Study Session Staff Report Presentation and Discussion of Financing Options for Capital Improvements and ProjectsMEETING DATE: 05-02-05
STUDY SESSION
COUNCIL AGENDA REPORT
DATE: APRIL 28, 2005
TO: MAYOR AND TOWN COUNCIL
FROM: DEBRA J. FIGONE, TOWN MANAGER
SUBJECT: PRESENTATION AND DISCUSSION OF FINANCING OPTIONS FOR
CAPITAL IMPROVEMENTS AND PROJECTS
The purpose of the study session is to provide Council with information about various financing
options for capital facilities. While no decision about financing public improvements is needed in
the short term, the Town faces several issues and opportunities for which public financing may be
a consideration in the future. These issues and opportunities include: a dedicated source for capital
infrastructure improvements (such as streets, sidewalks, retaining walls, etc.); the Civic
Center/Library master planning process; land acquisition; affordable housing development; and
future redevelopment project area capital improvements.
Attached is the outline for the presentation which will be given by Emily Wagner, the Town's
financial advisor. Ms. Wagner assisted the Town with the issuance of the Certificates of
Participation used to finance redevelopment activities in the Town's redevelopment project area.
As noted on the outline, Ms. Wagner will begin with discussing financing methods in general,
followed by specific information on debt financing alternatives. She will also note financing
alternatives for operating and maintenance costs; however, this will not be the focus of the
presentation. In discussing debt financing alternatives, Ms. Wagner will provide examples about
how the alternatives might affect Los Gatos taxpayers. Ms. Wagner will also discuss process
considerations associated with pursuing debt financing alternatives, including public surveys to
gauge support and timing issues for seeking voter approval.
As noted previously, no financing decision or specific direction is expected from the Town Council
at the study session. Rather, the purpose of the study session is to provide basic information about
public financing alternatives for Council's consideration in the future as issues and opportunities that
may require public financing.
Attachment:
1. Outline for Presentation on Capital Financing Options
\icAx.)21/41_4_
PREPARED BY: PAMELA S. JACOBS
ASSISTANT TOWN MANAGER
Reviewed by: Assistant Town Manager own Attorney Clerk Administrator
Finance Community Development Revised: 4/28/05 1 1 :30 am
Reformatted: 5/30/02
AGENDA
Monday, May 2,2005
TOWN OF LOS GATOS
CAPITAL FACILITY FINANCING OPTIONS
OUTLINE FOR PRESENTATION
BY E. WAGNER & ASSOCIATES, INC.
I. TWO FINANCING METHODS
• Pay-as-you-go — Cash
• Pay -as -you -use - Debt
• Advantages and Disadvantages
II. DEBT FINANCING ALTERNATIVES
• General Obligation Bonds
• Certificates of Participation
• RDA Tax Allocation Bonds
1. 80% Monies
2. 20% Set -aside Monies
• CFD Special Tax Bonds
• Special Assessment District Bonds
III. AND THE SURVEY SAYS
IV. FUTURE CAPITAL INFRASTRUCTURE NEEDS OF LOS GATOS
V. SUMMARY OF FINANCING ALTERNATIVES FOR LOS GATOS' CAPITAL
FACILITY NEEDS
TOWN OF LOS GATOS
CALIFORNIA
TOWN COUNCIL STUDY SESSION
May 2, 2005/MINUTES
Los Gatos Civic Center
110 E. Main Street
Los Gatos, CA 95030
TIME
ITEM
(ACTION ON ITEM
5:46 PM
TOWN COUNCIL
The Town Council of the Town of Los Gatos met in the Council Chambers
of the Town of Hall, 110 East Main Street, at 5:45 PM, May 2, 2005, in a
Study session.
5:47 PM
ROLL CALL
All Council Members were present.
5:48 PM
OPEN/CLOSE
VERBAL
COMMUNICATION
5:49 PM
PRESENTATION
EMILY WAGNER &
ASSOCIATES.
UEnmi1y Wagner (E. Wagner & Associates)
• Presentation and discussion of financing options for Capital
Improvements and projects.
6:36 PM
COUNCIL
DISCUSSION
• Clarification regarding the cost of General Obligation Bonds verses
Community Facilities District Special Tax Bonds.
• Clarification regarding allocation of bond money.
• Clarification regarding General Obligation Bonds being the least
expensive.
6:46 PM
STUDY SESSION
ADJOURNED
Submitted by:
Jackie D. Rose, Deputy Clerk
Attest:
MarLyn J. Rasmussen, Clerk Administrator
VS
V
ATO
S
Office Sax 949 •Los Gatos • CA • 95031 • (408) 354-6934
Prepared by:
E. Wagner & Associates, Inc.
May 2, 2005
Two FinINingpliernatives for Capital Facilities
▪ Pay -As -You -Go
- Pay Cash
▪ Pay -As -You -Use
- Borrow the Money
Town of Los Gatos
E. Wagner & Associates, Inc.
1
Pav-As-You-eo
Advantage
• Substantial savings from not incurring interest costs
Disadvantage(s)
• Length of time it takes to save the needed cash for the project
• City is unable to undertake the project in a timely manner
• Costs are escalating at a faster rate than you are able to save
• Future users of the project (who will benefit from the project
may or may not have paid for the project)
Town of Los Gatos
E. Wagner & Associates, Inc.
Pav-As-Ysu-Uss
Advantage
• Matches the benefit(s) and cost of a project with the users of
the Project
• As the number of beneficiaries increase, the cost per capita
decreases
• Benefit from the project (over useful life - 30 years) is realized
by present users and future users of the project
Disadvantage(s)
• Additional interest costs incurred from borrowing the money
Town of Los Gatos E. Wagner & Associates, Inc.
