City of Culver City, California
Agenda Item Report
Meeting Date: 11/01/10 Item Number: J-3
JOINT CITY COUNCIL/REDEVELOPMENT AGENCY BOARD AGENDA ITEM:
Discuss and Provide Direction to the City Manager/Executive Director Regarding
Issuance of a Proposed Tax Allocation Bond.
Contact Person/Dept.: Glenn Heald/CDD
Todd Tipton/CDD
Nick Kimball/Finance
Phone Number: (310) 253-5752
(310) 253-5783
(310) 253-6013
Fiscal Impact: Yes [X] No [] General Fund: Yes [] No [X]
Public Hearing: [] Action Item: [X] Attachments: [X]
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: (E-Mail) Meetings and Agendas – City Council (10/27/10), Meetings
and Agendas - Redevelopment Agency (10/27/10).
Department Approval:
Sol Blumenfeld (10/25/10)
Jeff Muir (10/27/10)
City Attorney Approval:
Carol Schwab (by H. Baker) (10/27/10)
Agency General Counsel Approval:
Murray Kane (10/21/10)
Chief Financial Officer Approval:
Jeff Muir (by N. Kimball) (10/27/10)
City Manager/Executive Director Approval:
John M. Nachbar (10/27/10)
RECOMMENDATION:
Staff recommends the City Council and Redevelopment Agency Board (Agency
Board) discuss and provide direction regarding the proposal to issue a tax
allocation bond.
BACKGROUND:
Over the years, the Agency has issued tax allocation bonds to finance various
redevelopment activities. California Redevelopment Law allows redevelopment
agencies to pledge property tax increment to repay bonded indebtedness. Proceeds
from the bond issuance are used to further redevelopment activities.
The deadline for issuing debt for Component Areas 1 and 2 occurs in 2014. After
this date the Agency can generally no longer pledge tax increment from those
Component Areas to repay new debt. After 2014, tax increment will only be
received from those areas to repay tax increment debt that existed on or before the
expiration date. The Agency will generally no longer receive tax increment from the
expired component areas after the deadline has expired to receive tax increment in
2024.
City of Culver City, California
Agenda Item Report
DISCUSSION:
Due to the debt issuance expiration dates, decelerating growth of tax increment
receipts and competitive interest rates, the Agency has the opportunity to maximize
its bonding capacity by issuing tax allocation bonds and receiving new bond
proceeds. The new bond proceeds may be used to pursue a number of potential
development opportunities, including those identified in a Cooperation Agreement
with the City (see Table 1 below).
Additionally, there is the potential to refund the 1999 tax-exempt bonds with taxable
bonds to eliminate the tax-exempt restrictions. Although there is a cost to doing this
(approximately $150,000 per year, for a total cost of $1.5 million, in present value
terms), it will give the Agency spending flexibility as the constraints associated with a
tax-exempt bond issue will not apply|1010|.
In anticipation of a potential bond issuance, Fieldman, Rolapp and Associates
prepared a bond capacity analysis with various scenarios (Attachment 1), which are
based on potential projects that could be funded with bond proceeds. The capacity
analysis shows (assuming current rates) that the total amount of bond proceeds
would be approximately $50 - $55 million, depending on the desired ratio of taxable
to tax exempt proceeds. The Agency’s debt service cost would increase by
approximately $7.5 million per year to a total annual debt service cost of $21.5
million. The actual amounts will depend on interest rates at the time of bond
issuance.
Next Steps
If directed by the City Council and Agency Board to pursue a bond issuance, it will
be necessary to secure a team of professional bond consultants and a bond
underwriter to undertake the effort. Finance Department and Community
Development Department staff will likely utilize those firms|1010| who participated in prior
Agency bond issuances as they are all specialized professional bond service firms
and are highly regarded in their respective fields. Contracts for the consultants and
underwriters will be presented to the Agency Board for consideration prior to work
being initiated.
FISCAL ANALYSIS:
The current estimated bond capacity is approximately $50 – $55 million, dependent
on the mix of tax exempt versus taxable proceeds. Proceeds from this bond issue
would be used to fund some of the projects identified in this report.
If directed to move forward, the full costs of issuance of the 2010 Bonds, including
the cost of the services of the Bond Team, will be paid out of the proceeds of the
sale of the 2010 Bonds. City of Culver City, California
Agenda Item Report
ATTACHMENT:
1. Bond Capacity Analysis prepared by Fieldman Rolapp and Associates.
MOTION:
That the City Council and Agency Board:
Direct the City Manager/Executive Director to pursue a tax allocation bond
issuance.
