27 September 22, 2026
Honorable Mayor and City Council
City of Long Beach
California
RECOMMENDATION:
Recommendation to approve Resolution of the City Council of the City of Long Beach approving the implementation of a revolving credit facility lease financing with Wells Fargo Bank, National Association in an aggregate principal amount not to exceed $50,000,000 outstanding at any one time, for a maximum period of one year, and backed by the General Fund, to bridge finance various capital projects for the City of Long Beach, approving the forms and authorizing execution of related documents and approving related official actions. (Citywide)
DISCUSSION
Elsewhere on the September 22 meeting agenda are recommendations to approve separate but parallel requests from the Board of Public Utilities Commissioners for medium-term (3-year), revolving credit facility lease financings with Wells Fargo Bank, National Association (“Wells Fargo”): one for $60,000,000 maximum for the Gas Utility Fund, and the other for $45,000,000 maximum for the Sewer Utility Fund. The Utilities Department anticipates using this medium- term financing to get started immediately on critical facility needs as part of their capital improvement program, and eventually to “take out,” or repay, the medium-term (three years) financing with long-term municipal bonds – bonds that will also require City Council review and approval.
In light of the expected adoption of the Public Works Department’s FY 27 Capital Improvement Program, staff believes it expedient to piggyback on the Utilities Department’s bridge-financing process, and simultaneously recommend to City Council to adopt a resolution approving the implementation of a revolving credit facility lease financing with Wells Fargo Bank, National Association in an aggregate principal amount not to exceed $50,000,000 outstanding at any one time, for a maximum period of one year, and backed by the General Fund, to bridge finance various capital projects for the City of Long Beach, and approving the forms and authorizing execution of related documents and approving related official actions (referred to here as the “General Fund Revolving Line of Credit”), to be similarly prepared to cash-fund newly approved, critical capital improvement projects right away. Like the Utilities Department, City staff will eventually recommend long-term municipal bonds to “take out”, or repay, the short-term financing, or to use reaccumulated cash to do so.
Unlike tax-exempt municipal bonds, which are subject to strict spend-down requirements in the internal revenue code, short-term (one year) and medium-term (three years) revolving credit facilities lines of credit are not required by law to be drawn down and spent. They are contingent Financial Management
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Honorable Mayor and City Council
September 22, 2026
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financing, to be used if needed for capital project financing. Of course, there is a cost for contingent financing, even if never used. In this case, Wells Fargo Bank, National Association (“Wells Fargo”) will charge the City 30 basis points (3/10 of one percent) for any unused portion of the General Fund Revolving Line of Credit. So, for example, if the City ends up drawing on average only ½ of the $50,000,000 line of credit during the one-year period, then Wells Fargo will charge the City a “commitment fee” of .003 X $25,000,000 = $75,000.
More likely is that the City will need the contingent financing to pay for FY 27 capital improvement projects. Additional explanation of the cost of the proposed financing appears in the Fiscal Impact section below.
Two important technical aspects of the proposed General Fund Revolving Line of Credit merit further explanation. The first is the nature of pledged collateral. For a General Fund Revolving Line of Credit with lease financing and supported by the City’s general fund, the City is required to pledge City assets in a value equal to the maximum amount of the borrowing, in this case $50,000,000. Financing providers, in this case Wells Fargo, always require the City to pledge critical or essential assets as collateral – not because a bank wants to repossess the property, but in fact the opposite: to encourage the City to repay on time and in full in order to dissolve the bank’s leasehold interest in the pledged property. Neither Wells Fargo in this instance, nor any other bank, has ever had the power to take possession of a City asset pledged to lease financing.
Rather, the bank’s leasehold interest in pledged collateral serves only to buy time for the City to comply with payment terms in the (extremely unlikely) event the City fails to do so initially. Which it never has.
The City of Long Beach has decades of experience executing and utilizing this type of debt structure, both short-term and long-term. This debt structure has allowed the City to finance the demolition of the old county courthouse (allowing for the construction of the new civic center), improvements to Rainbow Harbor, public safety parking garages, traffic safety enhancements, upgrades to infrastructure and landscaping at municipal parks, libraries, and fire department facilities, and remains today the City’s main tool to finance long-term capital assets. Over the past 10 years, for example, the City has pledged 23 different Citywide assets, representing a collective asset value that exceeds $700,000,000. Because of the City’s strong budgeting and financial management practices, each one of the bond issues has received high credit ratings and strong bond market acceptance. All 23 previously pledged assets have remained continuously under City control and ownership, allowing uninterrupted operations to serve the City and its residents.
