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HomeMy WebLinkAboutRedevelopment Agency - 226 RESOLUTION NO. 726_ RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH APPROVING A CERTAIN CREDIT AGREEMENT BY AND BETWEEN THE REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH AND MORGAN GUARANTY TRUST COMPANY OF NEW YORK WHEREAS, the Redevelopment Agency of the City of Huntington Beach (the "Agency") has a need for a short-term loan facility; and the Agency has had presented to it a certain "Credit Agreement" from Morgan Guaranty Trust Company of New York and desires to enter into said Credit Agreement; and with regard to said Credit Agreement, the Agency has determined, pursuant to Government Code Section 5903, that the interest payable on said Credit Agreement will be subject to federal income taxation under the law as of the effective date of said Credit Agreement; and the Agency desires to approve said Credit Agreement pursuant to California Health and Safety Code Section 33601 and Government Code Sections 5900 et seg. NOW, THEREFORE, the Redevelopment Agency of the City of Huntington Beach does resolve as follows : Section 1: The Agency approves the Credit Agreement in substantially the form on file with the Executive Director, and authorizes the Agency Chairman or the Executive Director of the Agency, or his written designee, to execute said Credit Agreement subject to final review of revisions as articulated in the record by Agency Special Counsel pursuant to the memorandum of April 6, 1992 attached hereto and incorporated - 1 - herein by this reference as Exhibit "A" , and approval as to form by the City Attorney and Agency Special Counsel . Section 2: The Agency authorizes and directs the Executive Director of the Agency to execute such other documents as may be determined by the City Attorney and/or Agency Special Counsel to be necessary or appropriate to implement and effectuate the Credit Agreement. PASSED, APPROVED, and ADOPTED by the City Council of the City of Huntington Beach at a regular meeting thereof held on the 6th day of April 1992 . REDEVELOPMENT AGENCY OF THE CITY OF HUNTINGTON BEACH gency Chairman ATTEST: APPROVED AS TO FORM: Agency 3-lL- Aaency Agency Attorney 4- { 3-1 t REVIEWED AND APPROVED: APPROVED AS TO FORM: STRADLING, YOCCA, CARLSON & RAUTH xecutive D rector Agency Special C nsel 2 - 226 M E M O R A N. D U. M TO: The Honorable Mayor and Members of the Huntington Reach City C.otrncil FROM: Arthur De La Loza, Deputy City Attorney Thomas P. Clark, Jr . , Agency Special Counscl RE: Huntington Beach Redevelopment Agency Proposed 3.50. 000 Loan FaQ 13ty. _.__._..._...,._..._.. . _._ ._ .. nATE: April 6, 1992 This memorandum provides a list of those provisions of the proposed Credit Agreement between the Agency and MuLyc,u Guaranty Trust Company of New York that have been identified by Agency staff and legal counsel as needing clarification and/or revision. Following the list, the timing of the closing of the proposed credit agreement is discussed, along with the applicability of certain statutes, requiring public hi6ding and an interest rate cap, to the proposed credit agreement . AGENCY COMMENT LI=2 Section 1. 01. Definitions. "Available Tax Revenues" (p. 2) . The Agency would like this definition giinlified with references to the Third Amendment to the Waterfront Disposition and Development Agreement (the "Third Amendment to DDA") . "Breakage Costs" (p./2) . The definition is too broad. Bob Franz has already discussed this issue with Mark Northcross of Kelling Northcross and Norbriga, Inc. , and Mr. Northcross is in the process of working out appropriate language with the Morgan attorney. "Law" (pp. 4-5) . This definition refers to both the California Health and Safety Code .conA California Covornmont Code, thereby creating some ambiguity in the document' s subsequent use of "Law" as a defined term. "Senior Loan" (p. 6) . The Agency would like language clarifying that the credit agreement loan is juniuor to the "senior loan. " "Tax Revenues" (p. b) . This definition should be revised to indicate that the revenues defined are those accruing frorn Exhibit "A" 226 04-0E-92 03:40Fhi FROM (S C&R NEWPORT BEACH TC 9]%3 0 rUU and after the implementation date of the Third Amendment to DDA. Amounts payable to the Agency under agreements entered into pursuant to Health and Safety Code Section 33445 should also be excluded from the definition, as agreements entered into pursuant to Health and Safety Code Section 33401 already are. The Agency will seek to have the final parenthetic exception deleted in its entirety. Section 2 .06. 