“MINUTES”
CITY COUNCIL MEETING
CITY OF CARMEL-BY-THE-SEA
Tuesday, September 11, 2012
City Hall
East side of Monte Verde Street between Ocean and Seventh Avenues
II. Roll Call
PRESENT: Council Members Beach, Hillyard, Talmage, Theis and Mayor Burnett
ABSENT: None
STAFF PRESENT (partial list): Jason Stilwell, City Administrator
Heidi Burch, Assistant City Administrator/City Clerk
Don Freeman, City Attorney
V. Announcements from Closed Session, from City Council Members and the City Administrator.
A. Announcements from Closed Session.
Public Employee Performance Evaluation - Government Code Section 54957. Title: City Engineer.
Property Negotiations – Gov’t. Code Section 54956.8, Real Property negotiations between City Administrator Jason Stilwell and Christine Sandin regarding the Sunset Cultural Center.
City Attorney Don Freeman announced there were no announcements from closed session held on Monday, September 10, 2012.
B. Announcements from City Council members (Council members may ask a question for clarification, make an announcement or report on his or her activities).
1. Status of Water Replacement Project.
Mayor Burnett gave an update. The Administrative Law Judge, California Public Utilities Commission (PUC), issued a revised timeline for the PUC process including the deadline date of
October 1 for public agencies to provide proposals regarding public agency participation. He stated that he has been working with
Monterey Mayor Chuck Della Salla (Ad Hoc Committee) on issues of governance,
finance and ownership. That morning he stated
he participated in a 4 ½ hours meeting with Cal-Am’s team to determine what are
the most important decisions regarding public agency involvement. Regarding governance, the Water Authority developed
a Draft Framework regarding some decisions made by public agency, other
decisions joint decisions and Cal-Am decisions.
Regarding finance for Cal-Am’s Water Supply Project, there are three
sources of capital including short-term corporate debt, surcharge on water bills
prior to project online, debt from State revolving fund and Cal-Am’s
equity. Regarding ownership, Water
Authority regards it as a means, but not necessarily an end in itself; details
to be decided. There is a Water Authority meeting on Wednesday, September 12,
2012 in
Monterey. The Water Authority has contracted with two
consultants to do a technical review and permitting review on the three
projects, namely DeepWater Desal, the Peoples’ Desal and Cal-Am Water Supply
Project. And the Water Authority has not taken a position on the three proposed
water projects.
VII. Consent Calendar
E. Consideration of a Resolution awarding a bid to Ambrosia Construction for the Beach Boardwalk and Platform Installation Project in an amount not to exceed $74,430 and approving up to $10,000 for engineering and inspection services and survey and soil compacting testing during construction.
F. Consideration of a Resolution awarding the bid to Ambrosia Construction for the San Antonio Trail Installation Project in an amount not to exceed $62,677 and approving up to $10,000 for engineering and inspection services and survey and soil compacting testing during construction.
K. Receive and accept the agenda forecast.
Jason Stilwell, City Administrator, reviewed Items E & F. Both projects are grant funded projects as part of the City’s Del Mar Master Plan. The Projects are expected to start as soon as possible and completion is expected in approximately two months.
Mayor Burnett opened and closed the meeting to public comment.
Council Member TALMAGE moved to approve Consent Agendas Items E, F and K with other items, seconded by Council Member BEACH and carried by a vote of 5-0.
VIII. Orders of Council
A. Discussion of certain refinancing and refunding options for the City’s CalPERS Retirement Side Fund.
Mayor Jason Burnett recused himself due to his business relationship with Mr. Hill. Vice Mayor Talmage asked for the Staff Report. City Administrator Stilwell reviewed Side Fund Debt history. Council Member Talmage stated that the Council should consider four issues and provide direction on four items:
- Authorize
City Administrator to contact CalPERS for an accounting
- Debate
and decide about level schedule of payments
- Give
direction on private placement or public offering
- If
public offering, selection of the underwriter, and recommendation by Bill
Sharpe.
Craig Hill, NHA Advisors, presented his Power Point
Presentation.