2
FiIiaEcing AItem1tives for Oerating Costs
(ay -As -You -Go (Cash)
• General Fund
• New Tax
- Utility Users Tax
- Parcel Tax
• Capital Facilities
• Operating Costs
- General Fund
- Some financing mechanisms include operating component
• New Tax
• Challenging to get voter approval
• Must be very specific in use of tax
Town of Los Gatos
E. Wagner & Associates, Inc.
Debt Finanetng Aiternatives
• General Obligation Bonds
(new general tax)
• Certificates of participation
(existing surplus taxes and fees)
RDA Tax Allocation Bonds (Tax Increment Revenues
- 80% Monies
- 20% Set -Aside Monies
1915 Improvement Act Special Assessment District
(new special assessment)
Mello -Roos Community Facilities District
new s ecial tax
Town of Los Gatos
E. Wagner & Associates, Inc.
3
General Obligation Bond
• Ad valorem tax
• Requires 2/3 voter approval
. Least expensive form of long-term debt -no Reserve Fund and/or
funded interest (capitalized interest) during the acquisition period
of the project
. Education of public regarding the election, the tax rate, and the
project -time consuming
• Election three times a year:
- 1st Tuesday (after the 1st Monday) in March
- 1st Tuesday (after the 1st Monday) in June
- 1st Tuesday (after the 1st Monday) in November
• Tax rate can only be ad valorem
• Bond proceeds can only be used to finance real property and
improvements (i.e., no annual maintenance costs)
Town of Los Gatos
E. Wagner & Associates, Inc.
Example of Tax Rates in Los Gatos
Based on Assessed Valuation of $5.6 Billion
Amount of Bonds
Annual Tax Rate
Per S100,000 of
Assessed Valuation
$1 Million
$ 1.21
$10 Million
$20 Million
$12.07
$24.14
(1) Based on $500,000 Assessed Valuation
Average Tax Payers
Bill "I Per Year
$ 6.05
$ 60.35
$120.70
Town of Los Gatos
E. Wagner & Associates, Inc.
4
GO, fond T
Annual Debt Service
Assessed Valuation
= Annual Tax Rate per $100,000 of AV
Annual Tax Rate X Assessed Valuation = Tax Payers Total Annual Tax
100,000
Town of Los Gatos
E. Wagner & Associates, Inc.
• Can be used to finance real property improvements and equipment
• A lot of flexibility
- Lease Financing
• Parking Lot 4, 1992
• Street and Park Improvement, 2002
• Must have existing surplus funds (i.e., taxes, fees, utility user's tax, etc.)
to pay annual lease
• Stream of revenues must be in existence, reliable, dependable and
measurable
• No voter approval
• Most widely used in California
. Rule of 10 (ex: $500,000 surplus X 10 = $5 M Bonds Proceeds for
Capital Project)
Town of Los Gatos E. Wagner & Associates, Inc.
5
rr . Do not need voter approval
• Legal limit on amount of Tax Allocation Bonds to be
outstanding at any one time - $52 million
. Term of Bonds Limited to 12/25/41 with last day to collect tax
increment 1/1/2032 or when you reach Tax Increment CAP
of $250 million
. Last date to issue bonds —12/25/2011
• Projects to be financed — Public Infrastructure outlined in
Redevelopment Plan
Town of Los Gatos
E. Wagner & Associates, Inc.
80% Monies
Example of Tax Allocation Bonds
Based on Latest Tax Increment Projections
Year of
Issuance
9/1/2011
Amount of Bonds
$ 9.0 Million
Project
Proceeds
$7.5 Million
Final Maturity
2032
Town of Los Gatos E. Wagner & Associates, Inc.
6
20% Set -Aside Monies
Example of Tax Allocation Bonds
Based on Latest Tax Increment Projections
Year of
Issuance
9/1/05
Amount of Bonds
$ 15.5 Million
Project
Proceeds
$13.5 Million
Final Maturity
2032
Town of Los Gatos
E. Wagner & Associates, Inc.
l 915 Improvement Act Special Assessifent District
(he real property and improvements must benefit a well-defined
and limited area (i.e., "special" benefit must be established)
. The amount of assessment on an individual parcel must be
proportional to the benefit received
• Assessment can not be based on ad valorem
• Requires simple majority approval (by ballot) by property owners
(based on assessment) within the District (one vote/$1 of assessment)
• Can be used to finance real property, improvements, equipment, no
maintenance costs
• Maintenance costs must be financed under the 1972 Landscaping
and Lighting Act
______)
Town of Los Gatos E. Wagner & Associates, Inc.
