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ADMINISTRATIVE COMMITTEE |
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4. |
DISCUSS PLAN TO DEFEASE MECHANICS BANK LOAN (FORMERLY RABOBANK) |
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Meeting
Date: |
September
9, 2019 |
Budgeted: |
Yes |
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From: |
David J.
Stoldt, |
Program/ |
N/A |
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General
Manager |
Line Item
No.: |
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Prepared
By: |
Dave
Stoldt |
Cost Estimate: |
N/A |
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General
Counsel Approval: N/A |
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Committee
Recommendation: The Administrative
Committee reviewed this item on September 9, 2019 and recommended
____________________. |
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CEQA Compliance:
This action does not constitute a project as defined by the California
Environmental Quality Act Guidelines section 15378. |
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SUMMARY: On April 1, 2013 the District entered into a $4,000,000 installment purchase agreement on the Aquifer Storage and Recovery (ASR) Project Santa Margarita facilities. The proceeds were utilized to fund ASR completion and expansion, to replenish District reserves that had been expended for ASR, and to establish a debt service reserve fund of $219,136. Interest on the borrowing was established at 3.6%.
The current balance of the principal due is $3,466,312.30
Although the term was nominally established through December 31, 2042 there is a balloon payment due at the “Maturity Date” of June 30, 2023. At the Maturity Date the District must pay all outstanding Installment Payments or refinance the borrowing.
The borrowing is secured by the District’s pledge of “Revenues”, defined as “the water supply charge levied pursuant to Ordinance 152.” The Ordinance 152 Citizens Panel has advised the Board to develop a plan for payment of the loan, emphasizing a desire to pay the loan off at its 2023 maturity or sooner in order to unencumber the Water Supply Charge.
The remaining amortization through the Maturity date is shown at the top of the next page:
Hence, $2,952,998.30 will need to be paid or refinanced on June 30, 2023.
The Board has several options:
1) Status Quo 1: Make semiannual payments and refinance in 2023.
2) Status Quo 2: Make semiannual payments and budget the pay-off from reserves in the FY2022-23 budget.
3) Discretionary Set-Asides: Board budgets additional amounts each year beginning FY2020-21 to accumulate a portion of the pay-off balance.
4) Sinking Fund Defeasance: Board establishes a sinking fund beginning FY2020-21 to accumulate the full pay-off balance. Assuming a 1-year LAIF investment rate of 2.3%, the Board would need to set aside $962,202 each July 1st in the next three budgets, in addition to the regular annual principal and interest.
5) Full Defeasance: Board budgets to purchase a 3-year negotiable CD from reserves in the FY2020-21 budget to pay the full pay-off balance. At today’s 3-year interest rate (2.65%), this would require a set-aside in next year’s budget of $2,730,149 in addition to the annual principal and interest amount.
6) Prepayment: Board budgets to prepay on December 31, 2020. This would require a budgeted amount for FY 2020-21 of $3,431,185.30.
EXHIBIT
None
U:\staff\Board_Committees\Admin\2019\20190909\04\Item%204.docx