5gC�rity for Payments..; I'p ther Assurance. (p. 10) The Agency seeks clarification on what Morgan demands in requiring the Agency to "perfect" its pledge and the security interest created by the loan facility (beyond that already provided Health and Safety Coda Section 33641 . 5) . Section 2 . 07. Interest ; Interest PPri_Qft,! . (p. 1, Subsection (a) , line 3) C;harlge~ "nidde avai )able to the Agency" to "funded. " Section 2. 09 . O ion,a_1 Prep.Ayments . (p . 10) The reference to "Breakage Costs" may be problematic unless the definition of "Breakage Costs" is more tightly clarified in a manner acceptable to the Agency. Section 2, 10. Mandatory Prtr moment . (pp. 11-12) . This Section raises a question regarding the Agency's exposure to "Breakage Costs" as such are currently defined and, at this point, the potential magnitude of these cost is unknown. This problem may be remedied by tightening the definition of "Breakage Costs. " The reference ( lines 6-8) to "any bonds, notes, certificates of participation or other evidence of indebtedness . . . " should, be restricted to Main Pier Project. Area and Available Tax Revenues. Section 2 . 13 . Funding Losses . (p. 13) . This section is problematic in light of the current overbroad definition of "Breakage Costs" which could be alleviated by a clarification and tightening of that definition. The Agency also wants to know why Morgan wants the Agency to reimburse "an existing or prospective Participant" (line 10) for any Breakage Costs . Section 3 . 01. Increased Cost._ Maintainingof_ _ the.._Commitm pt.and RpQ uced Return. (p. 13) . The agency believes it is inappropriate for Morgan to expect the ayeric:y to fake the risk on changes in the law which may effect the loan facility, particularly in light of the short-term nature of the facility. in connection with this, Morgan will need to understand that this loan facility is not. tax exempt. Therefore, the Agency wants Morgan to raise any claim as to the purported tax exempt nature of the facility going into the Credit Agreement. The Agency doesn' t want Morgan' s tax attorr►ey5 c oati ny Lack to the Agency after the Agreement is Exhibit "A" - page 2 0238Q/2460/000 - 2 - 226 executed with claims pertaining to the purported tax exempt nature of the Agreement. (P. 14 , line 18) . The Agency wants the word "solely" inserted betwosn "Bank" and "from Availably Tax Revenues . " (p. 14, line 20) : the Agency would like the option of either repaying the additional amounts for prepaying without penalty . Section 4 .01. Effectiveness . (p. 16 , subsection (c) ) . The opinion referred to and attached as Exhibit C to the Agreement, will be submitted to Morgan as two opinions . The City Attorney will opine as to Nos . 1, 2 (ii) with the oxception of the Third Amendment to thn DDA, and 5 . Stradling, Yocca, Carlson & Rauth will opine as to Nos . 2 (i) , (i.i) as to the Third Amendment to the DDA, (iii) , 3, 4, and 6. The Agency will Seek clarification as what Lo Morgan is asking for in No. 7 and, if such clarification is given, either the City Attorney or Stradling, Yocca, Carlson & Rauth will opine as necessary and appropriate. Section 5. 02. n>>P Avtt} or. ztion�. .No Violati Onj No DQIA-u- . (p. 18, last sentence) . The Agency finds this language overly broad and will seek its revision in order to more narrowly fuuus it. Section 5. 07. No Sovereign Immunity. Morgan needs to explain the representation it is asking the Agency to make. Section 5. 