01/16/1985 Meeting - Laserfiche WebLink

Home Browse Search

. e . Explaining the refinancing plan, Mr. Wong said certificates of participation are ownership interests in lease payments. The present certificates were issued in June 1981 for $6.9 million at 11.57 percent interest. The parties involved in the refinancing plan are the Urban Renewal Agency, the City, the trustee which is First Interstate Bank, and the certificate holders. The Eugene Renewal Agency (ERA) pays rent to the City from revenue (tax increment) which is derived from the increase in the assessed value of the property in the renewal area. The revenue is called tax increment revenue. The City uses the money from the Renewal Agency to make lease payments for the Conference Center to the trustee. The trustee is the owner of the Conference Center. The trustee pays the certificate holders. The City would like to refinance the certificates in order to save money. Certificates worth $11.4 million will be issued. $4.5 million will be "zero coupon bonds;" no interest will be paid on them. The City will net only about $800,000 from the sale of the zero coupon bonds. The owners will receive $4.5 million when the bonds are paid. $6.9 million will be regular serial bonds. The City will net about $7.7 million in cash from the refinancing. $7.0 million will be put in an escrow account to pay the existing certificates. The rest will be used for issuance costs and a debt service reserve account. The new certificates probably can be marketed at about a 9.5 percent interest rate. Insurance will be bought on the new certifi cates to secure an "AAA" rati ng. The refinancing plan will require three changes in existing agreements among the parties. The first change is that the tax increment revenue of the Renewal Agency must exceed the outstanding debts by 125 percent before the Renewal Agency can issue additional tax allocation bonds. The outstanding debts must include those on the Conference Center parking garage and the Parcade and the rent payment to the City. The second change is that the debt service coverage of the Renewal Agency will increase from 100 percent to 110 percent; that is, tax revenue must exceed debt service by 10 percent. The tax increment revenue must be enough to pay outstanding bonds and certificates. The City has deposited the highest year's debt service payment (about $865,000) as a reserve with the trustee. The trustee can invest the reserve, but the City selects the investment medium. The time for which the trustee can invest that amount will be reduced from 5 to 10 years. At the present time, most of the money is invested for less than one year in Treasury Bills. The third change is in the lease/purchase agreement between the City and the trustee. The City will agree not to buid another conference center in the next two years; the lease termination date will be changed from June 2, 2006, to a date five days after all the certificates are paid; and the City will agree not to useproperty tax proceeds to make lease payments if the Renewal Agency does not make its payments to the City. The refinancing plan will be reviewed by the State Treasurer who will determine that the net savings to the City exceed three percent and that the issuance costs are reasonable. Council approval of the resolution will authorize the refinancing of the certificates. The council will modify the agreements later. MINUTES--Eugene City Council January 16, 1985 Pa ge 3