APFA2002/02/12ANAHEIM, CALIFORNIA — ANAHEIM PUBLIC FINANCING AUTHORITY
SPECIAL MEETING
FEBRUARY 12, 2002
The Anaheim Public Financing Authority met in regular session.
Present: Chairman Tom Daly and Authority Members Frank Feldhaus, Lucille Kring, Tom Tait
and Shirley McCracken.
Staff Present: City Manager David Morgan, City Attorney Jack White, Secretary Sheryll
Schroeder, Public Utilities General Manager Marcie Edwards, Public Utilities Assistant General
Manager Finance and Administration Mark Mazak.
A copy of the agenda for the meeting of the Anaheim Public Financing Authority was posted on
February 8, 2002 at the City Hall inside and outside bulletin boards.
Chairman Daly called the regular meeting of the Anaheim Public Financing Authority to order at
5:37 P.M. in the Council Chambers of the Anaheim City Hall, 200 South Anaheim Boulevard.
ADDITIONS /DELETIONS TO THE AGENDA: None.
PUBLIC COMMENTS: None.
ITEMS 1 - 2: Chairman Daly moved approval of Public Financing Authority Items 1 and 2,
seconded by Public Financing Authority Member McCracken. Motion carried unanimously.
Item 3 acted upon separately.
Council Member Tait requested a description of the financing for the $190,000,000 bond
projects.
Public Utilities General Manager, Marcie Edwards, stated that there were two separate
issuance's and one was the Series 2002B bonds for $90 million. She said that the intention
behind the financing was to refund an antiquated commercial paper program that was difficult to
sell and that was approximately $20 million and it was to allow Utilities to entertain refinancing of
the San Juan Generating Station bonds at a lower interest rate. She said that $64 million for the
bonds and $20 million for the paper program added up to $84 million and the request was for
$90 million and she informed that bond discounting was available and when Utilities sold bonds
and an additional amount was put out, Utilities could get a slight reduction on the interest rate
and it was feasible at the time.
Public Utilities General Manager Edwards said that the other issuance was for approximately
$100 million for Series 2002A to partially fund two years of the upcoming Capital Investment
Program and the distribution infrastructure. Public Utilities recommended that Capital Program
be funded both with debt as well as cash, due to the very low interest rates. The interest rates
had been at the current level only thirteen percent of the time in approximately twenty years,
she said, and there were cash reserves that were invested at a higher interest rate and the use
of this strategy would allow Utilities to build up the cash reserves. Manager Edwards would like
to build up the cash reserves over a number of years in order to hedge against some of the
outstanding risks that could continue in the energy sector. She said that both of the borrowings
were brought forward as part of Utilities five -year financial plan and it would not require a rate
increase in order to fund the debt service associated with the borrowings. She reminded the
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FEBRUARY 12, 2002
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Public Financing Authority of the things that could generate a rate increase such as unplanned
loss in the energy supply portfolio or a dramatic change in a regulatory environs and those were
the two items most difficult to project. She said she was hopeful that the cash position would
help Utilities defer even the significant risks. The plan itself was based around no rate increase
to fund the borrowings, she said.
Authority Member Tait asked if the borrowings would make a rate increase less likely to occur
as opposed to doing nothing and General Manager Edward said that he was correct. It would
allow Utilities to tailor up the cash reserves and the greater amount of cash reserves Utilities
had, the greater hedge there was against some of the outstanding risks, she noted, and it would
assist in avoiding a rate increase.
Chairman Daly asked about residential, commercial and industrial expansion and Manager
Edwards said that the vast bulk of the borrowing was intended to fund the Distribution
Infrastructure Program. She said that the distribution was the system of wires and cables that
extended through the neighborhoods and there were fifty different programs that were
midstream and that needed to be expedited. It included the upgrade of transformers to greater
capacity levels to handle load, re- conductoring circuits to carry additional capacity, pole
relocations, bird guarding equipment and many incremental distributions system upgrades.
