Finance Highlights 2009 1117 - Laserfiche WebLink

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Tax Allocation Bond Financing Financing The complex legal and financial structure of municipal bond issues and the long-term impact of bond financing require that the issuer form a team of professionals to assist in both structuring and marketing the bond issue. Staff has assembled a team of legal and financial professionals to assist in this process. The key members of the financing team and their roles are noted below: E Wagner & Associates Financial Advisor Jones Hall, APLC Bond CounseUDisclosure Counsel Urban Analytic, LLC Tax Increment Consultant Financing Plan As currently proposed the TAB issue will have a term of no more than 15 years, a par value of no greater than $8.3 million and a total interest cost of no greater than 8%. Based on these parameters for the TAB issue, debt service is estimated to be approximately $1.2 million annually. The debt service will be paid from housing set aside tax increment revenues generated by the Joint Project Area and the West San Leandro Project area of the RDA. The bonds will be "taxable" meaning that the interest paid on the bonds will be taxable income to the holders of the bonds. As a result of the bonds being taxable, the interest rate paid by the RDA will be approximately 1.5% to 2% greater than rates associated with anon-taxable issue. A taxable issue is mandated by Federal law based on the fact that BRIDGE was able to obtain 9% tax credits for the project, (which is beneficial to the project overall). The 9% tax credit refers to income tax credits passed on to private investors that provide financing to qualifying housing projects. The public policy issue for the Federal Government is that the 9% tax credits represent a significant public subsidy and that an additional subsidy provided by allowing the bonds to be "non-taxable" is not warranted. Typically, the RDA would issue the TABS through a competitive bid process. Generally, this is the most efficient and least costly method of selling the bonds. However, due to the general turmoil in financial markets and recent budget actions of the State with respect to redevelopment agencies, staff is considering alternatives to a competitive bid offering. More specifically, it is possible that the RDA might go to bid and have no bidders on that day, or the bids might be unacceptable. The primary alternative to a competitive bid is a negotiated sale. In a negotiated sale, an issuer identifies an underwriter early in the process and agrees to sell the issue to that underwriter. The underwriter (investment bank) starts a marketing process to sell the bonds and when comfortable with a certain level of "pre-sales" agrees to purchase the entire issue. The advantage is greater certainty of a successful sale. The disadvantage is that the overall interest rate maybe higher. Staff plans to decide on and recommend the final and best an approach for issuing the TABS to Council in December.