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94-21390 ResoRESOLUTION N0. 94-21390 A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA SUPPLEMENTING AND AMENDING RESOLUTION N0. 94- 21170 ENTITLED "A RESOLUTION OF THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA AUTHORIZING THE ISSUANCE OF NOT MORE THAN $65,000,000 IN AGGREGATE PRINCIPAL AMOUNT OF CITY OF MIAMI BEACH, FLORIDA TAXABLE SPECIAL OBLIGATION BONDS (PENSION FUNDING PROJECT) TO DISCHARGE ALL OR PORTIONS OF THE CITY'S UNFUNDED ACTUARIAL ACCRUED LIABILITIES " WITH RESPECT TO THREE PENSION PLANS MAINTAINED BY THE CITY; PROVIDING FOR THE RIGHTS AND SECURITY OF ALL HOLDERS OF BONDS ISSUED PURSUANT TO THIS RESOLUTION; PROVIDING CERTAIN DETAILS OF THE BONDS; PROVIDING FOR THE DETERMINATION OF ALL OTHER DETAILS OF THE BONDS BY SERIES RESOLUTION; APPOINTING A TRUSTEE AND PROVIDING FOR THE APPOINTMENT OF -OTHER FIDUCIARIES BY SERIES RESOLUTION; PROVIDING FOR THE NEGOTIATED SALE OF THE BONDS; AUTHORIZING VALIDATION OF THE BONDS; AUTHORIZING OFFICIALS OF THE CITY TO TAKE ALL NECESSARY ACTIONS IN CONNECTION WITH THE ISSUANCE OF THE BONDS; AND PROVIDING FOR AN EFFECTIVE DATE", ADOPTED BY THE MAYOR AND CITY COMMISSION ON MAY 18, 1994; PROVIDING ADDITIONAL DETAILS OF THE BONDS AND DELEGATING THE FINAL TERMS AND AWARD OF SUCH BONDS TO THE MAYOR, SUBJECT TO CERTAIN LIMITATIONS; APPOINTING A PAYING AGENT AND REGISTRAR; APPROVING A BOND PURCHASE AGREEMENT, PRELIMINARY OFFICIAL STATEMENT AND OFFICIAL STATEMENT WITH RESPECT TO THE BONDS; PROVIDING FOR A CREDIT FACILITY AND RESERVE ACCOUNT INSURANCE POLICY FOR THE BONDS AND COVENANTS FOR THE BENEFIT OF THEIR ISSUER; APPROVING A GUARANTY AGREEMENT WITH RESPECT TO THE RESERVE ACCOUNT INSURANCE POLICY; PROVIDING FOR A HEDGE AGREEMENT; AUTHORIZING RELATED ACTIONS; AND PROVIDING FOR AN EFFECTIVE DATE. W~iEREAS, on May 18, 1994, the City of Miami Beach, Florida (the "City") adopted Resolution No. 94-21170 (the "Authorizing Resolution") authorizing the issuance of not to exceed $65,000,000 of City of Miami Beach, Florida Taxable Special Obligation Bonds (Pension Funding Project) (the "Bonds), setting out certain details with respect to the Bonds and providing for the determination of other details and the approval of certain documents with respect to the Bonds by a resolution supplementing the Authorizing Resolution to be adopted by the City prior to the issuance of the Bonds (the D09: [04548.DOCS.MIA180035]RFSO-2. "Series Resolution" and together with the Authorizing Resolution, the "Resolution"); and WHEREAS, the Mayor and City Commission of the City (collec- tively the "Commission") have determined to set out at this time certain additional details with respect to the Bonds, appoint a Paying Agent and Registrar for the Bonds, approve a Credit Facility, Reserve Account Insurance Policy and Hedge Agreement (as such terms are defined in the Authorizing Resolution) and provide certain covenants for the benefit of the issuers thereof, authorize various documents in connection with the Bonds and delegate to the Mayor, within the limitations contained in the Resolution, the determination of the final terms of the Bonds and the award thereof . NOW, THEREFORE, BE IT DULY RESOLVED BY THE MAYOR AND CITY COMMISSION OF THE CITY OF MIAMI BEACH, FLORIDA. SECTION 1. DEFINITIONS; SERIES RESOLUTION. All terms used in capitalized form and not defined herein shall have the meanings ascribed to such terms in the Authorizing Resolution. This resolution constitutes the Series Resolution for all purposes under the Authorizing Resolution. SECTION 2. DETAILS OF BONDS. Subject to the limitations contained herein and in the Authorizing Resolution, the Bonds shall be issued in such aggregate principal amount, shall be dated, shall have such Series designation, shall mature on such dates and in such amounts, shall be in the form of Serial Bonds and/or Term Bonds, shall have such Interest Payment Dates, shall bear interest at such rates not to exceed 9.25 per annum, shall have such Amortization Requirements, shall be subject to redemption at such times and at such prices, all as shall be set forth in a certificate executed by the Mayor prior to or at the time of the award of the Bonds (the "Mayor's Certificate") with the advise of Bear, Stearns & Co. Inc., financial advisor to the City (the "Financial Advisor"). The Bonds shall be numbered consecutively from 1 upward preceded by the letter "R" and shall be issued as uncertificated securities through the book-entry only system maintained by The Depository Trust Company of New York. SECTION 3. PAYING AGENT AND REGISTRAR. First Union National Bank of Florida is hereby appointed as the Paying Agent and Registrar for the Bonds. SECTION 4. AWARD OF BONDS; BOND PURCHASE AGREEMENT. The definition of "Purchasers" contained in the Authorizing Resolution is hereby amended to delete the reference to "Clayton Brown & Associates, Inc." and replace it with "Rauscher Pierce Refsnes, Inc.". Subject to the limitations contained herein and in the Authorizing Resolution, the final award of the Bonds to the Purchasers is hereby delegated to the Mayor; provided, however, that the Bonds shall not be awarded to the Purchasers and issued unless, based upon the interest rates the Bonds shall bear and the estimated rate of interest upon which payments to be made by the D09:[04548.DOCS.MIA180035]RFSO-2. - 2 City under the Swap Agreement (as hereinafter defined), if any, shall be computed, as determined by the Finance Director taking into account interest rates in effect on the date of award of the Bonds, the annual savings and the net present value savings over the term of the Bonds, in each case resulting from the issuance of the Bonds and the discharge of the Unfunded Actuarial Accrued Liabilities, shall equal or exceed $600,000 and $1,500,000, respectively. The Commission hereby