City Makes Plans to Pay Off Remaining Debt from $85 Million City Hall Seismic Retrofit

Published : Monday, March 12, 2018 | 5:47 AM

Seismic Retrofit

The City of Pasadena is planning to pay off the last of its debt obligations related to the $85 million seismic refit of the Pasadena City Hall, which took three years to complete between 2004 to 2007.

The Council’s standing Finance Committee on Monday will discuss funds transfers which allow the City to pay off the $3.94 million balance before the May, 2018 deadline.

After the transfers, the City would also have available $578,864 in residual funds which the City’s Finance Director Matthew Hawkesworth is proposing be used to continue to pre-fund the City’s looming employee pension obligations.

The proposal involves funds transfers from the Off-Street Parking Facilities Fund to the General Fund in the amount of $4,518,208, part of which can be used to pay off the outstanding debt, which stands at $3,940,000.

Funding for the City Hall seismic retrofit came from $47.3 million worth of Variable Rate Demand Lease Revenue Bonds which also funded a Rose Bowl improvement project. The $9.4 million for the project was almost 20 percent of the bond issuance, and the General Fund has been paying debt service on that portion of the bonds.

As a result of the 2011 credit crisis, the City privately placed the bonds with MUFG Union Bank, and in January 2013, the City restructured and partially refunded these by issuing the 2013A and 2013B bonds, extending the Rose Bowl portion of the 2006 debt to 2043. The General Fund’s portion of the bonds, in the amount of $3.94 million, remained intact with its original 3.285 percent term.

By May, the City has the option to either pay off the balance or refinance and remarket the debt.

To complete the $4,518,864 that is proposed to be transferred from the Off-Street Parking Facilities Fund to the General Fund, the Finance Department is looking at a $1,979,903 transfer representing the repayment of debt service paid by the General Fund on behalf of the Off-Street Parking Fund for the Old Pasadena garages, which is not included in the fiscal year 2018 budget.

Also, as a result of the full redemption of bonds issued by the City related to the original 1986 financing of garages, the City received $2,538,961 which should be transferred to the General Fund as well.

Explaining the financial impact of the recommended actions, Hawkesworth said the transfer of funds from the Off-Street Parking Facilities Fund to the General Fund should reduce the General Fund’s outstanding debt by $3,940,000 and reduce the General Fund’s annual debt service payment by an average of $730,000 per year from 2019 to 2024, or total debt service savings of about $4,380,000.

Hawkesworth also explained that transferring the residual funds of $578,864 to the Section 115 Trust should help ease the City’s burden from pension costs, which are projected to double by 2031, with sharp increases between next year and 2024.

“The CalPERS Board approved a new amortization policy a couple of weeks ago that reduced the amortization of all gains and losses going forward from a 30-year term to a 20-year term. As such, any gains or losses will have a greater and more profound effect in future rates,” Hawkesworth wrote.

“Based on these factors, staff is recommending the placement of these one-time funds to add to the initial deposit of $10 million in the trust fund and continue to safeguard the City’s financial position in regards to more than $500 million in unfunded accrued liability for pension.”

The Finance Committee special meeting starts at 4:30 p.m. at the City Council chambers, Room S249 at City Hall.

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