DISCUSSION POINTS
- Pension
Side-Fund Fundamentals
- Prior
Council Discussion/Validation Action
- Financing
Strategies
- Preliminary
Analysis
- Recommendation
- Schedule/Next
Steps
PENSION SIDE-FUND FUNDAMENTALS
- Created
in 2003 by CalPERS to address risk pools for small public agencies
- Side-Fund
amount, amortization and actuarial investment rate faced at time of
implementation
- Annual
Side-Fund payments increase over time
EXISTING PENSION OBLIGATIONS
- Public
Safety Side-Fund
- $3,376,278
Liability as of June 30, 2012 Report
- Current
Contribution - $235,000
- Final
Payoff Date – FY 2033/34
- Miscellaneous
Side-Fund
- $2,750,158
Liability as of June 30, 2012 Report
- Current
Contribution - $315,000
- Final
Payoff Date – FY 2022/23
PRIOR COUNCIL DISCUSSION/VALIDATION ACTION
- No Legal Challenge
- Anticipated Completion Date Mid-October 2012
PRIOR ACTION/DISCUSSION
- Carmel
CalPERS Pension committee Report (October 2011)
- Side-Fund
Refinancing or Redemption Identified as Key Project (January 2012)
- Conceptual
Pension Obligation Bond Discussion (July 2012)
- Approved
Validation Action/Process (July 2012)
PENSION OBLIGATION BOND ACTIONS
- Council
approval for Validation Action
- POBs
are payable from the General Fund on the legal theory that they are
“obligations imposed by law” under the California Constitution.
- All
POBs are reviewed by the Superior Court to validate the Bonds under this
legal theory
- Judicial
validation is a time-honored process under specific legal procedural
provision
- Process
takes 90-120 days to complete
- Bond
Counsel will represent the Cit in the Validation Process working with the
City Attorney.
FINANCING STRATEGIES
- Objectives
- Take
advantage of lower interest rates
- Restructure
pension obligations for level payments
- Amortization
will be based on success of sales tax initiative
- Financing
Approach
- Develop
financing program for approved prior to November election
- Proceed
after November election results are available
PENSION OBLIGATION BOND STRUCTURE
- Bond Replaces
Side-Fund payments
- Pension
Obligation Bond Can be Sold to:
- Private
Placement Provider-Bank or Financial Institution
- Investment
Bank/Underwriter-Investors (individuals, money managers, funds) purchase
bonds through underwriter
- Best
Option Depends on:
- Market
rates
- Term
of bond
PENSION OBLIGATION BOND CONSIDERATIONS
- Private
Placement Provider will purchase entire bond and not require public rating
or official statement/offering memorandum
- Public
Offering (through underwriter) will require public rating and official
statement for investor review
- Differential
in transaction costs - $35,000 -$40,000
- Relatively
low compared to interest savings over term of financing
PRELIMINARY ANALYSIS
Graphs: Safety Side-Fund POB Payment Schedule (Original Term
& 10-Year Amortization) and Miscellaneous Side-Fund POB Payment Schedule
(Original Term & 10-Year Amortization)
RECOMMENDATION
- Direct
City Staff and consultants to develop POB documents for October approval
- Prepare
for POB sale in mid-November
- Draft
POB documents for public offering
- Begin
public rating process
- Begin
underwriter selection process
SCHEDULE/NEXT STEPS
- September City Council Meeting – Direct Staff
on POB
- September
– Request Side-Fund Payoff Amount from CalPERS
- October City Council Meeting – Approve POB
Financing Documents
- October
– Validation Action Complete Rating Process, Underwriter Selection
- November
6 – Sale
Tax Election
- Mid-November
– Set Interest Rates Based on 10-Year Term (if Sales Tax Measure Passes)
or 22-Year Term
- December
– Close POB, Fund CalPERS Side-Fund Obligation
Vice Mayor Talmage opened the meeting to public comment.
Monte Miller and Ron Kabat, CPA, addressed the Council.
Vice Mayor Talmage closed the meeting to public comment.
Council Member Talmage stated that the Council should
consider four issues and provide direction on four items. With regard to authorizing the city
administrator to contact CalPERS for an accounting, by consensus the Council
authorized the city administrator to contact CalPERs for a specific payoff value. With regard to a level schedule of payments, Council
Member Talmage stated that if Sales Tax Initiative passes, then flat 10-year
term, or if Measure fails, then a flat blended term (11-year term and 22-year term)
of 16-year or 17-year terms. By consensus,
the Council decided on a level schedule of payments. Council requested the consultant determine
the lowest payment for a 30-year term. With
regard to private placement versus public offering, Council Member Talmage
advocated for a public offering. By
consensus, the Council decided on pursuing a public offering. With regard to the selection of an
underwriter for a public offering, upon advice of the consultant, Council
Member Talmage recommended asking the city administrator to issue an RFQ to firms. And he stated the criteria used to select a
firm should be based on expertise, experience and lowest rate. Council
Member Beach
summarized her view that Council decisions will be based on upcoming vote, not the timing of the market. Council Member Talmage agreed that
the Council decision will be based on the outcome of the Sales Tax
Initiative. Consultant stated that he will
provide background analysis including sensitivity analysis with matrix based on
different terms.