approves the form of the Bond Purchase Agreement (the "Bond Purchase Agreement") for the purchase of the Bonds by the Purchasers, a copy of which draft form has been presented at this meeting. In connection with the sale of the Bonds to the Purchasers, the Mayor is hereby authorized to execute the Bond Purchase Agreement, upon compliance by the Purchasers with the requirements of Florida Statutes Section 218.385, in substantially the form presented at this meeting, subject to such changes, insertions and omissions and such filling-in of blanks therein as may be necessary to evidence the terms of the Bonds and such additional changes as may be approved by the Mayor. The purchase price at which the Bonds shall be awarded to the Purchasers shall be determined by the Mayor in consultation with the Financial Advisor but shall not be less than 98~ of the principal amount of the Bonds (not including original issue discount). The execution and delivery by the Mayor of the Bond Purchase Agreement for and on behalf of the City shall be conclusive evidence of the approval of such officer and the City of any such changes, insertions, omissions or filling-in of blanks. SECTION 5. PRELIMINARY OFFICIAL STATEMENT AND OFFICIAL STATEMENT. The Commission hereby approves the distribution of copies of the Preliminary Official Statement with respect to the Bonds (the "Preliminary Official Statement") in substantially the form presented at this meeting with such changes, insertions and omissions and such filling-in of blanks therein as may be approved by the Mayor. The Mayor or his designee is hereby authorized to deem the Preliminary Official Statement "final" for purposes of Securities and Exchange Commission Rule 15c2-12 and to execute any certificates in connection with such finding. The Mayor, the City Manager and the City Clerk are hereby authorized to execute the final Official Statement with respect to the Bonds (the "Official Statement") on behalf of the City, in substantially the form of the draft of the Preliminary Official Statement presented at this meeting with such changes, insertions and omissions and such filling-in of blanks therein as shall be necessary to evidence the terms of the Bonds and such additional changes as may be approved by the Mayor, with such execution to be conclusive evidence of the City's approval of any changes, insertions and omissions and filling-in of blanks therein. The use of the Preliminary Official Statement and the Official Statement in the marketing and sale of the Bonds is hereby approved. SECTION 6. CREDIT FACILITY; RESERVE ACCOUNT INSIIRANCE POLICY. As used herein, the following terms shall have the following meanings: nog:~oasas.nocs.~u.~isooss~x~so-2. - 3 "AMBAC Indemnity" shall mean AMBAC Indemnity Corporation, a Wisconsin-domiciled stock insurance company. "Municipal Bond Insurance Policy" shall mean the municipal bond insurance policy issued by AMBAC Indemnity insuring the payment when due of the principal of and interest on the Bonds as provided therein. "Surety Boad" shall mean the surety bond issued by AMBAC Indemnity guaranteeing certain payments into the Debt Service Reserve Account with respect to the Bonds as provided therein and subject to the limitations set forth therein. The Commission hereby authorizes the City to secure the Municipal Bond Insurance Policy and the Surety Bond in connection with the issuance of the Bonds and to pay the premiums with respect thereto. For all purposes of the Resolution, the Municipal Bond Insurance Policy shall be treated as a "Credit Facility" thereunder and the Surety Bond shall be treated as a "Reserve Account Insurance Policy" thereunder. For so long as the Municipal Bond Insurance Policy and the Surety Bond are in effect and AMBAC Indemnity has not defaulted in its obligations thereunder, and notwithstanding any provisions to the contrary contained in the Authorizing Resolution, the City, the Trustee, the Paying Agent and the Registrar, as applicable, covenant and agree, but solely for the benefit of AMBAC Indemnity, as follows: A. Consent of AMBAC Indemnity. Any provision of the Resolution expressly recognizing or granting rights in or to AMBAC Indemnity may not be amended in any manner which affects the rights of AMBAC Indemnity without the prior written consent of AMBAC Indemnity. B. Consent of AMBAC Indemnity in Lieu of Bondholder Consent. AMBAC Indemnity's consent shall be required in lieu of Bondholder consent, when required, for the following purposes: (i) execution and delivery of any supplemental resolution or any amendment, supplement or change to or modification of the Resolution; (ii) removal of the Trustee or Paying Agent and selection and appointment of any successor trustee or paying agent; and (iii) initiation or approval of any action not described in (i) or (ii) above which requires Bondholder consent. C. Consent of AMBAC Indemnity in the Event of Insolvency. Any reorganization or liquidation plan with respect to the City must be acceptable to AMBAC Indemnity. In the event of any reorganization or liquidation, AMBAC Indemnity shall have nog:~oasas.nocs.NUa~isoo3s~xESO-2. - 4 - the right to vote on behalf of all Bondholders but shall in no event vote to reduce the principal amount of Bonds Outstanding or to reduce the interest rate which the Bonds bear. D. Consent of AMBAC Indemnity Upon Default. Anything in the Resolution to the contrary notwithstanding, upon the occurrence and continuance of an event of default, AMBAC Indemnity shall be entitled to control and direct the enforcement of all rights and remedies granted to the Bondholders or the Trustee for the benefit of the Bondholders under the Resolution. E. Notices to AMBAC Indemnity; Accountings. 