ARLINGTON COUNTY, VIRGINIA

[Pages:14]ARLINGTON COUNTY, VIRGINIA

County Board Agenda Item Meeting of September 18, 2004

DATE: August 25, 2004

SUBJECT: Substitution of the Letter of Credit for the Ballston Public Parking Garage Revenue Bonds

C. M. RECOMMENDATION:

Approve the attached Resolution (Attachment A), (i) approving the terms and conditions of Bank of America's proposal; (ii) authorizing the Chairman of the County Board, the County Manager and the Director of the Department of Management and Finance, or any of them, after legal review and approval by the County Attorney, to approve the basic documents, which include, but are limited to the Alternate Letter of Credit and Reimbursement Agreement and the Addendum to Placement Memorandum to substitute the irrevocable Letter of Credit with Bank of America N.A., the new LOC provider; and (iii) authorizing the Chairman and Vice Chairman of the County Board, the County Manager, and the Director of the Department of Management and Finance, or any of them, to execute on behalf of the County the Alternate Letter of Credit and Reimbursement Agreement and such instruments, advancements or certificates necessary or appropriate to carry out the substitution of the existing Letter of Credit, and, the County Manager or the Director of Management and Finance to prepare and deliver the Addendum to the Placement Memorandum.

ISSUES: Should the County Board approve the terms and conditions of the Alternate Letter of Credit?

SUMMARY: In 1984, the County financed the construction of the Ballston Public Parking Garage (the "BPPG") by issuing of $22.3 million in revenue bonds. These bonds are backed by a Letter of Credit (the "LOC") whose first term expired in September of 1991. The second term expired September 26, 1998. The third term expired on September 26, 2003, and the fourth term expires on September 26, 2004. In July 2004, Arlington County issued a request for proposal from financial organizations that could offer this service. The current LOC provider, Citibank, decided not to bid on the RFP issued by the County. Two other banks, Bank of America and SunTrust Bank, presented their offers to provide an irrevocable letter of credit to support the revenue bonds issued by Arlington County. Through this action, it is proposed that a LOC be negotiated with Bank of America. This bank proposes an annual fee of 25 basis points, which is

County Manager: _____________

County Attorney: _____________

Staff: Gus Vega, DMF; Barbara Donnellan, DMF

seven basis points lower than the fee proposed by SunTrust Bank. It is requested that the County extend its moral obligation pledge to fund shortfalls in parking revenues available to pay certain debt service and operating and maintenance payments. The County's moral obligation has never been called upon.

BACKGROUND: As the keystone in the County's plan to encourage the redevelopment of the Ballston area, in 1984 the County issued $22.3 million in revenue bonds (the "Bonds") to finance the construction of the BPPG parking garage, a 2805-space public parking facility adjacent to the Ballston Mall. This investment triggered substantial retail, office, and residential construction in Ballston. The Bonds were issued with the intention that the operating, capital and Bond-related debt service costs would be financed with BPPG parking fees and other related project income.

These revenue bonds were structured as seven-day variable rate revenue bonds in order to take advantage of lower interest rates that accrue to short-term tax-exempt financial instruments. As of June 30, 2004, $7.0 million of the original $22.3 million of the Bonds have been retired. Given that the holders of these shorter-term bonds may require the County to purchase the Bonds at the end of any seven-day period, it is necessary to back the Bonds with an LOC from a major, highly-rated financial institution. The LOC provides the bondholder assurance that the scheduled debt service payments on the Bonds will be paid when due.

DISCUSSION:

Selection of the Letter of Credit Provider

In order to determine which LOC arrangement was in the County's best interest, the County issued a request for proposals to major domestic and domestic divisions of major international financial institutions that are competitive in the LOC market. The County received proposals from Bank of America and SunTrust Bank. Citibank, the current provider of the LOC decided not to present an offer. After an extensive negotiation with the two offerors, County staff recommends the contracting of Bank of America's services because the annual fee is lower than the one proposed by SunTrust Bank and because Bank of America had the less restrictive requirement to review the bond documents negotiated in 1984. A more detailed analysis of these documents would have taken too long and the new LOC must be in place before September 23, 2004, two business days before the expiration of the existing LOC.

Terms of the Letter of Credit Renewal

The LOC terms offer a reasonable financial plan for the BPPG during the next five years. The plan includes a mandatory Bond principal payment of only $0.5 million annually, which is equal to the County's current repayment plan, and gives the County financial flexibility to better handle currently unforeseen events. As previously indicated, the new LOC with Bank of America will be 25 basis points per annum. Finally, the existing County moral obligation pledge originally provided as credit support when the Bonds were issued in 1984 would continue, and other existing terms and conditions in the original and extended LOC would continue throughout the term of the LOC. The County's moral obligation has never been called

Substitute Letter of Credit for Ballston

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Parking Garage Revenue Bonds

on; parking revenues have always been adequate to pay debt service and operating and maintenance costs.

FISCAL IMPACT: The proposed new terms of the LOC will maintain the fees that have been paid to Citibank annually, 25 basis points. The LOC fees will be paid (as are operating expenses, debt service, and capital expenses) from the BPPG parking fees and related revenues.