Chairman Daly asked if there would be an opportunity to accomplish some additional
undergrounding, as the improvements or replacements were made of the existing facilities.
Manager Edwards said that it was intended, as part of the borrowing, to use a portion of the
money to augment or expedite the undergrounding fund.
Authority Member Kring commented that the City's rates, because of the management of the
Utility Department, were at least 28 percent lower than the surrounding areas for residential
consumers. Manager Edwards said that the rates ran between 20 and 48 percent on average,
depending on the rate class.
Authority Member Feldhaus asked about the rates for commercial /industrial and Manager
Edwards said that the rate differential between the commercial /industrial classes ranged from
approximately 12 to 15 percent to 25 percent and there was still a significant advantage.
Authority Member McCracken asked if the reserves would be maintained with the issuance of
the bonds to buffer against any major change or emergency so that the rate - payers would not
have to fund a major increase and Manager Edwards said that was the intent. She said that
many utilities held a much larger cash reserve hedge than the City had historically and cities
such as Turlock, Modesto, Imperial Irrigation, Glendale and Burbank all held over $100 million
cash hedge. Anaheim was currently in the $25 to $30 million range and she did not want to use
the cash to assist funding the Capital Program and deferring the capital had a different set of
negatives associated with it, she said. She projected that this would allow the $25 to trend
upwards to approximately $40 to $45 million in the cash reserve fund. She said that would help
the City hedge against some of the surprises that could come forward from the energy sector.
Twelve to fourteen possible surprises that could happen had been analyzed and price values
had been assigned to those surprises, she noted, and those ranged from $1 to $40 million on an
annual basis. It was unlikely that twelve of the surprises could happen at one time and this
would go a long way in assisting to maintain the price advantage that utility customers had
come to expect, she added.
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Chairman Daly asked if there was any penalty for early payment of the bonds and Mark Mazak,
Utilities Assistant General Manager Finance and Administration, responded that the bonds had
a standard ten -year call. He said that after ten years, they could be called without penalty or
after the ten years, they would have to be defeased with an escrow account.
Chairman Daly offered Resolutions Nos. APFA2002 -1 and APFA2002 -2 for adoption.
1. RESOLUTION NO. APFA2002 -1 RESOLUTION OF THE BOARD OF
137 DIRECTORS OF THE ANAHEIM PUBLIC FINANCING AUTHORITY (1) authorizing the
issuance of not to exceed $100,000,000 aggregate principal amount of revenue bonds of
said Authority; (II) approving the forms and authorizing the execution of an Indenture of
Trust, an Installment Purchase Agreement, a Purchase Contract and other related
documents; (III) approving the execution and deliver of an official statement; and (IV)
approving certain actions in connection therewith.
2. RESOLUTION NO. APFA2002 -2 RESOLUTION OF THE BOARD OF
DIRECTORS OF THE ANAHEIM PUBLIC FINANCING AUTHORITY, (1) authorizing the
137 issuance of not to exceed $90,000,000 aggregate principal amount of revenue refunding
bonds of said authority; (II) approving the forms of and authorizing the execution of an
Indenture of Trust, an Installment Purchase Agreement, an Escrow Agreement, a
Purchase Contract and other related documents; (III) approving the execution and
delivery of an official statement; and (IV) approving certain actions in connection
therewith.
Roll call vote: Ayes — 5, Chairman Daly and Public Financing Authority Members McCracken,
Feldhaus, Tait, and Kring. Noes — 0. Motion carried.
137 3. Approve minutes from Public Financing Authority Special meeting of September 18,
2001.
Chairman Daly moved, seconded by Public Financing Authority Member Kring, to approve the
minutes of September 18, 2001. Motion carried unanimously.
ADJOURNMENT:
There being no further business, Chairman Daly moved to adjourn the Anaheim Public
Financing Authority, seconded by Authority Member McCracken. Motion carried unanimously.
The regular meeting of the Anaheim Public Financing Authority adjourned at 5:49 P.M.
Sheryll Schroeder, CMC /AAE
Secretary, Anaheim Public Financing Authority