Office of the City Administrative Officer

REPORT FROM

OFFICE OF THE CITY ADMINISTRATIVE OFFICER

Date: April 10, 2006 GAO File No. 0670-00008-0002 Council File No. Council District: To: The Mayor The Council From: William T Fujioka, City Administrative Officer ~

Reference: Los Angeles Convention and Exhibition Center Authority Variable Rate Lease Revenue Refunding Bonds Series 2003 B

Subject: Amendment to Standby Bond Purchase Agreements for the Los Angeles Convention and Exhibition Center Authority Variable Rate Lease Revenue Bond Series 2003 B

SUMMARY

The City Administrative Officer (CAO) is requesting authority to amend the Standby Bond Purchase Agreements for the liquidity facility providers for the Los Angeles Convention and Exhibition Center Authority (LACC) Variable Rate Lease Revenue Refunding Bonds Series 2003 B (2003 B) to reduce the fee from .29 percent of the amount of bonds outstanding to .15 percent and to extend the agreement from 2008 to 2011. To proceed with this amendment, the Mayor and Council will need to adopt a Resolution (Attachment A) that provides the authority to amend the Standby Bond Purchase Agreements (Attachment B) and authorize the CAO to negotiate and execute an agreement with Dexia Credit and JP Morgan Chase Bank (the liquidity facility providers) to provide the lowest cost liquidity facility. The CAO is also requesting authority to replace remarketing agents for non performance as stated in the Remarketing Agent Agreements. This is consistent with authority granted in other City Bond Programs, such as the Wastewater System Program, to ensure the best interest rate for the City. This authority was omitted from the initial resolution.

In June 2003, the City refunded over $450 million of the Los Angeles Convention Center debt to achieve savings of approximately $70 million to the City's General Fund. The financing structure for the refunding involved the issuance of $226 million in fixed rate bonds and $235 million in variable rate bonds, hedged by interest rate swaps.

The interest rate on variable rate bonds is reset periodically, either daily, weekly, monthly or a specified length of time. Each time the interest rate is reset, the bondholder has the opportunity to "put" the bonds back, that is, the bondholder can choose to no longer own the variable rate bonds. However, in the event that there is no new owner for the bonds, the bank providing the liquidity facility will purchase the bonds. For this reason, the issuance of variable rate bonds requires the use of a liquidity facility. In most cases, the bonds would be remarketed to a new investor. CAO File No. PAGE 0670-00008-0002 2

Through a competitive request for proposals (RFP) process, the CAO recommended the selection of and the Mayor and Council approved the selection of Dexia Credit and JP Morgan Chase Bank as the liquidity facility providers for the LACC 2003 B (C.F. 03-0482). The Standby Bond Purchase Agreement (the "Standby") is the agreement with the liquidity providers. It provides the liquidity facility at a cost of .29 percent of the amount outstanding each year through 2008. The fees for the liquidity facility have since decreased dramatically. The CAO was able to renegotiate the fee to .15 percent of the amount of bonds outstanding each year and to extend the decreased fee through the year 2011. This amendment will reduce to the cost of the liquidity facility, resulting in approximately $350,000 savings to the General Fund on an annual basis and approximately $1,750,000 over the five year term of the contract.

The CAO is requesting authority to replace the remarketing agents to ensure the lowest cost for the City. This will allow for the termination of the remarketing agent and replace them with one of the other remarketing agents in the syndicate. The CAO currently has this authority in the Wastewater System Program. This change is consistent with the authority previously granted to the CAO. This will allow for the redistribution of the bonds when one remarketing agent is not performing and increasing the cost to the City due to higher interest rates. The Remarketing Agent Agreements state that the remarketing agent can be replaced.

To realize these savings, the Standby Bond Purchase Agreement will need to be amended. The Mayor and City Council will need to approve the attached Resolution (Attachment A) to proceed with the amended terms of the Standby Bond Purchase Agreement (Attachment B).

RECOMMENDATIONS

That the Council, subject to the approval of the Mayor:

1. ADOPT a Resolution (Attachment A) of the City Council of the City of Los Angeles to amend the Standby Bond Purchase Agreement to decrease the cost of the liquidity facility providers and to authorize replacement of the remarketing agents as provided in the Remarketing Agent Agreements.

2. AUTHORIZE the City Administrative Officer to negotiate and execute an agreement with Dexia Credit Local and JP Morgan Chase Bank to provide the lowest cost liquidity facility (Attachment B) and extend the term until 2011.

FISCAL IMPACT STATEMENT

The amendment to the Standby Bond Purchase Agreement will reduce to the cost of the liquidity facility and will result in approximately $350,000 savings to the General Fund on an annual basis and approximately $1,750,000 over the five year term of the contract. CAO File No. PAGE 0670-00008-0002 3

DEBT IMPACT STATEMENT

The change in terms of the liquidity facility agreement will have no impact on the City's debt. The amended resolution will have no impact on the City's debt.

WTF:DMT:09060120C Attachment A

RESOLUTION OF THE COUNCIL OF THE CITY OF LOS ANGELES APPROVING AMENDMENTS TO TWO STANDBY BOND PURCHASE AGREEMENTS THAT PROVIDE LIQUIDITY SUPPORT FOR THE LOS ANGELES CONVENTION AND EXHIBITION AUTHORITY VARIABLE RATE LEASE REVENUE REFUNDING BONDS AND AUTHORIZING THE CITY ADMINISTRATIVE OFFICER TO SELECT AND APPOINT SUCCESSOR REMARKETING AGENTS FOR SUCH BONDS

WHEREAS, on June 4, 2003, the Los Angeles Convention and Exhibition Center Authority (the "Authority") issued its Los Angeles Convention and Exhibition Center Authority Variable Rate Lease Revenue Refunding Bonds, Series 2003B-1, 2003B-2, 2003C-1, 2003C-2, 2003D, 2003E and 2003F (collectively, the "Variable Rate Bonds"); and

WHEREAS, in connection therewith the City of Los Angeles (the "City") executed a Standby Bond Purchase Agreement dated as of June 4, 2003 (the "Dexia Agreement"), by and among the City, U.S. Bank National Association ("US Bank"), as trustee and tender agent, and Dexia Credit Local, acting through its New York Agency ("Dexia"), pursuant to which Dexia provides liquidity support for the Series 2003B-2, 2003C-2, 2003D and 2003E Variable Rate Bonds by agreeing to purchase such bonds tendered for purchase and not remarketed, and the City executed a Standby Bond Purchase Agreement dated as of June 4, 2003 (the "JP Morgan Agreement" and together with the Dexia Agreement, the "Agreements"), by and among the City, US Bank and JPMorgan Chase Bank, National Association ("JPMorgan"), pursuant to which JPMorgan provides liquidity support for the Series 2003B-1, 2003C-1 and 2003F Variable Rate Bonds by agreeing to purchase such bonds tendered for purchase and not remarketed; and

WHEREAS, the Agreements each establish an expiration date and set fees to be paid by the City to Dexia and JPMorgan for providing liquidity support for the respective series of the Variable Rate Bonds; and

WHEREAS, Dexia and JPMorgan have now agreed to reduce the fees charged to the City, and the City, Dexia and JPMorgan have agreed to extend the scheduled termination dates for the Dexia Agreement and the JPMorgan Agreement, and the parties must amend the Agreements to accomplish such fee reductions and extensions of the expiration date; and

WHEREAS, in connection with the issuance of the Variable Rate Bonds, the City entered into a Remarketing Agreement dated as of June 1, 2003, with Goldman, Sachs & Co. Inc. ("Goldman"), pursuant to which Goldman agreed to remarket the Series 2003B- 1 and Series 2003B-2 Variable Rate Bonds, by offering and selling such bonds on the secondary market from time to time; the City entered into a Remarketing Agreement dated as of June 1, 2003, with Bear, Stearns & Co. ("Bear") pursuant to which Bear agreed to remarket the Series 2003C-1 and Series 2003C-2 Variable Rate Bonds, by offering and selling such bonds on the secondary market from time to time; the City Attachment A

entered into a Remarketing Agreement dated as of June 1, 2003, with E.J. De La Rosa & Co., Inc. ("De La Rosa") pursuant to which De La Rosa agreed to remarket the Series D Variable Rate Bonds, by offering and selling such bonds on the secondary market from time to time; the City entered into a Remarketing Agreement dated as of June 1, 2003, with Loop Capital Markets LLC ("Loop") pursuant to which Loop agreed to remarket the Series 2003E Variable Rate Bonds, by offering and selling such bonds on the secondary market from time to time; and the City entered into a Remarketing Agreement dated as of June 1, 2003, with Jackson Securities ("Jackson") pursuant to which Jackson agreed to remarket the Series 2003F Variable Rate Bonds, by offering and selling such bonds on the secondary market from time to time (all of the Remarketing Agreements described above shall be referred to herein collectively as the "Remarketing Agreements," and Goldman, Bear, De La Rosa, Loop and Jackson shall be collectively referred to herein as the "Existing Remarketing Agents"); and

WHEREAS, the Remarketing Agreements provide for the resignation or removal of the applicable Remarketing Agents, and it is desirable to grant authority to the City Administrative Officer to act on the City's behalf to remove any of the Existing Remarketing Agents and select and appoint new Remarketing Agents under the Remarketing Agreements;

NOW, THEREFORE, BE IT RESOLVED by the Council of the City of Los Angeles (the "City Council") as follows:

SECTION 1. The form and content of the First Amendment to Standby Bond Purchase Agreement, by and among the City, US Bank and JPMorgan (the "JPMorgan Amendment"), and the form and content of the First Amendment to Standby Bond Purchase Agreement, by and among the City, US Bank and Dexia (the "Dexia Amendment" and together with the JPMorgan Amendment, the "Amendments"), copies of which are before this City Council and on file in the Office of the City Administrative Officer, are hereby approved, and any one of the City Administrative Officer (the "CAO") or Assistant CAOs (each, a "City Signatory") is hereby authorized and directed, for and in the name of and on behalf of the City, to execute and deliver the Amendments in substantially the form presented to and considered at this meeting, and the City Clerk is authorized to attest thereto, with such additions and changes therein as the executing City Signatory shall approve as being in conformity with the interests of the City, and as approved as to form by any Deputy or Assistant City Attorney (each, "Counsel"), such approval to be conclusively evidenced by such City Signatory's execution and delivery of the Amendments. The Agreements as amended by the Amendments shall be referred to herein as the "Amended Agreements."

SECTION 2. The City Administrative Officer is further authorized to execute and deliver one or more future amendments to the Amended Agreements for the purpose of modifying the annual facility fee payable by the City thereunder and/or extending the scheduled expiration date(s) thereof for any duration oftime deemed necessary, advisable or prudent thereby, provided that no such amendment(s) shall require an annual facility fee in excess of 0.40% (or in excess of 1.50% upon the occurrence and during the continuation of a rating agency downgrade of the long-term unenhanced ratings of the Variable Rate Bonds or the rating of the insurer of the Variable Rate Bonds or of any Attachment A

event of default under either Amended Agreement) of the amount permitted to be drawn thereunder without the approval of this City Council. The signature of any City Signatory shall be sufficient to bind the City and cause such amendments to be a valid and binding obligation of the City.

SECTION 3. The City Administrator Officer is hereby authorized to remove any Existing Remarketing Agent and to select and appoint any successor Remarketing Agent in accordance with the provisions of the applicable Remarketing Agreement. The City Administrative Officer is hereby authorized to negotiate on behalf of the City, remarketing agreements between the City and any successor Remarketing Agent, substantially in the form of the Remarketing Agreements and containing substantially the same financial and other terms as the Remarketing Agreements. Any City Signatory is authorized to execute said successor Remarketing Agreements with such changes as said City Signatory, upon the advice of Counsel, deems necessary and appropriate. The signature of any City Signatory shall be sufficient to bind the City and cause such Remarketing Agreements to be valid and binding obligations of the City.

SECTION 4. This Resolution shall take effect immediately upon its adoption.