Notes:
|1010| Tax-exempt bonds may be used primarily for infrastructure type projects for which no revenues will
be received in return. Tax-exempt bonds typically must be spent within five years of receipt of the
proceeds. Taxable bonds offer much more flexibility as they may be used for any legal purpose,
including for projects that generate revenue, and there is no specific deadline for expending the
funds. Staff has identified several appropriate uses and their estimated costs, as denoted in Table 1
below.
Table 1. Potential Bond Proceed Uses and Estimated Costs
Potential Use/Project Amount* Taxable/Exempt
Potential Redevelopment Projects
Refinance remaining 1999 bonds TBD Taxable
Downtown parking structure $ 13,600,000 Taxable
Parcel B subterranean parking (one level) $ 3,400,000 Taxable
Parcel B subterranean parking (second level) $ 4,000,000 Taxable
Town Plaza subterranean parking $ 5,000,000 Taxable
Washington-Centinela parking structure $ 9,866,000 Taxable
Washington-National offsite costs $ 400,000 Tax-exempt
Washington-National misc. develop. costs $ 10,000,000 Tax-exempt
AIP #4 $ 500,000 Tax-exempt
Future AIPs $ 15,000,000 Tax-exempt
City of Culver City, California
Agenda Item Report
Current Cooperation Agreement Items
Park improvements $ 500,000 Tax-exempt
Public Works laydown facility $ 5,400,000 Tax-exempt
Overland Ave bridge replacement $ 2,000,000 Tax-exempt
East Washington medians $ 1,560,000 Tax-exempt
Public facilities improvements $ 2,600,000 Tax-exempt
Street light replacements $ 8,740,000 Tax-exempt
Washington Blvd repaving $ 7,800,000 Tax-exempt
Transfer Plant expansion $ 3,120,000 Tax-exempt
Police Dept HQ facility (new) $ 31,200,000 Tax-exempt
Fire Training Yard (new) $ 2,700,000 Tax-exempt
Total Estimated Amount Taxable Items $ 35,866,000
Total Estimated Amount Tax-exempt $ 91,520,000
Total Estimated Amount All Items $ 127,386,000
* Note: all figures are staff estimates only
NOTE: The projects identified in the above table have been identified by staff and are in no particular
priority order. The Agency Board will make the final determination regarding which projects will be
funded and which will not.
|1010| Staff will likely seek the assistance of Fieldman Rolapp & Associates (Fiscal Advisor); Keyser Marston
Associates (Financial Consultant); Richards Watson and Gershon (Agency Bond Counsel); Kane,
Ballmer & Berkman (Agency General Counsel); and Stone & Youngberg (Bond Underwriter).
MEETING DATE: 11/01/10
AGENDA ITEM: JOINT CITY COUNCIL/REDEVELOPMENT AGENCY:
Discuss and Provide Staff Direction Regarding Issuance of a Proposed Tax
Allocation Bond.
ATTACHMENTS
Pages
1. Bond Capacity Analysis prepared by Fieldman Rolapp and Associates. 1. 114111111,==.
=WM
Project Fund
Taxable
Tax - Exempt
Taxable Bonds
$28 million
Taxable Bonds
25% Taxable
Bonds
$20;0 million
$33 2 million
Average Annual Debt Service
Taxable
Tax - Exempt
$3:5 million
$4.1 million
$3.9 million
$3.1 million
$3.9 million
$3.3 million
True Interest Cost (TIC)
Taxable
Tax - Exempt
5.34% 4.31%
5.12% 4.92%
5.44%
5.13%
$13.4 million
$40.2 million
$3.0 million
$4.8 million
5.00%
$28.0 million
$24.2 million
$26.2 million
$26.2 million
LDMAN ROLAPP
ASSOC :AT E:S:.
8/27/2010
4.91%
Attachment
CULVER CITY REDEVELOPMENT AGENCY
Tax Allocation Bonds
Current Existing Debt Service Structure:
Average Annual Debt Service
Taxable
Tax - Exempt
$20 million
Taxable Bonds
$20.0 million
$343 million
$33 million
•
.$4.2 million
.......
$28 million
Taxable Bonds
$28.0 million
$25.3 million
$3.8 million
$3.2 million
50% Taxable
Bonds
$26.7 million
$26 7 million
$4.0 million
$3.4 million
25% Taxable
Bonds
$13.7 million
$41.0 million
$3.1 million
$4.9 million
ntittallEIP 1111,1411
Project Fund
Taxable
Tax - Exempt
4 ,
True Interest Cost (TIC)
Taxable
:4.87%
5.41%
...•
•5.33%
•••••••••• •
4.30%
Tax - Exempt
439%
5.13%
4.92%
Taxable Refunding of 1999A Bonds: