CITY OF SAN JOSÉ FINANCING AUTHORITY
COMMERCIAL PAPER PROGRAM
Jeffrey Provenzano, Director of Environmental Services
Maria Öberg, Director of Finance
Qianyu Sun, Deputy Director of Finance – Debt and Treasury Management COUNCIL/SJFA AGENDA: MAY 6, 2025
ITEMS: 1&2
FILES: 25-475 & 25-476
CITY OF SAN JOSÉ FINANCING AUTHORITY
• A joint exercise powers authority (“JPA”) created by the City and the former Redevelopment Agency (“Former Agency”) of San José on December 8, 1992
• T o issue debt to finance the acquisition, construction and improvement of certain public capital improvements
• Former Agency dissolved in 2012 and the City became the successor agency to the Former Agency. The JPA remains in effect. • The City Council is the governing board of the Authority. The City Manager is the Executive Director, the City Clerk is the Secretary, and the Director of Finance is the Treasurer.
2 COMMERCIAL PAPER PROGRAM
• The City and CSJFA established the program in 2004
• Utilize a lease revenue financing structure, where the City pledges certain assets to CSJFA
• CSJFA can issue up to $175 million of CP Notes (taxable and tax-exempt) up to 270 days
• Maturing notes are either paid in full (principal and interest) or “rolled” to the following maturity date (interest may be capitalized) • Short-term or interim borrowing at variable interest rate • Secured by lease payments, pledged assets and a letter of credit (currently by US Bank, expires on June 20, 2025)
3 CP PROGRAM – BENEFITS & RISKS
4 Benefits Risks
Short-term financing LOC renewal
Lower cost of borrowing Variable interest rate
No additional liens on CIP Downgrade of LOC Bank
Flexible amortization Marketability of CP Notes
AGREEMENT WITH TD BANK
• TD Bank maintains strong credit ratings
• Commitment of $175 million for Series 1 Notes up to five years • Competitive fees – expect to save the City $112,000 annually 5 City Lease Revenue Debt Rating
(Moody’s/S&P/Fitch) Commitment Fee Rate
Aa2/AA/AA or above 0.32%
Agency Long-term Short-term Outlook
Moody’s A2 P-1 Stable
S & P A+ A-1 Stable
Fitch AA- F1+ Negative
KEY FINANCING TEAM MEMBERS
6 Municipal Advisor Public Resources Advisory Group
Note Counsel Anzel Galvan LLP
LOC Bank TD Bank N.A.
LOC Bank Counsel Chapman & Cutler LLP
CP Dealers Barclays, Morgan Stanley, TD Securities
7 MUNI WATER AMI PROJECT DESCRIPTION
• Installation of the Advanced Metering
Infrastructure technology to 27,000 meters
• Configuration of hosted software
• Meet water conservation targets
• Improve customer service
• Construction period of 2-3 years
• Expected useful life 15-20 years
FINANCING OF THE AMI PROJECT
• Issuance of tax-exempt CP notes up to for $23 million for the purchase and installation of AMI project
• The CP notes principal will be amortized over 10 years after the AMI Project is completed
• Source of payment - Water Utility Capital Fund
• CP Fees on the AMI Project
o Commitment Fee – 0.38% until May 20, then 0.32%
o Dealer Fee – 0.045%
o Misc. Annual Fees – 0.12%
8 UTILIZATION OF CSJFA CP PROGRAM
9 Project
CP Notes
Outstanding
Remaining
Authorization
Proposed
Authorization
Program
Utilization
2017 Flood Improvements -
PRNS $652,000 $5,031,000 $5,683,000
Energy Purchases - SJCE 75,000,000 75,000,000
ESCO Conservation - PW
5,015,000 5,015,000
Muni Water Building - ESD
40,000,000 40,000,000
Muni Water Advanced
Metering - ESD $23,000,000 23,000,000
Tot a l $5,667,000 $120,031,000 $23,000,000 $148,698,000 ITEM 1 RECOMMENDATIONS
Adopt a resolution approving and authorizing the execution and delivery of a letter of credit and reimbursement agreement; a fee agreement; amendments to certain financing documents; and authorizing other related actions to provide for the issuance of a letter of credit to support the City of San José Financing Authority’s Lease Revenue Commercial Paper Notes Program and for the release of certain components of the property under the site lease and the sublease, and authorizing the negotiation, execution and delivery of one or more extensions of the expiration date of such letter of credit.
10 ITEM 2 RECOMMENDATIONS
• Conduct a public hearing in accordance with Section 6586.5 of the California Government Code; and
• Adopt a resolution to approve and authorize the issuance of lease revenue commercial paper notes in the amount not to exceed $23,000,000 to finance the purchase and installation of the AMI Project.
UNDER BOTH THE DEBT MANAGEMENT POLICY AND SAN JOSE MUNICIPAL CODE SECTION 4.34.200, APPROVAL OF THE ISSUANCE OF THESE CP NOTES REQUIRES A TWO-THIRDS VOTE BY THE CITY COUNCIL (8 VOTES).
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