On March 26, 2024, the City Council approved a certain Project Agreement with Edgemoor Garden Grove Civic Center Partners LLC (the Developer) for the design and construction of the Civic Center Revitalization Project, which includes a new public safety facility, a parking structure, a re-imagined Civic Center Park, and the demolition of the existing police headquarters (the Project).

The estimated cost of the Project is $152 million.  The City set aside $12 million in cash during the Fiscal Year 2021-22 budget process since the planning phase of the Project.  The remaining $140 million will be financed.

Various financing options were evaluated with the Developer’s financing team and the City’s municipal advisor.  It was concluded that issuing tax-exempt lease revenue bonds through the Garden Grove Financing Authority (the Authority) was the most cost-effective method to finance the Project cost.  On November 14, 2023, the City Council adopted Resolution 9833-23 authorizing staff to take necessary actions to present the Bonds and related agreements and documents to the City Council and the Board of the Authority for approval at a future meeting.

If approved, the Bonds are anticipated to be issued on or about June 4, 2024.  Proceeds will be used to pay a portion of the Project cost.  The Bonds are special obligations of the Authority, payable solely from base rental payments to be made by the City.  The obligation of the City to make such rental payments does not constitute a debt of the City, and does not constitute an obligation for which the City is obligated to levy or pledge any form of taxation or for which the City has levied or pledged any form of taxation. The Authority has no power to tax.

The City has covenanted to provide timely disclosures to the Municipal Securities Rulemaking Board, including certain financial and operating data, and notice of certain events listed in the Continuing Disclosure Certificate (Attachment 5).   

To avoid capitalized interest and save on borrowing costs, the City will pledge certain facilities for the Bonds while the Public Safety Facility (PSF) and the parking structure are under construction.  These properties include the City Hall, the existing Police headquarters, the Community Meeting Center, the Senior Center, the Municipal Services Center/Public Works Yard, the City Administrative Office Building, and the Garden Grove Park, including the Sports and Recreation Center and the Atlantis Play Center.  The liens on these properties will be released upon the occupancy of the new PSF, at which time the PSF and parking structure will serve as the sole pledge for the Bonds.

The financing team for the Garden Grove Public Financing Authority Lease Revenue Bonds, Series 2024A consists of the following parties:

•  Municipal Advisor – Fieldman, Rolapp & Associates, Inc.
•  Bond and Disclosure Counsel - Stradling Yocca Carlson & Rauth LLP
•  Underwriter - Stifel, Nicolaus & Company, Incorporated
•  Underwriter’s Counsel – Anzel Galvan LLP
•  Trustee - U.S. Bank Trust Company, National Association
•  City Attorney and City staff

The par amount of the Bonds is $140 million, to be paid over 30 years.  Per preliminary sizing performed by the Bonds’ underwriter, Stifel, Nicolaus & Company, Inc. based on market conditions as of March 15, 2024, the average coupon rate is 4.690%, with true interest cost of 4.196%.  Average annual debt service is $8.85 million.  This amount will be programmed into the City’s annual operating budget in the General Fund.

On January 9, 2024, staff presented a five-year General Fund forecast to the City Council.  Under the base case scenario, the General Fund’s revenue would continue to exceed its operating expenditures after factoring in an estimated $9 million annual debt service payment.

Using market conditions as March 15, 2024, and assuming an underlying rating of AA for the Bonds based on the City’s current rating received from Standard & Poor’s in September 2021, the underwriter projects the Bonds would be issued with a premium of approximately $9.95 million.  The premium will be used to pay for (1) the cost of issuance, which is estimated to be $833,200, and bond insurance in the amount of $527,657, and (2) to reimburse the City’s General Fund for eligible Project costs incurred prior to the bond issuance.  However, all proceeds from the Bonds including potential interest earnings will remain designated for the Project and other purposes directly related to the Civic Center Revitalization plan through the City’s budgeting process.  Such uses might include the potential installation of solar equipment which would include a Power Purchase Agreement for the PSF and possibly other adjacent City facilities, such as the Fire Station, the Community Meeting Center and the Senior Center.

The issuance of the Bonds will not result in additional taxes or fees to the City’s taxpayers. 

It is recommended that the City Council and the Garden Grove Public Financing Authority:

•  Hold a public hearing to hear testimony for possible issuance by the Garden Grove Public Financing Authority of its Lease Revenue Bonds, Series 2024A in the principal amount of not to exceed $140,000,000 and the execution and delivery by the City and the Authority of a Lease Agreement, under which the City will make base rental payments to the Authority which shall be sufficient in time and amount to pay scheduled debt service on the Bonds and to finance the design and construction of certain public capital improvements to be located at Acacia Parkway, east of Euclid Street, in the city of Garden Grove, California, including an approximately 100,000 square foot public safety facility, a four-level parking structure that will provide approximately 350 parking spaces, and a reconfigured 2.8-acre Civic Center Park, as well as the demolition of the existing police headquarters building located at 11301 Acacia Parkway, Garden Grove, California.

• Adopt a resolution authorizing the execution and delivery of a Ground Lease, Lease Agreement, Indenture, Continuing Disclosure Certificate, and Bond Purchase Agreement in connection with the issuance of Garden Grove Public Financing Authority Lease Revenue Bonds, Series 2024A, approving the issuance of such Bonds in an aggregate principal amount of not to exceed $140,000,000, authorizing the distribution of an Official Statement in connection with the offering and sale of such Bonds, and authorizing the execution of necessary documents and certificates and related actions (Attachment 1).

•  Approve and authorize the execution of the Ground Lease by and between the City of Garden Grove and Garden Grove Public Financing Authority relating to the Garden Grove Public Financing Authority Lease Revenue Bonds, Series 2024A (Attachment 2).

•  Approve and authorize the execution of a Lease Agreement by and between the City of Garden Grove and Garden Grove Public Financing Authority relating to the Garden Grove Public Financing Authority Lease Revenue Bonds, Series 2024A (Attachment 3).

• Approve and authorize the execution of the Indenture by and among Garden Grove Public Financing Authority, the City of Garden Grove, and U.S. Bank Trust Company, National Association (Attachment 4).

• Approve and authorize the execution of the Continuing Disclosure Certification (Attachment 5).

• Approve and authorize the execution of the Bond Purchase Agreement between Stifel, Nicolaus & Company, Incorporated and the Garden Grove Public Financing Authority and the City of Garden Grove (Attachment 6).

• Approve and authorize the distribution of the Preliminary Official Statement relating to the Garden Grove Public Financing Authority Lease Revenue Bonds, Series 2024A (Attachment 7).

• Approve and authorize the execution of the Memorandum of Lease Agreement by and between the City of Garden Grove Garden Grove and the Garden Grove Public Financing Authority (Attachment 8).

• Approve and authorize the execution of the Indenture by and between the Garden Grove Public Financing Authority and U.S. Bank Trust Company, National Association (Attachment 9).

• Authorize the City Manager or her designee to execute any other documents that are necessary to cause the issuance of the Garden Grove Public Financing Authority Lease Revenue Bonds, Series 2024A.

• Authorize the City Manager or her designee to negotiate and finalize documents for a power purchase agreement to provide sustainable energy for the Public Safety Facility and adjacent areas; and, return to City Council for final approval and authorization to enter into such agreement.

• Authorize the City Manager or her designee to appropriate funds from the proceeds of the Bonds including potential premiums and interest earnings after paying the cost of the issuance for the Project and other items directly related to the Project and Civic Center Revitalization plan.