SR-405-002-01 (3)
September 14, 2004 Santa Monica, CA
TO: Mayor and City Council
Chairperson and Public Financing Authority
Chairperson and Parking Authority
FROM: City Staff
SUBJECT: Amendment to the Contract for the Construction of the Civic Center
Parking Structure establishing the Guaranteed Maximum Price,
Authorization for the Issuance of Lease Revenue Bonds by the Public
Financing Authority and Approval of Expenditure Appropriations and
Budget Changes.
INTRODUCTION
In order to proceed with the implementation of the Civic Center Parking Structure (the
“Project”), City Council, Public Financing Authority and Parking Authority are being
requested to take a series of actions that will include an amendment to the design-build
contract with ARB, Inc. establishing a Guaranteed Maximum Price (the “GMP”) to
construct the facility and bond issuance authorization to provide the necessary financing
for the project. The amendment to the contract with ARB, Inc. will provide a GMP for
the design and construction of the structure of $27,343,628 with a contingency of
$1,631,369. Funding of the project will require adoption of the attached resolutions and
related documents authorizing the issuance of the Public Financing Authority Lease
Revenue Bonds, Series 2004 (Civic Center Parking Project) (the “Bonds”).
BACKGROUND
As a result of increased parking demand and the necessity to complete earthquake
retrofitting of the downtown parking structures, the City has undertaken the
development of a new parking facility in the Civic Center (the “Project). The City
Council has taken several actions associated with the Project, including approving a
preliminary financing plan and a resolution adopted on March 27, 2001, declaring the
City’s intention to issue tax-exempt bonds to be used to reimburse the City for Project
expenditures prior to the issuance of the bonds, approving a contract with ARB, Inc. for
design-build services on October 23, 2001, and approving a development review permit
for the project on October 14, 2003.
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The new structure will be constructed on land owned by the City bounded by 4 Street
on the east, Civic Center Drive on the south, Avenida Mazatlan on the west, and
Olympic Drive on the north. There currently exists a County of Los Angeles easement
that encroaches about 12 feet along the western property line. City staff and the County
are in the final stages of negotiating an appropriate release of the easement that will
allow the financing and construction of the Project.
DISCUSSION
Project Design, Costs and Implementation
Since approval of the development review permit, the design-build team has secured
permits from the Architectural Review Board and California Coastal Commission, further
developed design documents, and prepared a detailed cost estimate and guaranteed
maximum price (GMP) proposal for construction. Staff has thoroughly reviewed and
negotiated the GMP proposal with ARB, Inc., including value-engineering measures that
reduce the totalProject cost while retaining the key functional and aesthetic elements of
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the Project. The JCM Group was retained to perform an independent cost estimate.
The cost estimate is within one (1) percent of ARB, Inc.’s proposal, providing
independent validation of the GMP.
The design-build contract with ARB included a provision allowing for an amendment to
the contract once the design was completed and the GMP amount could be negotiated.
The proposed GMP is $27,343,628. Staff recommends an additional Project
contingency of $1,631,369. The Project budget will include $2,294,350 for costs such
as construction management, non-City regulatory fees and permits, offsite
mitigation/utilities, testing/inspections and other consultant services that may arise
during the course of construction. The bond issuance costs, which include both a
reserve fund and capitalized interest for a twenty six (26) month period, are estimated to
be approximately $6,000,000. Therefore, the estimated total Project cost is
$37,269,347.
It is anticipated that construction will commence in fall 2004 and be completed by spring
2006.
Project Financing
The Public Financing Authority (the “PFA”) wishes to issue tax-exempt lease revenue
bonds, payable and secured by lease payments to be made by the City from the
General Fund for the Project. It is anticipated that payments to offset the amounts
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required from the General Fund will be available through the assignment of promissory
note payments from the Parking Authority to the City.
The following is a detailed discussion of the bond financing structure and related
documents provided by Bond Counsel.
The City will lease the site to the PFA and the PFA will, in turn, leaseback the site and
Project to be constructed to the City in exchange for base rental payments. The Bonds
will be secured by the base rental payments to be made by the City. The City agrees to
annually budget and appropriate sufficient funds to make the base rental payments,
provided the City has use of the Project.
The Parking Authority will assign its rights to receive certain promissory note payments
from the Redevelopment Agency to the City. The City anticipates sufficient revenues
from the promissory note payments to make the annual base lease payments. The
promissory note payments are not pledged to the payment of the Bonds.
The attached resolutions authorize the City (Attachment 1) and the PFA (Attachment 2)
to proceed with all steps necessary to the issuance of the Bonds. The resolutions
authorize the issuance of a maximum principal amount of bonds of $42 million with a
maximum interest rate of 5.25% for a maximum term of 30 years. The resolutions also
provide approvals of all steps necessary to complete the financing, including the
approval of all necessary documents and certificates and related actions. The City
resolution also authorizes the City to accept and approve the assignment of the Parking
Authority’s right to receive payment under a promissory note.
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Also attached is a resolution of the Parking Authority (Attachment 3) which authorizes
the assignment of payments to be received under a promissory note to the City
pursuant to a Promissory Note Assignment (Attachment 12).
City staff is currently working with the County of Los Angeles to amend a County
easement on the Project site that, without modification, would preclude the construction
The Bonds cannot be sold until this modification is approved by
of the Project.
the County and the City.
