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CITY OF SAN LEANDRO <br />MEMORANDUM <br />DATE: December 15, 2009 <br />TO: City Council Finance Committee <br />FROM: Perry Carter, Interim Finance Director, <br />SUBJECT: Issuance of Tax Allocation Bonds by the Redevelopment Agency for The <br />Alameda at San Leandro Crossings Housing project. <br />BACKGROUND/DISCUSSION <br />At the Committee's November 17, 2009 meeting, staff presented a report regarding the issiuance <br />of Tax Allocation Bonds (TAB's) by the Redevelopment Agency (RDA) for The Alameda at San <br />Leandro Crossings Housing project. That report is attached for-the Committee's reference. <br />In that report staff sought approval of the Committee to take the recommended TAB financing <br />forward to the full City Council for review and approval In addition, staff sought Committee <br />approval of a contingency plan whereby ashort-term loan from the City's Water Pollution <br />Control Plant (WPCP) could be made to the RDA. The contingency loan would be for a period <br />of up to 90 days and would allow the RDA to meet a funding deadline. <br />The Committee considered staff s recommendations and indicated concern over the cost of the <br />financing. Staff responded that the major contributor to the cost was the necessity to issue <br />taxable bonds. The Committee then asked if staff had considered internal financing to lower the <br />overall borrowing cost. In particular, the Committee asked if there were sufficient funds in the <br />Water Pollution Control Plant fund to finance the project. Staff responded that it had reviewed <br />internal borrowing as an option and was not recommending internal financing. The Committee <br />then asked staff to take a second look at internal financing as an option and to report any finding <br />to the Committee in December. <br />Since the November Committee meeting, Finance staff has met with the City Manager and <br />Public Works Director to see if an internal financing with WPCP funds might be feasible. In <br />brief, it would require a major dislocation of WPCP capital improvement plans to make $6.9 <br />million available for a borrowing period of 10 io 15 years. An analysis of WPCP cash <br />requirements over the next five years alone shows balances dipping to under $7.0 million, <br />exclusive of working capital requirements. In terms of projects, the Public Works Director has <br />indicated that at least four major projects would be negatively impacted by such a loan. These <br />include the cogeneration facility, sludge thickener project, wet weather storage project and the <br />collection system point repair program project. Consequently, in view of the negative impact <br />that such a borrowing would have on the WPCP, which is rate payer funded, staff is not <br />