2014-28563 Reso RESOLUTION NO. 2014-28563
A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE
CITY OF MIAMI BEACH, FLORIDA, AUTHORIZING THE CITY TO
NEGOTIATE WITH WELLS FARGO BANK, NATIONAL
ASSOCIATION, A PROPOSER UNDER CERTAIN REQUEST FOR
PROPOSALS DATED MARCH 20, 2014 FOR TAXABLE AND TAX-
EXEMPT REVOLVING LINES OF CREDIT, AND IF UNABLE TO
REACH AGREEMENT WITH SAID PROPOSER, TO NEGOTIATE
WITH ONE OR MORE OF THE OTHER PROPOSERS UNDER SUCH
REQUEST FOR PROPOSALS; AND PROVIDING AN EFFECTIVE
DATE.
WHEREAS, the City of Miami Beach, Florida (the "City") is duly authorized,
pursuant to the Constitution of the State of Florida, Chapter 166, Part II, Florida Statutes,
as amended, Chapter 159, Part VII, Florida Statutes, as amended, and the Charter of
the City (collectively, the "Act"), to borrow money to finance capital projects; and
WHEREAS, the City is in need of interim financing to pay costs of capital
projects (the "Financing Program"); and
WHEREAS, in connection with the Financing Program, a request for proposal
dated March 20, 2014 (the "Request for Proposals") was issued on behalf of the City and
the City has received proposals from several financial institutions; and
WHEREAS, Wells Fargo Bank, National Association, (the "Bank"), one of the
proposers under the Request for Proposals, has offered to the City a loan through two
revolving lines of credit in an aggregate principal amount not to exceed $60,000,000
outstanding at any time (the "Loan"); and
WHEREAS, the City has determined that it is in the best interests of the City to
undertake the Financing Program through the Loan.
NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY
COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA, that the City is hereby
authorized to negotiate the loan with the Bank, and if unable to reach agreement with the
Bank, to negotiate with one or more of the other proposers under the Request for
Proposals.
This Resolution shall become effective immediately upon adoption.
PASSED AND ADOPTED this day of_April 2014.
Attest: n� '
APPROVED AS TO
FORM &LANGUAGE
• &FOR EXECUTIM
City Clerk
�<
SYS y\
City Attorn
= �5 = y {(/� Date
COMMISSION ITEM SUMMARY
Condensed Title:
A Resolution Of The Mayor And City Commission Of The City Of Miami Beach, Florida,Authorizing
The City To Negotiate With Wells Fargo Bank, National Association, A Proposer Under Certain
Request For Proposals Dated March 20, 2014 For Taxable And Tax-Exempt Revolving Lines Of
Credit, And If Unable To Reach Agreement With Said Proposer, To Negotiate With One Or More
Of The Other Proposers Under Such Request For Proposals;And Providing An Effective Date.
Key Intended Outcome Supported:
• Improve the City's overall financial health and maintain overall bond rating.
Supporting Data (Surveys, Environmental Scan, etc.): N/A
Issue:
Shall the City Commission Adopt the Resolution?
Item Summa /Recommendation.
The City's current Line of Credit ("LOC") was executed on October 12, 2012 to provide the City liquidity to
continue to award contracts for new water, sewer, stormwater, and other city projects. This LOC was with
JPMorgan Chase Bank for$50 million for a period of 18 months.
The City, with the assistance of the City's Financial Advisors, RBC Capital Markets, asked JPMorgan
Chase and other major banks for proposals to renew the line of credit. Sixteen requests were sent out and
five banks sent their proposals to the City: JPMorgan Chase,Wells Fargo, BMO Harris Bank, SunTrust and
Bank of America. SunTrust and Bank of America only offered the City a $20 million LOC with terms that
were not reflective of current improved market conditions. Wells Fargo, JPMorgan Chase and BMO Harris
Bank offered the City a$60 million LOC.