1. The City or the Trustee, as applicable, shall furnish to AMBAC Indemnity: a. as soon as practicable after filing thereof, a copy of any financial statement of the City and a copy of any audit and annual report of the City; b. a copy of any notice to be given to the registered owners of the Bonds, including, without limitation, notice of any redemption of or defeasance of Bonds, and any certificate rendered pursuant to the Resolution relating to the security for the Bonds; and c. such additional information it may reasonably request. 2. The Trustee or the City, as applicable, shall notify AMBAC Indemnity of any failure of the City to provide relevant notices or certificates. 3. The City will permit AMBAC Indemnity to discuss the affairs, finances and accounts of the City or any information AMBAC Indemnity may reasonably request regarding the security for the Bonds with appropriate officers of the City. The Trustee and the City will permit AMBAC Indemnity to have access to and to make copies of all books and records relating to the Bonds at any reasonable time. 4. AMBAC Indemnity shall have the right to direct an accounting at the City's expense, and the City's failure to comply with such direction within thirty (30) days after receipt of written notice of the direction from AMBAC Indemnity shall be deemed as a default hereunder; provided, however, that if compliance cannot occur within such period, then such period will be extended so long as compliance is begun within such period and diligently pursued, but only if such extension would not materially adversely affect the interests of any registered owner of the Bonds. no9:~oasas.nocs.~isaoss~x~so-2. - 5 - 5. Notwithstanding any other provision of the Resolution, the Trustee or the City, as applicable, shall immediately notify AMBAC Indemnity if at any time there are insufficient moneys to make any payments of principal of and/or interest on the Bonds as required and immediately upon the occurrence of any event of default under the Resolution. F. Defeasance Obligations. "Defeasance Obligations" under the Resolution shall be limited to the following: 1. Cash (insured at all times by the Federal Deposit Insurance Corporation or otherwise collateralized with obligations described in paragraph 2. below). 2. Direct obligations of (including obligations issued or held in book entry form on the books of) the Department of the Treasury of the United States of America. G. Permitted Investments. "Permitted Investments" under the Resolution shall be limited to the Defeasance Obligations described under F. above and the following: 1. Obligations of any of the following federal agencies which obligations represent the full faith and credit of the United States of America, including: - Export-Import Bank - Farm Credit System Financial Assistance Corporation - Farmers Home Administration - General Services Administration - U.S. Maritime Administration - Small Business Administration - Government National Mortgage Association (GNMA) - U.S. Department of Housing & Urban Development (PHA's) - Federal Housing Administration. 2. Senior debt obligations rated "AAA" by Standard & Poor's Ratings Group ("S&P") and "Aaa" by Moody's Investors Service, Inc. ("Moody's") issued by the Federal National Mortgage Association or the Federal Home Loan Mortgage Corporation and senior debt obligations of other U.S. government sponsored agencies approved by AMBAC Indemnity. 3. U.S. dollar denominated deposit accounts, federal funds and banker's acceptances with domestic commercial banks which have a rating on their short term certificates of deposit on the date of purchase of "A-1" or "A-1+" by S&P and "P-1" by Moody's and maturing no more than 360 days no9:~oasas.nocs.~isooss~x~so-2. - 6 - after the date of purchase (ratings on holding companies not considered as the rating of the bank). 4. Commercial paper which is rated at the time of purchase in the single highest classification "A-1+" by S&P and "P-1" by Moody' s and which matures not more than 270 days after the date of purchase. 5. Investments in a money market fund rated "AAAm" or "AAAm-G" or better by S&P. 6. Pre-refunded municipal obligations defined as follows: Any bonds or other obligations of any state of the United States of America or of any agency, instrumentality or local governmental unit of any such state which are not callable at the option of the obligor prior to maturity or as to which irrevocable instructions have been given by the obligor to call on the date specified in the notice, and A. which are rated, based on an irrevocable escrow account or fund (the "escrow"), in the highest rating category of S&P and Moody's or any successors thereto; or B. (i) which are fully secured as to principal and interest and redemption premium, if any, by an escrow consisting only of cash or obligations described in paragraph F. 2. above, which escrow may be applied only to the payment of such principal and interest and redemption premium, if any, on such bonds or other obligations on the maturity date or dates thereof or the specified redemption date or dates pursuant to such irrevocable instructions, as appropriate, and (ii) which escrow is sufficient, as verified by a nationally recognized independent certified public accountant, to pay principal of and interest and redemption premium, if any, on the bonds or other obligations described in this paragraph on the maturity date or dates specified in the irrevocable instructions referred to above, as appropriate. 7. Investment agreements approved in writing by AMBAC Indemnity and supported by appropriate opinions of counsel with notice to S&P; and 8. Other forms of investments (including repurchase agree- ments) approved in writing by AMBAC Indemnity with notice to S&P. H. Valuation of Investments. The "value" of all investments under the Resolution shall be determined as of the end of each month as follows: D09:[04548.DOCS.MIA180035]RFSO-2. - 7 - 1. As to investments the bid and asked prices of which are published on a regular basis in The Wall Street Journal (or, if not there, then in The New York Times): the average of the bid and asked prices for such investments so published on or most recently prior to such time of determination. 