City council approved a $ 10 million bond earlier this week that Apple Valley officials say will help refinance a loan and fund costs associated with the attempted acquisition of the water supply system. by Liberty Utilities.
City council voted 5-0 on Tuesday to initiate the bond which will also pay for additional capital improvements and potential costs if Apple Valley continues to fight to acquire the water system, according to the city.
Apple Valley’s initial $ 10 million loan, or line of credit, had a three-year term, starting in October 2018, and a variable interest rate of 0.075 to 2.52 percent, the door said on Friday. – city talk, Orlando Acevedo, to the Daily Press.
“The city only paid interest for the term with a spent portion of $ 6 million due in October 2021,” according to Acevedo, who said the new bond is a fixed rate of 2.52% over 20 years. with a payment of $ 322,000 due every six months.
In an interim decision in May, San Bernardino County Superior Court Judge Donald Alvarez found Liberty had refuted the city’s arguments that its ownership of the system was a necessity and in the public interest, reported the Daily Press.
During his State of the City address in August, Chief Executive Officer Doug Robertson said that despite the judge’s ruling – along with millions in litigation costs – city council has finally made a good decision in pursuing the eminent domain action.
“The costs of the water litigation are estimated at $ 8.5 million at the end of August, and we have yet to hear when the judge will render his final decision,” Acevedo said Thursday.
The city will now begin the process of preparing, selling and issuing its 2021 Rental Income Bond before its October 1 due date.
To facilitate the bond issuance, the city and its Apple Valley public finance authority will enter into an agreement in which the city will lease the James A. Woody Community Center, gymnasium and town hall to the authority.
The city will then pay the base rents, which are promised to the owner of the bond by the city under an agreement between the trustee, US Bank.
At Tuesday’s meeting, City Councilor Art Bishop said the city has financial obligations and called the bond the “best tool” to refinance the loan, which will be frozen at a fixed rate.
In July, Stifel, Nicolaus and Company solicited tax-exempt bids from banks to lock in the interest rate until the bond closed in September.
After receiving two offers in July of 2.52% and 3.13% for a period of 20 years, city staff chose to proceed with a private placement with First Foundation Public Finance.
Based on a principal amount of $ 10 million and an interest rate bid of 2.52%, the city estimates that the average annual debt service will be around $ 644,000, while that total debt service on the bond will be just over $ 12.8 million – paid from the city’s general fund. until 2041.
Robertson told city council that using a bond, along with assets, is a common way to fund a 20-year loan.
In public comments Tuesday, residents Al Rice and Bill Inger objected to the bond, Inger telling city council he begged them in 2018 not to open a line of credit.
Inger protested to the city by pledging his assets to pay a lease on their own property. He requested a two-week extension on the agenda item for further public consideration.
During his State of the City address in August, Robertson told the crowd that any public body would be unable to meet the standards expected by Judge Alvarez in this case.
City council will await the judge’s final decision before considering any further action against Liberty. In the meantime, an outside consulting firm has been hired by the city for a possible recourse, according to Robertson.
Daily Press reporter Rene Ray De La Cruz can be reached at 760-951-6227 or [email protected] Follow him on Twitter @DP_ReneDeLaCruz.