AgdaPkt 2009-10-19 - Laserfiche WebLink

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7A age 1 REPORT To the Honorable Mayor and City Council From the Cit Mana er October 19,2009 SUBJECT Proposition 1 A Securitization Program RECOMMENDATION Approve, by resolution, the proposed proposition 1A Purchase and Sale Agreement in order to participate in the Proposition 1 A Securitization Program. BACKGROUND proposition 1A (Prop 1A) was passed by California voters in 2004 to ensure local property tax and sales tax revenues remain with local govemment thereby safeguarding funding for public safety, health, libraries, parks, and other local services. Provisions can only be suspended if the Govemor declares a fiscal necessity and two-thirds of the Legislature concur. The emergency suspension of Prop 1 A was passed by the Legislature and signed by the Governor as ABX4 14 and ABX4 15 as part of the 2009-10 State budget package on July 28, 2009. Under this provision, the State will borrow 8% of the amount of property tax revenue apportioned to cities, counties and special districts. The State will be required to repay those obligations plus interest by June 30,2013. The legislature is currently reviewing a clean-up bill, SB 67, which would provide for a few critical changes to the enacted legislation, including but not limited to providing for: financing to occur in November; County auditor certification of amount of Prop 1A receivable; tax-exempt structure; California Communities as the only issuer; more flexibility on bond structure (interest payments, state payment date and redemption features); sales among local agencies; and revision to the hardship mechanism. While SB 67 has not yet been passed and signed into law, California Communities expects that to occur prior to funding the Program. If for any reason SB 67 is not enacted and the bonds cannot be sold by December 31, 2009, all approved documents placed in escrow with Transaction c~unsel will be of no force and effect and will be destroyed. Moreover, should SB 67 (or any other related legislation) be enacted and the contents of such substantively change the terms and conditions surrounding the City's participation in this program, staff will then bring. this matter back to Council for reconsideration. Proposition 1 A Securitization Program: Authorized under ABX4 14 and ABX4 15, the Prop 1A Securitization Program was instituted by California Communities to enable Local Agencies to sell their respective Prop 1A Receivables to Califomia Communities. Currently, SB 67 is being considered to clarify specific aspects of ABX4 14 and ABX4 15. Under the Securitization Program, California Communities will simultaneously purchase the Prop 1 A Receivables, issue bonds (Prop 1A Bonds) and provide each local agency with the cash proceeds in two equal installments, on January 15, 2010 and May 3, 2010 (to coincide with the dates