2. As to investments the bid and asked prices of which are not published on a regular basis in The Wall Street Journal or The New York Times: the average bid price at such time of determination for such investments by any two nationally recognized government securities dealers (selected by the Trustee in its absolute discretion) at the time making a market in such investments or the bid price published by a nationally recognized pricing service. 3. As to certificates of deposit and bankers acceptances: the face amount thereof, plus accrued interest. 4. As to any investment not specified above: the value thereof established by prior agreement between the City, the Trustee and AMBAC Indemnity. I. Defeasance of Bonds. In the event that the principal and/or interest due on the Bonds shall be paid by AMBAC Indemnity pursuant to the Municipal Bond Insurance Policy, the Bonds shall remain Outstanding for all purposes, not be defeased or otherwise satisfied and not be considered paid by the City, and the assignment and pledge created under the Resolution and all covenants, agreements and other obligations of the City to the registered owners shall continue to exist and shall run to the benefit of AMBAC Indemnity, and AMBAC Indemnity shall be subrogated to the rights of such registered owners. J. Payment Procedure Pursuant to the Municipal Bond Insurance Policy. 1. At least one (1) day prior to all Interest Payment Dates the Trustee will determine whether there will be sufficient funds in the funds and accounts established under the Resolution to pay the principal of or interest on the Bonds on such Interest Payment Date. If the Trustee determines that there will be insufficient funds in such funds or accounts, the Trustee shall so notify AMBAC Indemnity. Such notice shall specify the amount of the anticipated deficiency, the Bonds to which such deficiency is applicable and whether such Bonds will be deficient as to principal or interest, or both. If the Trustee has not so notified AMBAC Indemnity at least one (1) day prior to an Interest Payment Date, AMBAC Indemnity will make payments of principal or interest due on the Bonds on or before the first (1st) day next D09:[04548.DOCS.MIA180035]RFSO-2. 8 ' following the date on which AMBAC Indemnity shall have received notice of nonpayment from the Trustee. 2. The Registrar and the Trustee, as applicable, shall, after the giving of notice to AMBAC Indemnity as provided in 1. above, make available to AMBAC Indemnity and, at AMBAC Indemnity's direction, to the United States Trust Company of New York, as insurance trustee for AMBAC Indemnity or any successor insurance trustee (the "Insurance Trustee"), the registration books of the City maintained by the Registrar, and all records relating to the funds and accounts maintained under the Resolution. 3. The Registrar shall provide AMBAC Indemnity and the Insurance Trustee with a list of registered owners of Bonds entitled to receive principal or interest payments from AMBAC Indemnity under the terms of the Municipal Bond Insurance Policy, and the Paying Agent shall make arrangements with the Insurance Trustee (i) to mail checks or drafts to the registered owners of Bonds entitled to receive full or partial interest payments from AMBAC Indemnity and (ii) to pay principal upon Bonds surrendered to the Insurance Trustee by the registered owners of Bonds entitled to receive full or partial principal payments from AMBAC Indemnity. 4. The Trustee shall, at the time it provides notice to AMBAC Indemnity pursuant to 1. above, notify registered owners of Bonds entitled to receive the payment of principal or interest thereon from AMBAC Indemnity (i) as to the fact of such entitlement, (ii) that AMBAC Indemnity will remit to them all or a part of the interest payments next coming due upon proof of Bondholder entitlement to interest payments and delivery to the Insurance Trustee, in form satisfactory to the Insurance Trustee, of an appropriate assignment of the registered owner's right to payment, (iii) that should they be entitled to receive full payment of principal from AMBAC Indemnity, they must surrender their Bonds (along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee to permit ownership of such Bonds to be registered in the name of AMBAC Indemnity) for payment to the Insurance Trustee, and not the Trustee or Paying Agent and (iv) that should they be entitled to receive partial payment of principal from AMBAC Indemnity, they must surrender their Bonds for payment thereon first to the Paying Agent who shall note on such Bonds the portion of the principal paid by the Paying Agent and then, along with an appropriate instrument of assignment in form satisfactory to the Insurance Trustee, to the Insurance Trustee, which will then pay the unpaid portion of principal. 