Our
Town:
Compton Resident, Carson Car Dealership Help Youth and The Poor, One Car at a
Time
Growing Pains: Eminent Domain Pitting City Against Small Business Owner
Low Enrollment a Challenge at Compton Education Center
City’s Credit Rating Bumped Up a Notch
Compton Water Officials Say Tap Water’s OK
Dominguez High Football Star, USC Recruit Arrested for Robbery
Earl
Ofari Hutchinson:
Black Voters Alone Won’t Put Obama in the White House
Council Approves Multi-million Dollar Bond Issue to Fund Public Projects
By
Allison Jean Eaton
Bulletin Staff Writer
COMPTON – Despite
indicators that the economy is well on its way into recession, the
city last week approved the issuance of nearly $50 million in lease
revenue bonds.
The actual amount was last week set at roughly $45.1 million, and according
to the resolution approved both by the Council and the Council acting
as the Compton Public Finance Authority, the amount is not to exceed
$55 million.
The funds will be used to pay for a variety of public capital and improvement
projects.
A total of $11.2 million will be used for the construction of a new
state-of-the-art senior center. Another $8.7 million will be used to
construct a two-story parking structure at the transit center. Plans
to refurbish and add on to City Hall will receive a boost of $5.2 million,
while roughly $2.8 million will cover various city facilities improvements
and new park equipment. Finally, the Sheriff’s Department’s
citywide surveillance system will be allotted $2 million to purchase
surveillance cameras.
The remaining monies will be used to pay off a roughly $27 million
Certificate of Participation (COP) loan issued in 1997, the outstanding
balance of which is $14.7 million. Refinancing will save the city millions
in interest payments, officials said.
Money from the 1997 COP was used to refund a 1989 bond issue and for
computer equipment for the now defunct Compton Police Department.
Lease revenue bonds are a popular financing method used to fund capital
improvements while complying with state constitutional debt limitations.
The financing method was pioneered by Orrick, Herrington & Sutcliffe,
an international law firm that offered the first lease revenue bonds
in the country.
The city hired Orrick to serve as its bond disclosure counsel, and
Orrick attorney Eugene Clark-Herrera was on hand last week to explain
the financing tool.
The Public Finance Authority will sell the bonds to underwriter Grigsby
Associates, which will in turn sell those bonds on the stock market,
Clark-Herrera said. The money the authority makes from the sale of
those bonds will be used to lease from the city some of its property.
The city will in turn sublease that property from the authority.
“Essentially, the loan that the city is going to receive will
be paid back out of the city’s General Fund by virtue of the
city making lease payments to itself,” said Clark-Herrera. “The
California Courts of Appeals long ago have determined that they (lease
revenue
bonds) are a constitutional means of local agencies raising funds.”
The property the city will in effect be leasing to itself includes
City Hall and the city’s four fire stations.
According to Chief Deputy City Atty. Craig Cornwell, the bond issuance
is being done in line with the Marks-Roos Local Bond Pooling Act. Enacted
in 1985, the law was created to provide a flexible alternative method
of financing needed improvements through the use of bond pools.
Marks-Roos was a solution to a problem created by Proposition 13. Passed
by California voters in 1978, it limited the ability of local public
agencies to increase property taxes based on a property’s assessed
value. Coupled with steep cuts in federal aid to state and local governments,
local governments’ ability to fund public infrastructure was
severely limited.
The act required the City Council to find a “significant public
benefit” for each of the capital projects to be funded by the
lease finance bonds, which it did.
Significant public benefit is defined in the act as: demonstrable savings
in effective interest rate, bond preparation, bond underwriting or
bond issuance costs; significant reductions in effective user charges
levied by a local agency; employment benefits from undertaking the
project in a timely manner; or more efficient delivery of local agency
services to residential and commercial development.
The 25-year-term bonds are structured at a fixed rate with level debt
service and are tax-exempt, said Darryl Street of Fieldman, Rolapp
and Associates, the financial advising firm that’s assisting
the city in preparing the transaction.
The city will pay each year between 2009 and 2014 roughly $2.3 million,
with what Street described as a “one-time bump up” to $3.8
million in 2015.
“The debt service during 2009 through 2014 remains relatively
unchanged from the prior debt service on the 1997 COPs,” said
Street.
With last week’s announcement that the city’s credit rating
was bumped up to an A- by Standard and Poor’s, Street said the
city will be able to secure an even better interest rate, which was
last Tuesday set at 5.5 percent. That, according to Street, will now
go down.
Additionally, the Federal Reserve was slated to meet yesterday and
was expected to again lower interest rates.
Street said that because Compton’s bonds are going to market
following this meeting, if the Fed did lower rates, the city will likely
be able to secure an even lower one.
ADVERTISE | CLASSIFIEDS | ABOUT US | CONTACT US | SUBSCRIBE | HOME
This site and its contents ©2008 thecomptonbulletin.com