SR-505-006 (3)
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APR 2 5 1989
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Council Meeting: April 25, 1989
Santa Monica, California
505 -0010
TO: Mayor and City council
FROM: city Staff
SUBJECT: Recommendation to Adopt a Resolution Declaring an
Interest in Borrowing Monies from the Local Government
Finance Authority
Introduction
This report requests the city Council adopt the attached resolution
declaring its interest in borrowing monies from the Local
Government Finance Authority, which may enable the city to reduce
the initial costs associated with bond financing a portion of its
capital improvements costs related to the Hyperion Treatment Plant.
Backqround
Recent cost projections from the city of Los Angeles indicate that
the City of Santa Monica's anticipated share of the capital costs
associated with upgrading the Hyperion Treatment Plant over the
next five years will total approximately $24 million. In addition,
Santa Monica's share of the Hyperion operating and maintenance
costs are projected to increase substantially.
staff is presently investigating several different financing
options which include rate increases and the sale of revenue bonds.
As a part of this analysis, staff has made initial contact with
financial consultants who have suggested that one option the City
may wish to pursue is to borrow monies from the Local Government
Finance Authority
(LGFA) . The LGFA is a consortium of
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municipalities which was formed in 1986 for the express purpose of
providing capital funding for local governments. It is a joint
powers authority formed prior to the Tax Reform Act of 1986 which
earned interest from investment of bond proceeds. Original
membership consisted of 12 cities (Santa Maria, Anaheim, Fullerton,
Lincoln, Livermore, Oakland, Roosevelt, Santa Clara, Beverly Hills,
Crescent City, Tracy, and Ring City). Four of the original members
(Beverly Hills, Crescent City, Tracy and King city) have since
dropped out of the LGFA as they have abandoned their particular
capital projects and have no need for the bond funds. Three of
these relinquished bond series remain available to prospective
borrowers to be selected by the LGFA.
Adoption of the attached resolution does not obligate the City in
any way. The resolution only indicates the city's interest in
competing for the opportunity to borrow monies from the LGFA. The
LGFA requires that a resolution declaring the City's interest be
submitted to the Authority by May 1, 1989. If the LGFA were to
approve the city's application, the city would be required to make
an irrevocable committment to borrow funds from the LGFA by July
15, 1989 or forego any opportunity to seek funding from the LGFA
in the future.
By adopting the resolution, the city Council is taking advantage
of one potential funding strategy which may prove feasible as a
means of lessening the immediate financial impact to wastewater
customers. The benefit which could be derived from the LGFA is
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avoidance of issuance and underwriting costs which the City would
incur if it was to issue bonds independently.
staff will present a report to City council in May explaining in
detail the ramifications of the increased Hyperion costs on the
present rate structure. The report will also propose a financing
plan to ensure that the City will meet its financial obligations
in a cost-effective manner.
At that time, staff will indicate
whether or not the city's application to the LGFA was approved and,
if approved, will present recommendations as to whether the City
should proceed with the LGFA financing mechanism.
~4dget/Financial Analysis
There is no budgetary/financial impact.
Recommendation
staff recommends that the
City council adopt the attached
resolution declaring the City of Santa Monica's interest in
borrowing monies from the Local Government Financing Authority.
Prepared by:
Stan Scholl, Director of General services
Byron Gaines, Utilities Manager
Marsha Eubanks, senior Administrative Analyst
Attachments:
Resolution
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RESOLUTION NO.
(City council Series)
A RESOLUTION OF THE CITY COUNCIL OF THE CITY
OF SANTA MONICA DECLARING ITS INTEREST IN
BORROWING MONIES FROM THE LOCAL GOVERNMENT
FINANCE AUTHORITY
WHEREAS, the city of Santa Monica desires to finance its
share of certain present and future obligations with respect to
the capital unproveme.nts at the Hype.rion Wastewater Treatme.nt
Planti and
WHEREAS,
the
Local
Government
Finance
Authority
("Authority") issued revenue bands prior to the passage of the Tax
Reform Act of 1986 and the proceeds of such revenue bonds may be
available to other governmental agencies to fund public projects;
and
WHEREAS, the City has been advised that substantial
saving may be realized by obtaining funds from the Authority; and
WHEREAS, the city must formally apply to the Authority in
order to obtain funds to finance the capital improvement payments
to the Clty of Los Angeles; and
WHEREAS, the city is authorized to undertake all of the
above pursuant to its Charter and other applicable laws of the
State of California,
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF SANTA
MONICA DOES RESOLVE AS FOLLOWS:
SECTION 1.
The City is interested in Obtaining funds
from the Authority to finance all or a portion of its share of the
capital improvement costs associated with the improvements to the
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Hyperion Wastewater Treatment Plant.
SECTION 2.
The City Manager is hereby authorized to
execute all necessary documents in order to apply to the Authority
for funds from the Authority's revenue bonds.
SECTION 3. The City Clerk shall certify to the adoption
of this Resolution, and thenceforth and thereafter the same shall
be in full force and effect.
APPROVED AS TO FORM:
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ROBERT M. MYERS
Cl.ty Attorney