Submitted By: Emory Roberts
presenter
Presentation By: Emory Roberts
end
Department: Finance
STAFF RECOMMENDATION (Motion Ready):
title
Adopt Resolution 2022-24 authorizing Truist Bank to complete the funding of a drawdown loan in an amount not to exceed $60,000,000
end
OCALA’S RELEVANT STRATEGIC GOALS:
Fiscally Sustainable
PROOF OF PUBLICATION:
Click or tap here to enter text.
body
BACKGROUND:
On February 20, 2014, Class Representatives filed a class action lawsuit against the City challenging the City’s Fire Fee as an unconstitutional tax imposed in violation of Article VII, Section 1(a) of the Florida Constitution. Class Representatives requested the trial court declare the Fire Fee unlawful and order class wide refunds to the greatest extent permitted under law.
On June 19, 2020, the Fifth District Court of Appeals (DCA), in a 14-page appellate decision, reversed the trial court and ruled the City’s Fire Fee was an unconstitutional tax. On October 11, 2021, the Court held a hearing on Class Representatives’ Motion to Compel the City to Fund the Common Fund. The Court found the Fifth DCA’s mandate was the final judgment in the case, the Fifth DCA had resolved all legal issues and properly considered and disposed of all the City’s defenses. The Court granted Class Representatives’ motion, determined the City had collected $79,282,909.44 in illegal taxes from class members since February 20, 2010, and ordered the City to deposit the illegal taxes into a separate fund (the “Common Fund”) within sixty (60) days to be disbursed upon further order of the Court.
This Court reserved jurisdiction regarding all remaining aspects concerning management of this class action, including disbursement of the Common Fund and payment of refunds, class representative service awards, attorneys’ fees, and costs.
Finance management contacted the City’s financial advisor, Dunlop & Associates, to discuss possible financing options for loans to help the City meet the Court’s directives. We began reviewing and analyzing audited FY2020 and preliminary unaudited FY2021 year-end (September 30, 2021) financial results for governmental and business type funds to determine unrestricted reserve funds availability. We included FY2022 Reserve requirements in our analysis to remain compliant with directives. Also, we reviewed restrictive and planned Capital Improvement Projects with management to determine what projects could be delayed that would make additional funds available for possible internal loans to the general fund.
After considering the various funding options, the City deems it necessary due to the Judgement and in its best interest to provide the funding of the common fund with a combination of $20 million of available unrestricted funds and internal loans and to pursue up to a $60 million taxable draw-down type loan. The City’s financial advisor, Dunlap & Associates, Inc. issued a Request for Quotes (RFQ) on November 15, 2021 to 24 different banks and lenders. Two qualified financial institutions responded with options for a draw-down type loan. The proposals were reviewed by Dunlap & Associates, Bond Counsel, and City Finance Management.
The City requested an extension from the Court until April 5, 2022 to complete all necessary funding processes and to deposit the funds into the “Common Fund” as directed.
On December 14, 2021, the City received two responses to a Request for Quotes for Bank Loan services related to the funding of the Taxable Revenue Bond (Fire Fee Reimbursement). The respondents were J P Morgan (JPM) and Truist (formerly known as SunTrust Bank).
This loan will be classified as a special purpose taxable municipal bond which are issued by state and local governments to finance a project that does not meet certain public purpose or public use tests under the Internal Revenue Service requirements to qualify for tax exemption.
FINDINGS AND CONCLUSIONS:
Truist Bank was ranked the highest of the two proposers for the $60 million loan. The loan will be priced at a variable rate from the closing date until July 1, 2022. There will be no prepayment penalty during the Variable Rate Period. On July 2, 2022, the variable rate shall convert to a fixed rate. The fixed rate option selected by management was Option 2 in the proposal which provides a rate of approximately 2.84% (based on 12/31/2021 rates) and the option to prepay the loan any time after October 1, 2027 without penalty.
FISCAL IMPACT:
The City will have additional funding available up to $60 million to comply with the court ordered fire fee repayment requirement and will assume additional long-term debt of up to $60 million. Annual debt service repayments will total approximately $4.8 million annually with final determination upon establishment of the fixed rate.
PROCUREMENT REVIEW:
This action was reviewed and approved in compliance with the City’s procurement policies.
LEGAL REVIEW:
The bank loan has been reviewed and approved for form and legality by the City Attorney, Robert W. Batsel Jr, City’s Bond Counsel, JoLinda Herring, Bryant, Miller, and Olive, and Dunlap and Associates, Inc., City Financial Advisor, who provided technical guidance throughout the process.
