MEETING DATE:
May 13, 2025
SUBJECT:
Title
RESOLUTION NO. SA 2025-036 - AMENDING THE ISSUANCE OF TAX ALLOCATION REFUNDING BONDS PURSUANT TO A SECOND SUPPLEMENTAL INDENTURE, APPROVING PRELIMINARY AND FINAL OFFICIAL STATEMENTS, AND PROVIDING FOR OTHER MATTERS RELATING THERETO
Body
Recommendation:
Recommendation
ADOPT resolution of the Successor Agency to the San Marcos Redevelopment Agency Amending the Issuance of Tax Allocation Refunding Bonds Pursuant to a Second Supplemental Indenture, Approving Preliminary and Final Official Statements, and Providing For Other Matters Relating Thereto.
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Board or Commission Action
The Countywide Redevelopment Successor Agency Oversight Board of the County of San Diego considered the proposed refunding of the Successor Agency’s Prior Bonds on April 17, 2025, and voted to approve the issuance of the Refunding Bonds.
Relevant Council Strategic Theme
Planning for the Future
Good Governance
Relevant Department Goal
Not applicable
Introduction:
The Successor Agency to the San Marcos Redevelopment Agency (“Successor Agency”) previously issued its $84,710,000 Tax Allocation Refunding Bonds, Series 2015A (the “Prior Bonds”) for the purpose of refinancing certain outstanding bonds of the former San Marcos Redevelopment Agency (“Former Agency”). The Successor Agency proposes to issue its Tax Allocation Refunding Bonds, Series 2025A (the “Refunding Bonds”) to refund the Prior Bonds.
California Health and Safety Code (“HSC”) Section 34177.5(a)(1) provides the authority for successor agencies to refund outstanding bonds. The issuance of refunding bonds under HSC section 34177.5, which was added to the Redevelopment Agency Dissolution Act (“RDA Dissolution Act”) by AB 1484, authorizes the Successor Agency to issue bonds for the purpose of refunding outstanding tax allocation bonds of the Former Agency or the Successor Agency to provide debt service savings provided that (1) the total interest cost to maturity on the refunding bonds plus the principal amount of the refunding bonds does not exceed the total remaining interest cost to maturity on the bonds to be refunded plus the remaining principal of the bonds to be refunded, and (2) the principal amount of the refunding bonds does not exceed the amount required to defease the refunded bonds, to establish customary debt service reserves, and to pay related costs of issuance.
On March 11, 2025, the Successor Agency approved Resolution No. SA 2025-035, approving the issuance of the Refunding Bonds and the forms of the Second Supplemental Indenture, Bond Purchase Agreement, and other related documents. Resolution No. SA 2025-035 also requested approval of the issuance of the Refunding Bonds by the County Oversight Board. On April 17, 2025, the County Oversight Board approved the issuance of the Refunding Bonds.
The Resolution before the City Council approves the Preliminary and Final Official Statements for the Refunding Bonds (as described below). Due to current market conditions, the Resolution also amends Resolution No. SA 2025-035 to increase the not-to-exceed principal amount of the Refunding Bonds to $48,000,000, and to revise that the net present value savings to the Successor Agency as a result of the refunding shall not be less than three percent (3.00%).
In order to sell the Refunding Bonds, the Successor Agency must approve a preliminary and final Official Statement in connection with the Refunding Bonds. The Preliminary Official Statement serves as the document that potential and actual investors will review when making a decision whether or not to purchase the Refunding Bonds. It contains preliminary information on the terms and conditions of the bond sale including the purpose and security features, and discloses economic, financial and legal information applicable to the issue. The Preliminary Official Statement describes the Former Agency, the Successor Agency, the project areas, the terms of the Refunding Bonds and describes the security for payment of the Refunding Bonds. The Preliminary Official Statement is governed by federal securities laws including the Securities Act of 1933 and the Securities and Exchange Act of 1934. Such laws require that the Preliminary Official Statement include all facts an investor may deem material in the purchase of the bonds and not contain any material misstatements or omission.
Once the terms of the Refunding Bonds are set (i.e., price, interest rate and maturity, etc.), that information is included in a Final Official Statement which is used by the underwriter to provide to the investing public.
The Continuing Disclosure Certificate, which is appended to the Official Statement, must be executed and delivered by the Successor Agency for the benefit of the holders and beneficial owners of the Refunding Bonds and to assist the underwriter in complying with Securities and Exchange Commission (“S.E.C.”) Rule 15c2-12(b)(5).
