City of Gonzales
CITY MANAGER DEPARTMENT
STAFF REPORT
TO: Honorable Mayor Rios and City Council
DATE: March 2, 2026
FROM: Carmen Gil, City Manager
THROUGH: Carmen Gil, City Manager
SUBJECT: Resolution No. 2026-10 and Resolution No. FA-2026-01 Amendment to the Indenture in Connection with the Lease Revenue Bonds, Series 2024A
RECOMMENDATION
It is recommended that the City Council of the City of Gonzales and the Authority Board of Directors receive this staff report and consider adoption of the following Resolutions:
1) Resolution No. 2026-10, A Resolution of the City Council of the City of Gonzales Authorizing the Amendment to the Indenture in Connection with the Gonzales Public Financing Authority Lease Revenue Bonds, Series 2024A, Approving the Execution and Delivery of such Amendment and Authorizing the Execution of Necessary Documents and Certificates and Related Actions 2) Resolution No. FA-2026-01, A Resolution of the Gonzales Public Financing Authority Authorizing the Amendment to the Indenture in Connection with the Gonzales Public Financing Authority Lease Revenue Bonds, Series 2024A, Approving the Execution and Delivery of such Amendment and Authorizing the Execution of Necessary Documents and Certificates and Related Actions
These resolutions authorize the execution and delivery of the necessary documents required by the City and Authority in connection with the amendment of the Gonzales Public Financing Authority Lease Revenue Bonds, Series 2024A (the “2024 Bonds”), which were issued on June 6, 2024, to provide interim funding for Phase 1 of the Community Center Complex Project. Such authorization will allow the City to proceed with extending the mandatory redemption date of the 2024 Bonds from May 1, 2026 to June 1, 2027 to align with the revised timing of the closing of the United States Department of Agriculture – Rural Development Loan (the “USDA Loan”) that will be used to refinance the 2024 Bonds on a longterm basis.
AGENDA
ITEM
10 BACKGROUND
The grand opening of Phase 1 of the Community Center Complex (the “Project”) took place on Saturday, January 10, 2026. Funding for the Project is comprised of several sources, including the following:
• $5 Million State grant for the Teen Innovation Center • Community Development Block Grant funds
• $1.8 Million County contribution to relocate existing library • $1 Million State Building Forward Library Infrastructure Grant Program • $500 Electric Vehicle Charging Station Grant from the California Energy Commission • Over $6 Million in Capital Campaign pledges and contributions • City Measure X Funds
• $9.825M USDA Loan
The USDA Loan mentioned above required interim funding while the Project was being constructed; therefore, on May 6, 2024, the City Council and the Authority Board of Directors adopted Resolution No. 2024-12 and Resolution No. FA-2024-01, respectively, authorizing the issuance of the Gonzales Public Financing Authority Lease Revenue Bonds, Series 2024A, which provided the required interim funding for the Project.
The 2024 Bonds were issued on June 6, 2024, with a 4.00% true interest cost, and the City has been using the proceeds of the 2024 Bonds to pay construction costs associated with the Project. The 2024 Bonds were strategically structured with a first optional redemption date of November 1, 2025, and a mandatory redemption on May 1, 2026, so that upon completion of construction of the Project, the City would apply its permanent loan with USDA to refinance the 2024 Bonds on a long-term basis.
REVIEW AND ANALYSIS
USDA has obligated funds to make the USDA Loan to the City and has committed to make the USDA Loan. Among the conditions to be met prior to the closing of the USDA Loan is USDA’s approval of each expenditure with respect to the Project. The City has been working diligently to obtain USDA’s approval of each expenditure, including contractor invoices, with respect to the Project. However, USDA has indicated that it will not be able to approve all such expenditures by May 1, 2026, and consequently, will not be able to close the USDA Loan by May 1, 2026, the mandatory redemption date of the 2024 Bonds.
Accordingly, the City wishes to amend the Indenture of the 2024 Bonds: (i) to extend the mandatory redemption date applicable to the 2024 Bonds from May 1, 2026, to June 1, 2027; and (ii) to extend the optional redemption date applicable to the 2024 Bonds from November 1, 2025 to November 1, 2026.
USDA is expected to have reviewed all expenditures with respect to the Project by June 1, 2027, which will enable USDA to close the USDA Loan, and the City would then apply the USDA Loan to refinance the 2024 Bonds on a long-term basis.
In order to amend the mandatory redemption date and optional redemption date of the 2024 Bonds, the City proposes to enter into the First Amendment to Indenture of the 2024 Bonds, whereby the mandatory redemption date and optional redemption date shall be amended, subject to obtaining consents to the amendment from the holders of the 2024 Bonds.
Based on preliminary discussions by the City’s consultants with holders of the 2024 Bonds, staff currently expects most bondholders to consent to the amendment of the mandatory redemption date and optional redemption date. Any bondholders that do not consent will be paid in full on May 1, 2026, which will enable the City to borrow a correspondingly reduced amount under the USDA Loan when the USDA Loan closes.
Financing Documents:
Being presented for approval by the City Council and the Authority Board of Directors, as applicable, are the following documents:
Authorizing Resolutions:
Resolutions authorizing the First Amendment to Indenture of the 2024 Bonds and authorizing the City and Authority to execute the necessary documents and certificates and related actions for the amendment.
