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HomeMy WebLinkAboutReso 2020-UB-01 Plan to Fund Calpers referencing Water fundRESOLUTION NO. 2020 -UB -01 A RESOLUTION OF THE UTILITY BOARD/CITY COUNCIL OF THE CITY OF AZUSA AUTHORIZING FORGIVENESS OF REMAINING LOAN BALANCE FROM THE WATER FUND TO THE GENERAL FUND ESTABLISHED BY RESOLUTION NO. 14-C81 UPON ISSUANCE OF PENSION OBLIGATION BONDS AND AUTHORIZING A LOAN FROM THE AZUSA LIGHT & WATER ELECTRIC UTILITY TO THE WATER UTILITY FOR THE PURPOSE OF PAYING THE WATER UTILITY'S PORTION OF THE UNFUNDED ACCRUED LIABIITY TO CALPERS WHEREAS, the Water Utility desires to retire $6.4 million in debt related to its Unfunded Accrued Liability for ("UAL") for employee pensions provided through the California Public Employees' Pension System ("Ca1PERS"); and WHEREAS, the General Fund ("City") has begun validation proceedings to issue Pension Obligation Bonds ("POB") to pay off its $80.6 million UAL for Ca1PERS pensions, including portions allocable to the Water Utility; and WHEREAS, the General Fund owes the Water Utility approximately $2.9 for a loan established by Resolution No. 14-C81 and desires to have the Water Utility forgive the outstanding loan balance and instead issue POBs as repayment of the loan; and WHEREAS, the Water Utility's outstanding UAL would be $3.5 million after the City issues POBs to pay down the Water Utility's UAL in lieu of repaying the $2.9 million loan; and WHEREAS, the Water Utility's current financial forecasts does not project sufficient metrics to maintain strong credit ratings without additional cash to pay its UAL; and WHEREAS, Electric Utility cash balances and other financial metrics are sufficient to lend $3.5 million to the Water Utility to pay its remaining UAL balance after the City issues $2.9 million its behalf, which will maintain a strong Water Utility credit rating; and WHEREAS, together the $2.9 million POB issuance by the City on the Water Utility's behalf and a $3.5 million loan by the Electric Utility will provide sufficient resources to pay-off the Water Utility's $6.4 million UAL to Ca1PERS for pensions, will minimize the amount of POB debt issuance in total, result in a higher lump sum payment to CalPERS for citywide unfunded accrued liability for pensions, thus, saving the Water Fund money over time. NOW, THEREFORE, BE IT RESOLVED that the Utility Board/City Council of the City of Azusa does hereby: Section 1. Authorize the forgiveness of the outstanding loan balance of approximately $2.9 million owed by the General Fund to the Water Fund established by Resolution No. 14-C81 upon completion of the General Fund issuing Pension Obligation Bonds to pay the same $2.9 million towards Water's $6.4 million portion of its Unfunded Accrued Liability for pensions to Ca1PERS. Section 2. Approve the Interfund Loan Agreement (Exhibit A) between the Azusa Light & Water, Water Fund ("Borrower") and the Azusa Light & Water Electric Fund ("Lender") as follows: Loan Amount Purpose Interest Rate Term Borrower Lender Repayment Source $3,500,000 Pay portion Variable 5 -year AL&W AL&W Water of Water's — LAIF term Water Electric Revenue Unfunded average Full Fund, No. Fund, Funds Accrued annual Payment 32 No. 33 Liability to yield due on Ca1PERS June 30, 2025 Section 3. Approve Promissory Note (Exhibit B) authorizing the repayment of the loan in accordance with Section 2 hereof. Section 4. Authorize and direct the City Manager or his/her designee, on behalf of the City, to execute the Agreement with the Azusa Light & Water in accordance with Section 2 hereof. PASSED, APPROVED and ADOPTED this 23`d day of March, 2020. oseph omero Rocha Boardmember/Mayor ATTEST: J r �-/,;Or'- ce Cornej o, J . e etar City Clerk STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF AZUSA ) I HEREBY CERTIFY that the foregoing Resolution No. 2020 -UB -01 was duly adopted by the Utility Board/City Council of the City of Azusa at a regular meeting of the Azusa Light & Water Utility Board thereof, held on the 23` day of March, 2019. AYES: BOARD/COUNCILMEMBERS: GONZALES, CARRILLO, MACIAS, ALVAREZ, ROCHA NOES: BOARD/COUNCILMEMBERS: NONE ABSENT: BOARD/COUNCILMEMBERS: NONE r ay&6ee Cornejo, . Secretary/City Clerk APPROVED AS TO FORM: City Attorney Best Mst & Krieger (Exhibit A) INTERFUND LOAN AGREEMENT This Loan Agreement ("Agreement") is executed as of March 23, 2020, between the Azusa Light & Water Water Fund ("Borrower") and the Azusa Light & Water Electric Fund ("Lender"). Lender agrees to lend to Borrower, and Borrower agrees to repay to Lender an amount not to exceed the Principal Amount and interest accrued on the unpaid loan balance, in accordance with the following: 1. Purpose of the Loan: To provide funds for use by Borrower or its designee, to fund forgiven balance per Resolution No. 2020 -UB -01. The loan shall account for borrowing between the Water Fund, Fund No. 32 and the Electric Fund, Fund No. 33 and shall not be available for appropriation or be considered revenue to the Borrower. 