5. In the event that the Trustee or Paying Agent has notice that any payment of principal of or interest on a Bond D09:(04548.DOCS.MIA180035]RFSO-2. - 9 which has become Due for Payment (as defined in the Municipal Bond Insurance Policy) and which is made to a Bondholder by or on behalf of the City has been deemed a preferential transfer and theretofore recovered from its registered owner pursuant to the United States Bankruptcy Code by a trustee in bankruptcy in accordance with the final, nonappealable order of a court having competent jurisdiction, the Trustee shall, at the time AMBAC Indemnity is notified pursuant to 1. above, notify all registered owners that in the event that any registered owner's payment is so recovered, such registered owner will be entitled to payment from AMBAC Indemnity to the extent of such recovery if sufficient funds are not otherwise available, and the Paying Agent shall furnish to AMBAC Indemnity its records evidencing the payments of principal of and interest on the Bonds which have been made by the Paying Agent and subsequently recovered from registered owners and the dates on which such payments were made. 6. In addition to those rights granted AMBAC Indemnity under the Resolution, AMBAC Indemnity shall, to the extent it makes payment of principal of or interest on Bonds, become subrogated to the rights of the recipients of such payments in accordance with the terms of the Municipal bond Insurance Policy, and to evidence such subrogation (i) in the case of subrogation as to claims for past due interest, the Registrar shall note AMBAC Indemnity's rights as subrogee on the registration books of the City maintained by the Registrar upon receipt from AMBAC Indemnity of proof of the payment of interest thereon to the registered owners of the Bonds, and (ii) in the case of subrogation as to claims for past due principal, the Registrar shall note AMBAC Indemnity's rights as subrogee on the registration books of the City maintained by the Registrar upon surrender of the Bonds by the registered owners thereof together with proof of the payment of principal thereof. K. Payment Procedure Pursuant to the Surety Bond. 1. In the event and to the extent that moneys on deposit in the Sinking Fund, including all amounts on deposit in and credited to the Debt Service Reserve Account in excess of the amount of the Surety Bond, are insufficient to pay the amount of principal and interest coming due on the Bonds , then upon the later of : ( i ) one (1) day after receipt by the General Counsel of AMBAC Indemnity of a demand for payment in the form attached to the Surety Bond as Attachment 1 (the "Demand for Payment"), duly executed, certifying that payment due under the Resolution has not been made; or (ii) the payment date of the Bonds as specified in the Demand for Payment presented to the General Counsel of AMBAC Indemnity, AMBAC Indemnity will make a deposit of funds in an D09:(04548.DOCS.MIA180035]RFSO-2. - 10 account with the Paying Agent, sufficient for the payment to the Paying Agent, of amounts which are then due to the Paying Agent under the Resolution (as specified in the Demand for Payment) up to but not in excess of the Surety Bond Coverage, as defined in the Surety Bond; provided, however, that in the event that the amount on deposit in, or credited to, the Debt Service Reserve Account, in addition to the amount available under the Surety Bond, includes amounts available under any other Reserve Account Insurance Policy or Reserve Account Letter of Credit (the "Additional Funding Instrument"), draws on the Surety Bond and the Additional Funding Instrument shall be made on a pro rata basis to fund the insufficiency. 2. The Trustee shall, after the submission to AMBAC Indemnity of the Demand for Payment as provided in 1. above, make available to AMBAC Indemnity all records relating to the funds and accounts maintained under the Resolution. 3. The Paying Agent shall, upon receipt of moneys received from the draw on the Surety Bond, as specified in the Demand for Payment, cause the Trustee to credit the Debt Service Reserve Account to the extent of moneys received pursuant to such Demand. 4. The Debt Service Reserve Account shall be replenished under the provisions of Section 304(B)(3) of the Authorizing Resolution in the following priority: (i) principal and interest on the Surety Bond, as provided under that certain Guaranty Agreement (the "Guaranty Agreement") to be entered into between the City and AMBAC Indemnity, and on any Additional Funding Instrument shall be paid from Non Ad-Valorem Funds appropriated in each Fiscal Year under the provisions of Section 304 (A) of the Authorizing Resolution on a pro rata basis and (ii) after all such amounts are paid in full, amounts necessary to fund the Debt Service Reserve Account to the required level, after taking into account the amounts available under the Surety Bond and any Additional Funding Instrument, shall be deposited from next available Non Ad-Valorem Funds appropriated in each Fiscal Year under the provisions of Section 304 (A) of the Authorizing Resolution. For purposes of clause (ii) of the first paragraph of such Section 304 (A) of the Authorizing Resolution, the payment of principal and interest on the Surety Bond, as provided under the Guaranty Agreement, and on any Additional Funding Instrument during any Fiscal Year shall be included in the computation of "deposits required to be made into the Debt Service Reserve Account during such Fiscal Year." D09:[04548.DOCS.MIA180035]RESO-2. - 11 - L. Trustee-Related Provisions. 1. The Trustee or Paying Agent may be removed at any time, at the request of AMBAC Indemnity, for any breach of the trusts set forth in the Resolution. 2. AMBAC Indemnity shall receive prior written notice of any Trustee or Paying Agent resignation. 3. Every successor Trustee shall be a trust company or bank in good standing located in or incorporated under the laws of the State, duly authorized to exercise trust powers and subject to examination by federal or state authority, having a reported capital and surplus of not less than $75,000,000 and acceptable to AMBAC Indemnity. Any successor Paying Agent shall not be appointed unless AMBAC Indemnity approves such successor in writing. 4. Notwithstanding any other provisions of the Resolution, in determining whether the rights of the Bondholders will be adversely affected by any action taken pursuant to the terms and provisions of the Resolution, the Trustee shall consider the effect on the Bondholders as if there were no Municipal Bond Insurance Policy. 