80C - JT PH - RESO LOCAL STREET FINANCING

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Street Improvement Financing August 20, 2007 Page 2 seal, grind and overlay, reconstruction, and critical concrete repair of sidewalk, curb and gutter. In order to explore financing alternatives and capacity, a financial team consisting of a financial advisor (Fieldman, Rolapp & Associates), an underwriter (De La Rosa & Co.), bond counsel (Orrick, Herrington & Sutcliffe), and disclosure counsel (Quint & Thimmig) was retained. Upon evaluation the team is recommending the use of an installment-sale Certificates of Participation (COP) financing structure that utilizes Gas Tax Revenue as the pledge to repay the certificates. The use of this innovative financing structure has several advantages. First, it utilizes an existing, stable revenue source already designated for the design, construction, maintenance, and operation of public streets and highways. Second, it does not require the pledge of any General Fund monies as collateral for debt payments. The COP installment sale also allows debt service capacity to exceed the 25g limit allowed through a straight bond structure as authorized under the California Streets and Highways Code. Lastly, the financing structure is exempt from the State's constitutional debt limit thereby preserving the City's ability to capitalize on existing bond capacity should it be necessary in the future. To implement the financing structure, the recommended action before the City Council is to conduct a public hearing and then the City Council and the Financing Authority adopt resolutions approving several actions. The City Council resolution approves an Installment Sales Agreement between the City of Santa Ana and the Santa Ana Financing Authority. The agreement would permit the purchase of the street improvements from the Santa Ana Financing Authority who would then assign the improvements back to the City for completion. In addition, a Trust Agreement would be established that would reassign all debt payments to the Bank of New York as the trustee. Finally, the resolution would authorize the City Attorney and Bond Counsel to initiate a validation action in Orange County Superior Court authorizing the use of Gas Tax revenues as a special fund and pledge under the Installment Sales Agreement. The Financing Authority resolution approves the Installment Sales Agreement and the Trust Agreement. Upon completion of these actions, the final bonding package and documents will be presented to Council and Authority Board for consideration and approval. 80C-2