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Agenda Item 24.

City Council Meeting

Meeting Date:	06/06/2017
FROM:	City Manager

Subject:

Update to the City of Brea Long-Term Debt Policy Required for Future Issuance of Bonds and Other Debt Obligations

RECOMMENDATION

Adopt the Resolution approving the City of Brea Local Debt Policy and taking related actions.

BACKGROUND/DISCUSSION

The City of Brea has included in its annual operating budget a section for Fiscal Policy Statements which includes both short-term and long-term debt policies. These debt policies are applicable to the City of Brea incurring obligations solely within its control such as the issuance of bonds or entering into capital lease agreements. Additionally, the City of Brea also has long-standing debt management practices, such as bond payment coverage, sufficiency of reserves, records retention, continuing disclosure compliance, etc. In addition, City staff continually monitor bonds for opportunities to refund (refinance) existing bonds to lower future bond payments.

The proposed City of Brea Local Debt Policy which incorporates the City's current fiscal policies and practices has been prepared to comply with Government Code Section 8855(i), which became effective on January 1, 2017. Section 8855(i) was added via Senate Bill (SB) 1029 (approved September 12, 2016), which made the following major changes to current law:

Requires the California Debt and Investment Advisory Commission (CDIAC) to track and report on all state and local outstanding debt until fully repaid or redeemed.
Requires that the report of proposed debt include a certification by the issuer that it has adopted local debt policies, which include specified provisions concerning the use of debt and the contemplated debt issuance consistent with those local debt policies.
Requires a state or local public agency to submit an annual report for any issue of debt.

The proposed Local Debt Policy meets all of the requirements of SB 1029; does not change any of the City's existing policies and practices and preserves flexibility for the City in managing its debt. It is also noted that the proposed Local Debt Policy does not pertain to pension and any employee benefit obligations.

An example of how the City of Brea's current practices compare with the proposed Local Debt Policy is the determination of the feasibility of bond refinancings. In November 2016, the the City Council approved the issuance of Successor Agency to the Brea Redevelopment Agency Redevelopment Project Area C 2016 Tax Allocation Refunding Bonds, Series A and B. The proposed Local Debt Policy and best management practices call for at least a three percent (3%) net present value (NPV) savings on a refinancing and the NPV savings on this bond refunding was 22.4%.

The proposed Local Debt Policy is required to be in place prior to any issuance of bonds and other debt obligations. The first issuance of debt subject to the Local Debt Policy will be the Successor Agency's 2017 Tax Allocation Refunding Bonds, Series A and B which are pending approval by the California Department of Finance.

COMMISSION/COMMITTEE RECOMMENDATION

The Finance Committee reviewed staff’s recommendation at their May 30, 2017 meeting and recommended approval.

FISCAL IMPACT/SUMMARY

There is no fiscal impact with the adoption of the Local Debt Policy.

RESPECTFULLY SUBMITTED:

William Gallardo, City Manager
Prepared by: Lee Squire
Concurrence: Cindy Russell, Administrative Services Director

Attachments
Resolution 2017-046
Exhibit A - Draft Debt Policy