AgdaPkt 2005-10-03 - Laserfiche WebLink

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6:/ -/ REPORT To the Honorable Mayor and City Council From the City Manager October 3,2005 Subject San Mateo County Mutual Aid Radio System Bonds Recommendation It is recommended that the City Council approve by motion the financing of Redwood City's portion of the County of San Mateo's law enforcement communications system through tax- exempt bonds issued by the County of San Mateo. Background In 2000 staff from the County of San Mateo advised cities throughout the County that the County would be replacing the law enforcement mutual aid radio system and that each entity would need to contribute funds for replacement based upon the relative population and assessed valuation of each entity. Redwood City's share of this cost was determined to be $319,192, or 3.3% of the total cost. County staff also advised city representåtives that the County intended to finance its own share of this project from tax-exempt bonds that the County would be issuing and provided cities with the option to participate in this financing. At the time of these discussions staff decided that this method of finance would be beneficial to the City as it preserved cash for other projects that were of high priority to the City (such as the 5th Avenue storm drain improvements) and allowed that City to take advantage of a relatively low borrowing rate of 4.33% while the City was earning about 5.0% on its investments. Since that time, interest rates have decreased due in part to the recession in 2001. Staff informally advised the County that Redwood City was interested in this method of finance but incorrectly believed that the County would eventually ask for formal approval at which time staff would submit this matter to Council for approval. The County proceeded to issue the tax-exempt bonds in 2001 and only recently requested payment from the City for its share of the interest and principal payments related to these bonds for FY2002/03 through FY2004/05. Staff is now requesting that the City Council formally approve financing the City's portion of this cost via the tax-exempt bonds that were issued by the County in 2001. Although the City is currently earning less on its investments (3.0% as of May 31, 2005), we believe that it is advantageous to continue to finance this obligation through the County's bond issue as almost all indications are that we are in a rising interest rate environment and that by continuing to participate in this financing we will be locking into a relatively low fixed rate of interest.