Item 7 - Redevelopment Project FinancingN
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AGENDA REPORT OF OW
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CITY OF POWAY
TO; Honorable Mayor and Members of the City Council
Honorable Chairman & Members of the Redevelopment Agency
FROM; James L. Bowersox, City Manager/Executive Dir
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DATE. June 12t 1986
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SUBJECT: RIDEVELAPMENT PROJECT FINANCING
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BACKGROUND
several months ago, the City Council/Redevelopment Agency directed staff to
explore the possibilities of financing additional capital improvements for
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the Redevelopment Agency. A municipal swimming pool was specifically men-
tioned as one of the projects to be considered. As the City Council/
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Redevelopment Agency is aware, Federal Legislation HR3838 is under con-
reform
sideration by Congress. This legislation is a tax proposal which
would affect the ability of the Poway Redevelopment Agency to issue tax
exempt bonds. Provisions of BR3838 would limit the use of tax exempt bonds
to those: projects which have less than 10% of a city's assessed valuation
within the project area boundaries. The Paguay Project Area has a
valuation of 20% of that of the City. The effect . of not being able to
issue tax exempt bonds is that a taxable bond carries an interest rate of
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approximately 2% higher. Over the life of a bond issue, that would
represent 20-30% greater interest payments.
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While the Federal Legislation is expected to go into effect on January 1,
1987, Congress has agreed that regulations governing bonds will become
effective September 1, 1986. Therefore, for the Poway Redevelopment Agency
to maximize its financial capabilities at this time, it is important to
consider making use of existing laws allowing tax exempt bonds to be issued
secured by tax increment.
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In December 1985, the Redevelopment Agency issued a $4.3 million bond
issue. Following a careful review of the financial projections for the
Redevelopment Agency, I believe that the projected tax increment for the
next 3-5 years would permit an additional sale of 515-20 million in bonds.
At same point in time, between year 5'and Year 10 of the Paguay
Redevelopment Program, the Agency should be able to shift to a pay-as-you-
go program. Therefore, it is not advisable:to extend the borrowing needs of
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the Agency for project implementation beyond 5-7 years.
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Agenda Report
June 12, 1986
Page 2
A secondary source of funding available to the Agency is the sale of
Certificates of Participation by the City coordinated with the tax incre-
ment of the Agency. Thatt is, in effect, the City_ Twould borrow money, the x
Agency would agree to pay debt: service when available. If it takes several r
years to develop revenue sources which will secure the City's indebtedness,
then the prepaid indebtedness by the: City also becomes the obligation of
the Agency.
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A review of the financial position of the City suggests that the City could T
safely issue approximately $ 7 million in Certificates of Participation with
subordination agreements to the Redevelopment Agency and still be in a
position where the Cit will not be obligated to service the debt on those'
po Y g f
bonds.
In summary, it is possible for a combined financial plan to be developed
which would provide the Agency with approximately $25 million in resources
over the.next 4-7 years for project implementation.
FINDINGS'
In December 1983, when the City Council approved the Redevelopment Plan for.
the Paguay Project Area, $136 million. in projects were identified to be
constructed by the Agency during the 20 year construction period, as
described by law.
To date, the Agency has undertaken approximately $6 million of those pro-
jects. As described briefly above, utilizing a combined financial program
comprised of Tax Allocation Bonds and Certificates of Participation, the
Agency could .have approximately $25 million in resources available for the
next 4-7 years.
It is estimated that the first year of what will be probably a 5 year
- program, would have resourcesof approximately $10 million based upon the
release of $3 million in Tax Allocation Bonds and proceeds from the $7
million Certificate of Participation issue. The remaining $15 million
would be available over a 3-4 year period. The implementation of such a
plan would permit the development of a viable 5 year Capital Improve ant
Program for the Agency. This :would permit projects to be designed and
built in an orderly manner through the services of both staff and con-
sulting engineering services.
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Agenda Report
June 12, 1986'
Page 3
The advantages to the City Council/Redevelopment Agency is that certain
_ highly -desired redevelopment projects would have their financing assured
within a predictable period of time. Projects which would be considered
for funding would be a canbination of increment and non -increment types.
Examples of increment projects would be assisting further industrial deve-
lopments
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to tints in the South Poway Planning Area and '
pm y g improvements to the. Poway
Creek mel to enable commercial development. Non -increment projects
include such improvements as a swimming pool, City Hall, Sheriff's
Substation, and parks.
Should the City Council/Redevelopment Agency desire to proceed with this
program, the staff should be directed to prepare all necessary documents to
carry it out:.
Attached for your review is a list of Redevelopment Projects `taken from the
Poway Project Area Redevelopment Plan frau which a list could be developed
and thereafter demented by means of the financing program. Specific -
projects would have to be identified: within the next 4-6 weeks in order to
include them within the bond issue.
- R XXI44 NDATIONS
It is recommended that the City Council/Redevelopment Agency approve in
concept the issuance of Tax. Allocation Bonds and Certificatesof
Participation in order to maximize the financial resources of the
Redevelopment Agency. It is further_recamnended that staff be authorized
to prepare contracts for professional services in order to facilitate these
programs. These contracts would be for Bond Counsel, Underwriting, Fiscal
Analysis, and Financial Services.
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Attachment
Redevelopment Projects List
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PAGUAY REDEVELOPMENT PLAN
PROTECTS SUGGESTED FOR CONSTRUCTION
1986 Tax Allocation Bonds
1986 Certificates of Participation
Public Facilities
1.
Swimming Pool
2.
Sheriff Station
3.
City Hall
4.
Arbolitos Park
5.
Valle Verde Park
6.
Performing Arts Center
7.
Joint-Use Facilities
Public Improvements
1.
Espola Road - north of Poway Road
2.
Second access to Garden Road
`3.
Detention basin(s)
I' 4.
Drainage; Projects along Poway Creek
5.
Sewage treatment plant
6..
Water treatment plant expansion
7.
dater improvements
8.
Carriage Road Bridge
9.
Pamerado Road - south of South Poway Parkway
to .
Cammnity Road
11.
Old Coach Area Improvements
Projects to Benefit Low-Moderate Inane Housing
1.
Assist with purchase of mobile home park by residents
2.
Neighborhood revitalization projects
3.
Project to assist other senior citizen housing
Other
1.
Repay existing City loans
2.
Assist residential/canuercial/ ndustrial redevelom-rit projects
-,UN 12 1986 ITEM ?`
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