Consideration and Adoption of Ordinance No. 2018-16:  An ordinance of the Council of City of Flagstaff, Coconino County, Arizona, relating to the financing of certain projects, specifically approving publication of notice of proposed lease of land and buildings from, and lease-purchase back of such land and buildings to, the City of Flagstaff, Arizona, and request for bids in connection therewith; authorizing the acceptance of a bid with respect thereto; approving and authorizing the execution and delivery of a ground lease and a lease-purchase agreement and, if it is determined that the hereinafter described certificates are to be sold and executed and delivered, a trust agreement and a purchase agreement as well as, in either case, other necessary agreements, instruments and documents; if determined that such certificates should be sold and executed and delivered as provided herein, approving the sale and execution and delivery of certificates of participation in such lease-purchase agreement to provide the necessary financing therefor; delegating to the Management Services Director of the City of Flagstaff, Arizona, the authority to determine when bids for such land and buildings shall be accepted, to designate the final principal amount, maturity dates, interest rates and payment dates and other matters with respect to such lease-purchase agreement and to accept a proposal for the purchase of the certificates; approving preparation and distribution of a Preliminary Official Statement and the Final Official Statement; and authorizing the taking of all other actions necessary to the consummation of the transactions contemplated by this ordinance.

This ordinance allows for the issuance of Certificates of Participation and enter into a lease-purchase agreement for the purpose of financing construction on the Core Maintenance Facility.  An ordinance for this action is required by City Charter ARTICLE VI - FINANCE AND TAXATION, Section 5 - WHEN ACTIONS ARE TO BE TAKEN BY ORDINANCE.

Series 2018 Certificates of Participation will be issued in an amount not to exceed $3,700,000 related to the construction of the Core Maintenance Facility project. The debt service payments will be made from the revenues received $2.50 per ton tipping fee collected at the landfill.  Debt service expenditures are budgeted in the Solid Waste Fund.

None

Council Goals:
Transportation and Other Public Infrastructure-Deliver quality community assets and continue to advocate and implement a highly performing multi-modal transportation system.
 
Regional Plan:
Goal PF.2. Provide sustainable and equitable public facilities, services, and infrastructure systems in an efficient and effective manner to serve all population areas and demographics.

Yes. Council authorized the 2012 election which voters approved the construction of the Core Maintenance Facility. On April 5, 2019 Council awarded a design/build contract.  On July 6, 2017 Council approved Resolution No. 2017-25, a reimbursement resolution related to the Core Maintenance Facility for an amount not to exceed $3,700,000. First reading of the ordinance took place at the Regular Meeting of April 17, 2018.

• Approve the Ordinance as written allowing the City to move forward with the issuance of Certificates of Participation and the Lease-Purchase agreements. Pros-Allows for cash flow necessary to complete voter approved projects.  Cons-Increases City indebtedness.
• Recommend changes to the Ordinance modifying the issuance of either the Certificates of Participation or Lease-Purchase agreements. Pros and Cons are dependent on changes.
• Do not approve the issuance of Pledged Revenue indebtedness. Pros-Delays level of debt for the City. Cons-Will put the Core Maintenance Facility in a negative cash flow and City will need to find the cash flow for work completed to date.

In October, 2007, staff initiated a discussion with the City Council regarding the need for a new Public Works Maintenance Facility (now Core Services Maintenance Facility). The consensus of Council was that there is a compelling need to research and develop a plan to pursue a new facility. At that time, Council approved a $2.50 per ton tipping fee at the landfill to begin collecting funds for a capital reserve for Environmental Services’ (now Solid Waste) proportionate share of debt service for a new facility. The tipping fee continued until after the May 2011 election which is when the bond election for a $42,000,000 facility failed.  In November 2012, voters approved $14 million in general obligation bonds and construction of a Core Services Maintenance Facility.  In July 2014, by Ordinance 2014-19, Council approved the reinstatement of the $2.50 per ton tipping fee to help fund and finance the project. Construction of the facility began in FY 2017 and is estimated to be completed in FY 2018. Staff will be issuing approximately $3.7 million in debt with the primary repayment source being the tipping fees. 

Staff began discussion with the City’s financial advisor, Stifel, Nicolaus & Company, earlier this fiscal year to determine best method of financing the Solid Waste portion of debt.  Options included revenue obligations or certificates of participation (annual appropriations).  After detailed research and discussions with the financial advisor, staff chose the certificate of participation option utilizing the negotiated sale alternative with Piper Jaffray selected as the Underwriter. By using the Core Maintenance Facility in this financing, staff believes we will receive a favorable market rating and interest rates.  Annual debt service payments will be approximately $230,000 to $275,000, payable from the tipping fee revenue outlined about.
 
Certificates of Participation (the “Certificates”) involve a lease-purchase financing mechanism that allows the City to borrow for capital projects.  The Certificates represent undivided proportionate interests in lease payments (the “Lease Payments”) to be made by the City under a Lease-Purchase Agreement, to be dated as of June 1, 2018, by and between a trustee bank, as lessor (the “Trustee”), and the City, as lessee.  The property which will be the subject of the Lease-Purchase Agreement (the “Leased Property”) will be provided for by a Ground Lease, to be dated as of June 1, 2018, by and between the City, as lessor, and the Trustee, as lessee.  The Certificates will be executed by the Trustee, in its separate capacity as trustee, pursuant to a Trust Agreement, to be dated as of June 1, 2018, between the City and the Trustee.  Under the Trust Agreement, the right to receive the Lease Payments will be assigned to the Trustee.
 
The Certificates will be payable solely from the Lease Payments.  The City’s obligation to pay the Lease Payments will be subject to annual appropriation – no funds or revenues of the City will be pledged to make the Lease Payments.  If the City fails to appropriate for the Lease Payments, the Trustee will take possession of the Leased Property and exercise remedies provided in the Trust Agreement, including re-leasing or selling its leasehold interest in the Leased Property and applying any proceeds from such re-leasing or selling to payments due on the Certificates.  Under such circumstances, possession of the Leased Property would be returned to the City at the expiration of the term of the Ground Lease, currently set for July 2, 2043.

The Trust Agreement allows for the issuance of additional certificates of participation under certain circumstances to expand or improve the Leased Property or to refund the Certificates.

The process to construct a Core Maintenance Facility was voted on by the public involved: Consult, Involve, Collaborate and Empower.

The process to authorize the issuance of indebtedness is to Inform the public.