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4/11/2003
ORDINANCE NO. 6964
AN ORDINANCE ADOPTING A PLAN FOR THE DEFEASANCE AND PAYMENT OF SEWER
REFUNDING REVENUE BONDS, SERIES 1996, ISSUED BY THE CITY OF PUEBLO,
COLORADO, ACTING BY AND THROUGH ITS SEWER ENTERPRISE; AND AUTHORIZING
AND APPROVING RELATED DOCUMENTS AND ACTIONS IN CONNECTION THEREWITH
WHEREAS, the City of Pueblo, in the County of Pueblo and State of Colorado (the "City "),
is a municipal corporation duly organized and existing as a home rule city pursuant to Article XX of
the Constitution of the State of Colorado (the "State ") and the home rule charter of the City (the
"Charter"); and
WHEREAS, under the Charter, the City is possessed of all powers which are necessary,
requisite or proper for the government and administration of its local and municipal affairs, all
powers which are granted to home rule municipalities by the Colorado Constitution, and all rights
and powers that now or hereafter may be granted to municipalities by the laws of the State; and
WHEREAS, the City owns and operates a municipal sanitary sewer system (the "Sewer
Enterprise "); and
WHEREAS, the legislative powers of the City are vested in a board of council members,
known as the city council (the "City Council "), which also operates as the governing body of the
Sewer Enterprise; and
WHEREAS, the City, acting by and through its Sewer Enterprise, previously issued its
Sewer Refunding Revenue Bonds, Series 1996, in the initial principal amount of $11,100,000, of
which $3,550,000 remains outstanding (the "1996 Bonds "), pursuant to Ordinance No. 6128,
adopted by the City Council, acting as the governing body of the Sewer Enterprise, on second
reading on October 15, 1996 (the "1996 Bond Ordinance "); and
WHEREAS the 1996 Bonds are payable under a Paying Agency Agreement dated as of
November 1, 1996 (the "Paying Agency Agreement") between the Sewer Enterprise and The Bank
of Cherry Creek, a Branch of Western National Bank (successor to The Bank of Cherry Creek,
N.A.) (the "1996 Paying Agent'); and
WHEREAS the Sewer Enterprise desires to borrow funds through a program administered
by the Colorado Water Resources and Power Development Authority (the "Authority") for a
wastewater treatment project which will enhance the public health and welfare of the residents of
the City, and a necessary condition for that borrowing is the defeasance of the 1996 Bonds; and
WHEREAS the Sewer Enterprise has moneys legally available to it which will enable it to
establish an escrow account with enough funds for the payment of the remaining principal of, and
the interest on, the 1996 Bonds, as they become due; and
WHEREAS, the City has engaged James Capital Advisors, as financial advisor for the City
( "James Capital "), Kutak Rock LLP, as bond counsel for the City ( "Kutak"), and the City Attorney, to
work with the Sewer Enterprise to develop a timetable and a plan for the defeasance and payment
of the 1996 Bonds, and for the borrowing from the Authority (the "Plan "); and
WHEREAS, James Capital, Kutak, the City Attorney and a representative of the Sewer
Enterprise have drafted a timetable setting forth various steps to be taken to accomplish the Plan
and have presented that timetable at this meeting of the City Council, sitting as the governing body
of the Sewer Enterprise; and
WHEREAS, there has also been presented at this meeting a form of Escrow Agreement,
dated as of May 20, 2003 (the "Escrow Agreement"), between the Sewer Enterprise and The Bank
of Cherry Creek, a Branch of Western National Bank, as Escrow Agent (the "Escrow Agent°), which
would provide for the establishment of an escrow account, funded with moneys legally available to
the Sewer Enterprise, which moneys and the investments purchased with such moneys will provide
for the defeasance and the payment in full of the 1996 Bonds as they become due; and
WHEREAS, the City Council, sitting as the governing body of the Sewer Enterprise, wishes
to approve the outline and general timetable for the Plan, to adopt and approve the form of the
Escrow Agreement, and to approve the deposit of moneys legally available to the Sewer Enterprise
into the escrow account, all to provide for the defeasance and payment of the 1996 Bonds; and
WHEREAS, the City Council, sitting as the governing body of the Sewer Enterprise, has
considered the proposal and the outline of the Plan, and has determined that it is in the best
interests of the residents of the City that the Plan be implemented without undue delay;
BE IT ORDAINED BY THE CITY COUNCIL OF PUEBLO:
SECTION 1
Approval of Plan Generally. The City Council, sitting as the governing body of the Sewer
Enterprise, hereby approves and authorizes the execution of the Plan generally, along the
approximate timetable presented at this meeting.
