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Poway Expects Big Savings From Refinancing City Hall

By taking advantage of low interest rates, the city anticipates saving $200,000 a year on the cost of constructing City Hall and Council Chambers.

When the city of Poway financed the construction of City Hall and City Council Chambers in 2003, certificates of participation were used to issue $17.6 million of debt securities to build the two buildings on Civic Center Drive.

Unlike the capital appreciation bonds that have drawn attention to the Poway Unified School District recently, the certificates of participation, or COPs, provide opportunities to refinance the debt, according to a city staff report. The first opportunity to refinance is January 2013, and the City Council voted this week to move forward with refinancing the debt, as interest rates are lower than they were in 2003.

City staff estimates that by refinancing, the city can expect to save around $200,000 a year, totaling $4 million in savings over the next 20 years, when the bonds will be paid in full.

The 2003 COPS were issued at rates ranging from 3 percent up to 5 percent, and city staff believe that current market conditions would allow for all of the 2012 COPS to be issued at 3.5 percent. After a 10-year “call protection period,” the city could again refinance the debt if market conditions are favorable in 2023.

The certificates have been rated AA+ by Standards and Poors, according to city officials. The rating service noted Poway’s strong financial position, “good financial policies and practices,” unemployment rates lower than the national average and strong household income when issuing the high rating.

“The refunding is estimated to save the city about $200,000 per year, or $4 million over the life of the debt,” City Manager Penny Riley said. “This is great news for the residents of Poway.”

In a presentation by the city’s financial advisor, Tim Schaefer of Magis Advisors, it was stressed that the terms of the loan are not changing, and the amount of money borrowed is not rising. The COPS will be offered to bidders on Oct. 3 and will be closed on Oct. 17.

Completed in 2004, the project to build City Hall and Council Chambers cost $21.6 million. The city put down a $4 million down payment, and $17,655,000 was financed by the 2003 COPs. The outstanding amount of the COPs is $14,490,000.

The cost of issuing the 2012 COPs is estimated at $207,750, according to a city staff report. Bond counsel by Richards, Watson & Gershon will cost $62,300; disclosure counsel by Best, Best & Krieger will cost $32,000; and financial advisor Magis Advisor will be paid $44,750, according to a staff report.

A PowerPoint presentation by Tim Schaefer at this week’s City Council meeting is attached in the PDF section of this article.

Babs September 21, 2012 at 04:07 AM
Mangum thinking not needed on the City Council The PUSD Board Meeting minutes for October 10, 2010 show that Mangum made the motion to issue and approve Item D-401: The resolution “Authorizing Issuance of $105,001,642.25 General Obligation Bonds. The item outlined all the issues now known including its non-callable status. Mangum’s motion was seconded by Vanderveen and the Board voted unanimously in favor of the resolution. On September 6, 2012 Mangum wrote to the Pomerado News, “I was not on the board in 2011 when the $105 million in non-callable bonds were approved.” And ‘apologized’ for not foreseeing the future. On September 16, 2012 a flyer was distributed at Poway Days that reads, “In 2011 Jeff Mangum DID NOT VOTE TO ISSUE the controversial $105 million in school bond. HE WAS NO LONGER ON THE SCHOOL BOARD.” We do not need this sort of behavior on our Poway City Council?
Fran September 21, 2012 at 04:27 PM
If you want something even funnier to read - get your hands on the flyer Mangum is distributing that states he supports "bond reform - recent PUSD events demonstrate the need for institionalized bond reform - including truth-in-lending disclosures and amortization schedules like those required for mortgages." Mangum is counting on his supporters to be functionally illiterate and not read the mountains of evidence showing he and the rest of the board knew substantially everything in October 2010. The Series A bond wasn't much better and the costs to service that bond were actually shoved off onto the Series B (and it's a significant chunk of money - millions of dollars in fees that we're paying interest on). All the information was disclosed to Mangum and the Board in the documents supplied to him prior to the vote in October 2010. Now whether or not he actually read the documents in October 2010 is an entirely different discussion. Go to the Thanks a Billion Facebook page and you can read/see for yourself. There are links to many of the documents with more documents being loaded.
Fran September 21, 2012 at 04:36 PM
Did you know that Poway Unified School District's bond underwriter contributed $25,000 to the Prop C campaign and then was awarded the contract to sell the bonds for a profit? http://californiawatch.org/dailyreport/feds-urged-crack-down-donations-bond-measures-18072
Babs September 21, 2012 at 05:03 PM
Poway Voters are not Fools. Mark Twain wrote, "It's easier to fool people than to convince them they have been fooled." Let's hope the Poway voters will say, "Fool me once, don't fool me again."
Fran September 24, 2012 at 04:55 PM
Hey Babs - have you seen the latest news on how much the 2009 Series A and the 2011 Series B are really going to cost? They got $31 million EXTRA unauthorized funds that will cost taxpayers an additional $200 million to pay back. 2009 was 13% over the authorized amount. Now will someone please tell me how Mangum and the rest didn't understand what they were doing was illegal. And if it wasn't illegal it sure should be.

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