2002 AGN JUN 18 I04 - Laserfiche WebLink

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CITY OF COLTON AGENDA REPORT FOR COUNCIL MEETING OF June 18,2002 TO: Honorable Mayor and City Council FROM: Thomas K. Clarke, Electric Utility Director) Item #4 SUBJECT: Ordinance Continuing an Electric System Revenue Fund and Accounts Therein and Providing for the Flow of Funds from the Electric System Revenue Fund DATE: Junell,2002 BACKGROUND: On January 5, 1995, the City of Colton (the "City") adopted Ordinance No. 0-21-94 which established an Electric System Revenue Fund. On September 5, 1995, the City adopted No. 0-13-95 which repealed Ordinance No. 0-21-94 and continued the Electric System Revenue Fund and established a flow of funds for the Electric System Revenue Fund. The City entered into an Installment Purchase Agreement, dated as of October 1, 1995 (the "1995 Installment Purchase Agreement") with the Colton Public Financing Authority (the "Authority") pursuant to which the City agreed to make certain payments to facilitate the construction and additions to its Electric System (the "1995 Project"). The Authority financed the 1995 Project through the issuance of $17,585,000 Revenue Bonds (City of Colton, California Electric System Improvements") (die "1995 Bonds"). The City entered into an Installment Sale Agreement, dated as of April 1, 1997 (the "1997 Installment Sale Agreement") with the Financing Authority for Resource Efficiency of California ("FARECal") pursuant to which the City agreed to make certain payments to facilitate the prepayment of amounts due under the 1995 Installment Purchase Agreement. The prepayment of the 1995 Installment Purchase Agreement was financed using a portion of $46,565,000 of Certificates of Participation issued through FARECal (the "1997 Bonds"). On May 28, 2002, the City Council authorized the City to enter into a contract with El Colton LLC for the acquisition, construction and installation of a gas-fired simple cycle combustion turbine nominally rated at 43 megawatts (the "Project"). The City will need to finance the cost of the Project through revenue bonds to be sold by the Authority by mid-August 2002 (the "2002 Bonds"). In connection with the issuance of the 2002 Bonds, the City will need to enter into an Installment Purchase Agreement (the "2002 Installment Purchase Agreement") with the Authority pursuant to which the City will agree to make certain payments to facilitate the Project. The payments under the 2002 Installment Purchase Agreement will be subordinate to the City's payments under the 1997 Installment Sale Agreement. DISCUSSION/ANALYSIS: In order to provide for the flow of funds for both the 1997 Installment Sale Agreement and the 2002 Installment Purchase Agreement, Bond Counsel, Fulbrigbt & Jaworski, has indicated that the City should repeal Ordinance 0- 13-95 and adopt a new Ordinance that continues the Electric System Revenue Fund and Account therein and amends the flow of funds from the Electric System Revenue Fund (the "2002 Flow of Funds Ordinance"). In order for the Authority to sell the 2002 Bonds by mid-August so that the City can meet its obligations under the contract with Noresco, the 2002 Flow of Funds Ordinance must be in effect. For the 2002 Flow of Funds Ordinance to be in effect, there must be two readings, a publication of the 2002 Flow of Funds Ordinance in a newspaper of general circulation in the City and the passing of 30 days from the date of the second reading without challenge. The City and its financing team are in the process of developing the necessary documentation for the 2002 Bonds, including the 2002 Installment Purchase Agreement, an Indenture of Trust, a Preliminary Official Statement and a Notice of Sale (the "2002 Bond Documents"). Staff will bring the 2002 Bond Documents in substantially final form to the City Council for its approval at a subsequent meeting prior to the sale date.