(2)AR 102009 Proposition 1A - Laserfiche WebLink

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TO: CITY OF COLTON AGENDA REPORT 1 -UK GUUNUL MLL I INU Ur uctooer zu. zuuv HONORABLE MAYOR AND CITY COUNCIL FROM: Bill Smith, Interim Deputy City Manager ITEM #2 SUBJECT: Approve and Adopt a Resolution Approving the Form of and Authorizing the Execution and Delivery of a Purchase and Sale Agreement and Related Documents with Respect to the Sale of the Seller's Proposition IA Receivable from the State; and Directing and Authorizing Certain Other Actions in Connection Therewith. DATE: October 13, 2009 BACKGROUND: Proposition 1A was passed by California voters in 2004 to ensure local property tax and sales tax revenues remain with local government thereby safeguarding funding for public safety, health, libraries, parks, and other local services. Provisions can only be suspended if the Governor declares a fiscal necessity and two-thirds of the Legislature concur. The emergency suspension of Proposition 1A was passed by the Legislature and signed by the Governor as ABX4-14 and ABX4-15 as part of the 2009-10 budget package on July 28, 2009. Under the 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 S1367, a clean-up bill that would provide for a few critical changes to the enacted legislation. These changes would include that: financing would occur in November; the county auditor certifies the amount of Prop 1A receivable; financing would be tax- exempt; and California Communities would be the only issuer. In addition, the bill also requests more flexibility in bond structure (interest payments, state payment date and redemption features), sales of receivables among local agencies, and a revision to the hardship mechanism. While SB 67 has not yet been passed and signed into law, California Communities expects this 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 counsel will be of no force and effect and will be null and void. DISCUSSION/ANALYSIS: Authorized under ABX4-14 and ABX4-15, the Proposition 1A Securitization Program was instituted by California Communities to enable Local Agencies to sell their respective Proposition 1A receivables to California Communities. Currently, SB67 is being considered to clarify specific aspects of ABX4-14 and ABX4-15. Under the Securitization Program, California Communities will simultaneously purchase the Proposition 1A 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 that the State will be shifting property tax from local agencies). The purchase price paid to the local agencies will equal 100% of the amount of the property tax reduction. All transaction costs of issuance and interest will be paid by the State of California. Participating local agencies will have no obligation on the bonds and no credit exposure to the State.