld `M ~o2r.-4 ct Director of Finance/Treasurer City Attorney 4-11 3