HomeMy WebLinkAbout2003-09-23 - AGENDA REPORTS - REFINANCE PRICE CLUB NOTE (2)Agenda Item:
PFA ITEM: 1
CITY OF SANTA CLARITA
AGENDA REPORT
NEW BUSINESS City Manager Approval:
Item to be presented by: Barbara Boswell
DATE: September 23, 2003
SUBJECT: REFINANCE OF THE PRICE CLUB PROMISSORY NOTE TO A
FIXED RATE REAL PROPERTY LEASE
DEPARTMENT: Administrative Services
RECOMMENDED ACTION
1. City Council approve the prepayment of the Price Club Note by entering into a site lease and
a lease agreement and authorize the taking of certain actions in connection with the execution
and delivery of the not to exceed $2,600,000 Fixed Rate Lease Agreement, subject to City
Attorney approval.
2. City Council convene to the Public Finance Authority and have the Public Finance Authority
approve documents in connection with the execution and delivery of the not to exceed
$2,600,000 Fixed Rate Lease Agreement, subject to City Attorney approval.
BACKGROUND
In connection with the development of a Price Club within the City (now known as Costco), the
City entered into an Annexation and Public Improvement Agreement by and among the City, CP
Shopping Center Partners, Canyon Park Princessa Partners, and the Price Club Relative to the
Annexation and Development of Certain Commercial Properties (the "Agreement"). Pursuant to
the Agreement and in consideration for the construction of certain public infrastructure
improvements, the City issued its Promissory Note, dated February 26, 1991 (the "Note"), in the
original principal amount of [$2,557,436] bearing interest at the rate of 10% per annum. The
Note is payable from an amount equal to 70% of the sales tax generated by the development.
Unpaid interest accrues annually. The Note may be prepaid at any time without penalty. The
current prepayment amount including accrued interest is $2,516,955 through October 5, 2003.
63- U (o
• ! / 3, I
r�
In order to lower the interest rate with respect to this financing, it is proposed to prepay the Note
and to use the equity in the McBean Transfer Station (the "Property") through a private
placement lease transaction involving Zions First National Bank ("Zion") for seven years.
The City agrees to annually appropriate general funds to make the lease payments. The interest
rate on the Fixed Rate Lease is 3.64% for seven years.
Tonight's action by the City Council and the Public Finance Authority is to approve documents
in connection with the prepayment of the Note and the execution and delivery of the not to
exceed $2.6 million Fixed Rate Lease.
ALTERNATIVE ACTIONS
1. The City Council may elect to not approve the resolution authorizing the City Manager to
enter into agreements for the refinance of the Price Club Note through a Fixed Rate Lease
Agreement, resulting in continuing to pay the debt under the current arrangement.
2. Other action as determined by the City Council.
3. The Public Finance Authority may elect to not approve the resolution authorizing the City
Manager to enter into agreements for the refinance of the Price Club Note through a Fixed
Rate Lease Agreement, resulting in continuing to pay the debt under the current arrangement.
4. Other action as determined by the Public Finance Authority.
FISCAL IMPACT
Under the current arrangement, debt service payments are based solely on actual Sales Tax
receipts. Current Sales Tax Revenue projections forecast the debt being satisfied in
approximately seven years. This estimate is subject to variations and changes in the economy.
Under the proposed arrangement, the General Fund would be obligated for the payments
regardless of the Sales Tax receipts. The annual payments are expected to be reduced by
approximately $70,000 per year, based on actual receipts and forecasted revenue streams. Over
the seven-year period, the City is expected to yield savings in excess of $525,000. Costs to
refinance are estimated at $74,000 and will be rolled into the Lease.
ATTACHMENTS
Resolution of the City Council
Resolution of the Board of the Santa Clarita Public Financing Authority
The following are available in the City Clerk's Reading File:
Site Lease
$2,600,000 Fixed Rate Lease Agreement
Assignment Agreement