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 (2003 TABs) available for refunding is $14,180,000 (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 (2011 TABs) available for refunding is $33,224,736. The total outstanding amount of the 2003 TABs and 2011 TABs to be refunded is $47,404,736.
The Debt Service Savings Analysis based on market conditions as of March 15, 2017, indicates that 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. This will result in an annual increase to the City of approximately $182,570 based on current market conditions, subject to change. The following is a summary of the savings for each bond issue:
| Bonds |
Current Average
Annual Debt
Service |
New Average
Annual Debt
Service |
Total
Average
Annual Savings |
Annual
Distribution
to the City |
| 2003 |
$1,682,173 |
$1,522,274 |
$159,900 |
$19,779 |
| 2011 |
$3,897,544 |
$2,581,529 |
$1,316,014 |
$162,791 |
| TOTAL |
$5,579,717 |
$4,103,803 |
$1,475,914 |
$182,570 |
The first step in moving forward with the refunding bonds was accomplished by the Successor Agency by adopting SA Resolution 2017-04 on April 4, 2017, which includes the Debt Service Savings Analysis, Indenture of Trust, Escrow Agreement and Bond Purchase Agreement. SA Resolution 2017-04 directs the Successor Agency to undertake proceedings for the proposed refunding of the outstanding bonds, approve the required legal documents and authorize all of the necessary actions relating to the proposed refinancing, hiring bond counsel and other professional services and directing City officials to execute related documents.
The next step is for the Oversight Board to consider adoption of the required resolution accompanied by the Successor Agency Resolution, Debt Service Savings Analysis, and related bond documents. Once the Oversight Board has approved their resolution, the next step is to forward the Oversight Board Resolution and the Successor Agency Resolution with all attachments to the California Department of Finance (DOF) who has up to sixty days to approve the Oversight Board Resolution. Staff will be requesting an expedited review of the Oversight Board Resolution by the DOF.
The final step will occur after the DOF approves the Oversight Board Resolution. Thereafter, the Successor Agency will adopt a resolution approving the Preliminary Official Statement (bond offering document) and other related bond documents. Based on the current schedule, staff anticipates this action would be scheduled for Successor Agency consideration on May 16, 2017. |