AgdaPkt 2003-11-03 - Laserfiche WebLink

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Police Acdvltles League Building 9. Officials from the Police Activities League (PAL) have recently requested that the City guarantee a loan that PAL is obtaining from the Bay Area Bank to bridge a $1.5 million shortfall in the financing of the construction of the PAL building located at 3399 Bay Road. Up to $1.5 m0lion of the :pond proceeds will be made available to support this loan guarantee to PAL. Should tote PAL default on repaying all or a portion of their loan from the Bay Area Bank, the City would be responsible for repaying the unpaid balance to the bank. If the PAL repays its loan, these funds will then be used to "call" or retire the $1.5 million of outstanding Public Financing Authority bonds. The net interest cost on this portion of the bonds will be about $50,000 for the first year. Application of Proceeds The 1991 bonds will be paid off in full prior to their stated maturity ( "refunded "). New, 2003 lease revenue bonds will be issued by the PFA to pay off the 1991 bonds and to provide the City with sufficient funds for new projects to allow the City to advance as a loan approximately $2.89 million to the Agency to allow it to complete its redevelopment projects and $1.5 million to support the loan guarantee to PAL. The City's general fund (from utility users' tax revenues) will make lease payments on the 2003 lease revenue bonds and the Agency will reimburse the City with tax increment for its share of the debt service on the 2003 bonds. The Financing Structure Summary The proposed financing structure is analogous to refinancing one's home to obtain a lower interest rate while at the same time increasing the size of the loan in order to obtain funds to remodel one's house. Here, we are refinancing to capture a lower interest rate and extending the payment term to finance the remodel of the downtown and to support the loan guarantee to the PAL. The Agency is expected to be able to repay this debt based on conservative assessed valuation growth projections of only two percent. If necessary, the Agency will have the option of limiting its discretionary expenditures in order to make full payments to the City on the loan. Alternatively, the City could allow the Agency to defer loan payments and apply tax increment to redevelopment activities. Restructured Debt Service and Savings to the General Fund Debt service on the PFA's outstanding 1991 bonds and 1998 bonds is approximately $2.34 million annually through FY 2011/12 ($1.13 million is attributable to the 1991 bonds and $1.21 million is attributable to the 1998 bonds) and is funded with utility users tax revenues. Debt service on the 1991 bonds will be restructured so that it is extended out to FY 2018/19, as will be debt service on the portion of the 2003 bonds funding the loan to the Agency. Total PFA debt service on 1998 bonds and 2003 bonds will not exceed its present level of $2.34 million through FY 2011/12. Additional debt service of approximately $985,000 annually would be added subsequent to FY 2011/12 through approximately FY 2018/19, some of which would be allocable to the refunding and some to the new money loans. Restructured debt service attributable to the refunding portion of the 2003 bonds will be approximately $810,000 annually through FY 2010/11 and $325,000 annually thereafter through FY 2018/19. Even with the extension of the debt service on the refunded 1991 bonds, staff expects that the 3