Loading...
HomeMy WebLinkAboutAgenda Report - January 20, 1999 F-01 PHAGENDA TITLE: PUBLIC HEARING HELD PURSUANT TO SECTION 147 (F) OF THE INTERNAL REVENUE CODE OF 1986 ON THE PROPOSAL OF THE NORTHERN CALIFORNIA powER AGENCY (NCPA) TO ISSUE REVENUE BONDS MEETING DATE: January 20, 1999 PREPARED BY: Electric Utility Director RECOMMENDED ACTION: That the City Council approve the attached resolution with respect to NCPA's proposal to issue revenue bonds. BACKGROUND INFORMATION: NCPA issued revenue bonds in 1992 to finance the cost of construction of its combustion turbine generating station located within the city limits of Lodi at White Slough. The bonds were issued on behalf of four NCPA members — Alameda ( 19.0%), Lodi (39.5%), Lompoc (5.0%) and Roseville (36.5%). In an effort to meet the challenges associated with electric industry deregulation, the NCPA Commission has authorized and directed NCPA staff to take specific actions to reduce the costs of all NCPA projects. The single largest cost component of NCPA projects is debt service. With interest rates at historically low levels, significant cost savings have been achieved by refinancing existing NCPA project bonds in the current interest rate market. The last of the NCPA project bonds to be refinanced are the bonds associated with NCPA's combustion turbine project at White Slough. All NCPA projects are financed with tax exempt bonds. While tax exempt bond financing significantly lowers project cost compared to taxable equivalents, there are certain restrictions placed on the use of projects financed in this manner. The most important of these restrictions, is the so called private use limitations. In general, private use limitations prohibit a non -tax exempt entity from using, controlling or benefiting from the output of a tax exempt financed project. The limitation does not generally apply to transactions of 30 days or less. In the past, this limitation was of minimal importance since all projects were built with the intent of serving the current and future needs of project participants. If surplus output existed at any time, the output was sold to other tax exempt entities or on the wholesale short term market. As the generation market has become more competitive, NCPA has been able to significantly lower its member power costs by engaging in market based transactions. These market based transactions have lead to greater opportunities for NCPA to optimize the use of its generating APPROVED' H. Dixo Flynn -- CityAin-ager CITY OF LODI COUNCIL COMMUNICATION facilities. One such use includes possible future transactions with the newly formed California Independent System Operator (ISO), the operator of the majority of California's high voltage transmission grid. Private use limitations, however, also apply to certain transactions with the ISO. Although we have not been able to find a way to remove private use limitations in their entirety, we have found a means by which we can refinance the debt of the combustion turbine at White Slough using tax exempt bonds while gaining the ability to enter into certain long term arrangements with the ISO. This added flexibility is achieved by issuing the bonds as "qualified 501 (c) (3) bonds". "501 (c) (3)" refers to the section in the Internal Revenue Code of 1986 relating to certain non-profit corporations, such as the ISO. The Code and the Treasury Regulations require that a public hearing be held under Section 147 (f) of the Code in order for the bonds to be issued as qualified 501 (c) (3) bonds. The purpose of the public hearing is to afford the public opportunity to be heard on the question as to the nature and location of the facilities to be either financed or refinanced by the issuance of the bonds. Since the facilities are located within the city limits of Lodi and since Lodi is the major project participant, the Lodi City Council is the appropriate jurisdictional body to hold such a public hearing. Issuance of bonds as qualified 501 (c) (3) bonds has no adverse impact on bond interest rate, debt service savings nor term of the debt service payments. The only identified impact is increased operational flexibility of the facilities. This added flexibility could result in significant decreases in the cost of power from the project above and beyond the savings associated with the refinancing of the project. FUNDING: None required. Alan N. Vallow Electric Utility Director PREPARED BY: Alan N. Vallow, Electric Utility Director MUTIl, C: City Attorney APPROVED: H. Dixon Flynn -- City Manager Please immediately confirm receipt of this fax - 333-6702 CITY OF LODI P. O. BOX 3006 LODI, CALIFORNIA 95241-1910 ADVERTISING INSTRUCTIONS SUBJECT: NOTICE OF PUBLIC HEARING REGARDING COMBUSTION TURBINE POWER GENERATING STATION PUBLISH DATES: WEDNESDAY, JANUARY 6, 1999 TEAR SHEETS WANTED: ONE AFFIDAVIT AND BILL