CITY OF GONZALES
2024 LEASE REVENUE BONDS
(COMMUNITY CENTER INTERIM FUNDING)
MAY 6, 2024
2 Background
City’s Community Center Project is underway
Funding for the Project includes several sources:
$5.0M State grant for the Teen Innovation Center
Community Development Block Grant funds
$1.8M County contribution to relocate existing library $1.067M State Building Forward Library Infrastructure Grant Program $400k Electric Vehicle Charging Station Grant from the California Energy Commission and Capital Campaign with pledges and contributions
City contribution
$9.825M Loan secured from United States Department of Agriculture Rural Development USDA Loan requires interim funding during construction In front of City Council tonight is the approval of the 2024 Bonds (the USDA required interim financing) and 2024 Bond documents, certificates and related actions 3 Interim Funding Plan
Multiple financing options evaluated
Public bond offering is the most cost-effective option Lease Revenue Bond structure, which utilizes a lease/leaseback arrangement between City and City’s Financing Authority
Leased asset is the Community Center
Lease structure requires a fair rental value test
To meet the test the 2024 Bonds are being structured as a 20-year financing, which allows for the annual lease payments to coincide with fair rental value 2024 Bonds can be redeemed as early as November 1, 2025, current estimated construction completion and a mandatory redemption six months post estimated completion on May 1, 2026 2024 Bonds will be replaced with permanent USDA Loan upon redemption 4 Estimated Sources & Uses and Payments
Sources:
Par Amount of 2024 Bonds $9,825,000.00
City Contribution $950,951.06
Total Sources $10,775,951.06
Uses:
Total Underwriter's Discount $49,125.00
Costs of Issuance $170,000.00
Deposit to Capitalized/Prefunded Interest Fund $731,826.06 Deposit to Project Construction Fund $9,825,000.00
Total Uses $10,775,951.06
Net Debt service
through
mandatory
redemption on
May 1, 2026
At closing of the 2024 Bonds, the City will
deposit funds for:
• The loan interest cost through May 1, 2026
(the mandatory redemption)
• Financing costs of issuance
• Underwriter’s discount
• Interest deposit will make debt service
(interest) payments through redemption
• USDA loan will provide the funding to
redeem the principal
Period Ending Principal Coupon Interest
Total Debt
Service
Capitalized/
Prefunded
Interest Net Debt Service
5/1/2025 - $351,107 $351,107 ($351,107) -
5/1/2026 - 380,719 380,719 (380,719) -
5/1/2027 $390,000 3.875% 380,719 770,719 - $770,719
5/1/2028 405,000 3.875% 365,606 770,606 - 770,606
5/1/2029 420,000 3.875% 349,913 769,913 - 769,913
5/1/2030 435,000 3.875% 333,638 768,638 - 768,638
5/1/2031 450,000 3.875% 316,781 766,781 - 766,781
5/1/2032 470,000 3.875% 299,344 769,344 - 769,344
5/1/2033 485,000 3.875% 281,131 766,131 - 766,131
5/1/2034 505,000 3.875% 262,338 767,338 - 767,338
5/1/2035 525,000 3.875% 242,769 767,769 - 767,769
5/1/2036 545,000 3.875% 222,425 767,425 - 767,425
5/1/2037 565,000 3.875% 201,306 766,306 - 766,306
5/1/2038 590,000 3.875% 179,413 769,413 - 769,413
5/1/2039 610,000 3.875% 156,550 766,550 - 766,550
5/1/2040 635,000 3.875% 132,913 767,913 - 767,913
5/1/2041 660,000 3.875% 108,306 768,306 - 768,306
5/1/2042 685,000 3.875% 82,731 767,731 - 767,731
5/1/2043 710,000 3.875% 56,188 766,188 - 766,188
5/1/2044 740,000 3.875% 28,675 768,675 - 768,675
Total $9,825,000 - $4,732,570 $14,557,570 ($731,826) $13,825,744 5 Documents Being Approved Tonight
Authorizing Resolutions
Authorize the Authority to issue bonds in a principal amount not to exceed $9,825,000 to finance the Project, and authorizes City and Authority staff to execute the legal documents for the 2024 Bonds
Site Lease
Agreement between the City as lessor and the Authority as lessee, under which the City leases the Leased Property to the Authority in consideration of the payment of an upfront amount which will be used by City to construct the Community Center Project Lease Agreement
Agreement between the Authority as lessor and the City as lessee, under which the Authority leases the Leased Property back to the City and the City agrees to pay semiannual lease payments to provide revenues with which to pay principal and interest on the 2024 Bonds when due Indenture of Trust
Provides for execution and delivery of the 2024 Bonds and lays out the covenants and specifics of the 2024 Bonds, as well as the prepayment options.
Trustee’s duties, repayment mechanisms, default and remedies provisions, and Bondholder’s associated rights and remedies Assignment Agreement
Provides the terms and conditions under which the Authority assigns the City’s lease payments to the Trustee, for ultimate payment to Bondholders Bond Purchase Agreement
Agreement with Hilltop Securities under which Hilltop Securities agrees to purchase the 2024 Bonds; establishes closing requirements and closing document and opinion deliverables
Preliminary Official Statement
The document that provides disclosure of the City and the City financings to investors and potential investors of the 2024 Bonds Continuing Disclosure Certificate
Certificate of the City to provide annual reporting and ongoing significant events reporting 6 Finance Team Professionals
Project Oversight: City of Gonzales
Financial Advisor: NHA Advisors
Bond and Disclosure Counsel: Kutak Rock
Underwriter: Hilltop Securities
Trustee: US Bank
7 Timeline
May 6, 2024
• City Council Approval
Mid-May
• City completes rating
process for the Bonds
• Underwriter begins
pre-marketing
Late May
• Bonds priced in bond
market
June
• 2024 Bonds closed and
funded