TITLE
Recommendation to adopt resolution authorizing the execution of a Revolving Line of Credit with JPMorgan Chase Bank, N.A., by the Board of Water Commissioners, on behalf of the City of Long Beach, in an amount not to exceed $60,000,000, for a maximum term of three years, with the option to extend for an additional two-year periods, secured and payable solely from Long Beach Water Department revenues in the Water Fund Group, and authorize the execution of all necessary documents in connection therewith. (Citywide)
DISCUSSION
To assist with the Long Beach Water Department’s (Water Department) continual infrastructure improvements, the City of Long Beach (City) proposes to establish a Revolving Line of Credit with JPMorgan Chase Bank, in an amount not to exceed $60,000,000, with a maximum term of three years, with the option to extend for an additional two years. The Line of Credit will enable the Water Department to have maximum financial flexibility and draw funds for water system infrastructure improvements on an as-needed basis over the three-year term. This short-term financing will also enable the Water Department to manage cash flows and pay interest-only payments on amounts drawn from the Line of Credit.
The total cost of issuing the Line of Credit including trustee, consultant, and counsel fees is estimated to be $100,000. In addition, to maintain the Line of Credit, the Water Department will pay an annual commitment fee of $165,000 for a total first year cost of $265,000. The commitment fee must be paid, even if the Line of Credit is unused. The Line of Credit may also be extended at the option of the bank, with the consent by the Board of Water Commissioners (Board), for another two years.
If the Line of Credit is utilized, the Water Department will pay an index variable rate of 1.00 percent, plus 1.01 percent, for a total of 2.01 percent. If the entire Line of Credit is drawn, the estimated interest cost for all three years would be approxim...
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