First Amendment to Indenture:
An amendment to the Indenture, among the City, Authority, and U.S. Bank as trustee for the 2024 Bonds, extending the mandatory redemption date from May 1, 2026 to June 1, 2027; and extending the optional redemption date from November 1, 2025 to November 1, 2026.
Schedule:
If the City Council and the Authority Board of Directors approve their respective resolutions, City staff will work with the financing team to extend the mandatory redemption date and optional redemption date of the 2024 Bonds as described above. Below is a summary of the anticipated schedule:
Date Activity
March 2, 2026 City Council and Authority Board of Directors Approve Resolutions March 3, 2026 Distribute the Amendment Solicitation to 2024 Bondholders March 20, 2026 Solicitation Period Expires
March 25, 2026 Exchange Date for 2024 Bondholders Consenting to the Amendment May 1, 2026 Accrued Interest Paid to Consenting Bondholders; Principal + Accrued Interest Paid to Non-Consenting Bondholders
Explain Recommendation and How it Supports the Mission
Gonzales will continue to be a safe, clean, family-friendly community, diverse in its heritage, and committed to working collaboratively to preserve and retain its small-town charm.
Explain: The construction of the Community Center will provide residents with a facility for a wide variety of public and private functions, recreation programs and other activities which will enhance the quality of life of Gonzales residents.
Explain how the Recommendation Directly Implements the Vision The City Council and Staff of the City of Gonzales will realize our Vision by providing the leadership, commitment and resources necessary to provide excellent services that enhance the quality of life of our diverse community. X Yes ____ No____ N/A
Explain: Please see explanation above for the Mission.
City services will be delivered in a cost-effective, respectful and friendly manner to insure the safety and well-being of the residents and the promotion of business, recreational, housing and employment opportunities in an environmentally sustainable manner. X Yes ____No ____ N/A Explain: Please see explanation above for the Mission.
Strong fiscal policies allow us to provide appropriate infrastructure for:
• Public Safety Yes __X_ No ___ N/A
• Housing Yes __X_ No ___ N/A
• Recreation X Yes ____ No ___ N/A
• Environment X Yes ____ No ___ N/A
• Education X Yes ____ No ___ N/A
Explain: Please see explanation above for the Vision.
ALTERNATIVES
The City may elect not to amend the Indenture for the 2024 Bonds; however, doing so would result in the $9,825,000 of outstanding principal on the 2024 Bonds being subject to mandatory redemption on May 1, 2026. In that scenario, the City would need to either issue lease revenue refunding bonds in a public offering transaction (similar to the 2024 Bonds transaction) or enter into a private placement with a lender to pay off the $9,825,000. Both alternatives would need to be executed on an expedited basis to meet the May 1, 2026 mandatory redemption deadline. The estimated interest cost of these alternatives is higher than the cost associated with the proposed amendment, and the longer execution timelines introduce additional risk. Accordingly, these alternatives are not recommended.
BUDGET IMPACT
There are several costs associated with the proposed amendment. Upon settlement of the amendment, anticipated for March 25, 2026, the City will pay financing costs to the consultants assisting with the process, which are estimated at $79,325. On May 1, 2026, the City will be responsible for paying accrued interest to bondholders who consent to the amendment and principal plus accrued interest to bondholders who do not consent. The accrued interest owed to both consenting and non-consenting bondholders will be paid from capitalized interest funds held by the Trustee and will therefore have no direct budgetary impact on the City. The principal payment to non-consenting bondholders is currently estimated at $845,000 which the City will need to pay from its own funds, including moneys in the 2024 Bonds project fund that are no longer needed to complete the 2024 Project. As a result of the bond extension, interest payments will next be due on November 1, 2026, May 1, 2027, and June 1, 2027, which is the amended mandatory redemption date. A portion of the November 1, 2026 interest payment is expected to be covered by remaining capitalized interest funds; however, the City will need to budget for the remaining interest payments in FY 2026-27. The exact schedule and amounts of interest payments in FY 2026-27 will be finalized after the amendment is settled, which is currently anticipated to occur on March 25, 2026. The principal amount that will be subject to mandatory redemption on June 1, 2027 will be refinanced on a long-term basis with the USDA Loan. The City will also budget approximately $75,500, to be paid on June 1, 2027, representing the financing costs associated with the closing of the USDA Loan.
CONCLUSION
It is recommended that the City Council and the Authority Board of Directors receive this staff report and consider adoption of the following Resolutions:
1) Resolution No. 2026-10, A Resolution of the City Council of the City of Gonzales Authorizing the Amendment to the Indenture in Connection with the Gonzales Public Financing Authority Lease Revenue Bonds, Series 2024A, Approving the Execution and Delivery of such Amendment and Authorizing the Execution of Necessary Documents and Certificates and Related Actions 2) Resolution No. FA-2026-01, A Resolution of the Gonzales Public Financing Authority Authorizing the Amendment to the Indenture in Connection with the Gonzales Public Financing Authority Lease Revenue Bonds, Series 2024A, Approving the Execution and Delivery of such Amendment and Authorizing the Execution of Necessary Documents and Certificates and Related Actions
Attachments:
1. Resolution No. 2026-10
2. Resolution No. FA-2026-01
3. First Amendment to Indenture 2024 Lease Revenue Bonds (2026)