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  Next Week's City Council Meeting Agenda and Finance Committee Agenda
November 16, 2013

  • The Tuesday, September 17, 2013, Successor Agency to the Richmond Community Redevelopment Agency/Richmond City Council Regular Agenda/ Packet is available at  http://sireweb.ci.richmond.ca.us/sirepub/meet.aspx. See memo from City Manager Bill Lindsay below regarding upcoming bond sales.
  • The Thursday, November 21, 2013, Public Safety Committee Meeting agenda/packet is on the web at http://sireweb.ci.richmond.ca.us/sirepub/meet.aspx. It may be of interest that one of the items on this agenda was placed there by Corky Booze (DISCUSS and CONSIDER: waiving the fees associated with Code Enforcement issues at 801 Hoffman - Vice Mayor Boozé (620-6593). Mr. Booze may have a financial interest in this property which would make it a legal conflict of interest for him to agendize, discuss and vote on it.


From City Manager Bill Lindsay:

Mayor and Members of the City Council:

As you will note, the City Council agenda includes a proposed resolution appointing an underwriter and authorizing additional actions by staff related to the proposed refinancing of Successor Agency debt.  The purpose of this email is to provide additional information on the potential financial impacts of the mortgage acquisition program on the refinancing of this debt. 

The staff report that was completed for the Successor Agency agenda item regarding the refinancing of the former redevelopment agency debt provides a description of the potential impacts of the mortgage acquisition program based on conversations with the proposed underwriter.  In essence, the underwriters have stated that there is no fundamental credit risk as a result of the City’s pursuing this mortgage acquisition program over and above what would be normal credit risk for a similar bond from Richmond or from a similar agency in California.  They also state that there will be investor interest in the bonds.  However, they also acknowledge that potential buyers of Richmond’s bonds would seek a yield premium (i.e., a higher interest rate) because of the “headline risk.”  In essence, potential buyers want to be compensated for needing to do additional credit analysis of Richmond’s bonds, given the fact that Richmond has been in the news with its mortgage acquisition program.  They estimate this interest rate premium at approximately 50 basis points (one-half of one percentage point).  At that level, the refunding bonds will still deliver economic savings, but lower savings than if there were no yield premium.  It should also be noted that interest rates for all municipal bonds have increased since August, when the Successor Agency bonds were initially marketed, further reducing economic savings that were estimated when the bond issue was originally structured this past summer.

It is important to understand the fiscal impacts on the City (as distinguished from the Successor Agency) of this interest rate premium.  Interest rate savings resulting from the refinancing no longer go solely to the Richmond Redevelopment Agency (or its Successor Agency).  Because of the State dissolution of redevelopment agencies, the interest rate savings are shared among all agencies that receive a share of the property tax.  As a result, the City of Richmond would receive approximately 28% of any annual savings resulting from the refinancing.  As estimated in the staff report, the 50 basis point “headline risk” premium will cause $1,050,000 less in savings over the life of the bond issue than would be achieved without this premium.  The impact to the City of Richmond resulting from lower property tax revenues would then be approximately 28% of this amount, or $294,000 over the life of the issue.  This is approximately $30,000 per year in impact to the City’s General Fund.

In further conversations with the underwriter, they have noted that information regarding the mortgage acquisition program provided directly to potential bond buyers may help reduce this interest rate premium.  Finance Director Jim Goins and I will work to provide such information as the underwriter begins to market the bonds.

Please feel free to contact me if you have any questions or require any additional information.

Bill Lindsay
City Manager