TITLE
Recommendation to adopt resolution approving amendments to the Indenture of Trust for the City’s 2010 Taxable Revenue Bonds (Carnival Cruise Terminal Financing) to allow additional time for the Carnival Corporation to access funds for certain terminal improvements and certain costs of operation of terminal facilities. (District 2)
DISCUSSION
On November 2, 2010, the City issued $30,000,000 of Taxable Revenue Bonds (2010 Bonds) to refund the outstanding 2002 Taxable Revenue Bonds that had been issued on behalf of Carnival Corporation (Carnival), and to finance additional capital improvements to Carnival’s leasehold interest in the area adjacent to the Queen Mary. The 2010 Bonds are a limited obligation of the City guaranteed and payable solely by Carnival from the tariff levied by the Port of Long Beach (Port), and collected by Carnival. The tariff of $6.33 is assessed on cruise passengers embarking and debarking from Carnival’s Long Beach cruise ship terminal, and is used to pay for debt service and to create a capital reserve for future Carnival improvements.
Carnival has requested two amendments to the Indenture of Trust. The first amendment would allow additional time for Carnival to use bond proceeds toward additional terminal facilities and other costs of operation of the terminal facilities. Currently, under the Indenture of Trust, bond proceeds not spent by July 1, 2015 are to be used to redeem bonds.
The second amendment would allow Carnival more time to spend the excess tariff revenues. Currently, under the Indenture of Trust, the excess tariff revenues not needed to pay for the 2010 Bond debt service are to be used to redeem bonds three years after such revenues have been received.
The Carnival Corporation unconditionally guarantees the payment of debt service on the 2010 Bonds. At any time while the 2010 Bonds are outstanding, should Carnival’s wharfage tariff revenue be insufficient to pay the scheduled debt service in full, Carnival is required to make up any deficiencies in the wharfage tariff-based revenues necessary to pay the debt service.
The 2010 Bonds do not constitute a debt, liability, or general or moral obligation of the City. Neither the full faith and credit, nor any taxing power of the City, is pledged to the repayment of the 2010 Bonds. The City does not have a claim to the 2010 Bond proceeds or the tariff revenues.
This matter was reviewed by Principal Deputy City Attorney Dominic T. Holzhaus on August 19, 2015 and by Budget Management Officer Victoria Bell on August 20, 2015.
TIMING CONSIDERATIONS
City Council action is requested on September 8, 2015, to facilitate processing of the required documents.
FISCAL IMPACT
There is no fiscal impact to the City. The amendments would extend the deadline by which Carnival may spend bond proceeds and the tariff revenues not needed to pay for scheduled debt service on the 2010 Bonds. If the Resolution is not adopted, the excess funds would be used to redeem the 2010 Bonds earlier than their stated maturity date. The financing is an obligation of Carnival, and is unconditionally guaranteed by Carnival. There is no local job impact associated with this recommendation.
SUGGESTED ACTION
Approve recommendation.
BODY
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LONG BEACH APPROVING AMENDMENTS TO THE INDENTURE OF TRUST FOR THE CITY'S 2010 TAXABLE REVENUE BONDS (CARNIVAL CRUISE TERMINAL FINANCING), AND AUTHORIZING RELATED ACTIONS
Respectfully Submitted,
JOHN GROSS
DIRECTOR OF FINANCIAL MANAGEMENT
APPROVED:
PATRICK H. WEST
CITY MANAGER