The second technical aspect of the transaction involves the Finance Authority of Long Beach (FALB). The Finance Authority of Long Beach is a joint powers authority (JPA) between the City of Long Beach and the Housing Authority of the City of Long Beach. The FALB was established by City Council in 2015 to facilitate City financing involving certificates of participation and lease revenue bonds. Utilizing a JPA structure to facilitate debt financings dates back to 1997, when the Long Beach Bond Finance Authority initially served that role. Today, the City routinely uses that same financial tool and legal structure to finance the City’s long term capital projects. Since the legal structure of the transaction is a “lease-leaseback” of the pledged City assets, the Finance Authority needed to review and approve the proposed transaction before City Council consideration. The Finance Authority did so at its meeting on August 5.
Honorable Mayor and City Council
September 22, 2026
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A Request for Qualifications (RFQ) was issued on February 25, 2026, to establish a Pool of Revolving Line of Credit Providers. City staff from all affected departments (Financial Management, Public Works, Harbor, Utilities and Airport) in conjunction with the City’s municipal advisors, (KNN Public Finance LLC, Public Resources Advisory Group, Inc., Frasca & Associates, LLC, and PFM Financial Advisors, LLC) compiled a list of over 25 potential firms to invite to submit their qualifications. Ultimately, six providers were qualified to participate in the Pool. On June 2, 2026, a Request for Information (RFI) was sent to the Pool requesting each firm to update their proposed interest rates and terms related to the General Fund Revolving Line of Credit to reflect current market dynamics. The City received four responses, of which Wells Fargo offered the most advantageous options.
This matter was reviewed by Deputy City Attorney Ashleigh Stone on September 4, 2026 and by Revenue Management Officer Valerie Valentine on September 04, 2026.
TIMING CONSIDERATIONS
City Council action is requested on September 22, 2026, to facilitate the closing of the transaction on the revolving credit line.
FISCAL IMPACT
Total aggregate principal amount of the General Fund Revolving Line of Credit will not exceed $50,000,000 outstanding at any one time. The one-time cost to establish the one-year General Fund Revolving Line of Credit, including bond and bank counsel, municipal advisor fees, and title documentation is estimated to be $180,000. A commitment fee of 0.3 percent will be applied on any unused portion of the line of credit. Assuming no funds are drawn, the annual commitment fee is estimated to be $150,000. Commitment fees are assessed and paid on a quarterly basis and those fees will ultimately be determined by use of the line. Both one-time fees and commitment fees are expected to be initially absorbed within current resources budgeted in the General Fund Group in the Treasury Bureau from department cost savings in the Financial Management Department.
If the General Fund Revolving Line of Credit were drawn upon immediately in the maximum amount of $50,000,000, at the current effective interest rate of 3.4 percent as of 8/26/2026, the maximum annual interest cost would be $1,718,000. However, staff is presenting costs from an estimated minimum and maximum perspective to demonstrate the cost limits of an approach that fully utilizes the line and an approach that does not fully utilize the credit line.
Actual annual interest costs will vary based on the amount drawn on the General Fund Revolving Line of Credit and at a variable interest rate. Should the City decide to use the line of credit and draw funds, the City will need to prepare for a take-out financing to pay off the line at the end of the year, which could be paid with bond proceeds or accumulated cash. The proposed General Fund Revolving Line of Credit as a financial product was structured and based on the credit strength of the City’s most creditworthy revenue stream, i.e., the General Fund. However, the General Fund Group itself will not be paying for the affected capital projects on the line of credit. Should draws on the line for capital projects occur, those fund groups will be responsible for the principal and interest costs for utilizing the line of credit and taking advantage of this bridge financing tool.
Honorable Mayor and City Council
September 22, 2026
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The proposed General Fund Revolving Line of Credit may only be used for capital project bridge-financing. It will not be used for operating purposes.
The proposed General Fund Revolving Line of Credit pertains to FY 27 Capital Improvement Program projects that have not yet begun, therefore, is separate and apart from the Series 2026 Lease Revenue bond sale of about $230,000,000 scheduled to be presented to City Council for consideration on October 6, 2026. That upcoming bond sale, the second tranche of the “[City] Measure A Infrastructure Bond Program”, will finance numerous capital projects that have already been completed or are already well under way.
This recommendation has no staffing impact beyond the normal budgeted scope of duties and is consistent with existing City Council priorities. There is no local job impact associated with this recommendation.
SUGGESTED ACTION:
Approve recommendation.
Respectfully submitted,
Kevin Riper
Director
Financial Management
ATTACHMENTS: ATTACHMENT A - LONG BEACH - GENERAL FUND - LOC - 2026 - CITY COUNCIL RESOLUTION
ATTACHMENT B - SITE AND FACILITY LEASE
ATTACHMENT C - LEASE AGREEMENT
ATTACHMENT D - FEE LETTER (LONG BEACH-WELLS FARGO) LEASE-LEASEBACK 4931-1507-1675 V6
ATTACHMENT E - LETTER AGREEMENT