BOARD MEETING DATE: June 12, 1998 AGENDA NO. 36
PROPOSAL:
Review Options Regarding Use of Proceeds from Sale of El Monte Property
SYNOPSIS:
The Board at its May 8, 1998 meeting requested a review of the options available to the AQMD regarding the use of proceeds from the sale of its El Monte facility.
COMMITTEE:
Administrative Committee, May 22, 1998, Recommended for Approval – Option A
RECOMMENDED ACTION:
Option A: Approve the attached resolution amending Resolution 96-19 authorizing the redemption of the Series 1992, year 2009 Term Bonds from proceeds from the sale of the El Monte property. Amend the FY 1998-99 Budget, approved on May 8, 1998, to decrease Interest Expense and decrease Interest Earnings. Transfer the balance of the Debt Service Fund which cannot be applied to the redemption of the year 2009 Term Bonds to the General Fund.
Option B: Approve the attached resolution rescinding the authority previously granted to redeem Series 1992 Bonds and authorize the closing of the Debt Service Fund and transfer of proceeds to the General Fund.
Option C: Modify the resolution in Option A to redeem only a portion of the Series 1992, year 2009 Term Bonds, (in total principal redemption amounts of $5,000 or any multiple thereof), and amend the FY 1998-99 Budget to reflect the estimated changes to Interest Expense and Interest Earnings. Transfer the balance of the Debt Service Fund which is not applied to the redemption of the year 2009 Term Bonds to the General Fund.
Barry R. Wallerstein, D.Env.
Acting Executive Officer
Background
In 1992 the AQMD did an advanced refunding of its Diamond Bar Installment Sale Revenue Bonds. This refunding, to take advantage of lower interest rates, included an early call option (without penalty) of the $6,355,000, 6.00% Term Bonds due August 1, 2009 from proceeds received from the sale of the District’s El Monte property.
At its October 11, 1996 meeting the Board approved Resolution 96-19, authorizing the sale of the El Monte property and the disposition of proceeds from the sale to redeem Series 1992 Bonds. The $7.1 million sale of the El Monte property was completed on January 23, 1998 and resulted in net proceeds of $6,793,990 to the AQMD. Pursuant to Resolution 96-19 a Debt Service Fund was established to account for the proceeds. As of March 31, 1998, the balance of the Debt Service Fund with interest was approximately $6,847,200.
Based on a projected June 30, 1999 Undesignated Fund Balance of approximately $5.1 million (5.6% of revenues), the Board members present at the Budget workshop on April 23, 1998, directed staff to amend the proposed draft FY 1998-99 Budget to recognize the proceeds from the sale of El Monte in the General Fund, thereby increasing the projected June 30, 1999 Undesignated Fund Balance to approximately $12.1 million. This action required Board approval to rescind portions of Resolution 96-19 directing the establishment of a Debt Service Fund and the redemption of the Series 1992 Bonds.
Proposal
At its May 8, 1998 meeting the Board continued the public hearing on the FY 1998-99 Budget related to the disposition of the proceeds from the sale of the El Monte property to consider the options available to the Board. Staff is proposing three options for Board consideration. Option A would amend Resolution 96-19 directing staff to redeem the year 2009 Term Bonds at a principal cost of $6,355,000 and transfer the balance of the proceeds to the General Fund. Option B would amend Resolution 96-19 rescinding the authority to redeem the Series 1992 Bonds and transfer the proceeds to the General Fund. Option C would result in the modification to the resolution in Option A providing for a partial redemption (in multiples of $5,000) with the remaining balance of proceeds transferred to the General Fund. The Administrative Committee, at its meeting on May 22, 1998, recommended Option A.
Resource Impacts
The selection of Option A would require an amendment to the FY 1998-99 Budget to reflect lower interest costs and lower interest earnings; and the transfer of the remaining balance (approximately $600,000 to the General Fund). Option B would require a transfer from the Debt Service Fund of approximately $7 million to the General Fund. Option C would result in a combination of the above.
/ / /