ORDINANCE NO.
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DOWNEY,
AUTHORIZING THE ISSUANCE OF ONE OR MORE SERIES OF PENSION
OBLIGATION BONDS, APPROVING THE FORM OF AND AUTHORIZING
THE EXECUTION AND DELIVERY OF A TRUST AGREEMENT, AND
AUTHORIZING A VALIDATION ACTION AND OTHER MATTERS
RELATING THERETO.
WHEREAS, the legislative body (the “Legislative Body”) of the City of Downey (the
“Local Agency”) adopted a retirement plan pursuant to the Public Employees’ Retirement Law,
commencing with Section 20000 of the Government Code of the State of California, as amended
(the “Retirement Law”); and
WHEREAS, the Retirement Law obligates the Local Agency to (1) make annual
contributions to the California Public Employees’ Retirement System (the “System”), to fund
pension benefits for its employees, (2) amortize the unfunded accrued actuarial liability with
respect to such pension benefits, and (3) appropriate funds for the purposes described in (1) and
(2); and
WHEREAS, the obligation of the Local Agency to pay its unfunded accrued actuarial
liability to the System ( the “Pension Obligation”) is evidenced by a contract between the Local
Agency and the System, dated February 1, 1958 as heretofore and hereafter amended from time
to time (collectively, the “PERS Contract”); and
WHEREAS, the Local Agency desires to issue bonds (the “Pension Obligation Bonds”)
in an aggregate principal amount not to exceed the Pension Obligation, plus an additional
amount to pay costs of issuance of the Pension Obligation Bonds, for the purpose of refunding
the PERS Contract and thereby providing funds to the System in payment of all or part of the
Pension Obligation and to authorize the issuance of additional bonds in the future from time to
time for the purpose of paying the obligations of the Local Agency to the System required
pursuant to the Retirement Law, including (i) all or a portion of the unfunded accrued actuarial
liability of the Local Agency remaining unpaid on the date of issuance of such additional bonds
and (ii) refunding the Pension Obligation Bonds or additional series of bonds; and
WHEREAS, there is on file with the Legislative Body the proposed form of Trust
Agreement (the “Trust Agreement”) to be entered into between the Local Agency and a financial
institution to be selected as trustee (the “Trustee”), relating to the Pension Obligation Bonds,
including the forms of Bonds attached thereto as an exhibit.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF DOWNEY DOES
ORDAIN AS FOLLOWS:
SECTION 1. This Legislative Body hereby finds and declares that the issuance of the
Pension Obligation Bonds to refund the Pension Obligation, and the other actions contemplated
by this Ordinance are in the best interests of the Local Agency and are anticipated to result in
savings based on current actuarial assumptions.
ORDINANCE NO.
PAGE TWO
SECTION 2. This Legislative Body hereby authorizes and approves the issuance of the
Pension Obligation Bonds and hereby authorizes and directs the City Manager to execute the
Pension Obligation Bonds, and to cause the Pension Obligation Bonds to be authenticated and
delivered in accordance with the Trust Agreement. The Pension Obligation Bonds shall be in
substantially the forms attached to the Trust Agreement, with such changes therein, deletions
there from and additions thereto as the City Manager shall approve, such approval to be
conclusively evidenced by the execution and delivery of the Pension Obligation Bonds; the
Pension Obligation Bonds may be issued as either current interest fixed rate bonds, listed
securities, capital appreciation bonds, index bonds or auction rate securities or a combination
thereof, and may be issued in a single series or in two or more series, at one time or from time to
time, provided, however, that the aggregate initial principal amount of the Pension Obligation
Bonds shall not exceed the amount of the Pension Obligation (as confirmed by the System or the
Local Agency’s actuary) remaining unpaid on the date of issuance of the Pension Obligation
Bonds, plus an additional amount to pay costs of issuance of the Pension Obligation Bonds,
original issue discount, and underwriter’s discount on the Pension Obligation Bonds (such
underwriter’s discount, excluding original issue discount, not to exceed one percent (1%) of the
aggregate principal amount of the Pension Obligation Bonds, provided that, if listed securities
are issued, the underwriter’s discount for the listed securities shall not exceed three percent (3%)
of the aggregate principal amount of the listed securities); the maximum interest rate on each
series of the Pension Obligation Bonds which are issued as fixed rate bonds, including current
interest fixed rate bonds, listed securities or capital appreciation bonds shall not exceed seven
and one-half percent (7.5%) per annum and the maximum interest rate on each series of the
Pension Obligation Bonds which are issued as variable rate bonds, including index bonds or
auction rate securities shall not exceed seventeen percent (17%) per annum; and the Pension
Obligation Bonds shall mature not later than thirty (30) years following their date of issuance.