08. Pledged RevenLlea. This Section should be revised so as to account for and acknowledge the fact that the Agency must have the ability to continuing pledging tax increment in connection with its ongoing activities . Section 5 . 09 . No ERISA Pla.,n-$ . (P. 19) The Agency will verify this internally. Section 5. 10. Environmental Mp.tters . (p. 19) The Agency wants this section revised so as to clarify that the Agency is not, in entering into the Agreement, acknowledging any obligation on its part to remediate any envirnnmental hazards or toxic releases. Section 6 .08. Limitat.iUr�_cj i nclFhtedness . The Agency wants language included here that the agency' s covenant is limited to Main Pier Project Area only. Section 6. 10. Payment_of_,L%ans O_na.Mpn�y Mar.kP Advances . (p. 21, last sentence, foiirt.h line from bottom) . The Agency seeks to modify the last sentence by substituting : "to use its best efforts to" for : "that it will" in order to prevent the Agency from haviny to sell bonds prior to the Expiry Date at a time when the Agency could face poor market conditions . Exhibit "A" - page 3 0238Q/2460/000 226 Section 8 . 01. Notjgp$ . (p. 24) The Agency would like to delete or qualify the ability of the parties to provide notice by telex or facsimile . Section 8. 04 . Exp_enseS ,...n�r.ignp.nt-ary Taxes . indemnification. (p. 26) The agency believes $15, 000 is a more appropriate cap on Morgan' s legal fees and disbursements to its uoucibel with regard Lo the Agreement, instead of the current $25,000. OONCURRENT CLOSING_ OF CREDIT AGREEMF..NT_ANT) THIRD AMENDMENT TO WATER FRONT DTSPOSTTTON AND DEVEL0PMUJT-A,.GRJ4MFN The Agency is seeking the short-term credit facility as a financing component in connection with the Third Amendment to DDA. Consequently, the Agency does not wish to close with Morgan on the Agreement unless and until the Agency is ready to fund its obligations pursuant to the Third Amendment to DDA. For this reason, the Agency must arrange for the concurrent closing of both the Agreement with Morgan and the Third Amendment to DDA, in order that there be an equal priority on both agreements. APPLICABILITY_O.�'._,STOyL T1 ORY INTEREST_. RATE OAP AND PUBLIC BIDi7TNC� R)✓QU_l'REMENTS TO THE LOAN FACILITY. HPalt:h and Safety Code Section 33601 permits an agency to borrow money by the issuance of bonds or otherwise.. "Bonds" is defined as those financial obligations and debt instruments issued by an agency pursuant to Article 5 of Chapter 6 of. the Community Redevelopment Law. (Health and Safety Code Section 33602) . The interest rate on such "bonds" may not. exceed the 12% cap required by Government Code Section 53531, and are required to be sold at public sale: held after published notice. (Health and Safety Code Sections 33645(d) ; 33646) . As the proposed Agreement, constitutes a short- term credit facility, it is not a "bond" within the meaning of Health and Safety Code Section 33602, it is not subject to these limitations . Moreover, the Agency' s authority fuL enteiing info Lhe Agreement with Morgan is provided by Chapter 6 'of Division 6 of Title 1 of the Government Code (Sections 5900 et qe, All types of indebtedness issued pursuant to Chapter 11 may be sold at either public or private sale and are exempt from the usary of provisions of Article. X'V SAnticn 1 of the California Constitution. Exhibit "A" - page4 0238Q/2460/000 - 4 - 226 Res. No. 226 STATE OF CALIFORNIA ) COUNTY OF ORANGE ) CITY OF HUNTINGTON BEACH) I, CONNIE BROCKWAY, Clerk of the Redevelopment Agency of the City of Huntington Beach, California, DO HEREBY CERTIFY that the foregoing resolution was duly adopted by the Redevelopment Agency of the City of Huntington Beach at a meeting of said Redevelopment Agency held on the 6th day of April , 19_q2_, and that it was so adopted by the following vote: AYES: Members: Robitaille, Moulton-Patterson, Winchell, Silva, Green, MacAllister, Kelly NOES: Members: None ABSENT: Members: None Clerk of the RedevelopmenrAgency of the City of Huntington Beach, Ca.