BOARD MEETING DATE: September 8, 2006
AGENDA NO. 10

Authorize Transfer from AQMD Building Corporation Restricted Fund to New AQMD Building Corporation Depository Account with US Bank to Cover Ongoing Operation of Building Corporation Until All Bonds Mature

SYNOPSIS:

In 1989, AQMD set aside monies in a restricted fund to cover the ongoing operational expenses of the AQMD Building Corporation associated with the construction and debt service of the Diamond Bar Headquarters Facilities.  To date, all Building Corporation expenses regarding legal, trustee and audit costs have been paid for by the Trustee from Bond proceeds and interest earnings.  With the completion of tax arbitrage payments to the IRS and the close-out of all remaining construction related items, the Construction Trust Fund and Rebate Funds Series A and B balances are to be transferred to the Installment Purchase Payment Fund pursuant to the Installment Sale Purchase Trust Agreement.  This action requests the transfer from the AQMD to the Bond Trustee a total of $250,000 from the AQMD Building Corporation Restricted Fund to a new Depository Account to fund the remaining ongoing operations of the Building Corporation through 2015 and the transfer of the remaining fund balances in the Restricted Fund to the AQMD General Fund.

COMMITTEE:

Administrative, July 14, 2006, Recommended for Approval

RECOMMENDED ACTION:

1. Authorize transfer of $250,000 from the AQMD Building Corporation Restricted Fund to the AQMD Building Corporation Depository account with US Bank (Trustee) to fund the ongoing operations of the Corporation through 2015 when all bonds mature.
2. Authorize the transfer of the remaining balances in the AQMD Building Corporation Restricted Fund to the General Fund.

Barry R. Wallerstein, D.Env.
Executive Officer

Background

The AQMD Building Corporation (a separate legal entity) and AQMD entered into Installment Sale Purchase Agreements in 1988 and 1989 relating to the purchase of land and construction of the AQMD Headquarters Facilities.  These agreements require the AQMD to pay the debt service and ongoing administrative costs relating to this debt issuance.  In 1989, to meet its obligation to the Building Corporation, the AQMD established a restricted fund to cover the expenses associated with the continued operation of the Corporation.  To date, all Building Corporation expenses regarding legal, trustee and audit costs have been paid by the Trustee from the Construction Trust Fund.  With the completion of tax arbitrage payments to the IRS and the close-out of all remaining construction related items, the remaining Construction Trust Fund balances have been transferred to the Installment Purchase Payment Fund pursuant to the Installment Sale Purchase Agreements.  The Rebate Funds Series A and B balances will also be transferred to the Installment Purchase Payment Fund and be applied as a credit against subsequent installment payments due from AQMD upon transfer of sufficient funding from the AQMD to a new depository account with the Trustee to cover the ongoing administrative expenses of the Building Corporation.

The projected costs to support the ongoing operation of the Building Corporation through 2015 is made-up of the following:

Director’s & Officer’s Liability Coverage	$150,000
Attorney’s Fees	25,000
Audit Fees	50,000
Franchise Tax Board, Registry of Charitable Trusts,   Statement of Non-Profit Fees	2,000
10% Contingency	23,000
	$250,000

The amount of transfer from the Construction Trust Fund and Rebate Funds to the Installment Purchases Payment Fund as of May 31, 2006 is $561,392 and $402,189 respectively.  The balance in the AQMD Building Corporation Restricted Fund as of May 31, 2006 is approximately $534,000.

Proposal

This action requests (1) the transfer from the AQMD to the Bond Trustee (US Bank) a total of $250,000 in the AQMD Building Corporation Restricted Fund to a new Depository Account to fund the remaining ongoing administrative expenses of the Building Corporation through 2015, and (2) the inactivation of the AQMD Building Corporation Restricted Fund through the transfer of the remaining balances in the Restricted Fund to the AQMD General Fund.  After the bonds mature, all monies remaining in the Trustee Depository Account will revert back to theAQMD General Fund.