SECTION 2
Defeasance of the 1996 Bonds. The City Council, sitting as the governing body of the
Sewer Enterprise, hereby approves and authorizes the defeasance and payment of the 1996
Bonds, and directs the President and the Vice President of the City Council, the City Clerk and the
Wastewater Director (together, the "Authorized Officials"), in conjunction with James Capital, Kutak
and the City Attorney (together, the "Associated Professionals "), to take action or to cause the
1996 Paying Agent to take action to accomplish such defeasance and payment in accordance with
the 1996 Bond Ordinance.
SECTION 3
Approval of Escrow Agreement. The City Council, sitting as the governing body of the
Sewer Enterprise, hereby approves the Escrow Agreement, in substantially the form presented to
this meeting, and authorizes and directs the President or the Vice President of the City Council to
execute and deliver the Escrow Agreement for and on behalf of the Sewer Enterprise, in
substantially the form and with substantially the content as presented at this meeting, but with such
changes, modifications, additions and deletions therein as the City Attorney and the Authorized
Official executing the Escrow Agreement shall deem necessary, desirable or appropriate
(execution thereof to constitute conclusive evidence of the approval of any and all such changes,
modifications, additions or deletions).
SECTION 4
Deposit of Moneys into the Escrow Account. The City Council, sitting as the governing
body of the Sewer Enterprise, hereby authorizes and directs the deposit of enough money, not to
exceed $3,821,585, from the legally available funds of the Sewer Enterprise, into the escrow
account established pursuant to the Escrow Agreement, to provide for, and also authorizes and
directs the use of such moneys for, the complete payment of the 1996 Bonds.
SECTION 5
Additional Documents and Actions. The Authorized Officials, and any of them, are
hereby authorized and directed to execute and deliver for and on behalf of the City and the Sewer
Enterprise any and all additional certificates, documents, opinions or other papers, and to perform
all other acts as they may deem necessary or appropriate in order to implement and cant' out the
intent and purpose of this Ordinance.
SECTION 6
Repeals. All ordinances, resolutions, motions, orders, by -laws, rules or regulations, or
parts thereof, in conflict with this Ordinance are hereby repealed only to the extent of such
inconsistency.
SECTION 7
Severability. If any section, paragraph, clause or provision of this Ordinance shall for any
reason be held to be invalid or unenforceable, the invalidity or unenforceability of such section,
paragraph, clause or provision shall not affect any of the remaining parts or provisions of this
Ordinance.
SECTION 8
Effective Date. This Ordinance shall take effect on April 14, 2003, upon its final passage
and approval.
SECTION 9
Public Hearing. A public hearing on this Ordinance shall be held on Monday, April 14,
2003, at 7:00 p.m., in the City Council Chambers, One City Hall Place, Pueblo, Colorado.
INTRODUCED March 24. 2003
BY Al Gurule
Councilperson
APPROVED:
President of City Council
ATTEST:
Cily rk
PASSED AND APPROVED: April 14. 2003
a 7 ,
9 �
Background Paper for Proposed
ORDINANCE
DATE: March 24, 2003
DEPARTMENT: WASTEWATER
Gene Michael, Director
TITLE
(SUBSTITUTED COPY)
ow . -# CocCeC/
AGENDA ITEM # 38
AN ORDINANCE ADOPTING A PLAN FOR THE DEFEASANCE AND PAYMENT OF
SEWER REFUNDING REVENUE BONDS, SERIES 1996, ISSUED BY THE CITY OF
PUEBLO, COLORADO, ACTING BY AND THROUGH ITS SEWER ENTERPRISE; AND
AUTHORIZING AND APPROVING RELATED DOCUMENTS AND ACTIONS IN
CONNECTION THEREWITH.
