2001-08-30
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CITY OF ENCINIT AS
ENCINIT AS RANCH GOLF AUTHORITY
MINUTES of SPECIAL MEETING
Lilac Room, Civic Center
505 South Vulcan Avenue
THURSDAY, AUGUST 30,2001 at 3:00 p.m.
CALL TO ORDER/ROLL CALL
Chairman Kaiser called the meeting to order at 3: 1 0 pm.
Directors present:
Edward Kaiser, Alan Archibald and David Wigginton
Directors absent:
Susan Lamson, Kerry Miller.
Also present:
Tom Johnsen, Fieldman, Rolapp; Bill Huck, Stone & Youngberg;
Ardyce Jarvis, Carltas Co.; John McNair, Rod Linville, Mark Warren,
JC Resorts; Greg Lawlor, Encinitas Ranch Men's Club; Staff
members Leslie Suelter, Nancy Sullivan and Pat Drew, Board
secretary .
ORAL COMMUNICATION [3 minutes for each speaker. Maximum 15 minutes
for oral communication.]
None.
AGENDIZED BUSINESS ITEMS
1.
Approve Minutes of Special Meeting of July 19, 2001.
Chairman Kaiser moved approval of the July 19, 2001 Minutes, seconded by
Director Archibald. Approved 3-0-2 (Miller and Lamson)
2.
Update on Bond Refinancing.
(Leslie Suelter)
3: 16 pm - Telephone connection was made with Bond Counsel Bill Madison of
Jones Hall Hill & White in San Francisco.
Ms. Suelter gave the Board a brief review and said the reason they were at the
meeting was to review the various legal documents that had been submitted to
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Board members at the end of the previous week. The documents need to be
approved in order to go forward with the bond refunding. She briefed the Board
on the current market conditions and reviewed the various options.
Mr. Huck said that in general, interest rates had declined over the past six months,
both federal, prime and bond market interest rates. What they have seen, also,
maybe because of the weakness in the economy in many sectors, is a little bit of a
flight to quality so they have not seen as much of a decrease over the last six
weeks on interest rates on lower credit quality bonds. In fact, they have seen
some increase. They don't know where that leaves ERGA on the financing
because this is something that will not have a credit rating yet they believe it is
stronger than most non-rated financings that have been sold into the market place.
This is very much a business transaction between ERGA and Alliance Capital
Management, the owner of the existing bonds. The need is for Alliance to agree to
a change in the call date. They have agreed to that in concept and the call date
they have been looking at most recently is 9/1/04
Chairman Kaiser asked Mr. Huck to explain the significance of changing the call
date on the old bonds. Mr. Huck responded that to the extent that the call date is
shortened going from September of 2004 to March of 2004, for example, that
saves ERGA money because it would no longer be paying the 7.75% interest rate
on the old bonds for three years but only two and a half years. A lower amount of
money would go into the escrow so the effect is that it would reduce the size of the
bond issue and ERGA would be borrowing less money to achieve the same thing.
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Mr. Madison advised that one important legal fact is that the monies in the escrow
cannot be invested above the yields of the new bond and that will be substantially
lower than the yields on the old bonds. There will be negative arbitrage in the
escrow and that will require that more money be put into the escrow to make up for
the negative arbitrage, so that the more the call date is shortened the more
efficient the escrow and the better it is for ERGA.
Ms. Suelter pointed out that the defeased bonds that Alliance holds will be more
valuable because Triple A rated bonds, which they will become, are more valuable.
There are four or five variables which the negotiating team responsible for making
the investment decision on Alliance's part, will work with when they get back to
their offices next week. Depending on the Board's guidance to the bond team they
will begin their conversations with them on the following Tuesday.
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Chairman Kaiser asked if they were talking about Triple A rated bonds, tax free at
8% or better. Mr. Huck said the old bonds would have the same interest rate as
now, 7 %% and would be rerated Triple A, which is one of the deal points with
Alliance, and they would be outstanding until September 1st of 2004 or March 1st of
2004. Those are what are known as variables. The interest rate on the old bonds
must be paid until they are called and will be paid from the escrow in this case.
