Item B - Transportation Funding - Laserfiche WebLink

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ATTACHMENT E Bonding Alternatives for Pavement Preservation At the September 27 work session, Council directed staff to look at bonding alternatives for funding the backlog of pavement preservation projects. There are two types of bond- ing alternatives discussed in this attachment: General Obligation ("G.O.") bonds and revenue bonds. General Obligation Bonds Background: Based on the City's adopted Financial Management Goals & Policies, voter-approved General Obligation Bonds would be an appropriate funding source for transportation projects. The policies state that G.O. Bonds are to be used for major capi- tal construction or improvements in support of general municipal services. G.O. bonds must be approved by voters, and approval is subject to the double-majority provisions of Measure 50. The double-majority requirements include an exception if the bond election is held in November of even-numbered years. The next opportunity for a non-double majority election is November 2006. G.O. bonds come with approval for a new revenue source - property taxes. The property tax levy for G.O. bonds is outside of the Measure 5 tax rate limits. G.O. bonds are considered net direct debt of the City. The Budget Committee adopted revised debt policies and debt limits in February 2004. Any G.O. bonds issued for trans- portation projects would have to comply with those policies and limits. Possible Option: One option for bonding transportation projects would be to issue G.O. bonds in a net amount equivalent to what the TSMF would raise over a period of time. For this alternative, it is assumed that the G.O. bond measure should raise a net of $3.6 million per year for a ten-year period. In order to do so, the City would have to ask voters for authority to issue a total of $36,755,000 of G.O. bonds. Due to IRS restric- tions, this amount would have to be issued in four separate series. G.O. bonds in the amount of $36,755,000 would raise net transportation project funding of $36 million, with the balance used for bond issuance costs. The chart below sets out information on the tax levy and the impact on net direct debt over the life of the G.O. bond issues to fund transportation projects.