TITLE
Recommendation to adopt resolution approving an extension of the current Revolving Line of Credit with JP Morgan Chase Bank, N.A. by the Board of Utilities Commissioners (successor to the Board of Water Commissioners), on behalf of the City of Long Beach (City), for an additional one-year term and authorize the execution of all necessary documents and amendments in connection therewith before the existing Credit Agreement expires on May 21, 2023. (Citywide)
DISCUSSION
JP Morgan Chase Bank, N.A. currently provides the Utilities Department with a $60 million line of credit that was originally approved by the City Council on April 21, 2020. The current line of credit is scheduled to expire on May 21, 2023. The short-term borrowing program was established to allow the Utilities Department (then the Water Department) to periodically borrow on a low cost, short-term basis and/or reimburse the Utilities Department allowing the Department to better match the long-term asset life of the capital projects with its debt repayment schedule. When a sufficient size of principal is accumulated to efficiently convert the outstanding principal to long term bonds, the Utilities Department will initiate a bond transaction. The benefits of such a strategy are to delay the incurrence of higher cost, fixed rate debt service and avoid substantial amounts of idle cash invested at low rates.
Given the approaching expiration of the current line of credit, Utilities Department and Treasury Bureau staff, working with one of the Utilities Department’s municipal advisors, KNN Public Finance, initiated discussions with JP Morgan Chase to determine the bank’s interest in extending the existing credit agreement for one year. JP Morgan Chase agreed to provide an extension of this credit agreement for a one-year term with an amendment to the interest rate. Under the current line of credit, the tax-exempt borrowings paid by the Utilities Department were based on a percentage of the on...
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