TITLE
Recommendation to adopt resolution authorizing City Manager to execute documents in connection with the renewal of the letter of credit that provides support for the Taxable Variable Rate Demand Revenue Bonds, 2004 Series A (Long Beach Towne Center Site Refinancing Project) at an annual cost not to exceed $78,000. (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, 2004 Series A (Long Beach Towne Center Site Refinancing Project) of approximately $11.6 million with a final maturity on November 1, 2030, and approved the related documents and actions (Attachment A). Variable rate municipal debt is issued with a letter of credit (LOC) to enhance the investors’ security. The LOC is a guarantee, by the issuing bank, that secures the investors’ interests and it also guarantees the City’s debt payment to the bondholder. In the event that the City is unable to make payment on the bond, the LOC bank is required to cover the full amount of the payment and will assume control of the asset.
The term of a LOC ranges from one to three years. The existing LOC expires on September 30, 2012. Staff has negotiated a two-year replacement LOC with Wells Fargo Bank, the provider of the expiring LOC, at a level sufficient to guarantee up to $10,335,000 of outstanding notes. Wells Fargo Bank has offered to renew the LOC at 0.75%. The existing LOC is currently at 0.80%. All other terms related to the LOC remain the same.
This matter was reviewed by Assistant City Attorney Charles Parkin on July 31, 2012 and Budget Management Officer Victoria Bell on August 6, 2012.
TIMING CONSIDERATIONS
City Council action is requested on August 21, 2012 to facilitate the orderly substitution of the new LOC, as the current LOC expires September 30, 2012
FISCAL IMPACT
The one-time issuance expense of approximately $25,000 and the not to exceed annual cost amount of $...
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