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Home My WebLink AboutR11- Economic Development 3CONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO REQUEST FOR COMMISSION/COUNCIL ACTION r From: Barbara J. Lindseth Subject: DEBT SERVICE RESERVE Acting Director FUND RESTRUCTURING Date: April 11, 1995 ------------------------------------------------------------------------------- Synopsis of Previous Commission/Council/Committee Action(s): None. ------------------------------------------------------------------------------- Recommended Motion(s): (Community Development Commission) MOTION A: That the Community Development Commission authorize staff, together with the financial consultant, Miller & Schroeder Financial, Inc. , to issue a request for bids from investment bankers and investment agreement providers for the restructuring of the staff designated Debt Service Reserve Funds and to submit the bids as received to the Commission for acceptance and award of the best bid at the first available meeting date. (Mayor and Common Council) MOTION B: That the Mayor and Common Council authorize staff, together with the financial consultant, Miller & Schroeder Financial, Inc. , to issue a request for bids from investment bankers and investment agreement providers for the restructuring of the staff designated Debt Service Reserve Funds and to submit the bids as received to the Mayor and Common Council for acceptance and award of the best bid at the first available meeting date. l ' Administrator Barbara Lindseth,Acting Director ------------------------------------------------------------------------------- Contact Person(s) : Tim Steinhaus/Barbara Lindseth Phone: 5081 Project Area(s) : All Ward(s): All Supporting Data Attached: Staff Report Funding Requirements: Amount: N/A Source: N/A Budget Authority: N/A ------------------------------------------------------------------------------- Commission/Council Notes: ------------------------------------------------------------------------------- BJL:2058A COMMISSION MEETING AGENDA Meeting Date: 4/17/1995 Agenda Item Number: �' l � ECONOMIC DEVELOPMENT AGENCY OF THE CITY OF SAN BERNARDINO STAFF REPORT Debt Service Reserve Fund Restructuring Previously, staff has presented the concept of the proposed Debt Service Reserve Fund restructuring to both the Redevelopment Committee and to the Commission as a possible funding source for the Baseball Stadium construction. The Debt Service Reserve Funds are those funds currently held by the bond Trustee, not the Agency, as reserves for bond debt service. Four (4) of the bond issues are that of the Agency and one (1) is a City issue. The restructuring would permit the Agency and the City to receive the present value of the reserve funds' future interest payments in excess of what the reserve funds are currently earning. As a result of corporate reorganizations of the Trustee for several of the Agency's tax allocation bond issues during the last several years, it has been determined that the Trustee had not been maximizing the potential interest earnings on Trustee invested funds. Such funds continue to be invested at a passbook rate of interest that has averaged between 3% to 4.5% for this period of time. Even if the Agency decided at this time not to proceed with the restructuring of the Debt Service Reserve Funds so as to obtain a present value cash payment, it would nevertheless be advisable to direct staff to obtain proposals for the long-term reinvestment of the Debt Service Reserve Funds for the more secure tax allocation bond issues. If the Agency agrees to proceed with the Debt Service Reserve Fund restructuring, the only action required at this time would be to direct staff, together with Miller & Schroeder Financial, Inc. , to proceed with determining the specifications for the solicitation of bids for the Debt Service Reserve Fund structuring for the designated bond issues and to have Miller & Schroeder issue the request for bids. The bids as received would be submitted to the Commission and the Mayor and Common Council after staff evaluation for the final award and approval. Staff proposes that the following bond issues be considered for the Debt Service Reserve Fund restructuring: $10,000,000 San Bernardino Joint Powers Financing Authority Tax Allocation Bonds, Issue of 1994 (Police Station Financing Project) $10,215,000 Public Facilities Lease Revenue Refunding Bonds, 1989 Series A (This is a City issue and not an Agency issue.) ------------------------------------------------------------------------------- BJL:2058A COMMISSION MEETING AGENDA Meeting Date: 4/17/1995 Agenda Item Number: 0 0 Economic Development Agency Debt Service Reserve Fund Restructuring Staff Report Page - 2 - -------------------------------------------------------------------------------- $22,800,000 San Bernardino Joint Powers Financing Authority Tax Allocation Refunding Bonds, 1991 Series A (Central City Merged Project) $12,215,000 San Bernardino Redevelopment Agency Southeast Industrial Revenue Project Tax Allocation Bonds, Refunding Issue of 1988 $15,890,000 San Bernardino Joint Powers Financing Authority Tax Allocation Refunding Bonds, 1989 Series A ( State College Project No. 4) Miller & Schroeder Financial, Inc. , has estimated, based upon current market conditions and interest rates, that the Agency and the City could expect to receive between $2.8 and $3.2 million (of which approximately $400,000 to $500,000 would be funds for the City) as a present value payment from the restructuring of the Debt Service Reserve Funds for a ten (10) year period. This would thereby enable the Agency to reinvest the Debt Service Reserve Funds at the end of this ten (10) year period free and clear of any restructuring restrictions. The costs over the ten (10) year period would be (i) the cash flow above and beyond the current level of investment earnings that would typically be used as an offset to annual debt service payments, and (ii) the expected increased interest earnings over the ten (10) year period assuming that the Agency and the City would have independently reinvested at a higher rate of interest. The Debt Service Reserve Fund restructuring for the ten (10) year period is essentially a method to borrow against the interest earnings and to receive a lump sum payment at this time. Based upon the foregoing, staff recommends adoption of the form motion. Barbara J. Lindseth, Acting Director ------------------------------------------------------------------------------- BJL:2058A COMMISSION MEETING AGENDA Meeting Date: 4/17/1995 Agenda Item Number: