For Economic Development Committee May 27, 2020
TO: Honorable Economic Development Committee Members
APPROVAL: Rod Foster, City Administrator
FROM: Stephen Erlandson, Deputy City Manager
Title
Request the Economic Development Committee to Review and Discuss the Refunding of the 2008 Series B Merged Project Area (taxable) and the 2008 Series C Merged Project Area (taxable) Tax Allocation Bonds and Direct Staff to Forward the Item to the City Council and the Successor Agency Board to the Redevelopment Agency of the City of Rialto for Consideration.
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BACKGROUND:
As we all know, interest rates have been falling over the last 9 to 12 months to levels not seen in decades. The COVID-19 crisis has only accelerated that process to new all-time low levels. Government Agencies at all levels have been evaluating their current debt service payment schedules and, in those cases where the economics clearly demonstrate that a refunding makes sense, have taken actions to secure lower interest payments. Literally hundreds of millions of tax-payers’ dollars have been saved.
The former Redevelopment Agency of the City (now known as the “Successor Agency”) issued in 2008 its Tax Allocation Housing Set-Aside Bonds (Merged Project Area) Series B (taxable) and its Tax Allocation Bonds (Merged Project Area) 2008 C (taxable) at rates which were at an appropriate level for that period of time.
The Series B Bonds were issued in the par amount of $29,600,000 and the Series C Bonds were issued in a par amount of $21,965,000.
ANALYSIS/DISCUSSION:
When a former Redevelopment Agency issues refunding Bonds, ALL of the taxing jurisdictions within the borders of the former project areas benefit the refundings. When a City adopts a redevelopment plan, it captures a certain percentage of the property taxes collected by each governmental jurisdiction with property tax collection authority within the project area boundaries. In the case of Rialto, this means that the City, the county and just as importantly the School Districts within the Rialto Redevelopment Agency’s borders. There are 16 taxing jurisdictions that would greatly benefit from Rialto moving ahead, as promptly as possible, with the refundings.
FINANCIAL IMPACT:
As the attached chart illustrates, the savings for the below listed major taxing jurisdictions is quite dramatic. For example, the City of Rialto would receive an additional $3,302,011. The County of San Bernardino would receive an additional $2,656,264, while the School Districts which serve the City would receive an additional $6,678,931. The total savings to all of the governmental jurisdictions that have taxing authority is approximately $20,245,320. It must be kept in mind that the funds would flow back to the taxing agencies and would be distributed over the remaining years of the Project Area’s life on an annual basis.
It is also important to keep in mind that due to the current serious economic situation caused by the COVID-19 crisis that the current flow of tax revenues to ALL taxing agencies are going to be severely reduced. The BIGGEST financial “hits” will be felt by the City and the School Districts as State aid is going to be cut in a dramatic fashion. It would be my strong recommendation that the Bond refundings be structured in such a manner as to achieve the greatest savings in the immediate near term to help everybody through this fiscal crisis (please refer to the Attachment 1).
The current Bond issues have final maturity dates of 2037. The refunding Bonds will mature on the same dates as the existing Bonds. The maturity dates will not be extended.
The refunding process can be completed in a number of months and involves a process mandated by the State of California.
The $20,245,320 savings amount is based upon today’s interest rates. As rates move on a daily basis, it is impossible to predict with 100% accuracy what rates will be in the near future, however, it must be kept in mind that the estimated savings are dramatic and are even more important to the citizens of the City during this unusual and unprecedented period of budget shortfalls.
RECOMMENDATION:
Request the Economic Development Committee to review and discuss the refunding of the 2008 Series B Merged Project Area (taxable) and the 2008 Series C Merged Project Area (taxable) Tax Allocation Bonds and direct staff to forward the item to the City Council and the Successor Agency Board to the Redevelopment Agency of the City of Rialto for consideration.
Attachment
1. Rialto City & School Districts Up Front Savings Analysis