PASSED and ADOPTED by the Council of the City of Los Angeles this ___ day of , 2006, by the following vote:

AYES:

NOES:

ABSENT:

APPROVED AS TO FORM AND LEGALITY

ROCKARD J. DELGADILLO, City Attorney

BY: ______Assistant City Attorney

I certify that the foregoing Resolution was adopted by the Council of the City of Los Angeles at its meeting on , 2006.

FRANK T. MARTINEZ, City Clerk

By: ______Deputy City Clerk Attachment B

KUTAK ROCK LLP DRAFT 03/03/06

FIRST AMENDMENT

STANDBY BOND PURCHASE AGREEMENT

among

CITY OF LOS ANGELES,

U.S. BANK NATIONAL ASSOCIATION, as Trustee and Tender Agent

and

DEXIA CREDIT LOCAL, acting by and through its New York Branch

4849-4600-8320.2 Attachment B

FIRST AMENDMENT TO STANDBY BOND PURCHASE AGREEMENT

THIS FIRST AMENDMENT TO STANDBY BOND PURCHASE AGREEMENT (the "First Amendment") dated as of April[__ ], 2006 (the "Amendment Date") is entered into by and among the CITY OF LOS ANGELES, a municipal corporation and charter city existing and organized under and by virtue ofthe Constitution and the laws ofthe State of California (the "City"), U.S. BANK NATIONAL ASSOCIATION, as trustee and tender agent (together with any successors thereto, the "Trustee" and "Tender Agent") and DEXIA CREDIT LOCAL, a banking corporation duly organized and existing under the laws of the Republic of France, acting through its New York Branch (the "Bank" or "Dexia").

WITNESSETH:

WHEREAS, on June 4, 2003, the City, the Trustee and Tender Agent, and Dexia entered into a Standby Bond Purchase Agreement (the "Standby Agreement") whereby Dexia agreed to purchase certain of the $147,155,000 aggregate principal amount of the Los Angeles Convention and Exhibition Center Authority Variable Rate Lease Revenue Refunding Bonds, Series 2003B-2, 2003C-2, 2003D and 2003E (the "Bonds") which were tendered for purchase and not remarketed; and

WHEREAS, the City and Dexia wish to amend the Standby Agreement pursuant to Section 8.08 of the Standby Agreement as herein provided; and

WHEREAS, all capitalized terms used herein and not defined shall have the meaning provided in the Standby Agreement.

NOW, THEREFORE, in consideration of the foregoing and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Amendment to Section 1.01. Pursuant to Section 2.14 of the Standby Agreement, Section 1.01 therein is hereby amended as follows:

Scheduled Expiration Date. The defined term "Scheduled Expiration Date" is deleted and in place thereof the following is inserted:

"Scheduled Expiration Date" shall mean June 4, 2011, as such date may be extended from time to time pursuant to Section 2.14 hereof.

4849-4600-8320.2 Payment Account. The defined term "Payment Account" is deleted and in place thereof the following is inserted:

"Payment Account" shall mean the following account, or the Bank may designate such account as in writing to the City and the Trustee:

Dexia Credit Local, New York Branch Citibank N.A. New York, New York ABA#: 021000089 Account#: 36240356 Account Name: Dexia Credit Local, New York Reference: Los Angeles Convention

Section 2. Amendment to Section 3.01. Section 3.01 of the Standby Agreement is hereby amended by adding the following sentence at the end thereof:

"Effective the Amendment Date, in consideration of the Bank's undertakings hereunder, the City agrees to pay to the Bank, or cause the Trustee to pay, from amounts paid by the City to the Trustee for such purpose, on each Fee Payment Date, for each day in the period ending on the day before a Fee Payment Date and beginning on the next preceding Fee Payment Date (or, if not applicable, beginning on the Amendment Date), a Facility Fee equal to the sum of (a) the Available Commitment as in effect as ofthe close of business on each day during such period and (b) fifteen basis points (0.15%) per annum, calculated on the basis of a year of three hundred sixty (360) days, but accrued on the actual number of days elapsed; provided that in the event S&P, Moody's or Fitch reduce their Underlying Rating on the Bonds, the Facility Fee shall equal the sum of subsection (a) above and (i) twenty basis points (0.20%) per annum, in the case of a rating below Baa1/BBB+, or the equivalent of such rating and (ii) forty-five basis points (0.45%) per annum, in the case of any withdrawal, suspension or downgrade below Baa3/BBB-, or the equivalent of such rating; provided, however, that the Facility Fee due and payable on May 1, 2006 shall be calculated as follows: for each day in the period that is subsequent to, and including, February 1, 2006, and which day is also prior to (but not including) the Amendment Date (a "Pre-Amendment Fee Day"), the City agrees to pay the Bank on May 1, 2006, (A) an amount in accordance with the calculation of Facility Fee pursuant to Section 3.01 of the Standby Agreement for each Pre-Amendment Fee Day, without reference to this First Amendment, in addition to (B) an amount in accordance with the calculation of Facility Fee pursuant to this First Amendment for each day in the period beginning on the Amendment Date and ending on April 30, 2006.

4849-4600-8320.2 2 Section 3. Addition of Section 8.19. The Standby Agreement is hereby amended by the addition of a new Section 8.19, as follows:

"Section 8.19. USA Patriot Act. The Bank hereby notifies the City that pursuant to the requirements of the USA Patriot Act (Title III of Pub. L. 107 56 (signed into law October 26, 2001)) (the "Patriot Act"), it is required to obtain, verify and record information that identifies the City, which information includes the name and address of the City and other information that will allow the Bank to identify the City in accordance with the Patriot Act. The City agrees to furnish to the Bank promptly the information and related documentation required by bank regulatory authorities under applicable "know your customer" and anti-money laundering rules and regulations (including without limitation the USA Patriot Act), as from time to time may be reasonably requested by the Bank."

Section 4. Representations and Warranties. Each party hereto hereby represents and warrants to the others that this First Amendment has been duly authorized and validly executed by it and that the Standby Agreement as hereby amended constitutes its valid obligation enforceable in accordance with its terms. The City further represents and warrants that, as of the Amendment Date, all representations and warranties of the City contained in the Standby Agreement are in full force and effect and no Default or Event of Default has occurred under the Standby Agreement.

Section 5. Ratification. As amended and supplemented hereby, the Standby Agreement IS m all respects ratified and confirmed, and the Standby Agreement as so amended and supplemented hereby shall be read, taken and construed as one and the same instrument. All references to the "Standby Bond Purchase Agreement" or the "Agreement" in the Agreement or any related agreement shall be understood to include this First Amendment.

Section 6. Headings. Section headings in this First Amendment are included herein for convenience of reference only and shall not have any effect for purposes of interpretation or construction of the terms of this First Amendment.

Section 7. Counterparts. This First Amendment may be signed in counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument.

[Remainder of page intentionally left blank]

4849-4600-8320.2 3 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their duly authorized officers, all as of the day and year first above written.

CITY OF LOS ANGELES

By ______Name ______Title------

U.S. BANK NATIONAL ASSOCIATION, as Trustee and Tender Agent

By ______Name ______Title------

DEXIA CREDIT LOCAL, acting through its New York Branch

By ______Name ______Title------

4849-4600-8320.2 4 Attachment B

KUTAK ROCK LLP DRAFT 03/03/06

FIRST AMENDMENT

STANDBY BOND PURCHASE AGREEMENT

among

CITY OF LOS ANGELES,

U.S. BANK NATIONAL ASSOCIATION, as Trustee and Tender Agent

and

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

4827-6510-1312.1 Attachment B

FIRST AMENDMENT TO STANDBY BOND PURCHASE AGREEMENT

THIS FIRST AMENDMENT TO STANDBY BOND PURCHASE AGREEMENT (the "First Amendment") dated as of April[__ ], 2006 (the "Amendment Date") is entered into by and among the CITY OF LOS ANGELES, a municipal corporation and charter city existing and organized under and by virtue ofthe Constitution and the laws ofthe State of California (the "City"), U.S. BANK NATIONAL ASSOCIATION, as trustee and tender agent (together with any successors thereto, the "Trustee" and "Tender Agent") and JPMORGAN CHASE BANK, NATIONAL ASSOCIATION (formerly known as JPMorgan Chase Bank), a national banking association duly organized and existing under the laws of the United States of America (the "Bank" or "JPMorgan").

