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Home My WebLink About07/18/2000, C7 - STATE INFRASTRUCTURE LOAN BANK APPLICATION: MARSH STREET PARKING GARAGE EXPANSION counat j agen6a Repoat '�C7 CITY OF SAN LUIS OBISPO FROM: Bill Statler,Director of Finance VQf___ Prepared By. Linda Asprion, Revenue Manager SUBJECT: STATE INFRASTRUCTURE LOAN BANK APPLICATION: MARSH STREET PARKING GARAGE EXPANSION CAO RECOMMENDATION Adopt a resolution authorizing staff to complete and submit an application for a loan in the amount of $5.4 million dollars from the California Infrastructure and Economic Development Bank(CIEDB)to assist in financing the Marsh Street parking garage expansion. DISCUSSION Marsh Street Parking Garage Expansion Financing Plan Since the Marsh Street parking garage expansion was approved in the 1995-97 Financial Plan, we have planned to use debt financing to fund its construction in accordance with the City's debt financing policies. On March 21, 2000, the Council approved construction documents for this project, and authorized the CAO to award the contract if the lowest responsible bid is within the engineer's estimate. At that time, the Council also approved funding $5.4 million of the total project cost (about $6.4 million)through debt financing. Typically, we would issue lease-revenue bonds for this type of project through a competitive sale in the private market. Under this structure, the General Fund would have the underlying obligation for repayment, although the Parking Fund would be financially responsible for making the debt service payments under the lease agreement. As currently planned, the bond term would be for 30 years; and with an "A" rating, we would expect a net interest rate of about 6.5% in today's market. With the bid opening for the project scheduled for July 12, 2000, we would normally plan to present the Council with financing documents within the next 60 to 90 days. State Infrastructure Loan Bank The State of California recently authorized $475 million to be used by the CIEDB for an infrastructure state revolving loan fund program to assist local governments with the financing of public facilities. The interest rate charged on the loans will be 67% of the Thompson's Municipal Market Data Index for an "A" rated tax-exempt security. Although there are C74 Council Agenda Report State Infrastructure Loan Bank Application: Marsh Street Garage Page 2 supplemental fees associated with this loan program, the net cost will be still be significantly lower than a conventional bond issue. In accordance with the program guidelines, we have submitted a "pre-application" with the CIEDB, and we have received approval to submit a formal application. There are two primary advantages to the City in using the CIEDB loan program over a conventional debt financing: ■ Lower interest cost. As noted above, the.interest rate would be 67% of a conventional "A" rate bond issue—or about 4.5% versus 6.5% in today's market. This means an annual debt service savings of about$80,000, or$2.4 million over the life of the loan. ■ Direct Parking Fund obligation. The loan will be a direct obligation of the Parking Funding, with no underlying General Fund responsibility. While the City has completed a pre-application process and has been invited to submit an application, this does not mean the loan will be approved. There are several hurdles yet to cross as discussed below—and we are not optimistic about the outcome: ■ It is unclear whether a free-standing parking structure is an allowable infrastructure project under this program. The CIEDB Board of Directors will review this in conjunction with our final project application. ■ Once submitted, the application is rated on a point structure and then submitted with all the other applications for the CIEDB's Board of Director's review and ultimate approval. There is no way to know how the City's application will rate among the applications submitted or how many loans the Board of Director's will approve. ■ If the application is approved, the Parking Fund will undergo a private credit assessment by both Moody's and Fitch. This assessment is to ensure the CIEDB that the Parking Fund does not qualify to issue bonds on its own strength and yet is capable of repaying the loan. ■ The CIEDB is a brand new program, and only five loans have been approved to-date. As such, there are still operational and administrative kinks to be worked-out before funding will be available—even after loan applications are approved. Because of this, the timing of this program may not work for us given our project schedule. ■ Finally, there will be loan documents and a number of other financial and legal criteria that must be finalized to the satisfaction of both CIEDB and the City. For the reasons listed above, we are not optimistic about the likelihood that our loan application will be approved. However, given the potential benefits of the loan program, we recommend submitting an application on the chance that it may be approved, and on a schedule that meets our funding timeframes. C7-2 Council Agenda Report—State Infrastructure Loan Bank Application: Marsh Street Garage Page 3 Next Steps The loan application