ALTERNATIVE: Do not approve the funding for the fire fee refunds and seek alternate sources for payment.
RESOLUTION 2022-24
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF OCALA, FLORIDA AUTHORIZING AND PROVIDING THE ISSUANCE OF A TAXABLE REVENUE BOND, SERIES 2022 (FIRE FEE REIMBURSEMENT) IN AN AMOUNT NOT TO EXCEED $60,000,000 FOR THE PURPOSE OF FUNDING THE PROJECT AND PAYING COSTS OF ISSUANCE; PROVIDING THAT THE SERIES 2022 BOND SHALL BE A LIMITED OBLIGATION OF THE CITY PAYABLE FROM NON-AD VALOREM REVENUES BUDGETED, APPROPRIATED AND DEPOSITED AS PROVIDED HEREIN; APPROVING THE FORM OF AND AUTHORIZING THE EXECUTION AND DELIVERY OF A LINE OF CREDIT AGREEMENT IN ORDER TO EVIDENCE SAID LOAN; PROVIDING FOR THE RIGHTS, SECURITIES AND REMEDIES FOR THE OWNER OF THE SERIES 2022 BOND; AUTHORIZING CERTAIN CITY OFFICIALS TO EXECUTE SUCH SERIES 2022 BOND AND ALL NECESSARY DOCUMENTS ON BEHALF OF THE CITY AND TO TAKE ALL ACTIONS REQUIRED IN CONNECTION WITH THE SALE, ISSUANCE AND DELIVERY OF SUCH SERIES 2022 BOND; MAKING CERTAIN COVENANTS AND AGREEMENTS IN CONNECTION THEREWITH; REPEALING ALL RESOLUTIONS IN CONFLICT HEREWITH; PROVIDING FOR A SEVERABILITY CLAUSE; AND PROVIDING FOR AN EFFECTIVE DATE.
BE IT RESOLVED by the City Council of the City of Ocala, Florida, as follows:
SECTION 1. Authority for this Resolution. This Resolution is adopted pursuant to the provisions of the Constitution of the State of Florida, Chapter 166, Florida Statutes, the Charter of the City, and other applicable provisions of law (collectively, the “Act”).
SECTION 2. Definitions. Unless the context otherwise requires, the terms used in this Resolution shall have the meanings specified in this Section 2. Words importing singular number shall include the plural number in each case and vice versa, and words importing persons shall include firms and corporations.
“Act” has the meaning ascribed thereto in Section 1 hereof.
“Bond Counsel” means Bryant Miller Olive P.A., or other nationally recognized bond counsel firm.
“City” means the City of Ocala, Florida.
“City Attorney” means the duly appointed and acting City Attorney of the City or any duly authorized deputy thereof.
“City Council” means the City Council of the City of Ocala, Florida, the governing body of the City.
“City Clerk” means the duly appointed City Clerk or any duly authorized deputy or assistant thereof.
“Council President” means the President of the City Council.
“Debt Service Fund” means the Debt Service Fund established and created in the Line of Credit Agreement.
“Finance Director” means the Finance Director of the City.
“Judgment” means the Judgment of the Fifth District Court of Appeals, Case No. 5D19-1899 filed June 19, 2020.
“Lender” means Truist Bank, the original purchaser of the Series 2022 Bond, or its successor or assigns.
“Line of Credit Agreement” means the Line of Credit Agreement between the City and the Lender, in substantially the form attached hereto as Exhibit D.
“Non-Ad Valorem Revenues” means all revenues and taxes of the City derived from any source whatsoever, other than ad valorem taxation on real and personal property, which are legally available to make the payments required in the Line of Credit Agreement.
“Owner” or “Owners” means the Person or Persons in whose name or names the Series 2022 Bond shall be registered on the books of the City kept for that purpose in accordance with provisions of the Resolution. The Lender shall be the initial Owner.
“Person” means an individual, a corporation, a partnership, an association, a joint stock company, a trust, any unincorporated organization or governmental entity.
“Pledged Revenues” means the Non-Ad Valorem Revenues budgeted, appropriated and deposited as provided herein, and amounts on deposit from time to time in the Debt Service Fund, as provided in the Line of Credit Agreement.
“Project” means the reimbursement of fire fees to claimants in accordance with the Judgment.
“Resolution” means this Resolution of the City, as hereafter amended and supplemented from time to time in accordance with the provisions hereof.
“Series 2022 Bond” means the City’s Taxable Revenue Bond, Series 2022 (Fire Fee Reimbursement) authorized by Section 5 hereof.
