TITLE
Recommendation to adopt resolution authorizing City Manager to execute documents for the delivery of a new Letter of Credit agreement for the 2004 Series A Taxable Variable Rate Demand Revenue Bonds (Long Beach Towne Center Site Refinancing Project) and approving related documents at an annual cost not to exceed $100,000.
(District 5)
DISCUSSION
On December 16, 2003, the City Council adopted a resolution authorizing the issuance and sale of Taxable Variable Rate Demand Revenue Bonds (Long Beach Towne Center Site Refinancing Project) of approximately $11.6 million and approved the related documents and actions (Attachment A). The Letter of Credit (LOC) is a credit guarantee that supports this bond.
Allied Irish Banks (AIB) has provided the LOC since this bond was issued. In recent weeks, due to various economic issues related to the European financial markets and European banks, the AIB LOC is not providing the support the credit market requires, and the variable rate bond weekly rate has risen from 1.0 percent in early May, to 4.0 percent in early July. Unless a new LOC is approved, the annual interest costs due to the weakened AIB LOC will increase approximately $350,000.
Staff has been able to secure a two-year LOC from Wells Fargo Bank. The cost of issuance for this new LOC is approximately $40,000. The annual cost for the new LOC is approximately $90,000.
This item was reviewed by Chief Assistant City Attorney Heather A. Mahood on August 5, 2010 and Budget Management Officer Victoria Bell on August 6, 2010.
TIMING CONSIDERATIONS
City Council action is requested on August 24, 2010 in order to have a new Letter of Credit in place as soon as possible.
FISCAL IMPACT
Issuing a new letter of credit will prevent the FY 11 General Fund debt cost for this obligation from increasing by $350,000. The one-time cost of issuance is approximately $40,000 and will be funded from Department XC in the General Fund (GP) FY 10 Adopted Budget. There are no local jobs impacted by this action.
SUGGESTED ACTION
Approve recommendation.
BODY
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LONG BEACH APPROVING THE SUBSTITUTION OF THE LETTER OF CREDIT BANK RELATING TO THE CITY OF LONG BEACH (LOS ANGELES COUNTY, CALIFORNIA) TAXABLE VARIABLE RATE DEMAND REVENUE BONDS, 2004 SERIES A (LONG BEACH TOWNE CENTER SITE REFINANCING PROJECT), APPROVING A SUPPLEMENT TO THE OFFICIAL STATEMENT RELATING TO SUCH BONDS, APPROVING THE FORM AND AUTHORIZING AND DIRECTING EXECUTION OF A REIMBURSEMENT AGREEMENT WITH THE ISSUER OF THE SUBSTITUTE LETTER OF CREDIT AND AUTHORIZING OFFICIAL ACTIONS.
Respectfully Submitted,
LORI ANN FARRELL
DIRECTOR OF FINANCIAL MANAGEMENT/CFO
APPROVED:
PATRICK H. WEST
CITY MANAGER