is due to the CIEDB by August 1, 2000, and they plan to make a final decision by September 15, 2000. If they approve the loan, we would subsequently return with loan documents for Council approval. In the interim, we will take initial steps in preparing for a conventional lease-revenue bond financing. With this approach, if the application is not approved (or if it is, but the terms are not acceptable to the City), we will be able to proceed in a timely manner with a City financing. FISCAL IMPACT Since the loan rate is not fixed and is dependent on the market conditions at the time the loan is issued, it is not possible to determine the actual costs and resulting savings of the program. However, saving 33% on the interest rate of the loan will result in lower borrowing costs than a conventional financing, even with the incidental State loan fees. As noted above, we estimate that the savings will be about $80,000 annually. ALTERNATIVES The Council could choose not to pursue this option, and to just go forward with the more likely conventional financing to begin with. However, since it is possible (although unlikely) that our application will be approved (and in a timeframe that meets our funding needs), we recommend at least pursuing the CIEDB loan option first. ATTACHMENT Resolution authorizing the submission of the loan application ON FILE IN THE COUNCIL OFFICE Detailed loan application packet G:CIEDB Loan P rognun/Council Agenda Report—July 18,2000 C7-3 RESOLUTION NO. (2000 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO AUTHORIZING THE SUBMISSION OF THE APPLICATION TO THE CALIFORNIA INFRASTRUCTURE AND ECONOMIC DEVELOPMENT BANK FOR FINANCING OF THE MARSH STREET PARKING GARAGE EXPANSION AND APPROVING CERTAIN OTHER MATTERS IN CONNECTION THEREWITH WHEREAS, the California Infrastructure and Economic Development Bank ("Infrastructure Bank") administers a financing program to assist local governments with the financing of Public Development Facilities as described in Section 63000 et seq. of the California Government Code(the"Act"); and WHEREAS, the Infrastructure Bank has instituted an application process for financing under its Infrastructure State Revolving Fund Program; and WHEREAS, the City of San Luis Obispo desires to submit an application ("Loan Application") to the Infrastructure Bank for the financing of the Marsh Street Parking Garage Expansion ("Project"); and WHEREAS, the Act requires the Applicant to certify by resolution certain findings prior to a Project being selected for financing by the Infrastructure Bank. BE IT RESOLVED by the Council of the City of San Luis Obispo as follows: SECTION 1. The City of San Luis Obispo hereby approves the filing of a Loan Application with the Infrastructure Bank for the Project; and in connection therewith certifies that: a. The project is consistent with the General Plan of both the City of San Luis Obispo and the County of San Luis Obispo; b. The proposed financing is appropriate for the Project; c. The project facilitates effective and efficient use of existing and future public resources so as to promote both economic development and conservation of natural resources; d. The project develops and enhances public infrastructure in a manner that will attract, create, and sustain long-term employment opportunities; and e. The project is consistent with the Infrastructure Bank's Criteria, Priorities and Guidelines for the Infrastructure State Revolving Fund Program. SECTION 2. This resolution shall become effective immediately upon adoption. C7-4 Resolution No. (2000 Series) Page 2 -- - Upon motion of -- --—--- ---- —; seconded by and on.the following roll call vote. AYES: NOES: ABSENT: the foregoing resolution was adopted this _-_--_day of__ _____ , 2000. Mayor Allen Settle ATTEST; Lee Price, City Clerk APPROVED AS TO FORMe Jeffrey G. Jorgensen, City Attorney C7=5: 'F,4 MEETING AGEN( DATE ITEM # From: Bill Statler • To: Ken Schwartz Date: Mon, Jul 17, 2000 1:21 PM Subject: Re: July 18 Agenda Item C-7 Ken - My thought is that we should keep it on. This simply authorizes the staff(at some point)to submit the application -which we won't do until the Council finalize its actions (including the project budget, assuming we go forward at some point). Leaving it on will mean less staff work later(if we go forward with the project), and greater flexibility in meeting state filing deadlines (which keep changing). As noted in the report, this is just the application -and we are not optimistic about its approval. So, Council action now just better positions us to quickly find-out(when/if we go forward) if this is a viable financing option, and move on to other options in a timely way if it isn't. -Bill >>>Ken Schwartz 7/15/00 12:55:57 PM >>> Would it not be appropriate to pull and continue item C-7, Loan application for Marsh Street garage expansion and await clarification of bid overage? CC: John Dunn; Keith Opalewski; Linda Asprion; Michael McCluskey; Tim Bochum ❑COUNCIL ❑CDD DIR 'CAO $'F141 D!' CACAO ❑FIRE- 13ATTORNEY ,p pv'I L,IR (O'CLERKIORIG ❑POLICE C:70 6:GMT TEAM ❑REG DIR 13 L_"ILL-r+i ❑UTIL DIR ❑ -,�;, u r ❑PERS DIR !: C'Wilt.v.f•- ,r'-� RECEIVED J U L 18 2000 SLO CITY CLERK