RESOLUTION NO 114-08
RESOLUTION APPROVING
AN AMENDMENT TO THE
INTEREST RATE
MANAGEMENT PLAN
AND AUTHORIZING AN
AMENDMENT TO THE
QUALIFIED INTEREST
RATE MANAGEMENT AGREEMENT PURSUANT THERETO
ADOPTED OCTOBER 9, 2008,
APPROVING AN AMENDMENT TO THE
INTEREST RATE MANAGEMENT PLAN; AUTHORIZING AN INTEREST RATE MANAGEMENT
AGREEMENT RELATING TO ITS SEWER REVENUE BONDS, SERIES OF 1998; AUTHORIZING THE
PROPER OFFICERS OF THE AUTHORITY TO EXECUTE AND DELIVER THE INTEREST RATE
MANAGEMENT AGREEMENT; COVENANTING TO PAY THE PERIODIC SCHEDULED PAYMENTS DUE
FROM THE AUTHORITY UNDER THE INTEREST RATE MANAGEMENT AGREEMENT; RETAINING AN
INDEPENDENT FINANCIAL ADVISOR; AND AUTHORIZING THE EXECUTION AND DELIVERY OF
OTHER NECESSARY DOCUMENTS AND THE TAKING OF OTHER NECESSARY ACTIONS IN
CONNECTION WITH THE FOREGOING.
WHEREAS,
the Authority previously appointed Municipal Government Investors Corporation
(“mGIC”) as its independent financial advisor (the “Financial Advisor”); said
Financial Advisor has prepared an Interest Rate Management Plan (the “Plan”)
originally in order to better manage the Authority’s interest costs relating to
the $28,470,000 portion of the $28,935,000 outstanding principal amount of its Sewer
Revenue Bonds, Series of 1998, (the “Bonds”); and
WHEREAS,
the Plan sets forth an analysis of the risks associated with entering into a
Swap Agreement, as hereinafter described, as well as criteria for the selection
of a Counterparty and the Authority has been advised that it is in its best
financial interest to enter into the Swap Agreement that meets the parameters
set forth in the Plan; and
WHEREAS,
the Plan proposes that the Authority enter into a confirmation relating to an
Interest Rate Swap Agreement (the “Original Swap Agreement”) and the Authority
has been advised by the Financial Advisor that it is in its best financial
interest to enter into the Original Swap Agreement with a financial institution
with a credit rating in one of the two highest rating categories of Moody's
Investors Service and Standard & Poor's, without regard to qualifiers,
numerical or otherwise (the “Counterparty”) that meets the parameters set forth
in the Plan with respect to the Bonds, which Original Swap Agreement
constitutes a Qualified Interest Rate Management Agreement; and
WHEREAS,
the Authority entered into the Original Swap Agreement with Wachovia Bank,
National Association as Counterparty (the “Counterparty”), pursuant to an ISDA
Master Agreement, as supplemented by the Schedule and the Constant Maturity
Swap Terms and Conditions and Confirmation thereto; and
WHEREAS,
recent conditions in the capital markets resulting from the subprime mortgage
turmoil, among other circumstances have created an abnormal situation related
to short term tax-exempt interest rates resulting in unexpected negative cash
flow to the Authority resulting from the Original Swap Agreement; and
WHEREAS,
the Authority desires to amend the Plan (which is attached hereto as Appendix I
and made a part hereof) (the “Amended Plan”), authorize the execution and
delivery of an additional Swap Agreement (the 2nd Swap Agreement”)
and such other documents as shall be necessary or appropriate in connection
therewith in order to enter into an Offsetting Swap (the “Offsetting Swap”) for
approximately a one year period in order to reduce the negative cash flow
exposure of the Authority.
NOW,
THEREFORE, BE IT RESOLVED BY THE BOARD OF DIRECTORS OF THE
1. Appointment of Financial Advisor;
Adoption of the Amended Interest Rate Management Plan. The Authority hereby reappoints mGIC as its
Financial Advisor and hereby adopts and approves the Amended Interest Rate
Management Plan prepared and recommended by the Financial Advisor, subject to
such modifications from time to time as the General Manager, Chairman of the
Board of Directors, the Financial Advisor, Bond Counsel and Solicitor to the Authority
shall approve. The Financial Advisor is
hereby determined to be independent of the other parties to any transaction
that may occur pursuant to the Amended Interest Rate Management Plan. The Authority further reappoints HT Capital
Markets, A Division of Northeast Securities, Inc. as its Swap Structuring Agent.
2. Selection of the Counterparty. The Authority hereby determines that its
process for the selection of a Counterparty, in order to serve its best
financial interest, and to obtain financial terms and conditions which, in the
opinion of the Financial Advisor, are fair and reasonable, is to award the2nd
Swap Agreement to a Counterparty by a private sale by negotiation. The Financial Advisor is authorized and
directed to negotiate with the Counterparty, in order to obtain the 2nd Swap
Agreement having the form, and containing all the terms and provisions set
forth in Appendix II hereof, which is hereby incorporated by reference.
3. Authorization of the 2nd Swap
Agreement and Reverse Constant Maturity Swap Terms and Conditions. In order to manage interest rate risks or
costs to the Authority relative to the Bonds, the proper officers of the Authority,
as set forth in paragraph 4 below, are hereby authorized to execute and deliver
the 2nd Swap Agreement. The substantial
form of the 2nd Swap Agreement is hereby approved; provided that: (i) the notional amount subject to the 2nd
Swap Agreement shall not exceed the outstanding principal amount of the Bonds
to which it relates; (ii) the term of the 2nd Swap Agreement shall end no later
than October 31, 2009; (iii) the net effect of the 2nd Swap
Agreement, when taking into account the Authority’s existing Original Swap
Agreement, will be that the Authority shall be obligated to pay the monthly
average of an amount equal to a 61.515 of the 5 year London Inter-Bank Offered
Rate (“LIBOR”) Index, multiplied by the notional amount of the Swap, as
reflected by the outstanding principal amount of the Bonds, at the time in
question, as set forth in the amended Plan, at the times and in the manner set
forth in the 2nd Swap Agreement; (iv) the net effect of the 2nd Swap Agreement,
when taking into account the Authority’s existing Interest Rate Management
Agreement, shall obligate the Counterparty to pay an amount equal to the
monthly average of the Securities Industry and Financial Markets “SIFMA”)
Index, less a fixed spread not to exceed ____% multiplied by the respective
notional amount of the Bonds at the times and in the manner set forth in the 2nd
Swap Agreement; and (v) both parties may be required to make certain additional
payments to the extent required under the 2nd Swap Agreement, however, periodic
scheduled payments payable by the Authority pursuant to the 2nd Swap Agreement
shall be senior in right and priority of payment to termination payments which
may become due under the 2nd Swap Agreement.
The
Authority hereby determines that the 2nd Swap Agreement is in the Authority's
best financial interest and that it contains financial terms and conditions
which the Authority has been advised by the Financial Advisor are fair and
reasonable.
In
order to manage interest rate risks or costs to the Authority relative to the
Bonds and to provide for the provisions that are required to be in the 2nd
Swap Agreement, the Authority hereby approves the Reverse Constant Maturity
Swap (“CMS”) Terms and Conditions in substantially the form attached hereto as
Appendix III, which is hereby incorporated by reference.
4. Execution and Delivery of Documents. The Chairman, Vice Chairman or Treasurer of
the Authority is hereby authorized to execute and deliver, in the name of the Authority
and on its behalf, the following documents and to approve the final form and
substance thereof, and any amendments or supplements thereto, and to approve
the exact notional amount, term and interest rates under the 2nd Swap Agreement
(subject to Paragraph 3 above), such approvals to be conclusively evidenced by
the execution thereof (including such amendments as may be required to assure
compliance with the law), and the Secretary or Assistant Secretary/Treasurer is
hereby authorized to affix to all of the following documents the seal of the Authority
and to attest to the same, as necessary:
(a) The 2nd Swap Agreement; and
(b) Such
other documents, agreements, instruments and certifications, as the executing
officers determine to be reasonable and appropriate to provide for the 2nd Swap
Agreement as authorized by this Resolution.
Copies
of the foregoing documents, together with the other documents relating to the
transactions authorized hereby, in final form as executed and delivered by the
parties thereof, shall be filed in the official records of the Authority.
The
General Manager of the Authority is hereby authorized to accept the final
pricing of the 2nd Swap Agreement subject to the requirements of Paragraph 3
which are that the Authority shall be obligated to pay an amount equal to 61.515%
of the 5 year LIBOR Index, multiplied by the notional amount of the Swap, as
reflected by the outstanding principal amount of the Bonds and the Counterparty
shall be obligated to pay an amount equal to the monthly average of the SIFMA
Index, less a fixed spread not to exceed ____% multiplied by the respective
notional amount of the Bonds at the times and in the manner set forth in the
2nd Swap Agreement, and the General Manager is further authorized to execute
any documents evidencing such acceptance.
5. Payments Under the Swap Agreement
Payment
obligations (except any termination payments) of the Authority under the 2nd
Swap Agreement will be general obligations of the Authority. The Authority hereby covenants that it shall
include the amount of scheduled payments (except any termination payments) due
thereunder for each fiscal year in which such sums are payable in its budget
for that year; shall appropriate such amounts from its general revenues to the
payment of such scheduled payments; and shall duly and punctually pay or cause
to be paid the scheduled payments (except any termination payments) on the
dates and places and in the manner stated in the 2nd Swap Agreement according
to the true intent and meaning thereof, and for such proper budgeting,
appropriation and payment, the general unsecured, unenhanced obligation of the Authority
is hereby irrevocably pledged.
The
Authority hereby covenants that it shall include any termination payment due
under the 2nd Swap Agreement, for which revenues are not otherwise available in
the fiscal year in which such termination payment is due, in its budget to be
adopted for the fiscal year immediately following the fiscal year in which such
termination payment is due, and that it shall appropriate and pay such
termination payment from its general revenues promptly, when first
available. Nonetheless, to the extent
revenues are available for the payment, in whole or part, of a termination
payment in the fiscal year in which such termination payment is due, the Authority
shall pay such termination payment promptly from its general revenues.
The
Authority covenants with the Counterparty, and proper officers of the Authority
are hereby authorized and directed, to withdraw from the General Fund (or from
the Sinking Fund hereinafter authorized) and pay to the Counterparty on or
before the appropriate payment dates set forth in the 2nd Swap Agreement (or as
and when otherwise due by its terms and in order to provide same-day, available
funds for timely payment), amounts required to pay the periodic scheduled
payments and any other amounts due and owing under the 2nd Swap Agreement.
In
the event the Authority determines the same to be necessary or beneficial, and
with the consent of the Counterparty, the Authority hereby authorizes to be
established, a Sinking Fund for the payment of the periodic scheduled payments
and any other amounts due and owing under the 2nd Swap Agreement, with a paying
agent, to be named, and further covenants to maintain such Sinking Fund until
such obligations are paid in full.
Proper officers of the Authority are hereby authorized and directed to
contract with any such paying agent for its services in such capacity.
Exhibit 6A
to Appendix I hereto sets forth the estimated periodic scheduled payments to be
paid and received by the Authority pursuant to the Amended Plan, the Original
Swap Agreement and 2nd Swap Agreement. Exhibit 7A to Appendix I hereto sets forth
the maximum periodic scheduled payments to be paid by the Authority pursuant to
the Amended Plan, the Original Swap Agreement and 2nd Swap Agreement
followed by Exhibit 7B entitled ”Maximum Aggregate Net Debt Service” in
Appendix I listing the maximum combined obligations of the Authority taking
into account the periodic scheduled payments, not including any termination
payments, due under the Original Swap Agreement and the 2nd Swap
Agreement together with the interest portion of the Bonds, assuming that the
maximum interest rate on such Bonds is in effect.
6. Process for Selecting Counterparty. The identity of the Counterparty will be
determined by a negotiated process conducted by the Financial Advisor in
conjunction with the Structuring Agent.
The negotiations will ensure that the Authority receives payments from
the Counterparty, based upon the lowest percentage of spread deducted from the
SIFMA Index, at the time in question that is available in the marketplace. The Structuring Agent and the Financial
Advisor will implement rigorous credit standards and credit screening of
potential counterparties, with the requirement that any counterparty be rated
at the time of award no lower than the two highest rating categories by both
Moody’s and Standard & Poor’s respectively without regard to qualifiers
numerical or otherwise. The Authority
hereby approves and authorizes the use of this process for selecting a
counterparty and awarding the 2nd Swap Agreement.
