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City of San Leandro Notes to Basic Financial Statements For the year ended June 30, 2012 68 NOTE 7 - LONG-TERM DEBT, Continued A. Governmental Activities Long-Term Debt, Continued 2001 Certificates of Participation In 2001, the City issued $5,020,000 principal amount of 2001 Certificates of Participation (2001 COPs). The purpose of the 2001 COPs was to assist the Redevelopment Agency of the City finance redevelopment activities within the Joint Project Area of the City. The 2001 COPs bear interest rates ranging from 2.10% to 5.10% and are payable semiannually on each June 1 and December 1. Principal payments are payable annually on December 1. The certificates evidence fractional interest of the owners in lease payments to be made by the City for use and occupancy of the City corporation yard and are additionally secured and payable from the property tax increment revenues from the Joint Project Area within the City. Prior to February 1, 2012, tax increment revenues were used to fund debt service on the Bonds. As a result of the dissolution of the Redevelopment Agency pursuant to state law (See note 18), a Successor Agency assumed the debt and receives tax revenues used to pay debt service and fund other activities of the former Redevelopment Agency. Future debt service repayments on these bonds will be made by the Successor Agency from the Redevelopment Property Tax Trust Fund allocation (see Note 18). 2002 Tax Allocation Bonds In fiscal year 2004, the City’s Redevelopment Agency issued $15,935,000 principal amount of Tax Allocation Bonds (2002 TABs) to refund the City’s 1993 Tax Allocation Bonds (1993 TABs) used to finance the redevelopment activities within the Plaza Project Area (which have been completed) and to finance new redevelopment projects as set forth in the Redevelopment Plan. The bonds consist of serial bonds that mature annually each year through 2018 in amounts ranging from $305,000 to $860,000 and term bonds maturing in 2020 in the amount of $1,200,000, 2025 in the amount of $2,355,000 and 2033 in the amount of $3,520,000. Interest rates vary from 2.90% to a maximum of 6% and are payable semiannually on September 1 and March 1. The debt is secured and payable from the property tax increment revenues from the Joint Project Area within the City. The refunding of the outstanding 1993 TABs resulted in a present value loss of $70,679 or 1.1% of the principal amount of the refunded bonds. The nominal economic loss was necessary in order to raise the $8,015,000 of new money that was generated through the financing. Because of a prohibitively high additional bonds test on the 1993 TABs (225%) it was necessary to refund the outstanding bonds in order to most efficiently raise the new money. According to the analysis completed by the City’s financial advisor, the Agency raised $321,000 more through using the refunding than they could have risen using a subordinate lien new money only issue. Prior to February 1, 2012, tax increment revenues were used to fund debt service on the Bonds. As a result of the dissolution of the Redevelopment Agency pursuant to state law (See note 18), a Successor Agency assumed the debt and receives tax revenues used to pay debt service and fund other activities of the former Redevelopment Agency. Future debt service repayments on these bonds will be made by the Successor Agency from the Redevelopment Property Tax Trust Fund allocation (see Note 18).