Attachments:

Attachment A Exhibit A

Substitute Letter of Credit for Ballston

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Parking Garage Revenue Bonds

Attachment A

A RESOLUTION OF THE COUNTY BOARD OF ARLINGTON COUNTY, VIRGINIA AUTHORIZING THE SUBSTITUTION OF THE

LETTER OF CREDIT IN CONNECTION WITH THE COUNTY OF ARLINGTON, VIRGINIA VARIABLE RATE DEMAND REVENUE BONDS (BALLSTON PUBLIC

PARKING PROJECT)

WHEREAS, the County authorized and previously issued, pursuant to an Indenture of Trust, dated as of August 1, 1984 (the "Indenture"), between SunTrust Bank (formerly United Virginia Bank) as trustee (the "Trustee") and the County, $22,300,000 aggregate principal amount of the County's Variable Rate Demand Revenue Bonds Ballston Public Parking (the "Bonds") to various purchasers;

WHEREAS, the County and Bank of America, N.A. (the "Bank") shall enter into an Alternate Letter of Credit and Reimbursment Agreement (the "Alternate Reimbursement Agreement") to secure the payment of the Bonds;

WHEREAS, pursuant to the Alternate Reimbursement Agreement the Bank will be obligated to issue its irrevocable direct-pay letter of credit (the "Letter of Credit") in order to assure the payment of the principal of and interest on the Bonds until the expiration date of the Letter of Credit and pursuant to which the County will be obligated to the Bank for any draws made by SunTrust Bank, as trustee (the "Trustee"), under the Letter of Credit, but solely from Available Sources as defined in the Alternate Reimbursement Agreement;

WHEREAS, the Letter of Credit is being issued by the Bank in substitution for the letter of credit related to the Bonds previously issued by Citibank, N.A. which expires on September 26, 2004; and

Substitute Letter of Credit for Ballston

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Parking Garage Revenue Bonds

NOW, THEREFORE, BE IT RESOLVED BY THE COUNTY BOARD OF ARLINGTON COUNTY, VIRGINIA:

1. Approval of the Terms and Conditions of the Bank's Proposal. The terms and conditions contained in the Bank's Proposal, with such changes in terms and conditions that are in the County's best interests as may be negotiated and approved by the County Manager, in consideration with the Director of the Department of Management and Finance attached hereto as Exhibit "A" are approved.

2. Authorization of the Alternate Reimbursement Agreement. The Alternate Reimbursement Agreement is approved in substantially the form on file with the County Board, with such changes, insertions or omissions (including, without limitation, changes of the dates thereof) as may be approved by the County Manager, the Director of the Department of Management and Finance or the Chairman of the County Board, whose approval shall be evidenced conclusively by the execution and delivery of the Alternate Reimbursement Agreement. The execution and delivery of and performance by the County under the Alternate Reimbursement Agreement are authorized.

3. Execution of Documents. The Chairman and the Vice Chairman of the County Board, the County Manager and the Director of the Department of Management and Finance, or any of them, are authorized to execute on behalf of the County the Alternate Reimbursement Agreement, and, if required, the County Manager and the Clerk of the County Board are authorized and directed to affix or to cause to be affixed the seal of the County to the Alternate Reimbursement Agreement and to attest such seal. The Chairman and the Vice Chairman of the County Board, the County Manager and the Director of the Department of Management and

Substitute Letter of Credit for Ballston

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Parking Garage Revenue Bonds

Finance or their designees are authorized to execute and deliver on behalf of the County such instruments, documents or certificates, including but not limited to deeds of trust, amendments to deeds of trust, financing statements, amendments to financing statements, and to do and perform such things and acts, as they shall deem necessary or appropriate to carry out the transactions authorized by this Resolution or contemplated by the Alternate Reimbursement Agreement; and all of the foregoing, previously done or performed by such officers or agents of the County, are in all respects approved, ratified and confirmed.

4. Disclosure Documents. The Addendum to the Placement Memorandum is approved in substantially the form on file with the County Board, with such changes, insertions or omissions as approved by the County Manager or Director of the Department of Management and Finance. The County Manager or Director of the Department of Management and Finance, or either of them is authorized and directed to prepare and deliver the Addendum to the Placement Memorandum. The use and distribution of the Addendum to the Placement Memorandum is authorized and approved. The County Manager and Director of the Department of Management and Finance are authorized to execute the Addendum to the Placement Memorandum, if required. The Addendum to the Placement Memorandum shall be published in such publications and distributed in such manner, including by electronic distribution, and at such times as the County Manager, or such officers and agents of the County as he may designate, shall determine.

Substitute Letter of Credit for Ballston

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Parking Garage Revenue Bonds

5. Effective Date. This Resolution shall take effect immediately.

Adopted this _____ day of __________, 2004. ____________________________________ Clerk, Arlington County Board

Substitute Letter of Credit for Ballston

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Parking Garage Revenue Bonds

CERTIFICATE OF THE CLERK OF THE COUNTY BOARD OF ARLINGTON COUNTY, VIRGINIA

At a regular meeting of the County Board of Arlington County, Virginia, held on the __ day of September, 2004 the following County Board members were present as shown:

PRESENT:

On motion of ___________________, seconded by __________________, the following

Resolution was adopted by a majority of the members of the County Board recorded as follows:

MEMBER

VOTE

Dated: _____________, 2004

___________________________________ Clerk, Arlington County Board

Substitute Letter of Credit for Ballston

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Parking Garage Revenue Bonds

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