Title
Amendment of Airport Revenue Bond Ordinance (Ordinance S-44001)
Description
Request to authorize the City Manager, or his designee, to amend Ordinance S-21974, adopted April 20, 1994, by amending section 4.6 of article IV relating to the issuance and sale of airport revenue bonds.
This ordinance will amend the existing Airport Revenue Bond Ordinance ("Master Ordinance") to provide additional flexibility to the City when it issues airport revenue bonds by providing authorization for the Aviation Director to enter into certain leases longer than 10 years in term. The change will allow the City to issue bonds in a manner consistent with terms and conditions generally accepted by purchasers of airport revenue obligations.
Report
Summary
In 1994, City Council passed the Master Ordinance. The Master Ordinance, which has been amended from time to time, provides directions and definitions that set parameters for issuing airport revenue bonds. The Master Ordinance also makes certain covenants, or commitments, to bondholders such as:
- defining the revenue that secures the bonds;
- defining the security for the bonds; and
- outlining criteria necessary to issue additional bonds.
The City is currently in the process of issuing airport revenue bonds for project funding and refunding savings. In preparation for the bond sale, staff in Finance has consulted with Aviation staff to review all legal documents given current circumstances. To provide more flexibility, staff recommends a change to the Master Ordinance to eliminate the ten-year term limitation in certain Airport lease agreements. This change would enhance procurement options and allow for opportunities otherwise excluded by the ten-year limit.
Because the City has committed to bondholders that it will abide by the Master Ordinance, any changes to the Master Ordinance requires majority consent from bondholders as well as City Council authorization. Receiving majority bondholder consent is normally difficult as existing bondholders generally are unresponsive. Since the City is currently in the process of issuing over $400 million of airport revenue bonds, it has the opportunity to secure over 51% of bondholder approval of the Master Ordinance change by making the current sale contingent on such consent.
Department
Responsible Department
This item is submitted by City Manager Ed Zuercher and the Finance Department.