RPVCCA_CC_SR_2014_03_18_02_San_Ramon_FundingCITY OF Rt\NCHO PALOS VERDES
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
REVIEWED:
HONORABLE MAYOR & MEMBERS OF THE CITY
COUNCIL
DENNIS McLEAN, DIRECTOR OF FINANCE &
INFORMATION TECHNOLOGY l{AJ itn {j(YL c
MARCH 18, 2014
FUNDING THE SAN RAMON CANYON
STABILIZATION PROJECT
CAROLYNN PETRU, ACTING CITY MANAGER<®
Staff Coordinator: Kathryn Downs, Deputy Director of Finance & Information
Technology l(f)
RECOMMENDATION
1. Receive and file this Staff Report and accompanying Memorandum from Magis
Advisors;
2. Receive the Recommendations of the Finance Advisory Committee regarding
funding the San Ramon Canyon Stabilization Project; and
3. Direct Staff to proceed with implementation of the recommendations made to the
City Council by the Finance Advisory Committee.
EXECUTIVE SUMMARY
Finance Advisory Committee Recommendation Regarding Funding for the San Ramon
Canyon Stabilization Project
At its meeting on February 26, 2014, the Finance Advisory Committee (FAC) received a
presentation by the City's Financial Advisor of funding options for the San Ramon Canyon
Stabilization Project (the City Council's highest-priority infrastructure project); which
includes the option to finance a portion of the project through the issuance of debt.
Subsequent to presentations by Staff and the City's Financial Advisor, as well as the
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March 18, 2014
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FAC's discussion, the FAC unanimously agreed that the FAC's recommendation to the
City Council should include the following:
• Do not issue debt for the San Ramon project;
• Fast-track preparation of the IMP;
• Develop an overall IMP that may include the use of debt; and
• Engage in public outreach (e.g. civic engagement, provide education about the
IMP and gain public trust).
At its meeting on March 5, 2014, the FAC finalized its recommendations to City Council
(see Attachment A). Staff and the City's Financial Advisor generally agree with the
recommendation provided by the FAC. However, the recommendation to fast track the
IMP is expected to be considered and discussed by the Director of Public Works when
the Report Card and the proposed IMP are considered by the City Council on April 15,
2014 (update provided at the end of this report).
Significant Debt Financing Decision Factors -San Ramon Canyon
During the discussion between the FAC and the City's Financial Advisor on February 25th,
FAC Members suggested that Staff provide a summary of the "decision points" whether
to debt finance the reimbursement of Reserves used during the Project. Accordingly,
Staff offers the following.
Estimated Reserves & Capital Improvement Plan Information
Based on the 2013 Five-Year Financial Model:
• Capital Improvement Project Reserves are estimated to be about $6.9 million
as June 30, 2014 and $4.9 million as of June 30, 2018; and
• General Fund Reserves are estimated to be about $9.8 million as June 30,
2014 and $10.8 million as of June 30, 2018.
The estimate for General Fund Reserves at June 30, 2014 were adjusted with the FY13-
14 Midyear Financial Report to $10.4 million.
Based on the 2013 Five-Year Capital Improvement Plan (CIP):
• About $45 million of CIP expenditures were programmed during the 5 years
ending June 30, 2018; and
• Known, unfunded CIP project costs range between $31.8 million and $44
million.
Decision Points
1) Will current Reserve levels be sufficient in the event that one or more additional
high-priority projects require funding in the near-term?
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2) Does the risk of a catastrophic event draining the City's Reserves support the net
cost of borrowing $10 million?
3) What is the risk of a borrowing cost differential if debt-financing becomes
necessary during the next 1 O years, and interest rates are higher?
Answers to the above three questions are not known, may require probability assessment
and are not easily quantifiable. However, based upon the "Illustration as of 2/17/14" for
the pro-forma Certificate of Participation (debt issuance) included in the attached "Debt
Financing for the San Ramon Canyon Stabilization Project", dated February 18, 2014,
prepared by Magis Advisors, the cost of borrowing the net amount of $10 million would
include initial issuance costs of about $300,000 and annual interest cost of about
$500,000. The annual debt service that would be borne by General fund resources would
be about $670,000.
If the City elected to repay the borrowing at the earliest available date (in the tenth year),
the City will have incurred about $4.6 million in interest charges over that time period.
This calculation is similar to that used in a home mortgage: the portion of the debt service
attributable to interest is higher in the earlier years and decreases over time. By
comparison, the City could earn interest on reserves held during the same period. At
current interest rates, these earnings would approximate about $1,200 per million dollars
on deposit, per year, assuming that the reserves were invested in one-year U.S. Treasury
bills.
If construction or acquisition costs for capital projects rise by the near-term projected rate
of inflation plus 0. 75% (mimicking the historical relationship between the ENR
Construction Cost Index for public works projects and changes in the Consumer Price
Index), a project costing $1.0 million today would cost perhaps $1.34 million in ten years.
As a result, a $10.0 million project undertaken today, which is debt financed, and which
is fully repaid in ten years, would have cost the City approximately $15.04 million (principal
and interest) versus about $13.4 million (inflated cost), if deferred. Thus, the "opportunity"
cost of completing that project today versus waiting for ten years would be about $1.64
million ($15.04 million over ten years, less $13.4 million assumed inflated cost, plus lost
interest earnings). A one-percent rise in interest rates would change the annual debt
service requirements by about $85,000 per year, from approximately $670,000 to
approximately $755,000 per year.
BACKGROUND & DISCUSSION
Deadline to Complete Financing of the San Ramon Canyon Stabilization Project -If City
Council Proceeds
When construction-related contracts for the San Ramon Canyon Stabilization Project (the
"Project") were approved by the City Council on March 5, 2013, Staff reported the
following:
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"The City was awarded a grant from the Disaster Preparedness and Flood
Prevention Bond Act of 2006 to assist in financing the San Ramon Canyon
Stormwater Flood Reduction Project for the Stormwater Flood Management
Program. The Grant is administered by the State Department of Water Resources.
The maximum dollar amount of reimbursement offered through this State grant
was set at $9, 464, 727; the total cost of the work eligible for 50150 cost sharing is
$18,929,455."
To date, the City's 50% share of the Project has been funded with the City's Reserves.
The immediate decision before the City Council is whether to issue debt to fund the City's
50% share of the Project, and reimburse the City's Reserves.
The City Council adopted a reimbursement resolution on August 21, 2012 which allows
the City to reimburse its Reserves (not to exceed $12 Million) in the event the City Council
decides to issue tax-exempt debt for the Project after construction begins. The resolution
did not obligate the City to issue debt; but it does preserve the City's ability to do so.
Internal Revenue Service regulation 1.150-2 is the guidance referred to in the
reimbursement resolution. In order to reimburse itself for the costs of the Project with
proceeds of tax-exempt debt, the City must sell the bonds within 18 months of the date
that the City pays the first construction invoice (occurred on June 4, 2013). Tim Schaefer
of Magis Advisors (the City's Financial Advisor) previously advised Staff and the City
Council that its decision needs to be made by mid-March 2014 in order to complete the
debt financing by December 2014 (if the City Council elects to proceed).
FAC Assignment
The 2012-13 Work Plan for the FAC included an assignment to "Review the Financing
Plan for the San Ramon Canyon Stabilization Project". On March 6, 2013, based upon
the request of Staff, the FAC agreed that a decision about debt financing the Project be
postponed until after an Infrastructure Management Plan is underway. On May 7, 2013,
the City Council awarded a contract to a SA Associates for preparation of an Infrastructure
Report Card. Staff advised the Council that the Report Card would precede the City
Council's consideration whether to develop the City's initial Infrastructure Management
Plan (the "IMP").
The City Council approved 2013-14 Work Plan for the FAC includes the following task.
"Study infrastructure financing alternatives in conjunction with Staff development of an
Infrastructure Management Plan and make recommendations to the City Council'.
The City's Infrastructure Report Card, as well as Staff's presentation about the IMP
process and the Financial Advisor's financing considerations were provided to the FAC.
Staff expects to update the FAC, if and as the IMP is developed.