Because the City may need to draw from this line of credit, we are considering both tax-exempt and taxable
rates along with the unused rate. Wells Fargo had the best offer which represented the lowest cost
compared to the offers from BMO Harris Bank and JPMorgan Chase.
Proceeds from the LOC will be used for interim financing of stormwater capital projects approved by the
Commission in anticipation of future bond issues. The proceeds from any such long term bonds for capital
projects must first be used to pay down the LOC should any draws be necessary. The City may prepay the
line of credit prior to maturity at any time without penalty.
The City also may use the proposed LOC to award scheduled water and sewer capital projects and other
city projects while spending existing bond funds. This strategy should expedite the expenditure of existing
funds, minimize the need to draw against the line of credit and facilitate the issuance of future tax-exempt
bonds while building the required debt service coverage.
ADOPT THE RESOLUTION.
Advisory Board Recommendation:
The Finance& Citywide Projects Committee on April 16, 2014 approved this item and referred it to the
City Commission for action.
Financial Information:
Source of Amount Account Approved
Funds: 1 N/A
2
OBPI Total $
Financial Impact Summary:
City Clerk's Office Legislative Tracking:
Trish Walker, ext. 6461
Sign-Offs:
Department Director As ant ity Manager ity Manager
A GE PDW JLM—kw
T:\AGENDA\2014\4-23-14\consent\Line of Credit Authorization-Item Summary 2014.doc
MIAMIBEACH AGENDA ITEM
MIAMI BEACH
City of Miami Beach, 1700 Convention Center Drive, Miami Beach, Florida 33139,www.miamibeachfl.gov
COMMISSI N MEMORANDUM
TO: Mayor Philip Levine and Members o the City C mission
FROM: Jimmy L. Morales City Manager
DATE: April 23, 2014
SUBJECT: A RESOLUTION OF THE MAYO AND CITY COMMISSION OF THE CITY
OF MIAMI BEACH, FLORIDA, A THORIZING THE CITY TO NEGOTIATE
WITH WELLS FARGO BANK, NATIONAL ASSOCIATION, A PROPOSER
UNDER CERTAIN REQUEST FOR PROPOSALS DATED MARCH 20,
2014 FOR TAXABLE AND TAX-EXEMPT REVOLVING LINES OF CREDIT,
AND IF UNABLE TO REACH AGREEMENT WITH SAID PROPOSER, TO
NEGOTIATE WITH ONE OR MORE OF THE OTHER PROPOSERS UNDER
SUCH REQUEST FOR PROPOSALS; AND PROVIDING AN EFFECTIVE
DATE.
ADMINISTRATION RECOMMENDATION
Adopt the Resolution
KEY INTENDED OUTCOMES SUPPORTED
Improve the City's overall financial health and maintain overall bond rating.
ANALYSIS
The City's current Line of Credit ("LOC") was executed on October 12, 2012 to provide
the City liquidity to continue to award contracts for new water, sewer, stormwater, and
other city projects. This LOC was with JPMorgan Chase Bank for $50 million for a period
of 18 months.
The City, with the assistance of the City's Financial Advisors, RBC Capital Markets,
asked JPMorgan Chase and other major banks for proposals to renew the line of credit.
Sixteen requests were sent out and five banks sent their proposals to the City:
JPMorgan Chase, Wells Fargo, BMO Harris Bank, SunTrust and Bank of America.
SunTrust and Bank of America only offered the City a $20 million LOC with terms that
were not reflective of current improved market conditions. Wells Fargo, JPMorgan
Chase and BMO Harris Bank offered the City a $60 million LOC.