5. Notwithstanding any other provisions of the Resolution, no removal, resignation or termination of the Trustee or Paying Agent shall take effect until a successor, acceptable to AMBAC Indemnity, shall be appointed. M. Interested Parties. 1. To the extent that the Resolution confers upon or gives or grants to AMBAC Indemnity any right, remedy or claim thereunder, AMBAC Indemnity is hereby explicitly recognized as being a third-party beneficiary thereunder and may enforce any such right, remedy or claim conferred, given or granted thereunder. 2. Nothing in the Resolution expressed or implied is intended or shall be construed to confer upon, or to give or grant to, any person or entity, other than the City, the Trustee, AMBAC Indemnity, the Paying Agent, the Registrar, the Counterparty and the registered owners of the Bonds, any right, remedy or claim under or by reason of any covenant, condition or stipulation of the Resolution, and all covenants, stipulations, promises and agreements in the Resolution contained by and on behalf of the City shall be for the sole and exclusive benefit of the Issuer, the Trustee, AMBAC Indemnity, the Paying Agent, the Registrar, the Counterparty and the registered owners of the Bonds. D09:[04548.DOCS.MIA180035]RESO-2. - 12 - N. Additional Debt. The City shall not incur additional debt secured by or payable from all or a portion of the Non Ad-Valorem Funds attributable to the General Fund of the City ("General Fund Non Ad-Valorem Funds") unless the total amount of such General Fund Non Ad- Valorem Funds for the prior Fiscal Year were at least two (2.00) times the maximum annual debt service on all debt obligations (including all long-term financial obligations appearing on the City's most recent audited financial statements and the debt proposed to be incurred) secured by or payable from all or a portion of the General Fund Non Ad- Valorem Funds (collectively, the "Debt"); provided, however, that to the extent any portion of such Debt is primarily secured by or payable from sources other than General Fund Non Ad-Valorem Funds ("Other Sources") and for the prior Fiscal Year such Other Sources equalled at least 1.50 times the maximum annual debt service on such portion of the Debt, computed in accordance with the requirements of the documents under which such portion of the Debt was issued or incurred, then such portion of the Debt shall not be included as Debt hereunder. 0. Hedge Agreement Requirements. The City agrees that it shall not enter into any Hedge Agreement with respect to the Bonds unless the Hedge Agreement provides that if the Counterparty or, if the obligations of the Counterparty are guaranteed, the guarantor thereof in lieu of the Counterparty is rated at any time "A" or less by Moody's or S&P (it being understood that no collateral as described in this paragraph will be required if the rating is Al or better by Moody's and A+ or better by S&P), the obligations of the Counterparty under the Hedge Agreement shall be collateralized by obligations described in paragraph F.2. above having a value of at least 104 of the obligations of the Counterparty under the Hedge Agreement and which are marked-to-market on a monthly basis. SECTION 7. GUARANTY AGREEMENT. The Commission hereby approves the form of the Guaranty Agreement, a copy of which draft form of Guaranty Agreement has been presented at this meeting. In connection with the delivery of the Surety Bond by AMBAC Indemnity, the Mayor is hereby authorized to execute the Guaranty Agreement in substantially the form presented at this meeting, subject to such changes, insertions, and omissions and such filling-in of blanks therein as may be necessary to secure delivery of the Surety Bond. The execution and delivery by the Mayor of the Guaranty Agreement shall be conclusive evidence of the approval of the City of any such changes, insertions, omissions or filling-in of blanks. SECTION 8. HEDGE AGREEMENT. The Commission hereby authorizes the City, to the extent so recommended by the Finance Director based upon market conditions at the time of the final award of the Bonds, to enter into a Hedge Agreement with Morgan Stanley Capital vo9:~oasas.nocs.MInisooss~tmso-2. - 13 - Services Inc. (the "Swap Provider") in connection with the issuance of the Bonds. The Commission hereby approves the form of the Master Agreement, including all schedules, exhibits and attachments thereto, with respect thereto (collectively, the "Swap Agreement"), to be entered into between the City and the Swap Provider, a copy of which draft form of Swap Agreement has been presented at this meeting. The Mayor is hereby authorized to execute the Swap Agreement in substantially the form presented at this meeting, subject to such changes, insertions and omissions and such filling- in of blanks therein as may be necessary to enter in the Swap Agreement. The execution and delivery by the Mayor of the Swap Agreement shall be conclusive evidence of the approval of the City of any such changes, insertions, omissions or filling-in of blanks. The Mayor, the City Manager and other officers and employees of the City are hereby authorized to execute such other documents and instruments as may be necessary for the execution and delivery of the Swap Agreement. For all purposes of the Resolution, the Swap Agreement shall be treated as a "Hedge Agreement" thereunder and the "Swap Provider" shall be treated as a "Counterparty" thereunder. The Commission hereby approves the payment of accrued scheduled payments due under any Hedge Agreement on a parity, prorata, with interest due on the Bonds. In furtherance thereof, for purposes of estimating "Annual Debt Service Requirement" under the Resolution, while any Hedge Agreement is in effect, interest payable on the Bonds (or on any portion thereof with respect to which such Hedge Agreement is in effect) shall be calculated (i) for the Fiscal Year in which