The twelve million dollars or a little bit less that will be raised in this financing will be
used to buy federal securities that will sit in the escrow. Those federal securities
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are tailor made so that they mature exactly when needed in order to pay the
interest and principal of the old bonds until the call date.
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Chairman Kaiser asked what, if given the change in the bond market, the finance
team felt the projected savings would be for ERGA.
Mr. Huck responded that in general bonds have gone down, but they have seen a
pickup in interest rates for lower quality bonds like the ones being proposed. They
are non-rated bonds and they have gone up a little, at least on some transactions.
Here it becomes much less precise. When they say a bond has no rating, it has
no rating; therefore there is no way to know exactly where it stands in the credit
quality spectrum. The big question is where is Alliance going to perceive the ERGA
bonds in the credit quality spectrum. Alliance believes the bonds are investment
grade, which is why they bought them. The Finance team had been hoping that
these bonds would have an interest rate of 6% or 6.10%. So, at the present value
and at an interest rate on the long end of 6.20%, after financing $400,000 of
improvements there would still be $423,000 present value savings, net of all costs.
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Mr. Johnsen explained that the present value of the savings has decreased.
Whereas in July they, and ERGA, were looking at approximately $600,000 of
present value, it is now down to the $420,000 number, and that is accounting for
the $400,000 of new money. They felt that with all the discussions the Board has
had, they wanted to come back to the Board to say that the market had shifted a
bit, they don't exactly know where they are going to end up with Alliance and
wanted to update and revisit with the Board.
Chairman Kaiser said that the decision is still whether this is really going to be
worth it. Mr. Huck said he agreed with the Board's strategy to wait until the
Finance Team can come back with crisp numbers on what the new bonds would
be worth to Alliance and what ERGA is going to be saving, including what the new
call features would be and all those parameters that would be important to the
board members.
Ms. Suelter said she wished to clarify something for the Board. If the bonds are
not refunded now, or in the next year, the Board will not be able to do an advance
refunding until 2006. Part of the reason why this works is because Alliance can
change the call date but later it becomes less likely that they will agree.
Mr. Huck agreed that this is a unique situation because the buyer and seller are so
inextricably intertwined that part of this has been an advantage to Alliance in the
fact that the high quality part of the yield curve has improved.
Chairman Kaiser said that he felt that given all the discussion the decision is to
delay adoption of the resolution until hearing back from Bill Huck and Tom
Johnsen at the September 19 meeting.
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The Finance Team left the meeting at 4:02 p.m.
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3.
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Approve Resolution No. 02-01 -
A RESOLUTION OF THE BOARD OF DIRECTORS OF THE ENCINITAS
RANCH GOLF AUTHORITY AUTHORIZING THE ISSUANCE AND SALE OF
NOT TO EXCEED $13,000,000 PRINCIPAL AMOUNT OF REVENUE
REFUNDING BONDS, APPROVING RELATED INDENTURE OF TRUST,
TERMINATION AGREEMENT, SITE LEASE, LEASE AGREEMENT, ESCROW
AGREEMENT, AMENDMENT TO MANAGEMENT AGREEMENT, OFFICIAL
STATEMENT AND BOND PURCHASE AGREEMENT, AND AUTHORIZING
RELATED DOCUMENTS AND OFFICIAL ACTIONS.
No Action taken on the proposed resolution.
4.
Review Men's Golf Club Schedule for FN 2001/2002.
(Rod Linville)
Greg Lawlor, president of the Men's Golf Club presented their proposed schedule
for 2002.
Chairman Kaiser moved adoption of the Schedule, seconded by Director
Archibald. Approved 3-2 (Lamson and Miller absent).
5.
Review Summary of July, 2001 Revenues and Expenditures/Financial Statement.