The Pension Obligation Bonds shall constitute an obligation imposed by law, pursuant to the
Constitution of the State of California and the Retirement Law and an obligation of the Local
Agency not limited as to payment from any special source of funds. The Pension Obligation
Bonds shall not, however, constitute an obligation of the Local Agency for which the Local
Agency is obligated to levy or pledge any form of taxation or for which the Local Agency has
levied or pledged any form of taxation.
SECTION 3. The proposed form of Trust Agreement, between the Local Agency and the
Trustee, on file with the City Clerk, is hereby approved. The Mayor, City Manager, the
Assistant City Manager and the Director of Finance (the “Authorized Representatives”) are each
hereby authorized and directed, severally, or any such officer’s designee, for and on behalf of the
Local Agency, to execute and deliver the Trust Agreement, substantially in the form on file with
the City Clerk, with such changes therein, deletions there from and additions thereto (including,
but not limited to changes, deletions and additions as may be required by a municipal bond
insurer) as such Authorized Representative shall approve, such approval to be conclusively
evidenced by the execution and delivery of the Trust Agreement. Pursuant to the terms of the
Trust Agreement, the Legislative Body hereby approves the issuance of additional series of
bonds in the future from time to time (which additional series of bonds may be current interest
fixed rate bonds, listed securities, capital appreciation bonds, index bonds, auction rate securities,
variable rate bonds or tender option bonds) pursuant to supplemental trust agreements, subject to
ORDINANCE NO.
PAGE THREE
the limitations contained in the Trust Agreement presented to this meeting, for the purpose of
refunding the Pension Obligation Bonds or any additional series of bonds from time to time
issued pursuant to a supplemental trust agreement or for the purpose of paying the obligations of
the Local Agency to the System required pursuant to the Retirement Law, including all or a
portion of the unfunded accrued actuarial liability of the Local Agency remaining unpaid on the
date of issuance of such additional series of bonds.
SECTION 4. This Legislative Body hereby finds and determines that the entering into
of an interest rate swap agreement in the form of the International Swap Dealers Association
Master Agreement with appropriate schedules, confirmations and other related documents (the
“Swap Agreement”) with a counterparty pursuant to Section 5922 of the California Government
Code in a notional amount not exceeding the aggregate authorized principal amount of the
Pension Obligation Bonds is designed to result in a lower cost of borrowing for such Pension
Obligation Bonds, and the Authorized Representatives are hereby authorized to negotiate a Swap
Agreement with a counterparty in a notional amount not exceeding the aggregate principal
amount of any Pension Obligation Bonds, with a view to reducing the Local Agency’s cost of
borrowing evidenced and represented by such Pension Obligation Bonds, and the Authorized
Representatives are hereby authorized and directed, severally, or any such officer’s designee, for
and on behalf of the Local Agency, to execute and deliver the Swap Agreement, substantially in
the form on file with the City Clerk, with such changes therein, deletions there from and
additions thereto (including, but not limited to changes, deletions and additions as may be
required by a municipal bond insurer) as such Authorized Representative shall approve, such
approval to be conclusively evidenced by the execution and delivery of the Swap Agreement;
provided, that (i) no Swap Agreement shall have a term extending beyond the stated final
maturity date of the Pension Obligation Bonds; (ii) the net amounts, if any, payable by the Local
Agency with respect to a Swap Agreement shall be payable solely and exclusively from lawfully
available moneys of the Local Agency, and (iii) each Swap Agreement shall provide for receipt
of payment by the Local Agency at each payment date under the Swap Agreement of the net
amounts, if any, owed under the Swap Agreement.