WITNESSETH:

WHEREAS, on June 4, 2003, the City, the Trustee and Tender Agent, and JPMorgan, entered into a Standby Bond Purchase Agreement (the "Standby Agreement") whereby JPMorgan agreed to purchase certain of the $88,365,000 aggregate principal amount of the Los Angeles Convention and Exhibition Center Authority Variable Rate Lease Revenue Refunding Bonds, Series 2003B-1, 2003C-1 and 2003F (the "Bonds") which were tendered for purchase and not remarketed; and

WHEREAS, the City and JPMorgan wish to amend the Standby Agreement pursuant to Section 8.08 of the Standby Agreement as herein provided; and

WHEREAS, all capitalized terms used herein and not defined shall have the meaning provided in the Standby Agreement.

NOW, THEREFORE, in consideration of the foregoing and other valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:

Section 1. Amendment to Section 1.01. Pursuant to Section 2.14 of the Standby Agreement, Section 1.01 therein is hereby amended as follows:

Scheduled Expiration Date. The defined term "Scheduled Expiration Date" is deleted and in place thereof the following is inserted:

"Scheduled Expiration Date" shall mean June 4, 2011, as such date may be extended from time to time pursuant to Section 2.14 hereof.

Section 2. Amendment to Section 3.01. Section 3.01 of the Standby Agreement is hereby amended by adding the following sentence at the end thereof:

4827-6510-1312.1 Payment Date and beginning on the next preceding Fee Payment Date (or, if not applicable, beginning on the Amendment Date), a Facility Fee equal to the sum of (a) the Available Commitment as in effect as of the close of business on each day during such period and (b) fifteen basis points (0.15%) per annum, calculated on the basis of a year of three hundred sixty (360) days, but accrued on the actual number of days elapsed; provided that in the event S&P, Moody's or Fitch reduce their Underlying Rating on the Bonds, the Facility Fee shall equal the sum of subsection (a) above and (i) twenty basis points (0.20%) per annum, in the case of a rating below Baal/BBB+, or the equivalent of such rating and (ii) forty-five basis points (0.45%) per annum, in the case of any withdrawal, suspension or downgrade below Baa3/BBB-, or the equivalent of such rating; provided, however, that the Facility Fee due and payable on May 1, 2006 shall be calculated as follows: for each day in the period that is subsequent to, and including, February 1, 2006, and which day is also prior to (but not including) the Amendment Date (a "Pre-Amendment Fee Day"), the City agrees to pay the Bank on May 1, 2006, (A) an amount in accordance with the calculation of Facility Fee pursuant to Section 3.01 of the Standby Agreement for each Pre-Amendment Fee Day, without reference to this First Amendment, in addition to (B) an amount in accordance with the calculation of Facility Fee pursuant to this First Amendment for each day in the period beginning on the Amendment Date and ending on April 30,2006.

Section 3. Addition of Section 8.19. The Standby Agreement is hereby amended by the addition of a new Section 8.19, as follows:

Section 5. Ratification. As amended and supplemented hereby, the Standby Agreement 1s m all respects ratified and confirmed, and the Standby Agreement as so amended and supplemented hereby shall be read, taken and construed as one and the same instrument. All

4827-6510-1312.1 2 references to the "Standby Bond Purchase Agreement" or the "Agreement" in the Agreement or any related agreement shall be understood to include this First Amendment.

4827-6510-1312.1 3 IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be duly executed and delivered by their duly authorized officers, all as of the day and year first above written.

CITY OF LOS ANGELES

By ______Name ______Title------

U.S. BANK NATIONAL ASSOCIATION, as Trustee and Tender Agent

By ______Name ______Title------

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION

By ______Name ______Title------

4827-6510-1312.1 4