DATE:
May 16, 2023
TO:
Mayor and City Council Members
FROM:
Nils Bentsen, City Manager
BY:
Casey Brooksher, Director of Administrative Services
SUBJECT:
Proposed Early Retirement of 2018 San Bernardino County Transportation Authority (SBCTA) Loan
RECOMMENDED ACTION
It is recommended that the City Council authorize the proposed early retirement of the 2018 San Bernardino County Transportation Authority (SBCTA) Loan and approve Resolution No. 2023-26, amending the Fiscal Year (FY) 2022-23 Budget for the final principal and interest payment.
BACKGROUND
On May 1, 2018, the City of Hesperia approved a loan from the SBCTA in the amount of $18,762,403 to fund the City’s share of the construction of the interchange at Interstate 15 and Ranchero Road. The loan bears interest at variable rates based on the December quarterly Local Agency investment Fund (LAIF). The loan is paid from Development Impact Fees – Streets (DIF Streets) funds, with annual principal payments of $1,876,240 plus accrued interest, and is scheduled to mature on March 15, 2028. The current principal balance of the 2018 SBCTA Loan is $9,381,202.
ISSUES/ANALYSIS
During the preparation of the FY 2023-24 Budget, an analysis performed on the 2018 SBCTA Loan revealed an opportunity to retire the remaining principal obligation nearly 5 (five) years before the scheduled maturity, at an estimated savings of $820,855 (compared to variable rate interest estimated at 3.5% over the remaining debt service schedule).
DIF Streets revenue received from large industrial projects located along the I-15 freeway, along with the recent sale of vacant land remaining after completion of the Ranchero Interchange construction project has resulted in Streets DIF funds that are sufficient for the early retirement for the 2018 SBCTA debt obligation. Because the interest on the 2018 SBCTA Loan is variable, an estimate to retire the debt by June 30, 2023 is $9,545,373, which includes $9,381,202 in outstanding principal and $164,171 in interest estimated at 3.5% for the six-month period ending June 30, 2023.
According to the terms of the 2018 SBCTA Loan agreement, the City’s ability to fund construction improvement projects (CIP) using DIF Streets funds is limited to projects that were outlined in the 2018 loan agreement for which DIF Streets funds had already been committed, including projects involving Ranchero Road and Main Street. Projects that were not identified in the 2018 SBCTA agreement, but would otherwise be eligible for DIF Streets funding, are precluded from being funded by DIF Streets until the loan is repaid in full.
Early repayment of the 2018 SBCTA Loan is recommended due to the availability of DIF Streets funds. If approved, the early retirement of the debt is projected to result in an estimated $820,855 in interest savings from retiring the debt nearly five years in advance of its maturity date. In addition, the City will be released from the Streets DIF project funding restrictions upon full repayment of the loan.
FISCAL IMPACT
The estimate to retire the 2018 SBCTA Loan by June 30, 2023 is $9,545,373, which includes $9,381,202 in principal and $164,171 in interest estimated at 3.5% for the six-month period ending June 30, 2023. Using available reserves within Streets DIF Funds 300 and 306 to retire the debt nearly five (5) years early is projected to save approximately $820,855 in interest, versus following the existing amortization schedule with a variable interest rate estimated at 3.5%. If the early retirement of the debt is approved, Resolution No. 2023-26 will be needed in order to amend the FY 2022-23 Budget for the loan repayment to SBCTA.
ALTERNATIVE(S)
Provide alternative direction to staff.
ATTACHMENT(S)
Resolution No. 2023-26
City of Hesperia STAFF REPORT City of Hesperia STAFF REPORT City of Hesperia
STAFF REPORT
City of Hesperia
STAFF REPORT
Staff Report to the City Council
Proposed Early Retirement of 2018 San Bernardino County Transportation Authority (SBCTA) Loan May 16, 2023