the Hedge Agreement is entered into, based on the actual rates of interest which the Bonds bear and (ii) for all subsequent Fiscal Years, based on the higher of (A) the actual rates of interest which the Bonds bear and (B) the average rate of interest used to compute required payments by the City under the Hedge Agreement for the prior Fiscal Year. However, to the extent that at any time the estimate of "Annual Debt Service Requirement" is not sufficient to pay accrued scheduled payments due under any Hedge Agreement, the City shall, subject to the limitations of Section 304 (A) of the Authorizing Resolution, have a positive duty to budget and appropriate, by amendment, if necessary, from Non-Ad Valorem Funds lawfully available in each Fiscal Year, amounts sufficient to pay such accrued scheduled payments when due. For purposes of Sections 304 (A) and 304(B)(4) of the Authorizing Resolution, while any Hedge Agreement is in effect, fees and costs due or payable to any issuer of a Hedge Agreement during any Fiscal Year shall include all fees, costs and other amounts due or payable to such issuer of a Hedge Agreement during such Fiscal Year under the provisions of the Hedge Agreement other than payments due thereunder on a parity with interest on the Bonds. To the extent that a Hedge Agreement is in effect and without limiting the City's obligations under the Hedge Agreement (other nog:~oasas.nocs.~vunisooss~x~so-z. - 14 - than with respect to the payments made pursuant to this paragraph) , amounts remaining on Interest Payment Date Bonds on such Interest City, be paid to the portion of the City's deposit in the Interest Account on any after the payment of interest due on the Payment Date shall, at the direction of the Counterparty in satisfaction of all or a obligations under the Hedge Agreement. SECTION 9. FURTHER AUTHORIZATIONS. The Mayor, the City Man- ager, the Finance Director, the City Attorney and such other officers, employees and staff of the City as may be designated by the Mayor and the City Manager or either of them are each designated as agents of the City in connection with the issuance and delivery of the Bonds and are authorized and empowered, collectively or individually, to take all action and steps and to execute all instruments, documents and contracts on behalf of the City, that are necessary or desirable in connection with the Bonds, the Municipal Bond Insurance Policy, the Surety Bond and the Swap Agreement and which are not inconsistent with the terms and provisions of this Resolution. SECTION 10. HEADINGS FOR CONVENIENCE ONLY. Any headings pre- ceding the texts of the several sections hereof are solely for convenience of reference and do not constitute a part of this Series Resolution, nor do they affect its meaning, construction or effect. SECTION 11. TIME OF TAKING EFFECT. This Series Resolution shall take effect immediately upon its adoption. PASSED AND ADOPTED this (SEAL) Attest: ~C~ C_... ~,~`- City Clerk LEGAL DEPT. Date ~ -~''~ - ~' ~~ no9:~oasas.nocs.~isooss~x~so-2. - 15 - e,- ~ c,~ CITY HALL 1700 CONVENTION CENTER DRIVE MIAMI BEACH FLORIDA 33139 OFFICE OF THE CITY MANAGER TELEPHONE: (305) 673-7010 FAX: (305) 673-7782 COMMISSION MEMORANDUM TO: Mayor Seymour Gelber and Members of the City Commission FROM: Roger M. Carlto City Manager DATE: November 2, 1994 SUBJECT: SERIES RESOLUTION SETTING THE TERMS AND AUTHORIZING THE ISSUANCE OF UP TO $65,000,000 IN TAXABLE SPECIAL OBLIGATION BONDS (PENSION FUNDING PROJECT) ADMINISTRATION RECOMMENDATION The Administration recommends that the Mayor and City Commission adopt this Resolution authorizing the issuance of up to $65,000,000 in Taxable Pension obligation Bonds only if the resultant annual savings exceed $600,000 and the net present value savings for the life of the bonds exceed $1.5 million. BACKGROUND The retirement system for Firemen and Policemen, the City Supplemental Employees and Elected Officials Retirement System (the "Pension Plans") have an accrued actuarial unfunded liability of $56 million. The unfunded liability is accruing interest at 8 1/2% on $50.5 million in the two Fire and Police Plans and 9% on $5.5 million in the Unclassified Plan. The effective interest rate on the $56 million is 8.55%. The annual cost of funding this liability is over 55% of the total annual funding costs of the Pension Plans. The current funding cost of the unfunded liability is $5.9 million. This cost remains stable unti12004 when it reduces to $5.25 million. The following year, 2005, the cost again declines to $5.05 million and remains at the level through 2012. The cost then declines, in 2013, to $4.1 million with additional reductions and a final payoff in 2023 . AGENDA ~ 1" ITEM DATE ~~- ~'~~ SUBJECT: SERIES RESOLUTION SETTING THE TERMS AND AUTHORIZING THE ISSUANCE OF UP TO $65,000,000 IN TAXABLE SPECIAL OBLIGATION BONDS (PENSION FUNDING PROJECT) CHART#1 ® ~~ a ®~~~~ o ~.~.~ The City is required to fund each year such amounts, as determined by the independent actuaries, that shall be sufficient, along with member contributions, to meet the normal cost for current service as it accrues to members and to fully amortize, at such rates as determined by the Pension Boards, within thirty years the liability that has not been paid through normal contributions (the unfunded liability). This requirement is in Florida Statutes 112, Part VII. As the payment of this unfunded liability constitutes an obligation of the City which must be paid, it represents a financial burden on the City and its tax payers. It is the intention of the City to refinance this obligation at a lower cost than the current mandated cost through the issuance of Taxable Municipal Bonds. These Bonds would be issued with a final maturity no longer than the current amortization schedule of the unfunded liability. To ensure that the Pension Board