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Debt Policy
The City has never issued public debt. The Government Finance Officers Association
(GFOA) recommends that state and local governments adopt comprehensive written debt
management policies. These policies should reflect local, state, and federal laws and
regulations. Several elements of a debt policy, as suggested by the GFOA could include:
•!• Purposes for which debt may be issued;
•!• Legal debt limitations, or limitations established by policy;
•!• Use of moral obligation pledges;
•!• Types of debt permitted to be issued and criteria for issuance;
•!• Structural features that may be considered;
•!• Credit objectives;
•!• Method of sale;
•!• Selection of external financial professionals;
•!• Refunding of debt;
•!• Disclosure (primary and secondary market);
•!• Compliance with federal tax law provisions, including arbitrage requirements;
•!• Integration of capital planning and debt financing activities; and
•!• Investment of bond proceeds where otherwise not covered by explicit written law
or written investment policy.
Even if the City Council decides not to debt-finance a portion of the San Ramon project,
Staff proposes that the City Council establish a formal debt policy in the near future to
outline the parameters of when and how the City would consider the use of debt.
Infrastructure Report Card/Infrastructure Management Plan Update
The City's website has been updated by Public Works with the background material,
information and evaluations related to the infrastructure report card, which was presented
to the City Council on February 10. The report card can be accessed from the Public
Works webpage under "Infrastructure Report Card" and includes all the existing
documents reviewed by the outside consultant who prepared the report card. Public
Works is scheduled to review the material with the City Council on April 15, provide
responses to questions and queries from the February 10 infrastructure workshop, and
present the scope of work and estimate of cost to prepare and complete an Infrastructure
Management Plan (IMP) on all eight infrastructure categories. The scope of work will
include a civic engagement component with two IMP delivery schedules based on a
citywide, ad-hoc public involvement process and a committee/commission process.
Attachments
A-Memorandum from the FAC dated March 5, 2014, including attached Staff Report to
FAC dated February 26, 2014
B -Memorandum from Magis Advisors titled "Debt Financing for the San Ramon Canyon
Stabilization Project" dated February 18, 2014
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To:
From:
Date:
Subject:
MEMORANDUM
Rancho Palos Verdes City Council
Finance Advisory Committee
March 5, 2014
Recommendations re funding of the San Ramon
Canyon Stabilization Project
Attachment A
On August 21, 2012, the City Council passed a resolution to preserve the right to
reimburse its reserves if the City were to decide to issue tax-exempt debt for the San
Ramon Canyon Stabilization Project.
Although the 2012-1013 Work Plan for the Finance Advisory Committee ("FAC")
included an assignment to "Review the Financing Plan for the San Ramon Canyon
Stabilization Project", Staff stated that it did not have sufficient information to present to
the FAC and recommended that discussion of this item be postponed until preparation of
an Infrastructure Management Plan ("IMP") was underway. The idea was that funding of
the San Ramon Canyon Project should not be considered in isolation, but rather as part of
an overall financial strategy.
On May 7, 2013, Staff recommended, and the City Council approved, the retention of SA
Associates to prepare an Infrastructure Report Card for the City at a cost of just under
$50,000 (not counting staff time). According to the staff report:
"The evaluation will describe whether a facility is in compliance with
current codes and best practices. It will further provide suggestions and
improvements including preventive maintenance, repair, alteration,
rehabilitation or replacement to bring the existing infrastructure into
compliance with current codes, best practices and satisfactory level of
service. The report will be supported by preliminary cost estimates
for the recommended improvements and maintenance."
Staff and SA Associates presented the City Council with the Infrastructure Report Card at
an Infrastructure Management Workshop held on February 10, 2014. Consistent with
past statements and projections from Staff, the Report Card confirmed that the City's
infrastructure needs are considerable and that those needs are likely to increase in the
future. With all due respect, the F AC does not believe that the Report Card satisfied the
criteria set forth above.
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Attachment A
The F AC met for the first time on February 26, 2014 to review and consider the debt
option for the San Ramon project. A copy of the staff report for that meeting is attached
hereto.
F AC received an oral presentation from Deputy Director of Finance & Information
Technology Kathryn Downs that underscored some of the concerns raised in the staff
report. It also received a memorandum entitled Debt Financing for the San Ramon
Canyon Stabilization Project, dated February 18, 2014, and an oral presentation from the
City's financial advisor, Tim Schaefer of Magis Advisors. Mr. Schaefer's presentation
was essentially the same as the one he presented to the City Council at the February 10,
2014 Infrastructure Management Workshop.
Mr. Schaefer agreed with Staffs recommendation that it now proceed to prepare an IMP,
but orally stated (1) that he is not in favor of putting the City in debt, and (2) that until
and unless a proper IMP is prepared, he is unable to make a data driven proposal
regarding debt financing for the San Ramon project. He concluded, both in his
memorandum and orally, that "there is insufficient data to make a persuasive argument
for incurring debt." F AC members asked a number of questions which were answered by
Mr. Schaefer, Ms. Downs and Director of Finance & Information Technology Dennis
McLean. They then discussed their respective positions concerning the advisability of
incurring debt in connection with financing of the San Ramon Project and the content and
extent of F AC recommendations to be submitted to the City Council. At the conclusion
of the meeting, a subcommittee was formed to prepare an initial draft of a memorandum
setting forth those recommendations.
Because we believe that the timing of any debt financing will continue to be an issue, one
of the members of the subcommittee met with City Manager Carolyn Petru, Public Works
Director Michael Throne, Mr. McLean and Ms. Downs, to discuss issues involving the
preparation of the proposed IMP, the capacity of the public works department to address
new projects, and the advisability of serially focusing on the categories set forth on the
report card.
The PAC met again on March 5, 2014 to discuss the San Ramon project in light of the
City's overall financial picture and to finalize this Memorandum. The F AC agreed to
minor changes to the initial draft of this Memorandum and unanimously agreed with the
following recommendations.
Recommendations
Following are the FAC's recommendations:
1. We recommend that the City not issue debt in connection with the San Ramon
Canyon Stabilization Project. This recommendation is based on the state of the City's
2
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Attachment A
finances and our knowledge, or lack of knowledge, concerning competing needs for
money in the future.
Because of revenues received from Terranea over the past four years, the City's reserves
are in better shape now than at any time in its prior 36 year history. At the end of the
current fiscal year (June 30, 2014), the City will have approximately $9-10 million in
general reserves and, even after funding the San Ramon Canyon Stabilization Project,
another $6.8 million in CIP reserves. The City established its reserve funds exactly for
an expenditure like the one that has been required for San Ramon Canyon. Staff has
advised us that the San Ramon Canyon project is proceeding as planned and should be
completed within budget. We are aware of no facts that would indicate that the
remaining amounts in the CIP reserves together with new revenues to be dedicated to
infrastructure will be insufficient to fund the capacity of the public works department
projects during the next three years.
A number of the infrastructure projects envisioned by the City could independently
support debt financing if and when they are approved. But even as to those projects, we
agree with Mr. Schaefer and with the position stated by Staff over a year ago when it
recommended postponing discussion of funding the San Ramon Canyon Stabilization
Project until after the City's infrastructure needs could be evaluated on a global basis.
Also, we agree with the distinction which has been made by Mr. Schaefer between
funding (paying for) expenses and financing (controlling the timing of paying for)
expenses. Any conversation concerning spending money should begin with where that
money is going to come from. Borrowing does not create a source for expenditures.
2. We support proceeding with preparation of an IMP, but recommend that the
City establish a considerably faster timetable than the 2-3 years initially envisioned
by Staff for such project. We agree with preparation of the IMP to obtain an overall
view of the City's infrastructure before making financing decisions concerning any
individual project. Although we understand that Staff believes the Infrastructure Report
Card was a good starting point and foundation for preparation of an IMP, we do not
believe that the cost or time expended in connection with preparation of that document
was justified. We suggest that the Council direct the City Manager to impose tighter
controls on the next phase.
More importantly, if the overall problem -infrastructure deficiencies and paying to
address those deficiencies -is as great as staff and SA Associates have suggested, then it
would seem that the City can ill afford to wait another three years before recommencing
the present conversation.
3. We understand that, based upon the IMP, Staff may in the future propose an
overall infrastructure financing plan including the use of debt and/or increased
taxes. We have no opinion at this time concerning the merits of any such proposal and
do not mean by the recommendations in this Memorandum to foreclose any future
discussions regarding debt financing. The City has not issued debt before and we believe
3
2-8
Attachment A
it is important that any decision in this regard should be based on evidence that is well
established. We agree with the City's outside financial advisor that "making a decision
to borrow money is almost always better informed by reference to a policy and a plan
than to the needs of a particular transaction."
4. We recommend that the City engage in public outreach with respect to the need
for addressing its infrastructure problems and obtain public input with respect to
the choices for funding solutions to those problems. Comparisons of statistics such as
revenues per capita and capital outlay per capita of South Bay cities disclose that Rancho
Palos Verdes has historically had a minimalist view of government and taxes. But, as
Staff has repeatedly warned, and as the recent Infrastructure Report Card confirms, our
City has reached an age where storm drains, sewers and buildings need to be addressed -
and will continue to need to be addressed.
To what extent, and in what order, is something on which the public can weigh in only
with objective information. An IMP will provide one set of answers, but, depending on
how long preparation of that document will take, we believe that the City should begin
scheduling public workshops sooner rather than later.
4
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Attachment A
CITY OF RANCHO PALOS VERDES
MEMORANDUM
TO:
FROM:
DATE:
SUBJECT:
HONORABLE CHAIR & MEMBERS OF THE FINANCE
ADVISORY COMMITTEE
DENNIS McLEAN, DIRECTOR OF FINANCE &
INFORMATION TECHNOLOGY
KATHRYN DOWNS, DEPUTY DIRECTOR OF FINANCE
& INFORMATION TECHNOLOGY
FEBRUARY 26, 2014
FUNDING THE SAN RAMON CANYON
RECOMMENDATION
1. Receive and file the information within this Staff Report and its attachments; and
2. Prepare any comments and/or recommendations to the City Council.
BACKGROUND
Finance Advisory Committee Assignment
The 2012-13 Work Plan for the Finance Advisory Committee (FAC) included an
assignment to "Review the Financing Plan for the San Ramon Canyon Stabilization
Project". On March 6, 2013, the FAC recommended that a decision about debt financing
the San Ramon Canyon Stabilization Project be postponed until after an Infrastructure
Management Plan is underway. On May 7, 2013, the City Council awarded a contract to
a consultant for preparation of an Infrastructure Report Card, which may be used to
develop the City's initial Infrastructure Management Plan (IMP). On June 1, 2013, the
City Council followed the FAC recommendation by deferring the decision until more
information is available about the condition of the City's infrastructure, based upon
completion of the Infrastructure Report Card.
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FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
February 26, 2014
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Attachment A
The City Council approved 2013-14 Work Plan for the FAG includes the following task.
"Study infrastructure financing alternatives in conjunction with Staff development of an
Infrastructure Management Plan and make recommendations to the City Councif'.
Staff has recommended preparation of an IMP; which would identify the City's long-term
infrastructure needs (both actual projects and patterns of rehabilitation/replacement), as
well as funding options (e.g. use of restricted and non-restricted monies, new revenue
sources, etc.). The IMP would also enable the City to better evaluate debt financing, if
debt is required to meet long-term needs. Based on discussion during the Infrastructure
Workshop and at a subsequent Council meeting, Staff expects the City Council will direct
and appropriate the preparation of an IMP. Staff expects that additional reports will be
presented to the FAG for study and development of recommendations to City Council.
Purpose of February 261h Meeting
The purpose of this meeting is for the FAG to consider funding options for the San Ramon
Canyon Stabilization Project (the City Council's highest-priority infrastructure project);
which includes the option to finance a portion of the project through the issuance of debt.
When construction-related contracts for the Project were approved by the City Council on
March 5, 2013, Public Works Staff reported the following:
"The City was awarded a grant from the Disaster Preparedness and Flood
Prevention Bond Act of 2006 to assist in financing the San Ramon Canyon
Stormwater Flood Reduction Project for the Stormwater Flood Management
Program. The Grant is administered by the State Department of Water Resources.
The maximum dollar amount of reimbursement offered through this State grant
was set at $9,464, 727; the total cost of the work eligible for 50150 cost sharing is
$18, 929, 455."
To date, the City's 50% share of the San Ramon Project has been appropriated and
funded with the City's Reserves. The immediate decision before the City Council is
whether to issue debt to fund the City's 50% share of the project, and reimburse the City's
Reserves. Any recommendations developed by the F AC will be forwarded to the City
Council for its consideration of the matter, tentatively scheduled for March 18, 2014.
Deadline to Complete Financing of the San Ramon Project
The City Council adopted a reimbursement resolution on August 21, 2012 which allows
the City to reimburse its Reserves (not to exceed $12 Million) in the event the City Council
decides to issue tax-exempt debt for the San Ramon project after construction begins.
The resolution does not obligate the City to issue debt; but it does preserve the City's
ability to do so. Internal Revenue Service regulation 1.150-2 is the guidance referred to
in the reimbursement resolution. In order to reimburse itself for the costs of the San
Ramon project with proceeds of tax-exempt debt, the City must sell the bonds within 18
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FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
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Page 3 of 11
Attachment A
months of the date that the City pays the first construction invoice (occurred on June 4,
2013). Tim Schaefer of Magis Advisors (the City's Financial Advisor), has advised the
City that a City Council decision needs to be made by mid-March 2014 in order to
complete the debt financing by December 2014.
Infrastructure Report Card and Infrastructure Management Plan
Prior to this meeting, the Finance Advisory Committee was provided with the City's
Infrastructure Report Card and the PowerPoint presentations regarding the Report Card,
the IMP process and financing considerations that were presented to the City Council on
February 10, 2014; which can be found at the following link:
http://www.palosverdes.com/rpv/citycouncil/agendas/2014 Agendas/MeetingDate-
2014-02-10/
An Infrastructure Report Card, or assessment of current condition, was the first step
leading to development of an IMP. The Staff Report to the City Council, dated February
10, 2014, states:
"It is a snapshot in a moment of time: it does not evaluate community needs and
priorities nor is it an in-depth assessment. It is a data driven, objective review of
our public improvements that grades the existing state of the infrastructure in a city
on an established scale from Exceptional ("A'/ to Failing ("F'j. The grades are
selected based on criterion developed by the American Society of Civil Engineers
(ASCE) guidelines that have been consistently used for almost two decades."
The City's Infrastructure Report Card was developed by SA Associates, a team of
independent licensed civil engineers specialized in each category of infrastructure that
was graded. SA Associates has prepared a similar report card for both the City of Los
Angeles and Los Angeles County. The report card format was based upon similar report
cards prepared for the counties of Orange and San Diego.
The 2013 Infrastructure Report Card includes letter grades assigned to the overall
condition of each segment of infrastructure, as follows:
Public Buildings D
Park Sites B
Trails A
Storm Water System c
Sanitary Sewer System D
Abalone Cove Sanitary Sewer System D
Right of Way/Traffic Control Devices A
PVDS Landslide D
The letter grades follow a traditional scale of: A=Exceptional, B=Good, C=Average,
D=Poor, and F=Failing.
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FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
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Page 4 of 11
Attachment A
On February 10, 2014, the City Council directed Staff to bring back the City's Report Card
with the existing reports and data used in its preparation for the 8 different categories of
infrastructure and present the information to the City Council by April 151h.
DISCUSSION
Report and Presentation by Magis Advisors
In addition to the information previously forwarded to the FAC and the information
contained within this report, the City's Financial Advisor has prepared the attached report,
titled "Debt Financing for the San Ramon Canyon Stabilization Project" (the "Report"),
dated February 18, 2014, that provides the FAC and City Council with a summary of
criteria for consideration regarding whether or not to issue debt to reimburse the City's
Reserves. The City's Financial Advisor will deliver a presentation to the FAC regarding
the funding of infrastructure and the potential tax-free debt-financing of the San Ramon
project. Mr. Schaefer presented the following documents to the City Council on June 1,
2013 in preparation for its decision to finance the San Ramon project. The documents
have been updated and are attached the Report.
Attachments:
A. Checklist of Steps in a Debt Financing;
B. Debt Illustration for General Obligation Bonds; and
C. Debt Illustration for Certificates of Participation.
Mr. Schaefer's Report includes both factors favoring use of debt and not.
Summary of Existing Funding for Infrastructure
There are two costs associated with infrastructure: 1) maintenance; and 2) rehabilitation
or replacement. The costs of maintenance, such as sealing cracks in a City parking lot,
are not capitalized as they do not significantly extend the useful life of the infrastructure.
Proper maintenance can postpone rehabilitation or replacement, but cannot eliminate it.
This discussion focuses on the funding for rehabilitation or replacement.
Currently, the City has the following annual sources of revenue for infrastructure
rehabilitation or replacement.
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FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
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Page 5of11
'Sources are restricted and vary from year to
Various Grants & Other year. Examples include project-specific
One-Time Revenues grants and Quimby Act Developer Fees.
General Fund Historical contribution to residential street
Unrestricted Revenue rehabilitation.
General Fund
Unrestricted Transient Used for infrastructure projects per City
Occupancy}'~x , Coundl Reserve Policy.
General Fund
Expenditure Variance Used for infrastructure projects per City
(historical average)
~~til~~i!Q~ti~l~f&~!t~~i~t
Attachment A
1.00
1.60 1.60
3.70 3.70
Staff offers the following observations regarding these sources of infrastructure funding.
);;;-Proposition C sales tax is used solely for repaving Palos Verdes Drive South
(PVDS) in the landslide area. The cost of maintaining PVDS in a drivable condition
does not extend the useful life of the roadway; which must be rehabilitated nearly
quarterly (four times per year).
);;;-The Storm Drain User Fee sunsets in 2016. Unless a substitute fee is established
by the property owners or voters, there will be no dedicated revenue source for
storm drain renewal. Outside funding sources (e.g. grants and apportionments
from other agencies) are not commonly available for storm drains. The City's
Proposition 1 E grant for the San Ramon project was unique in that it came from a
state bond issue for stormwater projects amidst public reaction to the damage
caused by Hurricane Katrina. Public Works Staff does not expect that the City will
receive another grant opportunity such as this is the foreseeable future.
~ Grants vary from year to year, and are typically restricted to a specific project.
Usually that project involves rehabilitating infrastructure or installing "betterments"
(e.g. park sites and open space). Examples of recent grant eligible/funded projects
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FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
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Page 6of11
Attachment A
include improvements to Abalone Cove Shoreline Park, development of the
California Coastal Trail, purchases of open space, synchronization of traffic signals
on Hawthorne Boulevard, and improvements to pedestrian access along
roadways. The use of Quimby Act and other development impact fees, received
periodically from development of newly constructed buildings in the City, are
restricted to fund new infrastructure such as new park facilities.
~ Transient Occupancy Tax (TOT) is primarily received from Terranea Resort, which
opened mid-2009. Based upon assertions from industry experts at public
meetings, discussions with other government finance officers, and a widely
documented and industry accepted "resort life cycle"; resorts appear to have a
finite life cycle, and do not continue to generate local tax revenue indefinitely. Nor
is their certainty that this source will grow at an even rate or sustainable rate.
Limitations of Funds Available
Although the sources of infrastructure funding identified above total about $9.6 million
annually; based upon the observations outlined above, we may decrease that total by the
amounts used for PVDS in the landslide area and grants/developer fees to arrive at a
subtotal of $8.0 million per year to fund rehabilitation (extending the useful life) of existing
infrastructure. Furthermore, we know that about $1.3 million of that subtotal (the storm
drain user fee) will no longer be available in the near-term, unless there is an initiative to
renew the fee; and we may reasonably conclude that at least some of the TOT, $3.4
million of that subtotal, may not be available in the long-term. Additionally, the City's 2013
Five-Year Capital Improvement Plan includes residential and arterial roadway projects
with estimated costs totaling $27.9 million over the next five years (an average of $5.6
million per year).
Spending Level for Infrastructure
As reported in the 2013 Five-Year Financial Model, we do not know the future cost of
rehabilitating or replacing the City's existing infrastructure. Unknown cost, combined with
the need for a methodical long-term plan of infrastructure renewal, is why Staff proposes
development of an IMP. If and until an IMP is developed, we can only estimate a
theoretical replacement cost for infrastructure; such as the $331 million estimate reported
in the 2013 Five-Year Financial Model (for calculation, see Attachment D). Staff believes
that an IMP can provide more accurate estimates of the City's future infrastructure costs;
which will enable better decision-making with regards to funding those costs with existing
revenue sources, new revenues sources, or tax-free debt financing. However,
development of an IMP is a substantial project that may take up to 2-3 years; with a
commitment to perpetual updates thereafter.
ff the estimated theoretical replacement cost for infrastructure is correct, spreading that
cost over 30 years in nominal dollars results in an annual spending level of $11 million to
renew existing infrastructure (not providing for any enhancements). Spread the same
amount over 50 years in nominal dollars, and the theoretical estimate results in an annual
2-15
FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
February 26, 2014
Page 7 of 11
Attachment A
spending level of $6.6 million. As o.utlined above, Staff is concerned that the City's
available resources are insufficient to fund long-term needs.
Short-Term Decision Making
For purposes of this discussion, Staff considers "short-term" to be within the next 5 years.
In the absence of an IMP, the best information we have to support short-term decision-
making related to infrastructure funding is the Infrastructure Report Card. Staff suggests
focusing on the lowest scoring categories: Public Buildings, Sanitary Sewer System (both
Citywide and Abalone Cove), and PVDS Landslide.
Public Buildings
Within the Infrastructure Report Card exercise, the lowest scoring buildings were at the
Civic Center (City Hall) complex and the Ladera Linda Community Center.
On September 2, 2008, the City Council adopted the RPV Coast Vision Plan following a
significant public outreach effort. The Plan includes a phased master plan approach to
developing the Upper Point Vicente property as a fully-functioning Civic Center with the
following elements:
;.. Village Green
;.. City Hall with Council Chambers
;.. Community Center
;.. Cultural Center
~ Shared Surface Parking
;.. Trail Heads to surrounding open space areas
On November 17, 2009, the City Council authorized the preparation of a formal Master
Plan of the Civic Center and authorized staff to retain the services of several professional
consultants to complete the baseline studies funded through the FY09-10 budget. As a
part of the baseline study, Gonzalez/Goodale Architects issued a report in November
2010 that included an estimate of about $8.6 Million to refurbish the Civic Center facilities
to current building code standards and safety. At a Council meeting on June 29, 2010,
the City's Financial Advisor presented financing option scenarios that included the
complete reconstruction of the facility roughly estimated to be about $22.1 Million. The
City Council has not directed Staff to include either option in the budget or the Five-Year
Capital Improvement Plan. If and when the City Council determines that a project should
be pursued, it is likely that the City would be able to debt-finance construction if
necessary.
On May 3, 2011, Staff reported to City Council that the Ladera Linda Community Center
buildings has serious public safety maintenance deficiencies, including gas, water and
wastewater lines that require replacement at a significant cost, and that the buildings are
deteriorated to a point that would require replacement. A project to improve the Ladera
2-16
FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
February 26, 2014
Page 8 of 11
Attachment A
Linda Community Center with an estimated cost of $4 million was included in the FY17-
18 column of the 2013 Five-Year Capital Improvement Plan approved by the City Council.
If the City Council elects to appropriate the proposed project, it is likely that the City would
be able to debt-finance construction if necessary.
Citywide Sanitary Sewer System
The Los Angeles County Public Works Sewer Maintenance collects a sewer fee from the
City's property owners and maintains the City's sewer system. The county performs
maintenance and repairs. However, if there is a capacity issue (e.g. a larger pipe is
necessary), the City is responsible for making the improvement. The county developed
a 10-year cycle of cleaning and filming sewer pipes within the district. In recent history,
the City of RPV has been among the 5 cities in the district with the highest number of
incidents of sewer overflow. At the request of the City, the county fast-tracked cleaning
and filming of the City's sewer pipes to be completed within 5 years (as opposed to 10).
After the 5-year effort is completed, Staff expects that the county will conduct no more
cleaning and filming in the City for another five years, until the 10-year cycle begins again.
About 80% of the cleaning and filming has been completed in the City. As the pipes are
cleaned and filmed, the County catalogs problems and places them into a queue for repair
or schedules increased maintenance activities appropriate with the problem discovered.
The District revenue is limited, so projects that are identified may not be completed for
some time. Staff has recently been informed that District intends to issue a contract to
install liners in several segments needing repairs. The contract is not available, however
staff has requested a list of the future sewer segment lining and/or replacement projects
from the District. In the event that a project is approved and constructed by the District it
is likely that the performance of the system in the areas where liners were installed would
improve.
The results of the county's findings so far have indicated that about 95% of the City's
sewer system is working well. The California Water Resources Control Board has a zero
tolerance policy for sewer overflows; and could elect to enforce established fines for each
incident of overflow. However, significant concerns remain for a small portion of the City's
sewer system. These concerns, and the state's zero tolerance policy are what
contributed to the "D" grade issued to the citywide sewer system.
On November 17, 2009, Staff presented an update of the City's Sewer Master Plan to the
City Council. The City Council took action to contract with Harris & Associates to develop
funding options for sewer maintenance and capital improvements. Preliminary estimates
of a potential citywide sewer user fee have been developed.