7
OFIliULi1t\ rU!1tkSD s Ddi
• Levy a special tax
• Requires 2/3 voter approval by property owners
within the District
• Allows a flexible tax structure (Parcel Tax)
• Tax can not be based on ad valorem
• Can be used to finance real property, improvements
equipment and maintenance costs (for the new
facility only)
Town of Los Gatos
E. Wagner & Associates, Inc.
Example of CFD Special Tax Bonds
Year of Project Years of
Issuance Amount of Bonds Proceeds Tax
2008 $ 22.5 Million $20 Million 30*
Parcel "fa.
Residential
• Single Family
• Multifamily
a of
Units
9,000
3,500
Tax
per L nit
$80.00
$60.00
Acreage
--
--
Acre
Ta. Per
Square
Foot of
Leasable
Area
35%FAR
45%FAR
Commercial,
Industrial
--
--
538 acres
$1,500
$0.10
$0.07
* 30 years Capita] Tax
In -Perpetuity Maintenance or Service Component of Tax
Town of Los Gatos E. Wagner & Associates, Inc.
8
And the purvey Sa s
((Throuh a Survey
• Determine the amount of tax
• The Projects
. Timing
• General Elections — Presidential — every 4 years — 2008
- More voter turnout
- Higher rate of success
• Gubernatorial Election — every 4 years — 2006
• Average tax rate is $35-50 per year per $100,000
• Competing Interests can have an effect
• Schools
• Transportation
• County
. Other Issues
• Project — must be very specific and include Site Selection
• Time Consuming — can add a year to the process
Town of Los Gatos
E. Wagner & Associates, Inc.
re Ciii Illffsthfctur
Needs of
sGa
S
▪ Library
• Community Facilities
• Police Facility
• Civic Center
• Sports Field
. Parking Facilities
• Streets
Town of Los Gatos
E. Wagner & Associates, Inc.
9
Financing
/'r Limited
libraries;
protection;
(2) Through
DI Electors
there
t4) Ballot
assessment.
1 iqi
s
kr l r...
Fa i
i eS
if
of
FINANCING TECHNIQUE
CAPITAL
FACILITIES
SERVICES
REGISTERED
VOTER
ELECTION
REQUIRED
METHOD
OF LEVY
CAPITAL Cosrs
LIBRARY
STREETS
COMMUNITY
FACILrr ss
PARKING
FACILITIES
General Obligation Bonds
Ye
No
Yea-66.7%
Ad
Valorem
X
X
X
X
Tax Allocation Bonds
Yes
No
No
N/A
X
X
X
Certificates of Participation
Yes
No
No
N/A
X
X
X
X
Special Assessment District
Yes
Y&T
Yes-50%°
Assessment
X
X
CFD Spacial Tax Bonds
Yes
Yee
Yes-66.7%
Special Tax
X
X
X
X
to services for police protection; fire protection and suppression; ambulance and paramedic; recreation programs;
operations of museums and cultural facilities; maintenance of parks, parkways and open space; flood and storm
hazardous substance removal and cleanup.
1972 Landscaping and Lighting Act.
are landowners if there are fewer than 12 registered voters residing in territory of district. Electors are registered voters
are 12 or more registered voters residing in territory of district.
process. Vote is weighted based on assessment and needs a simple majority approval (50%+1). One vote per one dollar
Town of Los Gatos E. Wagner & Associates, Inc.
10
o
r
Long -Term Transit Capital
Investment Program
Santa Clara Valley Transportation Authority (VTA)
Presentation to Santa Clara City Council
April 12, 2005
Purpose of Discussion
Present Long -Term TCIP to local
jurisdictions and stakeholders.
2. Promote dialogue about revenue &
expenditure plans.
3. Encourage comments on Long -
Term TCIP to be sent directly to
VTA Board on behalf of jurisdictions.
2000 Measure A Projects \<
2000 Measure A transit projects are included'
in VTA's countywide transportation plan,
Valley Transportation Plan (VTP) 2030:
• Operating Assistance (at 18.5%)
. Silicon Valley Rapid Transit Corridor
(SVRTC) Project
. Downtown East Valley Transit improvement
Project
• Caltrain Improvements
(VTA Share of Caltrain Service Upgrades; South
County Service Upgrades; Electrification)
5
2000 Measure A Projects
(cont.)
• Bus Rapid Transit Corridors
O New Rail Corridors
• ACE Service Upgrades
• Mineta San Jose International Airport
People Mover (APM)
, Highway 17 Express Bus Service
Improvements
O Dumbarton Rail Corridor Service
, Palo Alto Intermodal Transit Center
O Zero -Emission Bus (ZEB) Demonstration
Program, vehicles & facilities
Thank you!
mow^ fir_
e,
-14
"'col
Proposed Revenue &
Expenditure Plans
2000 Measure A Program
Projected 30-year R&E Plan shown in
on page 14 in TCIP.
Detailed R&E spreadsheets shown in TCIP
Appendix A.
Ongoing Operations Capital Program
Projected 30-year R&E Plan shown in
_s".: on page 15 in TCIP.
,e
10