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<br />REPORT <br /> <br />7F <br />Page 1 <br /> <br /> <br />August25,2008 <br /> <br />SUBJECT <br />Finance Agreement between South Bayside System Authority (SBSA) and Redwood <br />City <br /> <br />RECOMMENDATION <br />Authorize by resolution the signing of the Financing Agreement between South Bayside <br />System Authority (SBSA) and City of Redwood City by the Mayor to implement the <br />existing provisions of the Joint Powers Agreement with respect to the issuance and <br />repayment of bonds. <br /> <br />BACKGROUND <br />The cities of Belmont, Redwood City and San Carlos and the West Bay Sanitary District <br />entered into an agreement entitled the "Joint Exercise of Powers Agreement - South <br />Bayside System Authority" on November 13, 1975. This Joint Exercise of Powers <br />Agreement (JPA) grants SaSA legal authority to issue long-term debt and bill each <br />member agency for their share of the indebtedness. Further, the JPA authorizes the <br />SaSA Commission to approve any debt issuance without requiring the approval of the <br />individual member agencies. However, each member agency appoints a member of <br />their city councilor board to represent the jurisdiction on the SaSA Commission. As <br />facilities jointly held by the member agencies, under the terms of the existing JPA each <br />agency is explicitly obligated to cover proportionally its share of any indebtedness <br />incurred to maintain, operate and improve the wastewater treatment facilities. <br /> <br />The Financing Agreement establishes the rate covenant and other bond covenants <br />ultimately used to secure the debt. These covenants are not in the existing JPA <br />agreement. Without the Financing Agreement, SBSA would likely have to bill each <br />member agency for their share of capital improvement costs on a pay-as-you-go basis, <br />meaning the City would have to issue its own debt independently. The SBSA Capital <br />Improvements Program addresses the replacement and rehabilitation of the aging plant <br />and facilities. <br /> <br />There are important advantages to SBSA issuing this debt: <br /> <br />. The member agencies will likely get better pricing on bond insurance and possibly on <br />the interest rates with a larger, more diversified issue. <br />. There are some economies of scale and the City will save on the shared issuance <br />costs. <br />. The broader customer base provided by pooling member agencies in the bond <br />issuance should yield better credit. <br />. Significantly less City staff effort is required if SaSA takes the lead. <br />. The debt will more clearly tie to the SaSA CIP efforts. <br /> <br />This is a one-time contractual agreement between SaSA and each member agency that <br />reiterates the JPA terms that each agency raise rates and fees as needed to repay their <br />