SECTION 5. If an Authorized Representative determines that it will be advantageous to
the Local Agency to purchase municipal bond insurance or secure other credit or liquidity
enhancement with respect to some or all of the Pension Obligation Bonds, such Authorized
Representative or his designee is hereby authorized to do so at market rates.
SECTION 6. This Legislative Body hereby designates Orrick, Herrington & Sutcliffe
LLP (“Orrick”), as bond counsel for the Pension Obligation Bonds, with bond counsel services
to consist of and be limited to rendering an opinion on the validity of the Pension Obligation
Bonds, the preparation of documents providing for the issuance of the Pension Obligation Bonds
and the validation action relating to the Pension Obligation Bonds. This Legislative Body
hereby agrees to compensate Orrick in the amount of $7500 to cover a portion of the cost of the
validation action (plus court filing fees and publication costs if paid by Orrick), such amount to
be paid from proceeds of the Pension Obligation Bonds, or if the Local Agency does not for any
reason (including, without limitation, a challenge to the validation action) issue Pension
Obligation Bonds prior to or during the 2005-2006 Fiscal Year, from any available funds of the
Local Agency. In the event the Pension Obligation Bonds are issued for purchase by the
ORDINANCE NO.
PAGE FOUR
California Statewide Communities Development Authority (the “Pool Bond Issuer”), all other
fees and expenses of Orrick shall be the responsibility of the Pool Bond Issuer to be paid from
proceeds of bonds (the “Pool Bonds”) issued by the Pool Bond Issuer to purchase the Local
Agency’s Pension Obligation Bonds. If the Local Agency issues Pension Obligation Bonds in
reliance on the validation and other than for purchase by the Pool Bond Issuer and substitutes a
firm other than Orrick as bond counsel, the Legislative Body hereby agrees to compensate Orrick
an additional $7,500 to more clearly approximate its true fees and costs associated with the
validation action, such amount to be paid from proceeds of the Pension Obligation Bonds or
from any available funds. This Legislative Body hereby acknowledges and consents to and
waives any conflict arising from the appointment of Orrick also as bond counsel and issuer
counsel to the Pool Bond Issuer in connection with the Pool Bonds.
SECTION 7. The Authorized Representatives of the Local Agency are, and each of them
hereby is, authorized and directed to do any and all things, including bringing a validation action
under Section 860 of the California Code of Civil Procedure, and to take any and all actions
(including any required publications of summons or other notice) and execute and deliver any
and all documents which they or any of them deem necessary or advisable in order to
consummate the transactions contemplated by this Ordinance and the Trust Agreement and
otherwise to carry out, give effect to and comply with the terms and intent of this Ordinance and
the Trust Agreement, including supplying information for and approving any portion of any
official statement or any future continuing disclosure for the Pool Bonds pertaining to the Local
Agency and approving any bond purchase agreement between the Pool Bond Issuer and the
Local Agency or between the Pool Bond Issuer and the underwriter of the Pool Bonds, including
any representations, warranties or covenants of the Local Agency contained therein.
SECTION 8. This Ordinance shall take effect 30 days following its adoption.
SECTION 9. The City Clerk shall certify to the adoption of this Ordinance and cause
the same to be published in the manner prescribed by law.
APPROVED AND ADOPTED this day of , 2005.
ANNE M. BAYER, Mayor
ATTEST:
KATHLEEN L. MIDSTOKKE, City Clerk
ORDINANCE NO.
PAGE FIVE
STATE OF CALIFORNIA )
COUNTY OF LOS ANGELES ) ss:
CITY OF DOWNEY )
I HEREBY CERTIFY that the foregoing Ordinance No. was introduced at a
regular meeting of the City Council of the City of Downey held on the day of ,
2005, and adopted at a regular meeting of the City Council of the City of Downey held on the
day of , 2005, by the following vote, to wit:
AYES: Council Members:
NOES: Council Member:
ABSENT: Council Member:
ABSTAIN: Council Member:
I FURTHER CERTIFY that a Summary of the foregoing Ordinance No. , was
published in the Press-Telegram, a newspaper of general circulation in the City of Downey, on
, 2005 (after introduction), and on , 2005 (after adoption, including the vote thereon).
It was also posted in the regular posting places in the City of Downey on the same dates.
KATHLEEN L. MIDSTOKKE, City Clerk