Turlock City Council members on Tuesday approved a higher interest rate for the redevelopment bond issuance intended to fund the Public Safety Facility, possibly reducing the city’s available funding for the project by $2.5 million.
The increase in allowed interest rates – from 7.25 percent to 8.5 percent – was proposed by the city’s bond underwriters, who said the higher rates may be required to secure a sale of the bond.
A $20 million share of the Public Safety Facility remains to be funded. At initially proposed 6.75 percent interest, the bond sale would raise $15 million, leaving a $5 million funding gap. The 7.25 percent interest cap, approved by council at their Jan. 11 meeting, would raise $14 million, leaving a $6 million gap. The 8.5 percent rate approved Tuesday would see the bond raise $11.5 million, leaving $8.5 million for the city to fund from alternate sources.
The City of Turlock won’t know what the bond interest rate will be until Thursday, when bonds are scheduled to be priced and sold. The RDA bond market has been thrown into disarray by Gov. Jerry Brown’s Jan.10 proposal to eliminate all redevelopment agencies statewide as part of balancing the state budget. The city’s bond underwriters said the market is starting to behave in a slightly more “orderly fashion, however, with some agencies able to sell their bonds.”
“I really don’t know what it’s going to be like on Thursday until we get there,” said Turlock Senior Accountant Marie Lorenzi.
The potential elimination of redevelopment agencies statewide leaves the City of Turlock in a “use it or lose it” scenario, where existing RDA bond debt would be honored by the State of California but no future debt could be issued. Should Turlock not issue the RDA debt now, it may never be able to fund a structure like the Public Safety Facility.
“We’re out of luck, period, forever, because you’re not going to have a revenue source large enough out of the general fund to pay back a loan,” said Councilman Forrest White. “… The reality is either we take it now, bite the bullet, do it, or risk the chance we don’t do it, they take it away, and we never do it.”
The change was approved by a 4-1 vote, with Councilwoman Mary Jackson dissenting.
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