ISSUE
Shouid the City Council approve a plan for the defeasance and payment of sewer
refunding revenue bonds, series 1996, issued by the City of Pueblo, through its sewer
enterprise: and authorizing and approving related documents and actions?
RECOMMENDATION
Approval of Ordinance
BACKGROUND
In November 2002, the City Council adopted a 10 -year financial plan for the
wastewater enterprise that included a new rate and fee schedule. The financial
plan was based on recovering operating costs and on a 10 -year capital
improvement program for the wastewater system. The capital improvement
program included replacing a 30 -inch sanitary sewer interceptor line located in
the Arkansas River channel bed. Construction for this project must begin in 2003
to avoid conflict with the U.S Army Corps of Engineers Arkansas River project
and with the City of Pueblo's Legacy Project.
Existing funds are insufficient for the interceptor replacement project. In
accordance with the new financial plan, the Wastewater Department has applied
for and received a loan in the amount of $8,363,188 from the Colorado Water
Resources and Power Development Authority, under the State Revolving Fund
(SRF) loan program authorized under the federal Clean Water Act.
Approximately $6 million of this loan will be used to fund the Arkansas River
Sanitary Sewer Interceptor Replacement Project, and the remainder will be spent
on sanitary sewer replacement and rehabilitation throughout the City of Pueblo
between 2003 and 2006.
The wastewater enterprise presently owes debt service on a series of revenue
bonds issued in the mid -1980s and refinanced in 1996. These bonds are
presently referred to as the 1996 Series bonds. The 1996 Series bonds will be
retired at the end of 2004. However, until the debt service payments on the
existing bond series is complete, Wastewater Department's current revenues
may be insufficient to maintain legal debt coverage on both the existing bonds
and on the SRF loan.
The plan for defeasance calls for placing $3,763,000 of operating capital in an
escrow account to be used for debt service payments on the 1996 Series bonds.
The escrow agreement will allow the City to fulfill its obligations to the investors in
the 1996 Series bonds, and also places the SRF loan in a first mortgage position
with regard to debt service payments.
FINANCIAL IMPACT
This ordinance will remove $3,763,000 in operating capital from the Wastewater
Enterprise through 2004, for the purpose of assuring compliance with bond
covenants on existing bonds.
PUEBLO SEWER ENTERPRISE ESCROW AGREEMENT
THIS PUEBLO SEWER ENTERPRISE ESCROW AGREEMENT, dated as of
May 14, 2003 (this "Escrow Agreement'), is made by and between the CITY OF PUEBLO,
COLORADO, ACTING BY AND THROUGH ITS SEWER ENTERPRISE (the
"Enterprise ") and THE BANK OF CHERRY CREEK, A BRANCH OF WESTERN
NATIONAL BANK, as escrow agent (the "Escrow Agent ").
WITNESSETH:
WHEREAS, the City of Pueblo, Colorado (the "City"), is a municipal corporation in the
State of Colorado (the "State "), duly organized and operating under the Constitution and laws of
the State and its Home Rule Charter; and
WHEREAS, the City, acting by and through the Enterprise, has previously issued its
Sewer Refunding Revenue Bonds, Series 1996 (the "Series 1996 Bonds ") in the aggregate
principal amount of $11,100,000, of which $3,550,000 is presently outstanding; and
WHEREAS, the ordinance authorizing the issuance and delivery of the Series 1996
Bonds provides that the Series 1996 Bonds are not subject to redemption prior to their maturity;
and
WHEREAS, the Enterprise desires to provide for the defeasance of the Series 1996
Bonds by providing moneys for the payment of the principal of and interest on the Series 1996
Bonds as they mature; and
WHEREAS, the Enterprise therefore will deposit moneys in a special fund and trust
account herein created and authorized, to be used solely to pay and discharge the Series 1996
Bonds as herein provided; and
WHEREAS, a portion of the moneys in the special fund and trust account will be
invested in the noncallable direct obligations of the United States of America (the "Government
Obligations ") listed in Exhibit A hereto; and
WHEREAS, the maturing interest on and principal of such Government Obligations will
be used by the Escrow Agent, together with cash in the escrow account, to pay the principal of
and interest on the Series 1996 Bonds on their respective payment dates; and
WHEREAS, the Escrow Agent, as Paying Agent for the Series 1996 Bonds (which are
