HomeMy WebLinkAboutR11- Economic Development Agency ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
REQUEST FOR COMMISSION/COUNCIL ACTION
From: Barbara J. Lindseth Subject: DEBT SERVICE RESERVE
Acting Director FUND RESTRUCTURING
Date: April 25, 1995
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Synopsis of Previous Commission/Council/Committee Action(s):
On April 17, 1995, the Community Development Commission continued this
item until May 1, 1995.
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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.
Administrator Barbara Lindseth,Acting Director
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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
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Commission/Council Notes:
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BJL:2058A COMMISSION MEETING AGENDA
Meeting Date: 5/01/1995
Agenda Item Number: j" //
ECONOMIC DEVELOPMENT AGENCY
OF THE CITY OF SAN BERNARDINO
STAFF REPORT
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Debt Service Reserve Fund Restructuring
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.)
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BJL•2058A COMMISSION MEETING AGENDA
Meeting Date: 5/01/1995
Agenda Item Number:
Economic Development Agency
Debt Service Reserve Fund Restructuring
Staff Report
Page - 2 -
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$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
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BJL:2058A COMMISSION MEETING AGENDA
Meeting Date: 5/01/1995
Agenda Item Number: _