To date, when repairs become necessary before the county can respond, or if capacity
improvements are necessary, the City has funded sewer projects with General Fund
money. As cities retain the ability to impose sewer user fees under the California Health
& Safety Code, restricted funding is typically unavailable for sewer systems. Low cost
2-17
FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
February 26, 2014
Page 9of11
Attachment A
financing may be available through .state programs; however, participation in these
programs is typically competitive with assistance going primarily to disadvantaged
communities. The City Council could elect to establish a citywide user fee for sewer
refurbishment conducted by the City, and reduce reliance on unrestricted revenue for
sewer infrastructure.
Abalone Cove Sewer System
The Abalone Cove sewer system was graded separately from the citywide system. As
reported previously to the City Council, the user fee revenue of about $54,000 and the
City's $50, 700 annual subsidy appears to be insufficient for proper maintenance of the
system. The City Council could elect to increase the Abalone Cove sewer user fee to
provide. additional funding for the system; however, the fee increase would be significant
to users and would likely be extremely unpopular. The annual Abalone Cove Sewer
District budget is used for current maintenance activities only. No improvements
extending the useful life of the system have been made.
Landslide
The City's manages its active landslide area through a dewatering well program and
regular repaving of PVDS to maintain its drivable condition. The City's efforts are
supplemented by the Abalone Cove Landslide Abatement District and the Klondike
Canyon Landslide Abatement District. These districts collect property assessments and
maintain additional dewatering wells. It should be noted that the City is a significant
property owner in these districts (primarily open space parcels), and the City's General
Fund pays property assessments totaling about $100,000 (or about 57% of the total
assessments collected in these districts).
As noted above, the City uses its Proposition C revenue to pay for the constant repair
and repaving of PVDS in the landslide area. The City has budgeted General Fund money
for 2 additional dewatering wells; which cost about $85,000 each. The City has planned
for a project to relocate PVDS back into the City's right-of-way. A total of $745,000 of
General Fund money has been appropriated for this project in FY13-14; and the Five-
Year Capital Improvement Plan includes a planned appropriation of $3.5 million (using
General Fund money) to be budgeted in FY14-15.
Although Staff and its grant consultants, Blaise & Associates, continues to search for all
grant opportunities available, Staff is unaware of any outside funding available to manage
the landslide. In the event of a significant incident, state or federal emergency money
would only become available if either the governor or U.S. President declare a disaster.
Considering the location and the impact of the landslide, Staff is not optimistic that such
a disaster would be declared. Furthermore, Staff has been advised that debt-financing
landslide repairs would be nearly impossible; and certainly not available after a significant
damaging incident.
2-18
FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
February 26, 2014
Page 10of11
Attachment A
The City's active landslide complex is ;:i significant, known risk that has been considered
in setting the thresholds for the City's Reserve Policy, which includes a rainy-day fund of
50% of annual General Fund expenditures, as well as a minimum $3 million reserve for
emergency capital projects. An incident caused by significant storm activity or earthquake
would likely necessitate a large City expenditure for which there is not expected to be any
restricted funding, debt-financing, or emergency money. The scope of such an
expenditure has not been quantified; but would likely be very significant.
Summary of Several Important Considerations for Short-Term Decision Making
Staff offers the following summary of decisions that may be considered by the City Council
over the next several years.
~ Is the City willing to establish a citywide sewer user fee?
~ Is the City wiling to increase the Abalone Cove sewer user fee?
~ Is the City willing to renew the storm drain user fee when it sunsets in 2016?
~ Will the Council set the Altamira Canton storm drain project as its highest priority?
If so, what will be its estimated multi-million dollar cost?
~ Is the City willing to debt-finance a portion of the San Ramon project to reimburse
its Reserves?
~ Is the City willing to refurbish or replace some or all of the low-scoring public
buildings? If so, is the City willing to debt-finance these projects?
If the answers to all or most of these questions are "No", it appears as though the City's
resources would not be sufficient to provide for long-term renewal of the City's
infrastructure.
Debt Policy
The Government Finance Officers Association (GFOA) recommends that state and local
governments adopt comprehensive written debt management policies. These policies
should reflect local, state, and federal laws and regulations. Several elements of a debt
policy, as suggested by the GFOA could include:
•:• Purposes for which debt may be issued;
•!• Legal debt limitations, or limitations established by policy;
•:• Use of moral obligation pledges;
•!• Types of debt permitted to be issued and criteria for issuance;
•:• Structural features that may be considered;
•!• Credit objectives;
•!• Method of sale;
•:• Selection of external financial professionals;
•:• Refunding of debt;
•:• Disclosure (primary and secondary market);
•:• Compliance with federal tax law provisions, including arbitrage requirements;
2-19
FUNDING THE SAN RAMON CANYON STABILIZATION PROJECT
February.26, 2014
Page 11 of 11
•!• Integration of capital planning and debt financing activities; and
Attachment A
•!• Investment of bond proceeds where otherwise not covered by explicit written law
or written investment policy.
Even if the City Council decides not to debt-finance a portion of the San Ramon project,
Staff proposes that the City Council adopt a formal debt policy to outline the parameters
of when and how the City would consider the use of debt.
Attachments
Debt Financing for the San Ramon Canyon Stabilization Project", dated February 18,
2014
Checklist Of Steps In A Debt Financing
Depredable Infrastructure Assets At June 30, 2012
2-20
Attachment A
CITY OF RANCHO PALOS VERDES
DEPRECIABLE INFRASTRUCTURE ASSETS AT JUNE 30, 2012
l:Ype •·~c~ '-··· ... ···-·<' ···! . >::~r@iK~t@~il~~ili~~~*~~~:J 0; •''t;l)ttl{~1,Wia~~{ffiI}~JJ.~~:~1t~~~ffi'n!iifl~if~l~f~ctqf;i:11t~~it~H;'*~~!i~!m'!~~~~e\~@'..~~~!;?,~l
SEWER LINE Clay so 1973 2,836 3.3S% 40 10,S96
SEWER LINE Clay so 1973 87,701 3.3S% 40 327,660
SEWER LINE Clay so 1973 13,182,228 3.3S% 40 49,2S0,207
SEWER LINE Clay so 1973 S26,113 3.3S% 40 1,96S,614
SEWER LINE Clay so 1973 202,831 3.3S% 40 7S7,798
SEWER LINE Clay so 1973 342,314 3.3S% 40 1,278,922
SEWER LINE PVC so 1973 9,6S8 3.3S% 40 36,083
SEWER LINE PVC so 1973 47,072 3.3S% 40 17S,866
SEWER LINE PVC so 1973 30S,1S3 3.3S% 40 1,140,084
SEWER LINE Abalone Cove System so 2002 4,68S,448 3.3S% 11 6,732,346
SEWER LINE PVDE Switchbacks so 2012 210,S32 3.3S% 1 217,S8S
SEWER MANHOLES Drop 30 1973 2,767 3.3S% 40 10,338
SEWER MANHOLES Shallow 30 1973 3,321 3.3S% 40 12,408
SEWER MANHOLES Siphon 30 1973 11,069 3.3S% 40 41,3SS
SEWER MANHOLES Standard 30 1973 4,383,410 3.3S% 40 16,376,886
SEWER MANHOLES Trap 30 1973 8,8SS 3.3S% 40 33,083
SEWER MANHOLES Abalone Cove System 30 2002 322,324 3.3S% 11 463,13S
SEWER PUMP STATIONS Bloomwood 2S 1972 S0,863 3.3S% 41 196,396
SEWER PUMP STATIONS Laurel 2S 1987 137,4SS 3.3S% 26 323,767
SEWER PUMP STATIONS Palos Verdes Dr 2S 1973 SS,346 3.3S% 40 206,779
SEWER PUMP STATIONS Pacifica Del Mar 2S 1998 186,38S 3.3S% lS 30S,S40
SEWER PUMP STATIONS Calle Entradero 2S 1998 186,38S 3.3S% lS 30S,S40
SEWER PUMP STATIONS Crest Rd 2S 19S9 21,S92 3.3S% S4 127,9SS
SEWER PUMP STATIONS Burrell Lane 2S 1979 91,181 3.3S% 34 279,SSl
SEWER PUMP STATIONS A~~lones~ve System 2S 2002 903,1S6 3.3S% 11 ',71
;, .. ,,,.,,.,,,', ,; ···~·.·:·•• ,·,· m@~~; ' ;·C<~rw~.'"'""e?~::-:,Ji~ ' ·, ..