Because the City may need to draw from this line of credit, we are considering both tax-
exempt and taxable rates along with the unused rate. Wells Fargo had the best offer
which represented the lowest cost compared to the offers from BMO Harris Bank and
JPMorgan Chase. The following chart summarizes the proposals received by the three
banks for comparative purposes;
Commission/Memo Re Line of Credit
April 23,2014
Page 2 of 3
JP Morgan Wells BMO
Chase Faro Harris Bank
Credit Amount $60,000,000 $60,000,000 $60,000,000
Term 18 Months 18 Months 18 Months
Upfront Fee $0 $0 $0
Annual Fee for Unused Credit 35 bps ($210,000) 20 bps ($120,000) 15 bps ($90,000)
Annual Interest on Draws:
Tax-Exempt 72%x(LIBOR+0.85%) 70%x(LIBOR+0.50%) 74%x(LIBOR+0.95%)
Taxable LIBOR+0.85% LIBOR+0.75% LIBOR+0.95%
Total cost w/o borrowing
18 months $315,000 $180,000 $135,000
Total cost w/$60M borrowing:
Tax-Exempt(annual cost) $432,000 $273,000 $488,400
Taxable(annual cost) $600,000 $540,000 $660,000
Proceeds from the LOC will be used for interim financing of stormwater capital projects
approved by the Commission in anticipation of future bond issues. The proceeds from
any such long term bonds for capital projects must first be used to pay down the LOC
should any draws be necessary. The City may prepay the line of credit prior to maturity
at any time without penalty.
The City also may use the proposed LOC to award scheduled water and,sewer capital
projects and other city projects while spending existing bond funds. This strategy should
expedite the expenditure of existing funds, minimize the need to draw against the line of
credit and facilitate the issuance of future tax-exempt bonds while building the required
debt service coverage.
Tax-exempt draws against the line of credit proposed by Wells Fargo will have a variable
interest rate equal to 70% of the sum of the Libor rate plus 0.50%, and taxable draws will
have a variable rate equal to the sum of the Libor rate plus 0.75%. The current Libor
rate is 0.15% as of April 9. 2014. Should we borrow today on a tax-exempt basis the
rate would be 0.15% + 0.50%, or 0.65%, or less than 1%.
There will not be any bank origination fees from Wells Fargo. However, there will be an
annual fee of 20 basis points (0.20%) on the unused portion of the line of credit
("Unused Facility fee", $120,000 if there are no draws). The City will also need to pay for
any closing costs as well as the fees for the bank's legal counsel, City's Bond Counsel
and the City's Financial Advisor which are estimated to be $60,500 plus expenses.
BACKGROUND
Florida law requires all governments to have funds available in the amount of the
contract at the time of awarding the contract. The most effective way to meet the City's
financing needs, without incurring significant additional cost, is to obtain a line of credit.
Commission Memo Re Line of Credit
Apr#23,2014
Page 3 of 3
This line of credit would be guaranteed by a covenant to budget and appropriate non-ad
valorem revenues.
Under this approach, the City could utilize the line of credit to meet its financial
commitment needs and be in compliance with state law while spending its existing
bonds proceeds or have the capacity to award new projects in advance of longer term
financing.
In accordance with Section 218.385, Florida Statutes, as amended, undertaking this
financing program on a negotiated basis through the line of credit is in the best interest
of the City (rather than a sale through competitive bidding) and will serve a proper public
purpose because it offers (1) borrowing at lower rates than those which the City could
command in the market, and (2) flexibility of financing which could not be obtained in a
sale through competitive bidding.
At the April 16, 2014 Finance and Citywide Projects Committee Meeting, the committee
recommended that the City negotiate with Wells Fargo and if unable to reach an
agreement with them, to negotiate with one or more of the other proposers, and
requested that this item be forwarded to the City Commission for approval.
CONCLUSION
The Administration recommends that the Mayor and City Commission of the City of
Miami Beach, Florida, adopt the attached resolution, authorizing the Administration to
negotiate with Wells Fargo Bank, National Association, a proposer under certain request
for proposals dated March 20, 2014 for taxable and tax-exempt revolving lines of credit,
and if unable to reach agreement with said proposer, to negotiate with one or more of
the other proposers under such request for proposals; and providing and effective date.
JLM: PDW: jr
T:\AGENDA\2014\4-23-14\consent\Line of Credit Authorization-Comm Memo 2014.doc