2. Principal Loan Amount: Not to exceed Three Million Five Hundred Thousand and 00/100 Dollars ($3,500,000.00). The loan will be recorded as receivable to the Lender and payable to the Borrower. 3. Term of the Loan: The term of this loan shall begin on March 24, 2020 and the outstanding loan balance is to be repaid by June 30, 2025. 4. Scheduled Payments: Borrower shall make payments each fiscal year beginning with Fiscal Year 2021. Such payments are due by June 30 for each fiscal year. At minimum, annual Scheduled Payments shall equal the amount of any accrued interest through June 30 of that fiscal year plus a principal payment equal one-fifth (1/5) of the original principal amount. 5. Repayment Source: Borrower must maintain positive cash balance of at least $19M or its adopted Reserve Policy, whichever is less, to be able to repay the loan. Missed scheduled payments shall be reported by the Finance Department to the the Utility Board. 6. Rate of Interest: Interest shall accrue annually on June 30 on the outstanding loan balance at the variable rates based on State of California's Local Agency Investment Fund Pooled Money Investment Account Average Annual Yield, currently at 2.266% for Fiscal Year 2018-2019. Loan interest will be recorded as revenue to the Lender and expenditure to the Borrower. 7. General Provisions: This Agreement constitutes the full Agreement by and between the parties and no other representations have been made regarding the contents of this Agreement. This Agreement shall not be amended, modified, or altered in any respect unless such amendment, modification or alteration has been reduced to writing and executed by both parties. LENDER: Azusa Light & Water, a municipal utility Fund Name: Electric Fund, No. 33 BORROWER: Azusa Light & Water, a municipal utility Fund Name: Water Fund, No. 32 EXECUTED BY: '—�M` Manny Robledo, Director of Utilities Sergio Gonzalez, City Manager (Exhibit B) PROMISSORY NOTE CITY OF AZUSA MARCH 23, 2020 For value received, the ELECTRIC FUND OF AZUSA LIGHT & WATER, a municipal utility organized and existing under the laws of the State of California, promises to pay the WATER FUND OF AZUSA LIGHT & WATER, a municipal utility organized and existing under the laws of the State of California, the estimated sum of THREE MILLION FIVE HUNDRED THOUSAND AND 00/100 DOLLARS ($3,500,000.00), revised as necessary to reflect incurred interest thereon from the date of actual receipt of loan proceeds as evidenced by the transaction date, at the variable annual interest rate equivalent to the Local Agency Investment Fund Pooled Money Investment Account Average Annual Yields, currently at 2.266% for FY 2018-2019, per annum. Any unpaid amounts will accrue annually and be added to the principal. The note is payable from excess cash balance. The balance of the note shall be fully repaid by June 30, 2025, unless extended by mutual written consent of both parties. This note is issued in connection with the funding of the General Fund's cash reserve balance. The Utility Board has authorized the loan for such purpose. Any unpaid interest shall accrue and be added to the outstanding balance. Principal and interest shall be payable in lawful money of the United States at Azusa, California. Demand, presentment for payment, protest and notice of protest are hereby waived. CITY OF AZUSA /I 0,r�/ x�l By:. oseph R. Rocha, Mayor ELECTRIC FUND LOAN TO WATER FUND TO PAY UAL TO CALIPERS FOR WATER PENSIONS DATED MARCH 23, 2020 LOAN TERM = FULL PAYMENT DUE ON JUNE 30, 2025 LAIF AVG. ANNUAL LOAN RATE* TOTAL ENDING YEAR LOAN PRINCIPAL (Changes INTEREST ANNUAL LOAN AT BALANCE PAYMENT Annually) INTEREST PAYMENT PAYMENT BALANCE 07/01/20 - 06/30/21 $3,500,000.00 $700,000.00 2.266% $79,310.00 $79,310.00 $779,310.00 $2,800,000.00 07/01/21 - 06/30/22 $2,800,000.00 $700,000.00 2.266% $63,448.00 $63,448.00 $763,448.00 $2,100,000.00 07/01/22 - 06/30/23 $2,100,000.00 $700,000.00 2.266% $47,586.00 $47,586.00 $747,586.00 $1,400,000.00 07/01/23 - 06/30/24 $1,400,000.00 $700,000.00 2.266% $31,724.00 $31,724.00 $731,724.00 $700,000.00 07/01/24 - 06/30/25 $700,000.00 $700,000.00 2.266% $15,862.00 $15,862.00 $715,862.00 $0.00 TOTALS $3,500,000.00 $237,930.00 $237,930.00 $3,737,930.00 Note: Payment due by June 30th of each fiscal year *Based on FY 18/19 Rate. LAIF Average Annual Interest Wil change annually.