(Rod Linville/John McNair)
Mr. Linville reviewed the July finances for the Board: total revenue for the month
was $499,798 compared to a budget of $489,431 for 102% of budget; expenses
were $272,264 compared to a budget of $275,334 or 99% of budget; net income
for the month was $226,276 compared to a budget of $212,429 or 107% of
budget; total rounds were 7,644 compared to a budget of 7,655 or 100% of
budget.
6.
Review Costs for New Restrooms
John McNair/Mark Warren)
Mr. McNair discussed the proposed sites for restrooms on the golf course. One to
be at Paseo de Las Flores at the crossing between holes one and two. The
options for the second would be either at the holes 14/15 side or the 13/16 side.
Because of the cost of the sewer lines Mr. McNair said it was his recommendation
that they go on the 14/15 side after crossing the new bridge. The sewer hook-up
would be on the 14/15 side. Mr. McNair reviewed the four quotes from Romtec,
Restroom Facilities Corporation, WALCON, Inc. and Alan Pre-Fab Building
Corporation, together with the floor plans for the multi-user facilities.
Mr. McNair said that for price his recommendation would be Restroom Facilities
Corporation, but for quality it would be Romtec. Mr. Wigginton pointed out that it's
a case of pay now or pay later when considering the bids, and said that it should
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be done right and make the facilities an asset on the golf course. It should reflect
the image of the course.
Chairman Kaiser asked Mr. McNair to work with Director Wigginton on the project
and the concept of having concession stands at holes 2 and 7. JC Resorts is
already working with ABC to determine the requirements for a liquor license. They
will come back to the board when they feel they are ready.
Mr. Warren said they would check into the City requirements for permits.
Mr. McNair said they would come back with final quotes with everything that has
been discussed. Chairman Kaiser said they should come back when he and
Director Wigginton feel they are ready.
7.
Entry Way Gate/Entry Improvements
(Mark Warren)
Mr. Warren said they would like to continue this item to the next board meeting
since they don't have the visual plan yet to show the Board.
8.
Incidents and Accidents.
(Rod Linville)
Mr. Linville reported on an incident that happened around last January. JC
Resorts received a letter from an individual who is working on litigation of recovery
of medical expenses and future medical expenses, because his son hit too many
balls on the driving range or range mats and injured his hand. He said that
hopefully his son was a future young pro.
9.
Potential Course Enhancements.
Chairman Kaiser said there is one issue he would like to bring up again and that is
that there is only one ball washer per hole and it's never in the right place. It's
really bothering him and other players. He wondered what it would cost to put
additional washers on the course. Mr. Warren replied that he thought they were
about $260 a piece and volunteered to look into additional washers and/or relocate
at the holes to maybe between the white and blue tees.
Mr. Warren said something had been brought to his attention from the Planning
Department via Phil Cotton of Community Services. In the past they had done the
grading and had discussions of the revegetation and their efforts to beautify the
area, and had prepped the left side of hole 13. It has been brought to his
attention that it is not an area in which they have any say in what goes into it, so
they have to rehydroseed that particular area with the native mix.
On the left side of hole 16 they can do whatever they wish. In the area from Quail
Gardens to Club House Drive, the left side of hole 11, they can do whatever they
want. The bottom line is that they are not going to be able to do what they want
on the left side of hole 13.
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10.
Discussion/Direction Concerning Course Operations, Conditions Needing Change.
None.
11.
Directors and/or Manager Reports
I[For reported topics not described on this agenda, State law prohibits Board
discussion, responses, and action. A Boardmember may ask questions, but
only to clarify what the speaker is reporting.]
None.
12.
Next Meeting - Wednesday, September 19, 2001 at 1 :30 p.m.
13.
Adjournment
Chairman Kaiser adjourned the meeting at 5: 15 p.m.
Respectfully submitted,
I
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Edward Kaiser
Chairman of the Board
Patricia Drew
Recording Secretary
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