Pursuant to Assembly Bill (AB) 1484, successor agencies are permitted to refinance debt obligations of the former redevelopment agencies. Conditions subject to refinancing of these debt obligations would be the reduction in the annual debt payments; that no new debt be created; and that the term of the refunding bonds shall be the same as that of the debt proposed to be refinanced. Staff has identified such an opportunity which is presented in this staff report. In December 2013, Staff had previously refinanced outstanding Tax Allocation Bonds (TABs) of the former Brea Redevelopment Agency secured by Project Area AB revenues. In November 2016, Staff had previously refinanced outstanding Tax Allocation Bonds of the former Brea Redevelopment Agency, secured by Project Area C revenues.
In July 2003, the Brea Redevelopment Agency issued $120,497,866 in Project Area AB Tax Allocation Bonds. The proceeds were used to fund redevelopment projects and the 1993 TABs. Currently, the outstanding balance on the 2003 Tax Allocation Bonds available for refunding is $16,475,000 (current interest bonds only). In June 2011, the Brea Redevelopment Agency issued $18,839,323 in Project Area AB Tax Allocation Bonds Series A and $10,295,000 Taxable Tax Allocation Housing Bonds Series B. The proceeds were used to fund Redevelopment Projects (Non-Housing and Housing) and refund the 2001 TABs. Currently, the outstanding balance on the 2011 Tax Allocation Bonds Series A and B available for refunding is $28,512,260.
Assembly Bill (AB 1484) permits successor agencies to refund outstanding bonds and other obligations of a former redevelopment agency if such refunding results in savings which benefit the taxing entities. The Debt Service Savings Analysis was prepared on March 16, 2017 in order for the Successor Agency and the Oversight Board to consider the issuance of the bonds. For the purposes of consistency, these projections have been used throughout this process. Staff will provide an update based on current market conditions at the City Council meeting.
Based on Debt Service Savings Analysis dated March 16, 2017 the refinancing of the outstanding bonds will produce an average annual reduction in bond payments of $1,475,914. The same reduction in annual bond payments frees up additional property tax revenues for distribution to affected taxing entities.
| Bonds |
Current Average
Annual Debt
Service |
New Average
Annual Debt
Service |
Total
Average
Annual Savings |
Annual
Distribution
to the City |
| 2003 |
$1,682,114 |
$1,522,214 |
$159,900 |
$19,779 |
| 2011 |
$3,897,643 |
$2,581,629 |
$1,316,014 |
$162,791 |
| TOTAL |
$5,579,757 |
$4,103,843 |
$1,475,914 |
$182,570 |
The first step in moving forward with the refunding bonds was accomplished by the Successor Agency adopting Resolution SA 2017-04 on April 4, 2017, and the Oversight Board adopting Resolution OB 2017-10 on April 14, 2017. These resolutions authorized the issuance of the refunding bonds and all the necessary actions relating to the proposed refinancing of the tax allocation bonds, including approval of the indenture of Trust, Bond Purchase Agreement, and the Escrow Agreement (available for review at the City Clerk's Office); hiring bond counsel and other professional services and directing City officials to execute related documents. The Oversight Board Resolution and the Successor Agency Resolution with all attachments were forwarded to the California Department of Finance (DOF) on April 14, 2017, and were approved on June 8, 2017.
The final step in the process requires the Successor Agency to adopt a resolution approving the Preliminary Official Statement (bond offering document) and authorizing the issuance of bonds. It is anticipated the bonds will be sold (priced) and closed by November 1, 2017. |
The Successor Agency has a total of $44,987,260 in outstanding 2003 and 2011 Project Area AB Tax Allocation Bonds. Staff is recommending that the Successor Agency refinance the outstanding bonds in order to reduce the average annual bond payments by $1,475,914, resulting in a corresponding average annual increase in property tax revenues to affected taxing entities. This will result in an average annual increase of approximately $182,570 in property tax revenues to the City's General Fund. The majority (approximately 95%) of the increase in annual property taxes to the taxing entities, including the City's share occurs from 2023 through 2036.
These are estimated savings based on current market conditions and subject to change. Staff will be providing an update based on current market conditions at the City Council meeting. |