······· ·~· :·:·:~-::: >'.':?:~~~~~;t~~~;~t$.~f~~m~~~~filY~~~lWti~~%fg~!If~~~ ,;,
.C·. •:• "' ·.~·.·... • •.•••. x.c: ,· ··;· ... .... ~--,~·· ·"•"'-'·'·· .,., ... ''' " .............. ·
STORM DRAIN OUTLETS 100 1973 142,793 3.3S% 40 S33,490
STORM DRAIN INLETS 100 1973 S6,4S3 3.3S% 40 210,914
STORM DRAIN CULVERTS 100 1973 S67,297 3.3S% 40 2,119,482
STORM DRAIN MANHOLES 30 1973 74,164 3.3S% 40 277,08S
STORM DRAIN CATCH BASINS 100 1973 SS6,227 3.3S% 40 2,078,123
STORM DRAIN CATCH BASINS 2S 2007 2S7,662 3.3S% 6 313,988
STORM DRAIN CATCH BASINS 2S 2007 320,000 3.3S% 6 389,9S4
STORM DRAIN LINES CMP 30 1973 17,821 3.3S% 40 66,S81
STORM DRAIN LINES CMP 30 1973 11,643 3.3S% 40 43,499
STORM DRAIN LINES CMP 30 1973 4,732 3.3S% 40 17,679
STORM DRAIN LINES CMP 30 1973 1,868 3.3S% 40 6,979
STORM DRAIN LINES CMP 30 1973 23,176 3.3S% 40 86,S88
Page 1 of S 2-21
Attachment A
CITY OF RANCHO PALOS VERDES
DEPRECIABLE INFRASTRUCTURE ASSETS AT JUNE 30, 2012
Ii~~{ . •••· .•.. · .·"····· .n:~'~fil:l~i~'~i~lliW~~;:r; '•,ts,H~W'P~~;•·• >:··~1:if%t~i~~~~Wi~1~•'~~\~i~~c(i1~• ('~ife~··Y:~arA~<i''.~~gg~~!;Mit'~]~:~~rn.·1~~~~t9ff:f§lt~rY:H![~~;1Y.!j»l~m~f!m%~~~,~~p1ace <:<>$~•·er{~.
STORM DRAIN LINES CMP 30 1973 22,415 3.35% 40 83,745
STORM DRAIN LINES CMP 30 1973 9,132 3.35% 40 34,118
STORM DRAIN LINES CMP 30 1973 1,992 3.35% 40 7,442
STORM DRAIN LINES CMP 30 1973 3,196 3.35% 40 11,941
STORM DRAIN LINES CMP 30 1973 28,060 3.35% 40 104,835
STORM DRAIN LINES CMP 30 1973 26,082 3.35% 40 97,445
STORM DRAIN LINES RCP 50 1973 24,214 3.35% 40 90,466
STORM DRAIN LINES RCP 50 1973 59,525 3.35% 40 222,392
STORM DRAIN LINES RCP 50 1973 53,962 3.35% 40 201,608
STORM DRAIN LINES RCP 50 1973 37,608 3.35% 40 140,507
STORM DRAIN LINES RCP 50 1973 26,151 3.35% 40 97,703
STORM DRAIN LINES RCP 50 1973 21,613 3.35% 40 80,748
STORM DRAIN LINES RCP 50 1973 7,748 3.35% 40 28,947
STORM DRAIN LINES RCP 50 1973 23,038 3.35% 40 86,072
STORM DRAIN LINES RCP 50 1973 60,593 3.35% 40 226,382
STORM DRAIN LINES RCP 50 1973 25,874 3.35% 40 96,668
STORM DRAIN LINES CMP 30 1994 4,076 3.35% 19 7,623
STORM DRAIN LINES RCP 50 1998 20,502 3.35% 15 33,609
STORM DRAIN LINES RCP 50 1999 30,067 3.35% 14 47,691
STORM DRAIN LINES RCP 50 1999 289,000 3.35% 14 458,400
STORM DRAIN LINES RCP 50 2000 1,100,000 3.35% 13 1,688,220
STORM DRAIN LINES RCP 50 2001 82,000 3.35% 12 121,770
STORM DRAIN LINES RCP 50 2001 52,500 3.35% 12 77,962
STORM DRAIN LINES RCP 50 2001 18,000 3.35% 12 26,730
STORM DRAIN LINES RCP 50 2001 3,100,000 3.35% 12 4,603,493
STORM DRAIN LINES HOP 50 2002 134,289 3.35% 11 192,955
STORM DRAIN LINES Upper San Ramon 50 2003 4,066,778 3.35% 10 5,653,993
STORM DRAIN LINES PVE/RPV Joint 50 2003 583,052 3.35% 10 810,610
STORM DRAIN LINES Altamira Canyon 50 2003 119,535 3.35% 10 166,188
STORM DRAIN LINES. PVIC 50 2004 333,693 3.35% 9 448,892
STORM DRAIN LINES Western Ave/Delasonde-Westmont 50 2005 634,523 3.35% 8 825,907
STORM DRAIN LINES Bay Club Interim 50 2006 179,535 3.35% 7 226,111
STORM DRAIN LINES Lining Pontevedre 50 2006 267,159 3.35% 7 336,468
STORM DRAIN LINES Lining Tarapaca 50 2006 81,730 3.35% 7 102,933
STORM DRAIN LINES Lining Various 50 2006 980,603 3.35% 7 1,234,999
STORM DRAIN LINES Lining Monero 50 2007 163,931 3.35% 6 199,767
STORM DRAIN LINES Sunnyside 50 2007 255,824 3.35% 6 311,748
STORM DRAIN LINES Sunnyside 50 2008 397,326 3.35% 5 468,489
STORM DRAIN LINES Mossbank 50 2008 245,885 3.35% 5 289,924
Page 2 of 5 2-22
Attachment A
CITY OF RANCHO PALOS VERDES
DEPRECIABLE INFRASTRUCTURE ASSETS AT JUNE 30, 2012
~ •···:wrn$ij~wii~~WtM~]1t@•6.;s;:n •·········· ···" •·n•··•·•;;;;;:~i~tt,i@*t~r~i.sqif~ili~~ni;;··~·c'.• ··~·~···111t1i*1?P:;~~a9rrn~~1:~~r(yf:~tTi·:11~~1m~f~~~~pJ~~~e?~rnw
STORM DRAIN LINES Altamira Canyon 50 2009 115,739 3.35% 4 132,045
STORM DRAIN LINES Via Colinita 50 2009 155,505 3.35% 4 177,413
STORM DRAIN LINES Lining Various 50 2009 1,122,978 3.35% 4 1,281,189
STORM DRAIN LINES Mccarrell Canyon 50 2010 ',487. 3.35% 3 cc•c~.,;;;;~'.;3.~;r.~~.; ... ~l!!i§!l~§[g~Mi§J'iAIN ASSET ....... lf@i% r~Mm£~~·,;·•;ii;s'i.~r:@;;;'•:rn1 %'-''i~~'~ ii1Wffi~1~~1;~~·f f i1~ .. ~·
·•·•··.····•···· ·.·.·,• . ' _·;.·-· -.·.· ·.' .·.'.·,·-·.·.-···-· ...... ,,,
MEDIANS TREES 10 1973 627,516 3.35% 40 2,344,467
··--·
MEDIANS NO TREES 100 1973 109,636 3.35% 40 409,612
MEDIANS NO TREES 100 1979 1,279 3.35% 34 3,921
MEDIANS PVDE/PVDS 100 2008 102,110 3.35% 5 120,398
MEDIANS PVDW /Hawthorne 100 2010 493,538 3.35% 3 544,819
TRAFFIC SIGNALS 50 1973 449,632 3.35% 40 1,679,873
TRAFFIC SIGNALS 50 1999 143,174 3.35% 14 227,097
TRAFFIC SIGNALS 50 2000 147,107 3.35% 13 225,772
TRAFFIC SIGNALS 50 2002 143,906 3.35% 11 206,773
TRAFFIC SIGNALS 50 2003 166,238 3.35% 10 231,119
TRAFFIC SIGNALS 50 2008 100,000 3.35% 5 117,910
TRAFFIC SIGNALS 50 2012 181,091 3.35% 1 187,158
CURB & GUTTER TREES 10 1973 2,096,185 3.35% 40 7,831,570
CURB & GUTTER NO TREES 100 1973 1,732,260 3.35% 40 6,471,908
SIDEWALK TREES 10 1973 2,545,542 3.35% 40 9,510,416
SIDEWALK TREES 10 1973 60,862 3.35% 40 227,387
SIDEWALK NO TREES 100 1973 3.35% 40 -
SIDEWALK NO TREES 100 1973 943,637 3.35% 40 3,525,528
SIDEWALK NO TREES 100 1973 375,283 3.35% 40 1,402,097
PAVEMENT OVERLAY 30 1973 2,093,761 3.35% 40 7,822,514
PAVEMENT OVERLAY 30 1995 42,890 3.35% 18 77,615
PAVEMENT OVERLAY 30 1996 559,474 3.35% 17 979,621
PAVEMENT OVERLAY 30 1997 960,756 3.35% 16 1,627,724
PAVEMENT OVERLAY 30 1998 138,200 3.35% 15 226,551
PAVEMENT OVERLAY 30 1999 11,190,735 3.35% 14 17,750,286
PAVEMENT OVERLAY 30 2000 2,673,734 3.35% 13 4,103,500
PAVEMENT OVERLAY 30 2001 4,185,610 3.35% 12 6,215,621 -----·.
PAVEMENT SLURRY SEAL 30 1973 7,142,793 3.35% 40 26,686,235
PAVEMENT SLURRY SEAL 30 1985 92,469 3.35% 28 232,643
PAVEMENT SLURRY SEAL 30 1993 2,420,686 3.35% 20 4,678,946
PAVEMENT SLURRY SEAL 30 1994 1,395,057 3.35% 19 2,609,102
PAVEMENT SLURRY SEAL 30 1995 8,709,975 3.35% 18 15,761,791
PAVEMENT SLURRY SEAL 30 1996 4,784,334 3.35% 17 8,377,215
Page 3 of 5 2-23
Attachment A
CITY OF RANCHO PALOS VERDES
DEPRECIABLE INFRASTRUCTURE ASSETS AT JUNE 30, 2012
Type ·• ~ if8W*fo@i~;:fi/Si•••··t?'.••·•·~ .. ··· ···•.•n'.¥w:r~;~rnwk~N81·t••·•r .'.'• ·t1te. ve'3r·A~q:;:@P~1i;;;:tJ~M·i:i@llift~~i9n?f~~or.••·•·•·· ·•Ag~}frf~tm~t:t~iti\i~i~ct1{~fl1ac~'¢0£t'.··· .. •.~
PAVEMENT SLURRY SEAL 30 1997 11,407,001 3.35% 16 19,325,875
PAVEMENT SLURRY SEAL 30 1998 295,816 3.35% 15 484,930
PAVEMENT SLURRY SEAL 30 1999 522,586 3.35% 14 828,905
PAVEMENT SLURRY SEAL 30 2000 2,447,651 3.35% 13 3,756,520
PAVEMENT SLURRY SEAL 30 2001 2,079,653 3.35% 12 3,088,280
PAVEMENT OVERLAY 30 2002 1,358,647 3.35% 11 1,952,189
PAVEMENT OVERLAY 30 2003 1,904,155 3.35% 10 2,647,324
PAVEMENT OVERLAY 30 2005 1,130,785 3.35% 8 1,471,851
PAVEMENT OVERLAY 30 2007 1,925,049 3.35% 6 2,345,874
PAVEMENT OVERLAY 30 2008 2,488,367 3.35% 5 2,934,045
PAVEMENT OVERLAY 30 2009 980,231 3.35% 4 1,118,331
PAVEMENT OVERLAY 30 2010 3,381,914 3.35% 3 3,733,310
PAVEMENT OVERLAY 30 2011 1,590,316 3.35% 2 1,698,652
PAVEMENT OVERLAY 30 2012 7 :i9c; QLl7 3.35% 1
• ... t?~;&q i~£#~~~1!~~@W;j:~~~$f*@it~~i'• •s.:•: ·~·:f s·. ~~i~~M~'.i iBW%ti;%: .. ··•·::.:c·: ·•·· ···•···,:;;:;.. •. !>UIS IV IAl;S" ···-}\it• ·,:. ··:~·:·· ., _ _,. -"•:> •• <o -;.,';_:: ~ >>> . -·· ·.·:.· ·.:·
RYAN PARK BUILDING 30359 Hawthorne 50 1969 32,865 3.35% 44 140,213
GARAGE 30359 Hawthorne 50 1969 4,069 3.35% 44 17,360
PLANNING/ENVIRONMENTAL SERVICE 30940 Hawthorne 50 1979 202,202 3.35% 34 620,377
CABLE TV STATION 30940 Hawthorne 50 1979 77,770 3.35% 34 238,606
HESSE PARK BUILDING 29301 Hawthorne 50 1982 407,190 3.3S% 31 1,131,609
DUMPSTER GARAGE 30940 Hawthorne 50 1982 6,897 3.35% 31 19,167
RECREATION AND PARKS 50 1983 52,860 3.35% 30 142,140
LADERA LINDA BUILDING 1 32201 Forrestal 50 1983 146,246 3.35% 30 393,254
LADERA LINDA BUILDING 2 32201 Forrestal 50 1983 134,793 3.35% 30 362,457
LADERA LINDA BUILDING 3 32201 Forrestal 50 1983 130,388 3.35% 30 350,612
LADERA LINDA BUILDING 4 32201 Forrestal 50 1983 130,388 3.35% 30 350,612
LADERA LINDA BUILDING 5 32201 Forrestal 50 1983 118,935 3.35% 30 319,815
LADERA LINDA SHED 32201 Forrestal 50 1983 3,399 3.35% 30 9,140
POINT VICENTE INTERPRETIVE CENTER 50 1984 173,090 3.35% 29 450,310
CITY HALL BUILDING 30940 Hawthorne 50 1986 965,712 3.35% 27 2,352,155
PVIC BUILDING EXPANSION 50 2006 6,013,760 3.35% 7 7,575,266
CITY HALL ROOF 25 2007 198,000 3.35% 6 241,327 ·---·-··---------
AFFORDABLE CONDO UNIT 28121 Highridge Rd #208 25 2009 328,916 3.35% 4 375,289
GENERATOR INFRASTRUCTURE 30940 Hawthorne 25 2010 252,05~ 3.35% 3 278,274
ISUBJ~~~ ~-'<·: .. .z11 ... ~--.-.~-···-·-·~-. ",?_' .. :.·· -· ::;.,.-;•.·•·.·.:•.:::· .. ··.>••Hx··•A:t'-:C. :::·_.;,.· .... · .Jmtm: :; . : 1•t;• {?d.~ &~i1~{t\1:~m•w ..••..•...•.. ·.·.:
··.· ··-······· ·;.· :::· .. •:•::;· ••. ,.:"''.P'•? :.·
HESSE COMMUNITY PARK 25 1973 3,308,215 3.35% 40 12,371,006
MARTINGALE TRAILHEAD PARK 25 1978 5,000 3.35% 35 15,856
Page 4 of 5 2-24
Attachment A
CITY OF RANCHO PALOS VERDES
DEPRECIABLE INFRASTRUCTURE ASSETS AT JUNE 30, 2012
Type ,-:. :·~.,:;~ ::::::(t~~~1~m~~~m~~111r;r~~~~t~tt1tj:~~:~1i~#H<sut
CLOVERCLIFF PARK 25 1983 19,500 3.35% 30 52,440
DEL CERRO PARK 25 1983 39,400 3.35% 30 105,956
ABALONE COVE SHORELINE PARK 25 1989 237,000 3.35% 24 522,920
LOWER HESSE PARK IMPROVEMENTS 25 2000 554,786 3.35% 13 851,686
LOWER HESSE PARK IMPROVEMENTS 25 2001 27,772 3.35% 12 41,253
ABALONE COVE BEACH IMPROVEMENTS 25 2003 133,297 3.35% 10 185,371
PVIC SOIL REMEDIATION 25 2003 1,250,105 3.35% 10 1,738,477
FORRESTAL SWALE 25 2007 464,787 3.35% 6 566,494
PVIC/AB COVE BLUFFTOP SAFETY FENCE 25 2007 129,505 3.35% 6 157,844
PVIC & FORRESTAL TRAIL IMPROVEMENTS 25 2009 114,284 3.35% 4 130,397
HESSE PARK LOWER PICNIC/PLAYGROUND 25 2010 198,377 3.35% 3 219,009
HESSE PARK BALL FIELD 25 2011 220.296 3.35% 2
Page 5 of 5 2-25
Attachment B
MEMORANDUM
MAG!S ADVISORS
pul::ill' f,,1•11f.-c;Pn"odii11g;
To: Kathryn Downs
Dennis Mclean
City of Rancho Palos Verdes
From: Tim Schaefer
Magis Advisors
Date: February 18, 2014
Subject: Debt Financing for the San Ramon Canyon Stabilization Project
This memorandum is to update you on our recent activity on the above matter and to provide
additional background material to the City's Finance Advisory Committee for its meeting of February 26,
2014. I will attend that meeting and be available to you and the Committee to discuss this material.
SUMMARY
Since we first engaged with you in this conversation, the City has taken several important steps
to frame its decision. First, it has prepared an infrastructure "report card," which evaluates the condition
of major components of the City's infrastructure. The City's staff has proposed the development of an
infrastructure management plan, which would establish a long-term planning protocol for the
replacement of infrastructure in a systematic way. We have strongly encouraged these steps because
making a decision to borrow money is almost always better informed by reference to a policy and a plan
than to the needs of a particular transaction. We have encouraged City staff to develop a basic debt
policy to be used in conjunction with the infrastructure management plan.