Discussion:
To determine compliance with the savings parameters for purposes of the issuance by the Refunding Bonds, the Successor Agency has caused its municipal advisor, Fieldman, Rolapp & Associates, Inc. (the “Municipal Advisor”), to prepare an analysis of the potential savings that will accrue to the Successor Agency and to applicable taxing entities as a result of the use of the proceeds of the Refunding Bonds to repay all or a portion of the Prior Bonds and, thereby, to refund all or a portion of the Prior Bonds (the “Debt Service Savings Analysis”).
The Debt Service Savings Analysis has determined that the proposed refunding of the Prior Bonds through the issuance of the Refunding Bonds satisfies the applicable HSC sections.
(A) The total interest cost to maturity on the proposed Refunding Bonds plus the principal amount of the Refunding Bonds does not exceed the total remaining interest cost to maturity on the Prior Bonds to be refunded plus the remaining principal of the Prior Bonds to be refunded.
(B) The $44,875,000 in estimated principal amount of the Refunding Bonds does not exceed the amount required to defease the Prior Bonds, to establish customary debt service reserves, and to pay related costs of issuance.
Additionally, in accordance with Section 5852.1(a)(1) of the California Government Code, the Municipal Advisor provided certain good faith estimates regarding the Refunding Bonds which were disclosed at the March 11, 2025 meeting in connection with the approval of Resolution No. SA 2025-035. Due to recent market volatility and the resolution to be considered, the Municipal Advisor has prepared the following revised good faith estimates, as of April 11, 2025, assuming the principal amount of the Refunding Bonds is $44,875,000.
1. True Interest Cost of the Refunding Bonds. Based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the true interest cost of the Refunding Bonds, which means the rate necessary to discount the amounts payable on the respective principal and interest payment dates to the purchase price received for the Refunding Bonds, is 3.68%.
2. Finance Charge of the Refunding Bonds. Based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the finance charge of the Refunding Bonds, which means the sum of all fees and charges paid to third parties (or costs associated with the Refunding Bonds), is $695,129.
3. Amount of Proceeds to be Received. Based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the amount of proceeds expected to be received by the Authority for sale of the Refunding Bonds less the finance charge of the Refunding Bonds described above and any reserves or capitalized interest paid or funded with proceeds of the Refunding Bonds, is $47,033,179.
4. Total Payment Amount. Based on market interest rates prevailing at the time of preparation of this information, a good faith estimate of the total payment amount, which means the sum total of all payments the Authority will make to pay debt service on the Refunding Bonds plus the finance charge of the Refunding Bonds described above not paid with the proceeds of the Refunding Bonds, calculated to the final maturity of the Refunding Bonds, is $56,140,594.
Attention is directed to the fact that the foregoing information constitutes good faith estimates only. The actual interest cost, finance charges, amount of proceeds and total payment amount may vary from the estimates above due to variations from these estimates in the timing of the sale of the Refunding Bonds, the amount of Refunding Bonds sold, the amortization of the Refunding Bonds sold, and market interest rates at the time of the sale. The date of sale and the amount of Refunding Bonds sold will be determined by the Successor Agency based on multiple factors. The actual interest rates at which the Refunding Bonds will be sold will depend on the bond market at the time of the sale. The actual amortization of the Refunding Bonds will also depend, in part, on market interest rates at the time of the sale. Market interest rates are affected by economic and other factors beyond the Successor Agency’s control.
The approval of the attached resolution will confirm the issuance of the Refunding Bonds and approve the form of and authorize execution of the Preliminary and Final Official Statements and the Continuing Disclosure Certificate.
Fiscal Impact:
The fiscal impact of the issuance of refunding bonds will result in the average annual reduction in bond payments of approximately $298,833. This same reduction in annual bond payments frees up additional property tax revenues for distribution to affected taxing entities. This will result in an average annual increase of $41,521 in property tax revenues to the City and San Marcos Fire Protection District combined starting in 2026 and continuing through the final maturity in 2034, as a result of the refunding. These are estimated savings based on market conditions as of April 11, 2025 and are subject to change.
Attachment(s)
Resolution Amending Issuance and Approving Preliminary Official Statement
Preliminary Official Statement (Continuing Disclosure Certificate is an appendix thereto)
Prepared by: Jeffrey Jorgenson, Accounting and Treasury Manager
Reviewed by: Donna Apar, Finance Director
Approved by: Michelle Bender, City Manager