sometimes called the "Refunded Bonds" in this Agreement), shall provide for such payment of
the Refunded Bonds as set forth herein;
NOW, THEREFORE, IT IS AGREED that in consideration of the mutual covenants
herein contained, and in order to secure the payment of the principal of and interest on the
Refunded Bonds, according to the schedules set forth herein, the parties hereto mutually
undertake, promise and agree for themselves and their respective representatives, successors and
assigns, as follows:
02- 141166.3
Section 1. The Enterprise hereby establishes with the Escrow Agent a special fund and
trust account designated as the "City of Pueblo, Colorado, Sewer Enterprise Refunding Revenue
Bonds, Series 1996, Escrow Fund" (the "Escrow Fund "). The Enterprise as of this date
irrevocably deposited into the Escrow Fund $3,821,585 from moneys legally available to the
Enterprise, and the Escrow Agent acknowledges receipt of that amount of money. The
Enterprise hereby directs the Escrow Agent to invest moneys in the Escrow Fund in the
Government Obligations described in Exhibit A hereof at a cost of $3,821,042.69, and to hold
$542.31 as uninvested cash, and the Escrow Agent agrees to make such investment and to hold
such cash.
The principal of and interest on the Government Obligations described above shall be
sufficient, together with cash on hand, and shall be used, as the Government Obligations mature,
to make the required payments of principal of and interest on the Refunded Bonds on their
payment dates. The debt service schedule for the Refunded Bonds is set forth in Exhibit B
hereto and the Escrow Agent is authorized to rely thereon.
Section 2. The Escrow Agent acknowledges receipt from the Enterprise of $800.00, as
full payment for its services in connection with this Escrow Agreement. The Escrow Agent
expressly waives any lien upon or claim against any other moneys and investments in the Escrow
Fund.
Section 3. The Escrow Agent agrees to hold the deposits in the Escrow Fund, together
with the Government Obligations herein authorized and directed to be purchased, at all times in
the Escrow Fund, wholly segregated from other funds and securities on deposit with it, shall
never commingle such deposit or securities with other funds or securities of the Escrow Agent,
and shall never at any time use, loan or borrow the same in any way unless said funds are fully
secured in the manner required by law for other trust funds. The Escrow Fund shall at all times
be maintained on the books of the Escrow Agent together with the Government Obligations so
purchased. The Government Obligations will be irrevocably deposited in the Escrow Fund, will
be registered in the name of the Escrow Agent and title to the Government Obligations shall vest
in the Escrow Agent on behalf of the registered owners of the Refunded Bonds.
Section 4. The maturing interest on and principal of the Government Obligations in the
Escrow Fund shall be used first solely to meet the debt service on the Refunded Bonds as
provided in Section 1 hereof. On or prior to each principal and/or interest payment date on the
Refunded Bonds and without further direction from anyone, including the Enterprise, the Escrow
Agent shall withdraw from the Escrow Fund an amount sufficient to pay the debt service on the
Refunded Bonds and shall use such moneys to pay the principal of and interest on the Refunded
Bonds. The Escrow Agent shall notify the Enterprise if the amounts on deposit in the Escrow
Fund are not sufficient to make the transfers required by Section 1 hereof, and the Enterprise
shall immediately deposit with the Escrow Agent an amount equal to the deficiency. The
Escrow Agent will not commingle any amounts subsequently deposited by the Enterprise to
make up a deficiency with the Government Obligations or any other funds in the Escrow Fund,
but will create, and deposit the amount of such deficiency in, a subaccount of the Escrow Fund.
The Enterprise hereby waives any and all conditions to any vesting of title to the Government
Obligations in the Escrow Agent and the timely payment of amounts due on the Refunded Bonds
from the Government Obligations.
02- 141166.3 2
Section 5. The Escrow Agent agrees to maintain the Escrow Fund until the date upon
which all the Refunded Bonds are fully paid, as to principal and interest, whereupon the Escrow
Agent shall redeem any Government Obligations remaining in the Escrow Fund and shall remit
all moneys, if any, then remaining in the Escrow Fund to the Enterprise.