“State” means the State of Florida.
SECTION 3. Findings. It is hereby ascertained, determined and declared as follows:
(A) The Pledged Revenues are not pledged or encumbered in any manner.
(B) The City previously issued a request for proposals seeking a loan with which to fund the Project, in response to which the Lender submitted a proposal dated December 14, 2021, a copy of which is attached hereto as Exhibit A (the “Proposal”).
(C) In accordance with the Proposal, the Lender is willing to provide the City with a loan in an amount not to exceed $60,000,000 (the “Loan”) based on the terms set forth in the Proposal.
(D) The Loan shall be evidenced by the Series 2022 Bond authorized hereunder.
(E) Due to the nature of the security for the Series 2022 Bond, the size of the Loan, the willingness of the Lender to purchase the Series 2022 Bond at an interest rate favorable to the City and the critical importance of timing of the sale of the Series 2022 Bond, it is hereby determined under Section 218.385, Florida Statutes that it is in the best interest of the public and the City to accept the offer of the Lender to purchase the Series 2022 Bond at a negotiated sale pursuant to the terms of the Proposal and the Series 2022 Bond.
(F) Debt service on the Series 2022 Bond will be secured by the City's covenant to budget and appropriate Non-Ad Valorem Revenues and by a pledge of the Pledged Revenues as provided herein. The estimated Pledged Revenues will be sufficient to pay all of the principal and interest on the Series 2022 Bond, as the same become due, and to make all other payments required by this Resolution or otherwise required to be paid from the Pledged Revenues.
(G) Debt service on the Series 2022 Bond and all other payments hereunder shall be payable from and secured solely by moneys deposited in the manner and to the extent provided herein. The City shall never be required to levy ad valorem taxes or use the proceeds thereof to pay debt service on the Series 2022 Bond or to make any other payments to be made hereunder or to maintain or continue any of the activities of the City which generate user service charges, regulatory fees or any other Non-Ad Valorem Revenues. The Series 2022 Bond shall not constitute a lien on any property owned by or situated within the limits of the City.
(H) It is estimated that Non-Ad Valorem Revenues will be available after satisfying funding requirements for obligations having an express lien on or pledge thereof and after satisfying funding requirements for essential governmental services of the City, in amounts sufficient to provide for the payment of the principal of and interest on the Series 2022 Bond and all other payment obligations hereunder.
(I) The Project is appropriately undertaken by the City under the Act and is a “project” as defined under Section 166.101, Florida Statutes.
(J) The City hereby authorizes the Series 2022 Bond.
(K) The City hereby determines that it is necessary, desirable and in the best interests of the City and its inhabitants that the City fund the Project through issuance of the Series 2022 Bond and the Project will serve the essential public purposes of the City.
SECTION 4. Project Authorized. The City deems it necessary due to the Judgement and in its best interest to provide for the Project and hereby authorizes the Project in the manner provided herein. The proper officers of the City are hereby directed to take all actions and steps deemed necessary to finance the Project, which are not inconsistent with the terms and provisions of this Resolution.
SECTION 5. Authorization of Series 2022 Bond. Subject and pursuant to the provisions of this Resolution, an obligation of the City to be known as “City of Ocala, Florida Taxable Revenue Bond, Series 2022 (Fire Fee Reimbursement)” is hereby authorized to be issued under and secured by this Resolution, in a principal amount not to exceed $60,000,000 for the purpose of providing funds, together with other legally available funds of the City, to fund the Project and pay the costs of issuance of the Series 2022 Bond.
Prior to the issuance of the Series 2022 Bond, the City shall receive a Purchaser’s Certificate from the Lender in substantially the form attached hereto as Exhibit B and a Disclosure Letter from the Lender containing the information required by Section 218.385, Florida Statutes, in substantially form attached hereto as Exhibit C.
SECTION 6. Payment of Principal and Interest; Limited Obligation. The City promises that it will promptly pay the principal of and interest on the Series 2022 Bond at the place, on the dates and in the manner provided therein according to the true intent and meaning hereof and thereof. The Series 2022 Bond is secured by a pledge of and lien upon the Pledged Revenues in the manner and to the extent described herein. The Series 2022 Bond shall not be or constitute a general obligation or indebtedness of the City as a “bond” within the meaning of Article VII, Section 12 of the Constitution of Florida, but shall be payable solely from the Pledged Revenues in accordance with the terms hereof. No holder of the Series 2022 Bond shall ever have the right to compel the exercise of any ad valorem taxing power or taxation of any real or personal property thereon or the use or application of ad valorem tax revenues to pay such Series 2022 Bond, or be entitled to payment of such Series 2022 Bond from any funds of the City except from the Pledged Revenues as described herein.
