TITLE
Recommendation to adopt resolution approving issuance by the Board of Water Commissioners, on behalf of the City of Long Beach, of up to $20,000,000 of Senior Sewer Revenue Commercial Paper Notes secured by revenues of the City's sewer system. (Citywide)
DISCUSSION
The City of Long Beach Water Department proposes to issue up to $20,000,000 of variable rate, Commercial Paper Notes for short-term financing of capital projects. The current variable interest rate is in the 0.5% to 0.6% range and is, historically, significantly lower than long-term interest rates. The upfront costs to implement the program are estimated to be approximately $425,000, which will be paid from debt proceeds and will be amortized over the life of the debt. Annual ongoing maintenance fees for the commercial paper program are estimated to be approximately $375,000 in addition to the annual debt service.
Debt service on the Commercial Paper Notes will be paid out of sewer revenues generated from charges to customers for sewer usage. Since the Commercial Paper Notes are shortterm, it is anticipated that the notes will eventually be paid off through long-term bond financing.
The rehabilitation, replacement and improvement of deficient and aging sewer facilities is a major priority of the Long Beach Water Department (LBWD) in order to maintain sewer system reliability and to be in compliance with new California Waste Discharge Requirements.
The Sewer Five-Year Capital Improvement Program (CIP) for FY 2009 through FY 2013 represents a significant ramp-up of projects, which have been prioritized based on the Sewer Master Plan Update currently being finalized.
Historically, LBWD has financed CIP requirements from cash on a pay-as-you-go (paygo) basis, where funds are accumulated until sufficient cash is available and then projects are undertaken. The Sewer Fund will not have sufficient cash to fund the planned five-year CIP solely on a paygo basis. A combination of paygo and interim debt financing will best fit the future needs of the Sewer Fund by providing maximum flexibility in funding capital projects.
The Board of Water Commissioners approved Resolution WD-1255 on May 7, 2009, authorizing the issuance and sale of Commercial Paper Notes.
This matter was reviewed by Principal Deputy City Attorney Charles Parkin on April 29, 2009.
TIMING CONSIDERATIONS
City Council action is requested on June 2, 2009 in order to facilitate processing of required documents.
FISCAL IMPACT
There is no impact on the General Fund as this is an obligation of the Sewer Fund (EF 311) and will be repaid by revenues from charges to customers for sewer usage.
SUGGESTED ACTION
Approve recommendation.
Respectfully Submitted,
KEVIN L. WATTIER
GENERAL MANAGER
WATER DEPARTMENT
LORI ANN FARRELL
DIRECTOR OF FINANCIAL
MANAGEMENT
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APPROVED: |
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PATRICK H. WEST |
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CITY MANAGER |