HomeMy WebLinkAboutAgenda Statement 1985/05/07 Item 10 COUNCIL AGENDA STATEMENT
Item 10
Meeting Date 5/7/85
ITEM TITLE: Resolution 42 ( /,/ Amending Resolution 11971 relating to
the issuance of revenue bonds for the purpose of providing
financing for a commercial sho. ' ing facility by The Home Depot
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SUBMITTED BY: Community Development Directo w 4/5ths Vote: Yes No X )
REVIEWED BY: City Manager:h h®.--
On March 21 , 1985, the City Council approved an inducement resolution for The
Home Depot for $2.5 million to assist in the financing of the construction of
their proposed new store at the southeast intersection of I-805 and H Street.
This store will be part of the proposed shopping center currently being
developed by Pacific Scene, Inc. We have recently received a request from
Home Depot to increase the amount of the revenue bond from the $2.5 million to
$3 million due to the relatively high issuance costs for the smaller issue.
RECOMMENDATION: That the City Council adopt the resolution amending
Resolution 11970 by increasing the not to exceed amount of the proposed
revenue bonds for construction of The Home Depot facility from $2.5 million to
$3 million.
BOARDS/COMMISSIONS RECOMMENDATION: Not applicable.
DISCUSSION:
In March, Home Depot requested $5 million in Commercial Development Bond
authorization and was subsequently approved for $2.5 million. Staff has
recently received a request from The Home Depot to increase their approved
revenue bond authorization from $2.5 million to $3 million due to the
substantial fees which are associated with the issuance of this type of bond.
A letter from the attorneys for the Home Depot is attached listing the
estimated costs of issuance for the $2.5 million bond issue. Total fees of
$137,000 are in excess of 5% of the bond issue and tend to negate the
advantages of tax exempt bond financing in comparison to private financing.
If the bond issue is increased to $3 million, the fees will remain essentially
the same, resulting in a more favorable financing cost.
At this time, staff has not received any additional applications for
industrial or commercial revenue bond financing for the current year. The
City has been authorized by the State to issue $4.6 million in tax exempt
private activity bonds for this calendar year. Unused capacity cannot be
carried forward. It is very likely that tax exempt financing for industrial
and commercial projects will no longer be allowed after 1985. It is therefore
10
Page 2, Item
Meeting Date 5/7/85
the recommendation of staff to increase the proposed bond issue for The Home
Depot to $3 million as requested. This will leave the City approximately $1 .6
million in bonding capacity to the end of this year. In the event that
additional bonding capacity is needed, the City may request to borrow
uncommitted capacity from other municipalities, the County, or State.
FISCAL IMPACT: The City of Chula Vista has been authorized to issue up to
$4,649,000 in private activity bonds for 1985. If the attached resolution is
approved, our remaining capacity will be $1 ,649,000.
The City receives a fee of one-eighth of one percent ( .125%) for the issuance
of industrial/commercial development bonds. The proposed $3 million bond
issue would result in fees to the City totaling $3,750.
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SMITH, GAMBRELL & RUSSELL
A PARTNERSHIP OF PROFESSIONAL CORPORATIONS AND INDIVIDUALS
ATTORNEYS AT LAW
2400 FIRST ATLANTA TOWER
ATLANTA, GEORGIA 30383
404/656-1800
TELEX 54-2589
April 23, 1985
VIA FEDERAL EXPRESS
RECEIVED
APR 2/1 1985
Mr. Fred Kassman
Development Specialist Community Development Dept.
The City of Chula Vista
Community Development Department
276 Fourth Avenue
Chula Vista, California 92010
RE: The Home Depot, Inc.
Dear Mr. Kassman:
Larry Smith of The Home Depot has requested that I provide you
with presently estimated issuance costs anticipated to be
incurred in connection with a 2 . 5 million dollar industrial
development bond issue by the City of Chula Vista. The figures
set forth below assume that the bond issue will be structured as
a variable rate demand obligation secured by a letter of credit,
and in some cases, the figures are still being negotiated.
Item Amount
Underwriter Placement Fee $ 25, 000. 00
Letter of Credit Fee (first year) 25 , 000 . 00
Bond Counsel 30,000 . 00
Counsel to Letter of Credit Bank 25 , 000 . 00
Underwriters Counsel 10, 000. 00
Company Counsel 15 , 000 . 00
Title and Recording (if land is required
as security) 5, 000. 00
City of Chula Vista 2 ,500 . 00
TOTAL $ 137 ,500 . 00
The foregoing list is neither final nor all inclusive, but it does
represent our present estimate of issuance expenses .
Mr. Fred Kassman
Page Two
April 23, 1985
Should we be able to be of any further assistance to you in this
regard, please do not heistate to contact me.
Yours very truly,
IP(
William L. Meyer
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cc: Mr. Larry Smith