PURPOSE

The purpose of this report is to request authorization to remarket $25 million Redevelopment Agency of the City of Burbank (Agency) Golden State Redevelopment Project, Subordinated Taxable Tax Allocation Bonds, issue of 1993.

BACKGROUND 

On June 17, 2003, the Agency authorized the appointment of a Financing Team as it relates to the remarketing of the $25 million Redevelopment Agency of the City of Burbank Golden State Project Area subordinated Taxable Tax Allocation Bonds, issue of 1993.  The bonds were originally purchased by the City and were used to help finance the construction of the Police/Fire facility.  The Agency has consistently included the subordinated bonds on its annual Statement of Indebtedness filed with Los Angeles County.  The subordinated bonds bear interest at the Local Agency Investment Fund (LAIF) interest rate plus one percent and are due December 1, 2043.  The subordinated indenture provides provisions for remarketing the bonds.  As a result, the remarketed bonds will bear current market interest rates and will amortize principal payments beginning on December 1, 2022 and ending December 1, 2043.

The net proceeds from the remarketing of the 1993 subordinated bonds will provide needed capital projects funding for projects such as the Development and Community Services Building.

ANALYSIS

The proposed remarketed tax allocation bonds are anticipated to generate approximately $24,645,000 in net proceeds assuming the use of a reserve fund surety and a bond rating in the �A� category.  A bond rating in the �A� category by Standard and Poor�s would allow for the remarketed bonds to be insured.  Should the Agency not receive the anticipated bond rating and not be able to obtain a reserve fund surety, net bond proceeds will be significantly less that the anticipated amount.  In the event that this happens, Staff recommends that the City and Agency entered into a loan agreement for the difference between the current $25 million subordinated debt owned by the City and the net bond proceeds.  The loan agreement would have the same interest rate terms as the current subordinated debt; however, the principal would be due by December 1, 2020.

A detailed cash flow for the remarketing has been prepared by the Underwriter, E.J. De La Rosa & Co., Inc., and reviewed by the Financing Team.  Based on current market conditions, annual interest only payments would be due on the remarketed bonds of $1,187,500 through 2021 with full amortization beginning in 2022 for a total principal and interest payment of approximately $1,855,000 annually through 2043.  The anticipated arbitrage yield on the remarketed debt is 4.75%.  In the future, the Amended and Restated Indenture of Trust used for the remarketing will be the indenture for any future debt obligations of the Golden State Project, if any.

FISCAL IMPACT

The proposed remarketing anticipates generating $24,645,000 which can only be used for capital projects of the City.  A cooperation agreement will be entered into between the City and Agency to ensure that the net proceeds will be expended for capital purposes.  The anticipated net proceeds will change pending final pricing of the remarketed bonds and factors such as the bond rating, if credit enhancement is obtained via bond insurance, as well as the ability to obtain a debt service surety bond.  Compensation for the Financing Team will be paid as part of the bond remarketing costs.  Based on the remarketing calendar, bond pricing has been scheduled for late September with funding by mid-October 2003.

RECOMMENDATION

Staff recommends that the Redevelopment Agency and City Council adopt the proposed resolutions.

1.        Adoption of proposed Redevelopment Agency resolution entitled:

A RESOLUTION OF THE REDEVELOPMENT AGENCY OF THE CITY OF BURBANK APPROVING AND AUTHORIZING AND DIRECTING EXECUTION OF CERTAIN DOCUMENTS RELATING TO THE PURCHASE AND REMARKETING OF THE AGENCY�S $25,000,000 REDEVELOPMENT AGENCY OF THE City OF BURBANK GOLDEN STATE REDEVELOPMENT PROJECT, SUBORDINATED TAXABLE TAX ALLOCATION BONDS, ISSUE OF 1993, AND AUTHORIZING AND DIRECTING ACTIONS WITH RESPECT THERETO. 

2.            Adoption of proposed City Council resolution entitled:

A RESOLUTION OF THE CITY OF BURBANK REQUESTING THE PURCHASE BY THE REDEVELOPMENT AGENCY OF THE CITY OF BURBANK OF ITS AGENCY�S $25,000,000 REDEVELOPMENT AGENCY OF THE CITY OF BURBANK GOLDEN STATE REDEVELOPMENT PROJECT, SUBORDINATED TAXABLE TAX ALLOCATION BONDS, ISSUE OF 1993. 

Exhibit A -      Draft Bond Documents, including Preliminary Remarketing Circular

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