HomeMy WebLinkAboutInvstmnt of Limited Obligation Bonds - Energy Independence PgrmCITY OF PALM DESERT/PALM DESERT REDEVELOPMENT AGENCY
JOINT CONSIDERATION
STAFF REPORT
REQUEST: APPROVE INVESTMENT BYTHE REDEVELOPMENT AGENCY IN
LIMITED OBLIGATION BONDS ISSUED BY CITY
SUBMITTED BY: JUSTIN M. McCARTHY, ACM FOR REDEVELOPMENT
DATE: OCTOBER 23, 2008
CONTENTS: PROPOSED AMORTIZATION SCHEDULE
Recommendation:
By Minute Motion, that the City Council and Agency Board:
1. Authorize the Agency Treasurer to invest lawfully available Agency
funds in limited obligation improvement bonds, which may be issued
by the City and secured by and payable from contractual
assessments related to the City's Energy Independence Program;
2. Direct staff to cause the preparation of documentation necessary for
the City Council to consider the issuance of limited obligation
improvement bonds secured by and payable from contractual
assessments related to the City's Energy Independence Program;
3. Authorize the City Manager and/or Executive Director to have
necessary resolutions and documents prepared for consideration by
the City Council and/or Agency Board.
Executive Summary:
Approval of this request will provide funding for the AB 811 Energy Program for the
purposes of reducing energy consumption throughout the city. The City Council has
already approved $2,500,000, which has been committed to the AB 811 Energy Program.
Additional applicants have expressed interest in participating in the program. The
$5,000,000 will fund the implementation of additional energy savings improvements in the
community.
Staff Report
Energy Program Funding
Page 2 of 2
October 23, 2008
Discussion:
As you are probably aware, the municipal bond market is essentially frozen this week and
has been for the last few weeks due to general financial conditions. The market is
expected to stabilize and slowly reopen after the bailout plan and the Federal Reserve and
FDIC interventions are instituted. Currently, the market is saturated with bonds that have
been slated for delayed sale. Consequently, a public issuance of additional debt is not
advisable at this time.
In the interim, the City will sell direct Private Placement Bonds to the Redevelopment
Agency in the amount of $5,000,000 on a short-term basis (2-5 Years); at an interest rate
to float with a floor of 4% and a cap of 6%. Repayment of the bonds will be secured by the
property tax apportionments attributable to the AB 811 Loans. The remaining interest
earned under the program (spread between 7% and the interest rate paid to the Agency)
will be used to create a reserve fund for the program to be used to facilitate the issuance of
bonds or alternative financing in the future.
Upon stabilization of the current market, staff will pursue alternative long-term financing
solutions. This could include a bond issue to take out the Agency owned bonds, or the
possibility of bank financing. City staff has initiated discussions with regional banks who
have already indicated interest in participating in the program.
Staff is therefore recommending that the City Council/Agency Board approve, in concept,
funding the AB 811 Energy Program, and authorize the City Manager/Executive Directorto
have necessary resolutions and documents prepared for consideration by the City Council
and Redevelopment Agency Board.
Submitted by:
I-
,J6stin VcCarthy
ACM fo Redevelo
Carlos L. OrtQa
City Manager/Executive Director
BY RDA 5-0
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