Fort Walton Beach Ordinance — 2228-Amending Section IV Memorial Cemetery Investment Policy — reading text

READING 1st ITEM YIL'f ORDINANCE 2228 2nd REM AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF FORT WALTON BEACH, FLORIDA, AMENDING SECTION IV OF THE BEAL MEMORIAL CEMETERY INVESTMENT POLICY ADOPTED BY ORDINANCE NO. 1922; AUTHORIZING A ONE- TIME INTERFUND LOAN IN THE PRINCIPAL AMOUNT OF $ 3, 870, 000. 00, WITH INTEREST AT 3. 53% PER ANNUM, A TWENTY-YEAR TERM, AND NO PREPAYMENT PENALTY, FROM THE BEAL MEMORIAL CEMETERY PERPETUAL CARE FUND TO FINANCE THE PURCHASE, RELEASE, AND EXTINGUISHMENT OF THE REVERTER CLAUSE OR REVERSIONARY INTEREST AFFECTING THE CITY HALL PROPERTY; REQUIRING REPAYMENT WITH INTEREST; MAKING LEGISLATIVE FINDINGS; PROVIDING FOR IMPLEMENTATION; PROVIDING FOR CONFLICTS; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City Council adopted the Beal Memorial Cemetery Investment Policy by Ordinance No. 1922 on June 23, 2015, to govern the management and investment of the Beal Memorial Cemetery Perpetual Care Fund ( the " Fund") and to ensure that Fund assets are prudently managed and preserved for the long-term care and maintenance of the City's cemeteries; and WHEREAS, although municipal cemeteries are exempt from certain provisions of Chapter 497, Florida Statutes, the Fund constitutes a restricted municipal fund dedicated to the perpetual care and maintenance of the City's cemeteries and is not available for unrestricted municipal expenditure; and WHEREAS, the City's management of the Fund is further governed by the fiduciary and prudent- investment principles incorporated into the Beal Memorial Cemetery Investment Policy, including the duties to conserve and enhance the value of Fund assets, maintain sufficient resources for current and long-term obligations, act in the interest of the Fund and its dedicated purpose, and exercise the care, skill, prudence, and diligence required by the Prudent Person Rule; and WHEREAS, in exercising its responsibilities with respect to the Fund, the City Council must make reasonably informed and prudent decisions concerning Fund assets, preserve sufficient liquidity and long-term resources to satisfy perpetual- care obligations, protect the Fund against uncompensated diversion of its assets, and provide for appropriate accounting, documentation, and continuing oversight of Fund transactions; and WHEREAS, although the Fund may not technically constitute an " endowment fund" under Florida law, the Fund operates in an analogous manner by accumulating and investing assets, receiving recurring cemetery revenues, generating investment earnings, and maintaining financial resources to support the City's perpetual cemetery- care obligations over an indefinite period; and WHEREAS, because recurring revenues and investment earnings may exceed the Fund' s projected maintenance expenses and capital requirements, the Fund may accumulate assets in excess of the amount reasonably necessary to satisfy its present and reasonably anticipated perpetual- care obligations, provided that the existence and amount of any such excess are established through a prudent and reasonably informed financial analysis; and WHEREAS, the City and the Jackson Land Trust are parties to litigation concerning a reverter clause or reversionary interest affecting the City-owned property on which City Hall is located at 107 Miracle Strip Parkway SW, Fort Walton Beach, Florida; and WHEREAS, at the direction of the City Council, the City Manager, City Attorney, and litigation counsel negotiated a proposed resolution of that litigation pursuant to which the City has the opportunity to purchase, obtain the release of, and permanently extinguish the reverter clause or reversionary interest for a purchase price of $3, 870, 000. 00, which purchase price is based upon the appraised value of the reversionary interest; and WHEREAS, extinguishment of the reverter will eliminate a continuing cloud and restriction affecting the City's title to the City Hall property, provide the City with greater control over a significant municipal asset, resolve the pending litigation, and preserve a broader range of alternatives for the future financing, improvement, use, or redevelopment of the property; and WHEREAS, before committing Fund assets to the transaction, the City retained PFM Financial Advisors LLC (" PFM"), an independent financial advisor, to evaluate the financial condition of the Fund and determine whether the contemplated transaction could be undertaken without impairing the Fund's ability to satisfy its present and projected perpetual- care obligations; and WHEREAS, in conducting its analysis, PFM reviewed and considered, among other matters, the Fund' s current balance and investment structure, twelve years of historical revenues and expenses, projected long-term cemetery maintenance obligations, the present value of resources required to support perpetual care, projected recurring revenues, identified capital- improvement needs, and the anticipated repayment of the contemplated interfund loan; and WHEREAS, PFM' s analysis provides the City Council with independent financial information upon which to evaluate the Fund's existing and projected resources, anticipated obligations, liquidity requirements, capital needs, and capacity to support the contemplated transaction while continuing to fulfill the Fund' s perpetual- care purpose; and WHEREAS, PFM determined that the Fund' s current balance of $ 5, 015, 400, when combined with the present value of projected recurring revenues and interfund loan repayments of$4, 842,674, results in Total Available Resources of approximately $9, 858, 074; and WHEREAS, PFM further determined that the Total Available Resources are sufficient to cover the primary funding requirement of $4, 157, 958, consisting of projected perpetual- care obligations together with the $ 3, 870,000.00 reverter- clause transaction, resulting in an estimated surplus of approximately $5, 700, 134; and WHEREAS, PFM also evaluated a more conservative scenario incorporating projected capital- improvement needs in addition to perpetual- care obligations and the contemplated transaction and determined that the Fund would retain an estimated surplus of approximately 4, 550, 134 under that scenario; and WHEREAS, based upon its analysis of the Fund' s historical performance, projected revenues, perpetual- care obligations, anticipated capital needs, investment resources, and contemplated loan repayments, PFM concluded that the Fund appears financially capable of  supporting the $ 3, 870,000.00 transaction under either scenario analyzed without impairing its ability to satisfy its projected perpetual- care obligations; and WHEREAS, the City Council finds that its retention of and reliance upon an independent financial professional to evaluate the Fund' s financial condition, future revenues, projected expenses, capital requirements, and long-term obligations constitutes a prudent and reasonably informed means of determining whether Fund assets are available in excess of those reasonably necessary to fulfill the Fund' s dedicated perpetual- care purpose; and WHEREAS, the City Council further finds, based upon PFM' s independent financial analysis and the other information presented to the City Council, that the Fund possesses sufficient financial resources to make the contemplated $ 3, 870, 000.00 interfund loan while retaining resources reasonably sufficient to satisfy its projected perpetual- care obligations and anticipated capital needs; and WHEREAS, the contemplated transaction will not constitute a grant, permanent transfer, or uncompensated expenditure of Fund assets because the City intends to account for the amount advanced by the Fund as an interfund loan receivable and as a corresponding liability of the borrowing City fund or account, with repayment of the full principal amount together with interest to the Fund; and WHEREAS, through the interfund loan, the Fund will exchange cash or other liquid assets for a documented City repayment obligation, thereby retaining an asset corresponding to the outstanding principal balance, receiving interest during the repayment period, and ultimately receiving repayment of the principal advanced; and WHEREAS, the City Council finds that requiring repayment of principal with interest, documenting the repayment obligation, separately accounting for the interfund receivable and corresponding liability, and providing for continuing monitoring of repayment materially distinguish the transaction from an expenditure or diversion of Cemetery Fund assets for an unrelated municipal purpose; and WHEREAS, the City Council further finds that the interest rate, repayment term, payment schedule, and other protections established by this Ordinance are intended to provide a reasonable return to the Fund, protect the Fund's financial interests, and ensure that the transaction remains consistent with the prudent management of Fund assets; and WHEREAS, the City Council finds that the Fund' s perpetual- care purpose does not require every dollar accumulated by the Fund to remain indefinitely in its existing form when reliable financial analysis demonstrates that the Fund possesses resources exceeding those reasonably necessary to satisfy its projected obligations and when such excess resources are prudently invested through a documented, interest-bearing obligation that preserves the value of the Fund; and WHEREAS, based upon PFM' s independent financial analysis, the safeguards incorporated into the interfund loan, and the findings set forth herein, the City Council finds that the one-time interfund loan authorized by this Ordinance is financially supportable, is reasonably expected to preserve sufficient resources for the Fund' s present and projected perpetual- care obligations, protects the Fund through repayment of principal and interest, and is consistent with the City Council' s fiduciary responsibilities in the administration and management of the Fund; and  WHEREAS, the City Council further finds that the acquisition and permanent extinguishment of the reverter or reversionary interest affecting the City Hall property serves a substantial municipal public purpose by resolving pending litigation, removing an encumbrance affecting a significant City-owned asset, and preserving the City' s ability to finance, improve, use, or redevelop the City Hall property in the future; and WHEREAS, after consideration of the Fund' s dedicated purpose, PFM' s independent financial analysis, the terms and safeguards of the interfund loan, the City's obligation to repay the Fund with interest, and the municipal benefits associated with extinguishment of the reverter, the City Council finds that authorization of the one-time interfund loan is prudent, financially responsible, in the financial interest of the Fund, consistent with the Fund' s perpetual- care purpose, and in the best interests of the City and its residents. NOW, THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF FORT WALTON BEACH, FLORIDA, AS FOLLOWS: SECTION