‘MINUTES’ for Six Noteworthy 11 September 2012 City Council Agenda Items

“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 

Archived Video Streaming

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:

1. Authorize City Administrator to contact CalPERS for an accounting
2. Debate and decide about level schedule of payments
3. Give direction on private placement or public offering
4. 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.