ADDENDUM  30.

COMMITTEE MEMORANDUM

HISTORY:

The City’s current Line of Credit (“LOC”) was executed on May 30, 2014 to provide the City with liquidity to continue to award contracts for new water, sewer, stormwater, and general fund projects.  On that date, the City and Wells Fargo Bank entered into a loan through two revolving lines of credit in an aggregate principal amount not to exceed $60 million outstanding at any time. The loan agreement allowed for tax-exempt draws up to $59 million and taxable draws up to $1 million. 

This loan had a maturity date of May 30, 2016, and on May 12, 2016, the maturity date was extended for 60 days until July 29, 2016.  The term was extended for an additional two year period effective July 30, 2016, with a new maturity date of July 30, 2018.  To date, the City has not drawn on this line of credit.

ANALYSIS:

Due to the continued need for liquidity to award contracts for new water, sewer, stormwater and general fund (General Obligation Bond) projects, the City would like to extend the LOC for an additional two year period.  The City may also utilize the LOC for borrowings for short-term capital and equipment needs in the future.

The City has the legal authority to obtain a line of credit pursuant to the Constitution of the State of Florida, Chapter 166, Part II, Florida Statutes, as amended, Chapter 159, Part VII, Florida Statutes, as amended, and the Charter of the City (collectively, the “Act”), to borrow money to finance capital projects.

The LOC will be secured by a covenant to budget and appropriate non-ad valorem revenues. The annual fees for unused credit will remain the same as the prior agreement.  The formula for draws on the LOC will adjust from the original agreement due to the recent change in the corporate tax rate.  Below is a schedule summarizing the terms of the amended agreement compared to the prior agreement.

The City utilizes the line of credit to meet its financial commitment needs and be in compliance with state law while spending its existing bonds proceeds and to provide capacity to award new projects in advance of longer term financing.

In recommending the renewal of this line of credit versus other financing options, the City’s CFO worked in conjunction with the City’s Financial Advisor, who concurred on this type of financing and on the competitiveness of the rates. This line of credit offers attractive legal terms and a low cost of the ability to encumber and access funds.

CONCLUSION:

The Administration requests the recommendation of the Finance Committee that the Mayor and City Commission of the City of Miami Beach, Florida, authorize the extension of the term of the loan in an aggregate principal amount not to exceed $60,000,000 outstanding at any time from Wells Fargo Bank, National Association; adopt a resolution in a form to come authorizing the execution and delivery of amended and restated loan agreement and promissory notes in connection with such extended loan; authorizing other actions in connection with the extended loan and the financing program; and providing for an effective date.