JOINT CITY OF SAN JOSÉ

CITY COUNCIL/SAN JOSÉ FINANCING AUTHORITY

SAN JOSÉ, CALIFORNIA TUESDAY, OCTOBER 15, 2002

The Council of the City of San José convened in Joint Session with the San José Financing Authority at 3:30 p.m. in City Council Chambers at City Hall.

Present: Council Members - Campos, Chavez, Cortese, Dando, LeZotte, Reed, Shirakawa, Jr., Williams, Yeager; Gonzales.

Absent: Council Members - Diquisto (excused).

2 (a) Adoption of a resolution of the City of San José Financing Authority:

(1) Authorizing the issuance of City of San José Financing Authority Lease Revenue Bonds, Series 2002B, Series 2002C and Series 2002D (Civic Center Project) (collectively, the “Bonds”) in the not to exceed aggregate principal amount of $425,000,000, to be sold through negotiated sales subject to certain limitations; and

(2) Approving in substantially final form, the Bonds, Indenture of Trust, Site Lease, Project Lease, Standby Bond Purchase Agreement, Preliminary Official Statements, Purchase Contract for the Series 2002B Bonds, Purchase Contract for the Series 2002C Bonds, Purchase Contract or the Series 2002D Bonds, Remarketing Agreement for the Series 2002C Bonds, and Remarketing Agreement for the Series 2002D Bonds; authorizing the Treasurer to execute and, as appropriate, to negotiate, and deliver these documents and other related financing documents and to take other actions as necessary in connection with the issuance of the Bonds.

(b) Adoption of an ordinance by the City Council approving, authorizing, and directing the execution of the Project Lease.

(c) Adoption of a resolution by the City Council:

(1) Approving in substantially final form and authorizing the execution of the Project Lease, Site Lease, Preliminary Official Statements, Standby Purchase Agreement, Bond Purchase Agreements, Continuing Disclosure Certificate and authorizing the Director of Finance to execute and, as appropriate, to negotiate, and deliver these documents and other related financing documents and to take other actions as necessary in connection with the issuance of the Bonds;

(2) Authorizing the City Manager to negotiate and execute an agreement with the Public Resources Advisory Group for financial advisory services in an amount not to exceed $320,000; and

(3) Authorizing the City Attorney to negotiate and execute an agreement with Jones Hall for bond counsel services in an amount not to exceed $300,000.

(Finance/Public Works)

(Deferred from 10/8/02 – Item 2)

Documents Filed: Memorandum from Finance Director Scott P. Johnson and Director of Public Works Katy Allen, dated October 9, 2002, recommending the adoption of an ordinance and said resolutions and pertaining to Civic Center Project Lease Revenue Bonds.

Discussion/Action: William Garbett and Pete Campbell spoke on the item. Referring to page 6 regarding interest rates, Council Member Reed asked if it would be beneficial to have a fixed-rate bond. Scott Johnson, Director of Finance, explained that Staff is proposing a mix of fixed and variable rate debt, and anticipates a savings over the life of the project with the variable rate; however, if variable rates increase significantly, Staff can look at switching to a fixed rate. Referring to Exhibit A, Council Member Reed asked who takes the risk of liquidity. Director Johnson responded that the liquidity provider would take the risk and then the City would have to purchase the bonds. Council Member Reed asked when the City would be at risk for buying back the bonds. Wes Huff, Financial Advisor from Public Resources Advisory Group, responded that the terms of the liquidity facility provide for a loan to the City for the purpose of purchasing any tendered bonds that were unsuccessfully able to be marketed. Council Member Reed asked what would be the bank rates. Mr. Huff explained the rates and indicated that less than 25% of the bond is at a variable rate. Council Member Williams asked what the basis is for fixed versus variable rate. Director Johnson explained that the chart on page 7 of the report compares the rates, and over a period of time shows savings. Council Member Williams asked why the difference from $343 million estimated for the project to the $425 million requested in the Staff report. Director Johnson responded that Staff requested the higher amount so Staff would not have to come back to Council with an additional request to accommodate any change in interest rates.

Upon motion by Vice Mayor Shirakawa, Jr., seconded by Council Member Chavez, and unanimously carried, Resolution No. SJFA-59, entitled: “A Resolution of the City of San Jose Financing Authority Authorizing the Issuance of Lease Revenue Bonds in Connection With Financing of a New City Hall, Authorizing and Directing Execution of an Indenture of Trust and Certain Financing Documents, Authorizing the Negotiation of the Sale of Bonds, Approving the Official Statements, and Authorizing Other Related Actions”, Ordinance No. 26758, entitled: “An Ordinance of the City of San José Approving, Authorizing and Directing Execution of a Project Lease”, and Resolution No. 71261, entitled: “A Resolution of the Council of the City of San José Approving,

Authorizing and Directing Execution of Certain Financing Documents and Directing Certain Related Actions in Connection With the Financing of a New City Hall” were adopted. Vote: 10-0-1-0. Absent: Diquisto.

ADJOURNMENT

The San José Financing Authority Board adjourned at 3:45 p.m.

RON GONZALES, MAYOR

ATTEST:

PATRICIA L. O’HEARN

CITY CLERK