SECTION 7. Approval of Line of Credit Agreement. The Line of Credit Agreement, in substantially the form attached hereto as Exhibit D, is hereby approved. The City hereby authorizes the Council President and the City Clerk to execute and deliver, on behalf of the City, the Line of Credit Agreement, with such changes, insertions and additions as the Council President may approve, their execution thereof being conclusive evidence of such approval.
SECTION 8. Amendment. No modification or amendment of this Resolution or of any resolution supplemental hereto may be made without the consent in writing of the Owner.
SECTION 9. Limitation of Rights. With the exception of any rights herein expressly conferred, nothing expressed or mentioned in or to be implied from this Resolution or the Series 2022 Bond is intended or shall be construed to give to any Person other than the City and the Owner any legal or equitable right, remedy or claim under or with respect to this Resolution or any covenants, conditions and provisions herein contained; this Resolution and all of the covenants, conditions and provisions hereof being intended to be and being for the sole and exclusive benefit of the City and the Owner.
SECTION 10. No Personal Liability. Neither the members of the City Council, any employees or officials of the City, nor any person executing the Series 2022 Bond shall be personally liable therefor or be subject to any personal liability or accountability by reason of the issuance thereof.
SECTION 11. Authorizations. The Council President and any member of the City Council, the City Manager, the City Attorney, the Finance Director, the City Clerk and such other officials and employees of the City as may be designated by the City are each designated as agents of the City in connection with the issuance and delivery of the Series 2022 Bond and are authorized and empowered, collectively or individually, to take all action and steps and to execute all instruments, documents, and contracts on behalf of the City that are necessary or desirable in connection with the execution and delivery of the Series 2022 Bond, and which are specifically authorized or are not inconsistent with the terms and provisions of this Resolution.
SECTION 12. No Third-Party Beneficiaries. Except such other persons as may be expressly described in this Resolution or in the Series 2022 Bond, nothing in this Resolution or in the Series 2022 Bond, expressed or implied, is intended or shall be construed to confer upon any person, other than the City and the Owner, any right, remedy or claim, legal or equitable, under and by reason of this Resolution, or any provision thereof, or of the Series 2022 Bond, all provisions thereof being intended to be and being for the sole and exclusive benefit of the City and the Persons who shall from time to time be the Owner.
SECTION 13. Resolution to Constitute a Contract. In consideration of the acceptance of the Series 2022 Bond authorized to be issued hereunder by the Owner, this Resolution shall be deemed to be and shall constitute a contract between the City and the Owner. The covenants and agreements herein set forth to be performed by the City shall be for the benefit, protection and security of the Owner. The City covenants with the Owner of the Series 2022 Bond that it will not, without the written consent of the Owner of the Series 2022 Bond, enact or adopt any ordinance or resolution which repeals, impairs or amends in any manner adverse to the Owner the rights granted to the Owner of the Series 2022 Bond hereunder.
SECTION 14. Repeal of Resolutions in Conflict. All resolutions or parts of resolutions in conflict herewith are hereby repealed to the extent of such conflict.
SECTION 15. Severability. If any phrase, clause, sentence, paragraph or section of this Resolution shall be declared invalid or unconstitutional by the judgment or decree of a court of competent jurisdiction, such invalidity or unconstitutionality shall not affect any of the remaining phrases, clauses, sentences, paragraphs or sections of this Resolution.
SECTION 16. Captions. The captions and headings in this Resolution are for convenience only and in no way define, limit or describe the scope or intent of any provisions or sections of this Resolution.
SECTION 17. Rules of Interpretation. Unless expressly indicated otherwise, references to sections or articles are to be construed as references to sections or articles of this instrument as originally executed. Use of the words “herein,” “hereby,” “hereunder,” “hereof,” “hereinbefore,” “hereinafter” and other equivalent words refer to this Resolution and not solely to the particular portion in which any such word is used.
SECTION 18. Effective Date. This Resolution shall take effect immediately upon passage.
[Remainder of page intentionally left blank]
PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF OCALA, FLORIDA, this ___________ day of March, 2022.
CITY OF OCALA, FLORIDA
(SEAL)
By:_________________________________________
President, Ocala City Council
ATTEST:
By:________________________________
City Clerk
Approved as to form and legality:
By:_____________________________
City Attorney