TO: DATED: JANUARY 4, 1999 ALICE M. REIMCHE CITY CLERK ORDERED BY: JE NIFER PERRIN 6EPUTY CITY CLERK JACQUELINE L. TAYLOR DEPUTY CITY CLERK forms\advins.doc NOTICE OF PUBLIC HEARING Notice is hereby given pursuant to Section 147(f) of the Internal Revenue Code of 1986 that a public hearing will be held before the City Council of the City of Lodi (the "City") on January 20, 1999 at 7:00 p.m., or as soon thereafter as possible, at the Carnegie Forum, 305 W. Pine Street, in Lodi, California, on the proposal of the Northern California Power Agency ("NCPA") to issue one or more series of revenue bonds in an aggregate principal amount not to exceed $100,000,000. The bond proceeds will be used to finance and refinance the cost of the construction of a combustion turbine power generating station located at 12745 N. Thornton Road in Lodi, California. The facility is owned, operated and managed by the NCPA. Notice is further given that at said hearing, all interested parties will have the opportunity to be heard on the question as to the nature and location of the facilities to be financed and refinanced and the issuance of such revenue bonds. For further particulars, contact the office of the City Clerk of the City of Lodi, California, by phone at (209) 333-6702. Dated: January 5, 1999 Alice M. Reimche City Clerk City of Lodi RESOLUTION NO. 99-11 A RESOLUTION OF THE LODI CITY COUNCIL APPROVING THE ISSUANCE OF BONDS BY THE NORTHERN CALIFORNIA POWER AGENCY FOR THE REFINANCING OF A COMBUSTION TURBINE POWER GENERATING PLANT LOCATED IN LODI, CALIFORNIA -------------------------------------------------------------------- WHEREAS, the Northern California Power Agency (the "Agency") has heretofore issued its Multiple Capital Facilities Revenue Bonds, 1992 Series A (the "1992 Bonds"), a portion of the proceeds of which were used to acquire and construct a combustion turbine power generating plant located at 12745 N. Thornton Road in Lodi, California (the "Project"); and WHEREAS, the Agency will now issue its Capital Facilities Revenue Bonds, 1999 Refunding Series A (the "Bonds") in an aggregate principal amount not to exceed $100,000,000 on behalf of the City of Lodi (the "City") and certain other members of the Agency to provide for the refinancing of the Project and the payment and redemption of a portion of the 1992 Bonds; and WHEREAS, pursuant to §147(f) of the Internal Revenue Code of 1986, as amended (the "Code"), the City Council of the City (the "City Council") is the "applicable elected representative" of the City and is, thereby, authorized to approve the issuance of the Bonds by the Agency on behalf of the City; and WHEREAS, the Project to be refinanced is located wholly within the City of Lodi, County of San Joaquin, State of California; and WHEREAS, on January 6, 1999, the City caused to be published in a newspaper of general circulation in the County of San Joaquin a notice of public hearing concerning the issuance of Bonds and the nature and location of the facilities to be refinanced thereby; and WHEREAS, the City Council has held a public hearing at which interested persons were given an opportunity to express their views concerning the issuance of the Bonds and the nature and location of the above-described facilities to be refinanced; and WHEREAS, the Agency has requested that the City Council approve the issuance of the Bonds in order to satisfy the public approval requirement of §14T(f) of the Code. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Lodi, as follows: 1. Pursuant to §147(f) of the Code, this City Council hereby approves the issuance of the Bonds in an aggregate principal amount not to exceed $100 million, such Bonds to be issued by the Agency. This Resolution constitutes the approval of the issuance of the Bonds by the applicable elected representative of the governmental unit having jurisdiction over the area in -which the Project is located in accordance with §147(f) of the code. 2. The members of the City Council and the officers of the City are hereby authorized and directed to take any and all actions and to execute any and all certificates and documents as may be necessary to carry out the purposes and intent of this Resolution. 3. This Resolution shall be in full force and effect from and after the date of its adoption. Dated: January 20, 1999 --------------------------------------------------------------------- -------------------------------------------------------------------- I hereby certify that Resolution No. 99-11 was passed and adopted by the City Council of the City of Lodi in a regular meeting held January 20, 1999, by the following vote: AYES: COUNCIL MEMBERS — Hitchcock, Mann, Nakanishi, Pennino and Land (Mayor) NOES: COUNCIL MEMBERS — None ABSENT: COUNCIL MEMBERS — None ABSTAIN: COUNCIL MEMBERS — None &V.� 7h - &1XX ALICE M. R MCHE City Clerk 99-11