Section 6. The Escrow Agent shall continuously secure any moneys in the Escrow Fund
not invested in Government Obligations by a pledge of Government Obligations in a principal
amount at all times at least equal to the total uninvested moneys held in the Escrow Fund. This
requirement shall not apply with regard to any such uninvested moneys to the extent and during
any time the same are fully insured by the Federal Deposit Insurance Corporation.
Section 7. The Escrow Agent shall not be liable or responsible for any loss resulting
from any investment made pursuant to this Escrow Agreement and in full compliance with the
provisions hereof. The Enterprise shall not be liable for any action or failure to act of the Escrow
Agent.
Section 8. In the event of the Escrow Agent's failure to account for any funds or
Government Obligations received by it for the account of the registered owners of the Refunded
Bonds, said funds and Government Obligations shall be and remain the property of the registered
owners of the Refunded Bonds, and if for any reason said funds or Government Obligations
cannot be identified, all other assets of the Escrow Agent shall be impressed with a trust for the
amount thereof and the registered owners of the Refunded Bonds shall be entitled to the
preferred claim upon such assets enjoyed by a trust beneficiary. The funds received by the
Escrow Agent shall not be considered as a banking deposit by the Enterprise, and the Escrow
Agent shall have no right or title with respect thereto. The funds so received by the Escrow
Agent as escrow agent shall not be subject to checks drawn by the Enterprise.
Section 9. The Escrow Agent, as Paying Agent, is hereby irrevocably directed to give
notice to the registered owners of the Refunded Bonds that the deposits referred to in Section 1
hereof have been made and that the Refunded Bonds have been defeased, such notice to be in
substantially the same form as attached hereto as Exhibit C.
Section 10. On or prior to each January 31, beginning January 31, 2004, the Escrow
Agent shall forward to the Enterprise a statement in detail of the income, investments, payments
and withdrawals of moneys from the Escrow Fund for the preceding calendar year. The
Enterprise shall have the right, at any time, to examine all the Escrow Agent's records regarding
the status of the Escrow Fund, and the details of all income, investments, payments and
withdrawals therefrom with respect to the Escrow Fund.
Section 11. The Escrow Agent shall not reinvest any cash or redeem and reinvest the
proceeds of any of the securities held in the Escrow Fund or substitute other securities for any of
the securities held in the Escrow Fund unless and until the Enterprise requests that such
reinvestment or substitution be made. Any such reinvestment or substitution must be in
Government Obligations. Prior to any request for such redemption and reinvestment of any
proceeds of any of the securities held in Escrow Fund or request to substitute other securities for
any of the securities held in the Escrow Fund, the Enterprise shall provide to the Escrow Agent:
(a) an opinion by an independent certified public accountant that after such reinvestment or
02- 141166.3 3
substitution the principal amount of the Government Obligations purchased, plus the remaining
securities held in the Escrow Fund, together with the earnings thereon and other available
moneys, will be sufficient to pay, as the same become due, all principal of and interest on the
Refunded Bonds which have not then previously been paid, and (b) an unqualified opinion of
nationally recognized municipal bond counsel to the effect that (i) such reinvestment or
substitution will not affect adversely the exclusion from federal income tax of the interest on the
Refunded Bonds, and (ii) such reinvestment or substitution complies with the Constitution and
laws of the State of Colorado and the provisions of all relevant documents relating to the
issuance of the Refunded Bonds.
Section 12. The Escrow Agent shall not be liable for any act done or step taken or
omitted by it or any mistake of fact or law or for anything which it may do or refrain from doing,
except for its negligence or its default in the performance of any obligation imposed upon it
hereunder.
Section 13. This Escrow Agreement is made by the Enterprise for the benefit of the
registered owners of the Refunded Bonds as provided herein and shall not be revocable by the
Enterprise, and the Government Obligations and other funds held in the Escrow Fund and all
income therefrom are hereby irrevocably appropriated for the payment of the Refunded Bonds in
accordance with this Escrow Agreement and as particularly described in Section 1 hereof.
