10B Action 2009 1221 - Laserfiche WebLink

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Finance for Alameda at San Leandro Crossings 3 December 21, 2009 Attached for Council's review is the draft Preliminary Official Statement, the Indenture and other bond documents and authorizing resolutions for both the City and the San Leandro Redevelopment Agency. Tax Status 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 bands being taxable, the interest rate paid by the RDA will be approximately 1.5% to 2% greater than rates associated with a non- 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. Competitive versus Negotiated Sale Typically, the RDA would issue the TABS through a competitive bid process. A competitive bid issue is usually 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. As discussed more fully in a following section, staff is requesting authorization for both a competitive and negotiated sale. Calendar Key dates far the financing are shown in the table below: November 17 To Finance Committee December 15 To Finance Committee December 21 RDA Board and Council adopts resolutions and deems Preliminary Official Statement final December 22 Publish Official Notice of Intention in Bond Buyer Print and mail POS, Publish Notice of Sale January 6, Bid Opening January 21 Bond Closing Contin ency Plan BRIDGE was approved by the State Tax Credit Allocation Committee (CTCAC) for federal 9% tax credits at the end of September 2009. There are strict deadlines associated with the receipt of these tax credits, including a construction start date requirement in early February. If BRIDGE does not close on all public and private sources of project