7. Dating of 2nd Swap Agreement. The Swap Agreement and other documents are
presently expected to be dated as of their date of execution within the next
sixty (60) days. The Chairman, Vice Chairman,
Treasurer and Secretary or Assistant Secretary/Treasurer (for attestation
purposes) of the Board of Directors are hereby authorized to approve at a later
date, the Swap Agreement and all such other documents, if the award of the Swap
Agreement is delayed, due to market conditions or other proper cause, such
approval to be conclusively evidenced by the execution of the 2nd Swap
Agreement and such other documents by the Chairman, Vice Chairman or Treasurer and
Secretary or Assistant Secretary/Treasurer (for attestation purposes) of the
Board of Directors.
8. Binding Effect to Covenants and Agreements. All covenants, obligations and agreements of
the Authority set forth in this Resolution and in the documents authorized
hereby shall be deemed to be the covenants, obligations and agreements of the Authority
to the fullest extent authorized or permitted by law, and all such covenants,
obligations and agreements shall be binding upon the Authority and its
successors from time to time and upon any board or body to which any powers or
duties affecting the same shall be transferred by or in accordance with
law. Except as otherwise provided in
this Resolution, all rights, powers and privileges conferred and duties and
liabilities imposed upon the Authority or the members thereof by the provisions
of this Resolution or the documents authorized hereby shall be exercised or
performed by such members, officers or other representatives of the Authority
as may be required or permitted by law to exercise or perform the same. No covenant, obligation or agreement herein
contained in any documents authorized hereby shall be deemed to be a covenant,
obligation or agreement of any member, officer, agent or employee of the Authority
in his or her individual capacity and neither the members of the Authority nor
any officer executing the 2nd Swap Agreement or any other document authorized
by this Resolution shall be liable personally thereunder or be subject to any
personal liability or accountability by reason of the execution and delivery
thereof.
9. Counsel. Wayne D. Gerhold, Esq. is hereby appointed
Bond Counsel with respect to the matters set forth in this Resolution and Adams
& Foley, LLC and is hereby directed to represent the Authority’s interests
in these matters.
10. Further Action. Any member of the Authority is hereby
authorized and directed to execute such further documents and do such further
things as may be necessary or proper to carry out the intent and purpose of
this Resolution or any document herein authorized.
11. Repeal of Inconsistent Resolutions. All prior resolutions or parts thereof inconsistent
herewith are hereby repealed to the extent of such inconsistency.
12. Resolution A Contract. This Resolution shall constitute a contract
with the Counterparty.
13. Statutory References. All references to specific provisions of
statutory law herein contained may be read and interpreted by reference to
amended, successor or replacement laws, but only to the extent consistent with
the intent and clear meaning of this Resolution. All inconsistencies shall be resolved with
recognition of, and in favor of, the rights of the Counterparty whose rights
shall not be impaired.
14. Benefited Parties. Nothing in this Resolution, expressed or
implied, is intended or shall be construed to confer upon, or to give to, any
person or corporation, other than the Authority, the Paying Agent for the Bonds,
if any, and the Counterparty, any right, remedy or claim under or by reason of
this Resolution or any covenant, condition or stipulation hereof; and all of
the covenants, stipulations, promises and agreements in this Resolution
contained by and on behalf of the Authority shall be for the sole and exclusive
benefit of such persons.
15. Severability. If any one or more of the covenants or
agreements provided in this Resolution on the part of the Authority to be
performed shall for any reason be held to be illegal or invalid or otherwise
contrary to law, then such covenant or covenants or agreement or agreements
shall be null and void and shall be deemed separable from the remaining
covenants and agreements, but shall in no way otherwise affect the validity of
this Resolution.
16. Counterparts. This Resolution may be executed in multiple
counterparts, each of which shall be regarded for all purposes as an original;
but such counterparts shall constitute but one and the same instrument.
17.
Effective Date. This Resolution shall take effect
immediately.
Adopted: October 9, 2008
ATTEST:
MUNICIPAL
AUTHORITY
______________________ By:___________________________
Secretary Chairman
[SEAL]