BOARD MEETING DATE: May 3, 2002
AGENDA NO. 36
Adopt an Ordinance Approving Addendum No.3 to Installment Purchase Agreement Relating to Diamond Bar Headquarters Facilities
SYNOPSIS:
On June 3, 1988, the Board authorized the Chairman to execute an Installment Purchase Agreement with the SCAQMD Building Corporation for the Diamond Bar Headquarters. This Agreement was amended on July 8, 1988, to identify the Diamond Bar site as the property to be purchased. A second amendment was approved on October 1, 1992, to refund a portion of the Series A and Series B Bonds, by issuance of the Building Corporation’s Installment Sale Revenue Refunding Bonds, Series 1992. This action is to adopt an Ordinance approving amendment number three for the purpose of refinancing the callable portions of the debt outstanding relating to the Diamond Bar Facility.
COMMITTEE:
Finance, April 19, 2002, Recommended for Approval
RECOMMENDED ACTION:
Adopt the attached Ordinance approving Addendum No.3 to the Installment Purchase Agreement with the SCAQMD Building Corporation.
Barry R. Wallerstein, D.Env.
Executive Officer
Background
On June 3, 1988, the Board authorized the Chairman to execute an Installment Purchase Agreement with the SCAQMD Building Corporation for the Diamond Bar Headquarters. This Agreement was amended on July 8, 1988, to identify the Diamond Bar site as the property to be purchased. A second amendment was approved on August 18, 1992, to refund a portion of the Series A and Series B Bonds to take advantage of lower interest rates, by issuance of the Building Corporation’s Installment Sale Revenue Refunding Bonds, Series 1992. This 1992 refunding also 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 AQMD’s El Monte property. This redemption was approved on June 12, 1998.
Proposal
In response to lower interest rates in the bond market, the SCAQMD Building Corporation has initiated a refunding of the callable portion of the 1992 Series Bonds. It is estimated that the SCAQMD could save approximately $70,000 annually over the remaining 12 years of the bond term. In addition, due to the 1998 redemption of the 2009 Term Bond, SCAQMD staff is proposing that this refunding be structured to spread out the 2008 and 2009 budget savings over the remaining 12 years of the debt. This restructuring could increase the annual budget savings to approximately $470,000.
The attached Ordinance authorizes replacement of the Agreement’s existing Schedule of Installment Purchase Payments with a new schedule reflecting the new, lower payments. The AQMD Board is authorized to approve this Ordinance under Government Code Section 54242. The sample Schedule attached to Addendum No. 3 is currently blank because the exact payments will not be known until the competitive bid of 2002 Bonds is conducted in the first week of June. Staff expects debt service savings of 2.5% to 3.0% annually.
Resource Impacts
The recommended action along with the related recommendation appearing elsewhere on this agenda will result in estimated annual budget savings from the refinancing of $70,000. Additional estimated annual budget savings of $400,000 could be realized from restructuring the financing to spread out the savings from the 2009 Term Bond redemption over the remaining 12 years of the bond term.
At its April 19, 2002 Special Meeting of the Governing Board, Supervisor Silva suggested that the Board consider using a portion of the projected FY 2002-03 unreserved fund balance to reduce AQMD’s outstanding debt. At present, both borrowing and earning rates are at historic lows. As of February 28, 2002 (the most recent investment report from its Treasurer) the AQMD’s weighted average yield on investments was 3.42%. The current refunding rate for the 2014 maturity is 4.75%. Therefore, based on current earnings and estimated borrowing costs for the longest maturity (2014), at present for every one million dollar reduction in borrowing the AQMD would see a difference of 1.75% or $17,500 in annual interest savings.
- Ordinance of the SCAQMD Board Approving Addendum No. 3 to the Installment Purchase Agreement Relating to Headquarters Facilities.
- B. Addendum No. 3 to Installment Purchase Agreement Relating to Headquarters Facilities
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