Section 14. This Escrow Agreement shall be binding upon and shall inure to the benefit
of the registered owners of the Refunded Bonds, as third party beneficiaries, and the Escrow
Agent and their respective successors and assigns; provided, however, that the Escrow Agent
shall not assign this Escrow Agreement without the consent of the Enterprise, which consent
shall not be unreasonably withheld. Said third party beneficiaries shall be entitled to enforce
performance and observance by the Enterprise and the Escrow Agent of the respective
agreements and covenants herein contained as fully and completely as if such third party
beneficiaries were parties hereto. Any bank into which the Escrow Agent may be merged or
with which it may be consolidated or any bank resulting from any merger or consolidation to
which it shall be a party or any bank to which it may sell or transfer all or substantially all of its
corporate trust business shall, unless the Enterprise disapproves in writing, be the successor
agent without the execution of any document or the performance of any further act. In the event
that the Enterprise disapproves of the successor agent resulting from any of the events described
above, the Enterprise shall immediately appoint any commercial bank which is a member of the
Federal Deposit Insurance Corporation and which has trust powers to be the successor escrow
agent hereunder, whereupon such successor agent shall immediately succeed to the agreements
and covenants of the Escrow Agent hereunder.
Section 15. If any one or more of the covenants or agreements provided in this Escrow
Agreement on the part of the Enterprise or the Escrow Agent to be performed should be
determined by a court of competent jurisdiction to be contrary to law, such covenant or
agreement shall be deemed and construed to be severable from the remaining covenants and
agreements herein contained and shall in no way affect the validity of the remaining provisions
of this Escrow Agreement.
02- 141166.3 4
Section 16. This Escrow Agreement may be executed in several counterparts, all or any
of which shall be regarded for all purposes as one original and shall constitute and be but one and
the same instrument. This Escrow Agreement shall be governed by the laws of the State of
Colorado.
Section 17. Time shall be of the essence in the performance of obligations from time to
time imposed upon the Escrow Agent by this Escrow Agreement.
42- 141166.3 5
IN WITNESS WHEREOF, the Enterprise has caused this Escrow Agreement to be
signed in its name by the President of the City Council and the Escrow Agent has caused this
Escrow Agreement to be signed in its corporate name by its authorized officer, all as of the day
and year first above written.
CITY OF PUEBLO, COLORADO, ACTING BY
AND THROUGH ITS SEWER E
By
President, City Council
THE BANK OF CHERRY CREEK., A BRANCH
OF WESTERN NATIONAL BANK, as Escrow
Agent
By - b MIOL
Authorized Officer
02- 141166.3 6
EXHIBIT A
GOVERNMENT OBLIGATIONS
02- 141166.3
Principal
Maturity
Type
Amount
Coupon
Date
Cost
U.S. T -Bill
$41,000
1.04475%
05/29/2003
$40,982.40
(yield)
U.S. Treasury
1,510,000
3.0000%
11/30/2003
1,546,106.22
Bond
U.S. Treasury
30,000
3.2500%
05/31/2004
31,084.15
Bond
U.S. Treasury
2,160,000
2.0000%
11/30/2004
2,202,869.92
Bond
02- 141166.3
EXHIBIT B
DEBT SERVICE SCHEDULE FOR
THE REFUNDED BONDS
Date Principal Interest Total
June 1, 2003 -- $85,352.50 $ 85,352.50
December 1, 2003 $1,470,000 85,352.50 1,555,352.50
June 1, 2004 -- 50,440.00 50,440.00
December 1, 2004 2,080,000 50,440.00 2,130,440.00
02- 141166.3
EXHIBIT C
NOTICE OF DEFEASANCE
OF
CITY OF PUEBLO, COLORADO, ACTING
BY AND THROUGH ITS SEWER ENTERPRISE
SEWER REFUNDING REVENUE BONDS
SERIES 1996
Notice is hereby given that there is on deposit with The Bank of Cherry Creek, A Branch
of Western National Bank, paying agent for the above - captioned bonds (the "1996 Bonds "), cash
and direct obligations of the United States of America ( "Government Obligations ") which are
sufficient to pay the remaining principal of and interest on the 1996 Bonds as they become due,
and that the 1996 Bonds therefore have been defeased.
THE BANK OF CHERRY CREEK, A BRANCH
OF WESTERN NATIONAL BANK
By L.4o�
02- 141166.3