Resolution No. 7455 for Fiscal Year 2022-23 Tax Levies
On General Obligation Bonds
August 16, 2022
DATE: August 16, 2022
TO: Honorable Mayor and City Council
FROM: Hue C. Quach, Administrative Services Director
Henry Chen, Financial Services Manager/City Treasurer
SUBJECT: RESOLUTION NO. 7455 DETERMINING THE AMOUNT OF REVENUE TO BE RAISED FROM PROPERTY TAXES FOR FISCAL YEAR 2022-23 TO PAY FOR THE DEBT SERVICE ON THE 2021 GENERAL
OBLIGATION REFUNDING BONDS
Recommendation: Adopt
SUMMARY
The City of Arcadia (“City”) has two General Obligation Bonds supported by voter approved levies. The Series 2011 issuance was to fund the building of a grade separation at the intersection of Santa Anita Avenue and the Gold Line right-of-way alignment, and the General Obligation Bonds Series 2012 are refunding bonds, replacing the Series 2001 General Obligation Bonds, which were used to finance the construction of the City’s police station. In 2021, these bonds were refinanced into the 2021 General Obligation Refunding Bonds (Series Bond Measure A and Series Police Station Project). Annually, the City Council is required to adopt a resolution to establish the supplemental taxes collected to make debt service payments for the outstanding General Obligation Bonds. The rates established for Fiscal Year 2022-23 are estimated to generate tax revenue of $423,000 and $417,000 for the 2021 General Obligation Refunding Bonds (Series Bond Measure A and Series Police Station Project), respectively, and will be paid directly by property owners as part of their annual property tax bills.
It is recommended that the City Council adopt Resolution No. 7455 determining the amount of revenue to be raised from property taxes for Fiscal Year 2022-23 to pay for the debt service on the 2021 General Obligation Refunding Bonds (Series Bond Measure A and Series Police Station Project).
Resolution No. 7455 for Fiscal Year 2022-23 Tax Levies
On General Obligation Bonds
August 16, 2022
BACKGROUND
The issuance of Series 2001 General Obligation Bonds was approved in a special election held on November 2, 1999, and the Series 2011 issuance was approved by the voters in the April 11, 2006, election. Both issues were passed with more than two- thirds of the votes cast in favor of the agreed indebtedness with the principal and interest payable from taxes levied upon taxable property within the City. In 2012, the bond market provided an opportunity to refinance the Series 2001 General Obligation Bonds. General Obligation Bonds Series 2012 were issued on November 6, 2012, solely for the refunding of the Series 2001, providing savings of approximately $1 million for taxpayers over the life of the bonds. Both the 2011 and 2012 Bonds are payable entirely by ad valorem property taxes levied on behalf of the City and collected by Los Angeles County.
In 2021, with interest rates near historical lows due to the COVID-19 pandemic, conditions provided another opportunity to refinance both Series 2011 and 2012 of the General Obligation Bonds. A private placement with Sterling Bank (subsequently acquired by Webster Financial) was completed to refinance both the 2011 and 2012 Series General Obligation Bonds. The transaction closed on November 23, 2021, and the private placement will yield roughly $840,000 in savings to taxpayers over the life of the bonds.
Each year, a resolution must be adopted by the City Council to determine the amount of revenue required to be raised from property taxes to pay for the debt service on the General Obligation Bonds. This information is the basis for establishing tax rates, which are forwarded to Los Angeles County and will be applied to properties within the City’s boundaries.
DISCUSSION
A separate schedule (Exhibit “A”) illustrating the calculation of the tax rate is attached to provide detail of the debt service payments, the assessed valuations, beginning balances, estimated expenditures, and the proposed tax rate for Fiscal Year 2022-23.
The levy rate for Series 2021 General Obligation Refunding Bonds (Series Bond Measure A) is 0.002162%, in comparison to 0.003243% last year, and the tax rate for the 2021 General Obligation Refunding Bonds (Series Police Station Project) is
0.002131% versus 0.002339% for the prior year. The reduction in the tax rates is due to the 4.02% increase in the City’s property assessed value for Fiscal Year 2022-23, along with the reduced debt service payment from the bond refinancing. With these rates, a home valued at $1,000,000 would pay $21.62 in taxes for the Series Bonds Measure A Bonds and $21.31 for the Series Police Station Project Bonds as part of their annual property tax payments. The total expected savings to taxpayers over the remaining life of the bonds from the refinancing are expected to be roughly $840,000.
Resolution No. 7455 for Fiscal Year 2022-23 Tax Levies
On General Obligation Bonds
August 16, 2022
The Fiscal Year 2022-23 debt service payments for the Series Bonds Measure A Bond totals $524,000, of which $467,000 represents Principal and $57,000 is Interest. For the Series Police Station Project Bond, the total amount due in Fiscal Year 2022-23 is $405,000, including $363,000 for Principal and $42,000 for Interest.
ENVIRONMENTAL ANALYSIS
The proposed action does not constitute a project under the California Environmental Quality Act (“CEQA”), and it can be seen with certainty that it will have no impact on the environment. Thus, this matter is exempt under CEQA.
FISCAL IMPACT
No General Fund costs are incurred through this action. The rates established for Fiscal Year 2022-23 are estimated to generate tax revenue of $423,000 and $417,000 for the 2021 General Obligation Refunding Bonds (Series Bond Measure A and Series Police Station Project), respectively, and will be paid directly by property owners as part of their annual property tax bills. These tax revenues will be added to each bond fund’s existing fund balances for debt service payments occurring in Fiscal Year 2022-23.
RECOMMENDATION
It is recommended that the City Council determine that this action does not constitute a project and is therefore, exempt under, the California Environmental Quality Act (“CEQA”); and adopt Resolution No. 7455 determining the amount of revenue to be raised from property taxes for Fiscal Year 2022-23 to pay for the debt service on the 2021 General Obligation Refunding Bonds.
Attachments: Exhibit “A” – Calculation of Tax Rate
Resolution No. 7455
Exhibit “A”
Calculation of Tax Rate
General
Obligation
Bonds
Balance
Available
(1)
7-01-22
2022-23
Assessed
Valuations
Estimated
Tax
Revenue
Debt
Service
(2)
% Tax Rates
2022-23 (3)
2021 Series
Measure A $602,000 $19,565,679,282 $423,000 $524,000 0.002162% 2021 Series
Police Station $385,200 $19,565,679,282 $417,000 $405,000 0.002131%
(1) Excess fund balance is included to ensure that positive cash balance is available for the debt service payments on August 1, 2022.
(2) Per debt service schedule below.
(3) For comparison, the levy rate from last year was 0.003243% and 0.002339% for Series 2021 General Obligation Refunding Bonds (Series Bond Measure A and Series Police Station Project), and their first-year levy rates were 0.006621% and
0.009657% in 2011 and 2001, respectively.
DEBT SERVICE PAYMENT SCHEDULE:
2021 G.O. Bond
Series Measure A
2021 G.O. Bond
Series Police
Station
Principal $467,000 $363,000
Interest $57,000 $42,000
Total $524,000 $405,000