Attached to this staff report are copies of the following documents necessary to the
issuance of the Bonds and the Parking Authority’s assignment of its right to receive
payments under a promissory note:
An Indenture by and among the PFA, the City and Union Bank of
California, N.A., as Trustee. The Indenture is the contract with the
bondholders and contains the terms of the Bonds, the duties of the
Trustee and the covenants and agreements of the PFA and City with
respect to the Bonds. (Attachment 4)
A Ground Lease by and between the City, as lessor, and the PFA, as
Lessee, whereby the City leases the site to the PFA. (Attachment 5)
A Lease Agreement by and between the PFA, as lessor, and the City, as
lessee, whereby the PFA leases the site and the Project to the City.
(Attachment 6)
An Assignment Agreement by and between the PFA and the Trustee,
whereby the rental payments are assigned to the Trustee for the benefit
of the bondholders. (Attachment 7)
A Continuing Disclosure Certificate, wherein the City agrees to provide
certain information annually to designated national bond information
depositories. (Attachment 8)
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A Preliminary Official Statement to be used in connection with the
offering and sale of the Bonds. (Attachment 9)
An Official Notice Inviting Bids for use in connection with the solicitation
of bids for the sale of the Bonds. (Attachment 10)
. A Notice of Intention to Sell to be published in the Bond Buyer for
solicitation of bids for the Bonds. (Attachment 11)
A Promissory Note Assignment by and between the Parking Authority
and the City, whereby the Parking Authority will assign the payments it
receives under a Promissory Note to the City. (Attachment 12)
The attached resolutions approve these documents and authorize their execution and
delivery by the specified agency’s officials and employees. These resolutions also
approve the preparation, execution and delivery of a Final Official Statement, the
execution and delivery of any additional documents and the performance of such acts
and as may be necessary or desirable to effect the offering, sale and issuance of the
bonds.
A list of questions which various national associations and the Federal Securities and
Exchange Commission recommends public officials ask when approving the issuance of
bonds is provided in Attachment 13. For your convenience, staff along with the City’s
Financial Advisor and Bond Counsel have provided answers to each question. Staff,
Financial Advisor and Bond Counsel are prepared to expand on these answers if
requested.
CEQA STATUS
On May 20, 2003, Council certified an environmental impact report analyzing the
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impacts of the proposed project and, on October 14, 2003, approved a statement of
overriding considerations and mitigation monitoring and reporting plan.
BUDGET/FINANCIAL IMPACT
The Pubic Financing Authority will issue up to $42 million in tax-exempt lease revenue
bonds. At current interest rates it is anticipated that the principal amount of the Bonds
will be approximately $37.6 million. The estimated annual debt service on the Bonds is
approximately $2.5 million which will be paid from base rental payments received from
the City pursuant to the Lease Agreement. The City will make the annual base rental
payments from generally available revenues in the City’s General Fund, or other
available revenues. It is anticipated that the City will use payments it receives from the
Promissory Note Assignment. To receive and administer the Bond proceeds, it is
necessary to establish a budget of $42,000,000 at account number 01990.601001
(Other Financing Sources); and appropriate additional capital improvement budget of
$26,805,000 at account number C010562.589200 (Civic Center Parking Structure
Bond Funded) and cost of bond issuance of $300,000 at account number
01224.555980. The remaining bond proceeds will be transferred to debt service fund
for capitalized interest and a reserve fund and budgeted at 01990.601002.
RECOMMENDATION
It is recommended that the City Council:
1. authorize the City Manager to negotiate and execute an amendment to the
design-build contract with ARB, Inc. establishing a guaranteed maximum price
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(GMP) for construction of the Project in the amount of $27,343,628;
2, establish a contingency of $1,631,369 for unforeseen City responsibilities during
construction of the Project;
3. authorize the City Engineer to issue any necessary change orders to complete
additional work within budget authority;
4. adopt the attached resolutions (a) authorizing the execution and delivery of
documents necessary for the issuance of the Santa Monica Public Financing
Authority Lease Revenue Bonds, Series 2004 (Civic Center Parking Project) and
(b) authorizing the execution and delivery of documents necessary for the
assignment of promissory note payments from the Parking Authority to the City;
and,
5. approve the expenditure appropriations and budget changes set forth above.
It recommended that the Public Financing Authority:
1. adopt the attached resolution authorizing the execution and delivery of
documents necessary for the issuance of the Santa Monica Public Financing
Authority Lease Revenue Bonds, Series 2004 (Civic Center Parking Project).
It is recommended that the Parking Authority:
1. adopt the attached resolution authorizing the execution and delivery of
documents necessary for the assignment of promissory note payments from the
Parking Authority to the City.
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Prepared By:
Gordon R. Anderson, Assistant City Manager
Steve Stark, Director of Finance
Linda Moxon, Deputy City Attorney
Andrew Agle, Assistant Director, Planning and Community Development
Lauren Friedman, City Architect, Environmental and Public Works Management
ATTACHMENTS TO:
1. City Council Resolution – See adopted Resolution No. 9980 (CCS)
2. Santa Monica Public Financing Authority Resolution See adopted
resolution No. 4 (PFAS)
3. Parking Authority Resolution See adopted resolution No. 243 (CCS)
THE FOLLOWING ATTACHEMENTS ARE NOT AVAILABLE ELECTRONICALLY
AND CAN BE VIEWED AT THE CITY CLERK’S OFFICE:
4. Indenture
5. Ground Lease
6. Lease Agreement
7. Assignment Agreement
8. Continuing Disclosure Certificate
9. Preliminary Official Statement
10. Official Notice Inviting Bids
11. Notice of Intention to Sell (Bond Buyer)
12. Promissory Note Assignment
13. Questions for Public Officials Approving Issuance of Bonds
.
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