Meeting Date: June 11, 2002
Subject/Title: Refunding of CIFP 1998-1 and CIFP 1999-1 (Companion Item to BIFA Agenda Item 02)
Submitted by: Pam Ehler, Director of Finance and Information Services
Approved by: John Stevenson, City Manager
Adopt City Council Resolution Approving Form And Substance Of An Amended And Restated Trust Agreement In Connection With The Issuance of Infrastructure Revenue Refunding Bonds, Series 2002A And Subordinated Series 2002B and Authorizing Changes Thereto And Execution Thereof.
The City of Brentwood and the Brentwood Infrastructure Financing Authority have previously issued bonds to finance improvements for CIFP 98-1 and CIFP 99-1, which comprised approximately 1,624 residential units in the City. Due to favorable market interest rates and the fact that approximately 85% of those units are now completed and occupied, it is possible to refinance those bonds and achieve lower interest rates. It is also possible to substitute a surety bond for a portion of the reserve fund which was originally funded with cash. In all, based on today’s market interest rates, the refinancing and substitution of the reserve fund can produce up to $1.4 million in new proceeds which can be used for additional capital improvements. The staff is recommending that these proceeds be applied toward the cost of the new police facility, which currently is not fully funded. This method of generating new proceeds through refinancing was successfully used by the City in 1999 with the refinancing of several prior series of the bonds for CIFP 94-1. Those additional proceeds were applied toward the cost of completing Sand Creek Road.
The Refunding Bonds will be issued in two series, a senior series representing approximately 85% of the issue, which will be insured and rated “AAA” and a subordinate series representing approximately 15% of the issue which will be non rated. This senior/subordinate is similar to the refinancing of the CIFP 92-1 bonds which the City completed in 1996.
The refinancing will not affect the assessment installments payable by any property owner in the district and their assessments will remain the same. In the event a property owner elects to prepay the assessment, there may be a shortfall in payment of the refunding bonds, which would need to be made up by the City. The City would first use interest earnings on the cash funded portion of the reserve fund to make up the shortfall, and then would use community facilities funds and potentially other funds of the City which are eligible. Historically, prepayments in Brentwood’s CIFP’s have been rare, with only 7 units having prepaid in these CIFP’s over the last 4 years. Accordingly, staff does not expect a significant amount of prepayments in the future.