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SUMMARY: Authorize the City Manager to Negotiate and Execute an Extension of the Letter of Credit Related to Two Types of Revenue Bonds
Recommendation to Authorize the City Manager to Negotiate and Execute an Extension of the Letter of Credit with the Combined Entity, Mitsubishi UFJ Financial Group (MUFG)-Union Bank, N.A., Related to the Current Outstanding $6,800,000 Alameda Public Financing Authority (APFA) Variable Rate Demand Revenue Bonds (Alameda Point Improvement Project), 2003 Series A, and the Current Outstanding $3,400,000 APFA Taxable Variable Rate Demand Revenue Bonds (Alameda Point Improvement Project), 2003 Series B, on Similar Terms and Conditions as the Existing Letter of Credit. [City Council and APFA] (Finance 2410)
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To: Honorable Mayor and Members of the City Council
Honorable Chair and Members of the Alameda Public Financing Authority
From: Jill Keimach, City Manager
Re: Authorize the City Manager to Negotiate and Execute an Extension of the Letter of Credit with the combined entity, Mitsubishi UFJ Financial Group (MUFG)-Union Bank, N.A., Related to the Current Outstanding $6,800,000 Alameda Public Financing Authority (APFA) Variable Rate Demand Revenue Bonds (Alameda Point Improvement Project), 2003 Series A, and the Current Outstanding $3,400,000 Alameda Public Financing Authority Taxable Variable Rate Demand Revenue Bonds (Alameda Point Improvement Project), 2003 Series B, on Similar Terms and Conditions as the Existing Letter of Credit
BACKGROUND
The Alameda Public Financing Authority (the Authority), issued a total of $13.44 million in variable rate bonds related to Alameda Point in 2003. The source of repayment for these bonds is the rental income received from properties managed by the City's Base Reuse Department. The credit and liquidity support for the bonds is currently provided by a direct pay letter of credit from MUFG Union Bank, N.A., which expires on June 14, 2017. The indenture of trust for the bonds requires that a new or extended letter of credit be in place 30 days prior to the expiration of the current letter of credit.
DISCUSSION
For the last several months, City staff and the City’s municipal advisor have been working with MUFG Union Bank, N.A. to extend the termination date of the current letter of credit (LOC). The current LOC is due to expire on June 14, 2017. The indenture of trust for the 2003 Variable Rate Demand Revenue Bonds requires that a new or extended letter of credit be in place 30 days prior to the expiration of the current letter of credit. MUFG Union Bank, N.A. staff have been going through the Bank’s internal process for the approval of an extension of LOC, which is expected to be completed by mid-May 2017.
At the current level of outstanding principal of the Variable Rate Demand Revenue Bonds of $10,200,000, the current annual fee at $1.00 per $1,000 totals approximately $10,200.
FINANCIAL IMPACT
It is expected that the LOC fee to be charged by the MUFG Union Bank, N.A. will stay the same at $1.00 per $1,000 of the then outstanding bonds balance. The letter of credit fees are charged to the Base Reuse Debt Service Fund budget.
MUNICIPAL CODE/POLICY DOCUMENT CROSS REFERENCE
This action is in conformance with the Alameda Municipal Code.
ENVIRONMENTAL REVIEW
This activity is not a project and is exempt from the California Environmental Quality Act (CEQA) pursuant to section 15378 (b)(4) of the CEQA Guidelines, because it involves governmental fiscal activities (financial matters related to outstanding bonds), which does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment.
RECOMMENDATION
Authorize the City Manager to negotiate and execute an extension of the existing letter of credit with MUFG Union Bank, N.A., related to the current outstanding $6,800,000 Alameda Public Financing Authority (APFA) Variable Rate Demand Revenue Bonds (Alameda Point Improvement Project), 2003 Series A, and the current outstanding $3,400,000 Alameda Public Financing Authority Taxable Variable Rate Demand Revenue Bonds (Alameda Point Improvement Project), 2003 Series B, on similar terms and conditions as the existing letter of credit.
Respectfully submitted,
Elena Adair, Finance Director