members were aware of the proposed transaction and the implications for their funding and fiduciary responsibility a workshop was held on Monday, October 24, 1994, at 4:00 P.M. In attendance were Commissioners Gottlieb, Liebman, Shapiro and Pearlson and ten members of the two affected Pension Boards as well as the Board's Attorney Steve Cypen. After substantial discussion, the Administration is confident that the members of the Pension Board are fully aware of their responsibilities and will administer the additional funds in the same responsible manner as they have in the past. RISK LIMITATION To limit the risk associated with the refinancing transaction a long term fixed rate transaction i s anticipated to be issued. However, to take advantage of the lower interest rates available in the short term interest rates, the City anticipates using a Swap Agreement to move a portion of the debt from a fixed to a variable rate for a short time period. A Swap Agreement is a form of Hedge Agreement in which liabilities are traded among parties. In this transaction we will enter into an Agreement with Morgan Stanley to assume the costs of $20 million in variable rate debt which will float monthly based on the LIBOR Rates and Morgan Stanley will assume the cost associated with $20 million in Fixed Rate Debt. Morgan Stanley, who is one of the largest dealers in these Hedge Agreements, will SUBJECT: .SERIES RESOLUTION SETTING THE TERMS AND AUTHORIZING THE ISSUANCE OF UP TO $65,000,000 IN TAXABLE SPECIAL OBLIGATION BONDS (PENSION FUNDING PROJECT) find another counterparty who wishes to reduce its exposure to Variable Rate Debt to enter into a separate agreement for $20 million leaving Morgan Stanley perfectly Hedged (without risk) and earning a fee of approximately 5 Basis Points (.OS%) on each side of the transaction. Using Swap arrangements will allow the City to take advantage of the short term rate but limit the risk of interest rate changes causing an increase in costs. Below is a chart of the annual average interest rates of the thirty year Treasury Bond, the three month Treasury Bill and the Actuarial Assumed Rate of Return. CHART #2 As you can see from the above chart, there has been one period 1979 through 1984 in which short term rates have averaged over the assumed rate of return from the Pension Plans. Through the use of short duration swap agreements the City will be able to enter into or remain out of the short term rates a pay no more than the fixed rates set at the time of issuance of the Bonds. The effect on the cost of the transaction is significant with the use of the interest rate Swap Agreement. The chart below is based on interest rates during the week of October 17, 1994, and shows cash flow savings of $700,000 annually for the five year duration of the Swap Agreement. At the expiration of the initial Swap Agreement the cash flow savings are reduced to $200,000 annually for thirteen years unti12013. At that point the cash flows turn negative unti12021 when the Bonds are retired. The effect of this one Swap Agreement is an increase of $2.5 million in cash flow savings and an increase in the present value, taking effect of the time value of money, of $1.5 million. SUBJECT: SERIES RESOLUTION SETTING THE TERMS AND AUTHORIZING THE ISSUANCE OF UP TO $65,000,000 IN TAXABLE SPECIAL OBLIGATION BONDS (PENSION FUNDING PROJECT) This additional savings is a result of a single Swap Ageement. The City would enter into additional Swap Agreements if interest rate outlooks remain favorable in the future and produce additional savings. The elimination of this unfunded liability is complete and permanent. If the Pension Plans do not achieve their assumed rates of return the current cost is affected. If salaries increase faster than the assumed rate of 6% it will affect current costs. The only way that an unfunded liability could be created is by a change in the above assumptions, the adoption of a new mortality table or a benefit increase covering prior service being enacted. Conversely, the Pension Plans have historically achieved returns in excess of their assumed rates. Should this trend continue, the Pension Plan will move from a fully funded status to an overfunded status. lust as the Pension Plans have done with an underfunding, they would amortize the overfunding over a period of years which would reduce current costs. ANALYSIS The attached Resolution sets the maximum interest rate on the Bonds. Appoints the Registrar and Paying Agent for the Bonds, authorizes the distribution of the Preliminary Official Statement relating to the Bonds, and approves the form of the Municipal Bond Insurance Policy, the Surety Bond, the Guaranty agreement and the hedge Agreement. The Resolution further authorizes the mayor, City manager, City Attorney and Finance Director to undertake all actions necessary to complete the transaction. Since the analysis presented in Chart #3, interest rates have moved higher. Interest rates have moved .125% which have reduced the savings that could be achieved in the transaction. The approval for CHART#3 SUBJECT: SERIES RESOLUTION SETTING THE TERMS AND AUTHORIZING THE ISSUANCE OF UP TO $65,000,000 IN TAXABLE SPECIAL OBLIGATION BONDS (PENSION FUNDING PROJECT) this Bond issue is requested so that the City has the ability to take advantage of a sudden change in interest rates. The minimum amount of savings necessary for the City to undertake the transaction is $600,000 in annual cash flow savings and a net present value of $1.5 million. The target savings is desired to be achieved in $750,000 in annual cash flow savings and a net present value of over $2.00 million. CONCLUSION Because the City can, through this transaction, refinance an existing obligation and achieve savings on a cash flow and net present value basis, the Administration requests approval of the Resolution.