Despite the significant progress, the City still lacks sufficient, actionable information to make an
adequately-informed decision about incurring debt. This is a result of some of the unique factors at work
in the City's situation. Principal among these factors are the source of ongoing funding for capital
projects and the assurance being provided by the City's accumulated reserves.
Accordingly, we have not made a specific recommendation to the City to incur debt at this time.
Instead, we encourage the Committee, City staff, and the City Council to proceed with the development
of the infrastructure management plan and to consider the factors discussed herein as a "one-off"
situation that may provide some economic benefit and restore the City's reserves until the
infrastructure management plan is providing more specific information about future capital needs.
A borrowing of $10.0 million undertaken today, should the City choose to do so, would entail an
annual commitment of about $600,000 to $670,000 over a thirty-year period to replenish reserves
drawn for the San Ramon project. Alternatively, a decision to not replenish those reserves would reduce
the City's liquidity to a level that might be insufficient to meet a catastrophic failure of the Palos Verdes
Drive South in the near-term. A decision to borrow is thus a "judgment call" for the City's policy-makers.
1301 Dove St., Suite 380 s Newport Beach, CA 92660 e Telephone: (949) 428-8363
www.magisadvisors.com
00128587.DOCX
2-26
Attachment B
Memorandum to Ms. Downs and Mr. Mclean
City of Rancho Palos Verdes
February 18, 2014
Page 2
BACKGROUND
Governmental expenditures generally fall into two categories: (a) current expenditures (i.e.,
those made for goods or services that will be used within the budget period, typically one year); and, (b)
capital expenditures (i.e., those made for fixed assets or improvements that will be used over multiple
years). This discussion focuses on the latter category and discusses how those expenditures are both
funded and financed. Funding and financing are not the same.
Capital expenditures are usually embodied in a "capital improvement program" (called a "CIP")
consisting of two discrete parts: a capital improvement plan; and, a capital improvement budget. An
effective CIP provides an orderly and routine method of planning for the funding and financing of
required capital expenditures over multiple planning periods. Rolling five-year periods are typical. The
annual updating process used for the CIP would also likely include updating certain information in the
infrastructure management program and vice-versa. Moreover, the combination of these factors would
enable the City's decision-makers a regular opportunity to alter priorities to respond to better
information and changing needs.
used to:
An effective CIP promotes "long-term" thinking-a definite plus when contemplating debt. It is
1. Adopt a method for ranking project priorities;
2. Encourage policy-driven choices for which proposed capital expenditures will be funded;
3. Allocate immediate and/or ongoing sources for those funding needs;
4. Indicate when financing the prioritized needs must be done.
Steps 3 & 4 are where debt decisions intersect with the CIP. The three choices are:
./ Pay-as-you-go ("PAYGO");
./ Borrowed money (i.e., bonds, sometimes called "pay-as-you-use", or "PAYUSE"),
./ A combination of the two-what most communities use.
A central part of the capital planning process is the identification of all available sources of
funding for the project over its useful life. At the heart of the choice is a determination of when the
funding will be available, where it will come from, and how certain it is to materialize in the amounts
and at the times needed. Debt financing is used to align those factors (the "when," "where," and "how")
more efficiently. In general, there is no such thing as a "perfect" answer.
PAYGO is usually the least expensive (in nominal terms) and simplest way of funding capital
improvements; but, it also subject to some significant limitations. PAYGO is usually reserved for those
projects that are smaller in scale and/or have short useful or economic lives (think "police cars and
copiers").
When PAYGO is used for major projects, it generally assumes that one or more of the following
conditions is true:
2-27
Memorandum to Ms. Downs and Mr. McLean
City of Rancho Palos Verdes
February 18, 2014
Page 3
Attachment B
./ The City's existing financial resources are adequate to fund both its capital needs and its
ongoing operating expenses for the foreseeable future; and/or
./ There is sufficient (and readily available), uncommitted fund balance or reserves to handle
foreseeable capital needs, plus sufficient other resources for unforeseen emergencies; and/or,
./ The cost of the capital assets is not rising faster than the earnings rate available on the
accumulated funds needed to pay for it; and/or,
./ Already-established expenditure priorities within the CIP can (and should) be changed to
provide resources to the project under consideration (i.e., other, competing projects have a
discretionary timing feature to them that makes them susceptible to change).
'lOne-time" revenues or reserves accumulated in fund balance (provided those excess fund
balances are uncommitted and liquid) are ideal sources of PAYGO financing. This is often the "best"
approach for a new or growing community. Older, mature communities usually have fewer options
because they often are dealing with significant amounts of deferred maintenance and the replacement
of fixed assets that have projected costs significantly higher than their historical cost. This appears to be
the case with the City. Moreover, once spent, financial resources used for PAYGO capital assets convert
cash into illiquid, fixed assets. That's because PAYGO "misallocates" the costs of major capital facilities
that have very long useful lives because it calls on current taxpayers to pay the full cost of major capital
projects, "up front;" and, those illiquid assets cannot be easily "reconverted" to cash if cash is needed
for other purposes, including emergencies. Using PAYGO exclusively also results in "opportunity costs,"
when resources that could be used in other ways are used to finance capital assets. The alternative to
PAYGO is debt, or PAYUSE.
PAYUSE is a financing method, not a funding strategy. Instead of funding the project from
revenues, it is funded initially from the proceeds of debt; and then, the ongoing funding over time is
used to repay the debt. PAYUSE is also an effective way to align the timing and amounts of financial
resources (needed for the required assets) to the benefits the assets will deliver to the community. The
"fancy" phrase for this is "intergenerational equity," but it is really a simple concept. PAYUSE (debt) is a
way of distributing the burden of paying for an asset (over time) to the stakeholders who will benefit
(over time) from its acquisition.
So, communities will "lean" more toward PAYUSE when:
1. The asset being acquired has a long useful and economic life and "fairness" demands
that the cost of the asset should be economically apportioned among both current and future users; or,
2. There is significant deferred maintenance that has not been provided for in the past; or,
3. The availability of significant, incremental revenues for the replacement of capital assets
is limited or restricted; or,
4. The expected rate of cost inflation for the acquired asset being considered is likely to be
greater than the borrowing rate; or,
2-28
Memorandum to Ms. Downs and Mr. Mclean
City of Rancho Palos Verdes
February 18, 2014
Page4
Attachment B
5. Earnings rates on reserves or liquid assets are low and are reasonably expected to stay
that way for the near term; or,
6. Borrowing rates compare favorably to inflation and investment earnings.
Note: The tax exemption available to local governments often produces better economics from
the PAYUSE because of the built-in subsidy; the Federal government is essentially subsidizing the
municipality's borrowing costs.
Similarly, communities will "lean" more toward PAYGO when the opposite conditions are
present. The point is that the choices are made along a continuum and rarely follow a rigid adherence to
one or the other. Choosing between debt, or paying cash, shouldn't be thought of as "bad" or "good,"
but rather as a response to a particular need to align sources of funding over time with the benefits
being provided by the community's fixed assets.
In order to evaluate the use of debt to finance the San Ramon Canyon Stabilization Project, the
City must consider its overall budget and fiscal position over a time period longer than a normal budget
cycle. The City's budget practices generally have been that:
1. Operating revenues fully cover operating expenses, including debt service;
2. Established reserves meet minimum policy levels; and,
3. "One-time" revenues are used to fund nonrecurring expenditures.
The City has never incurred debt on its own. Instead, it has relied on "own source" revenues
and/or grants and contributions from other governments to finance its capital needs. Debt should not
be considered appropriate for any recurring use such as operating or maintenance costs. Capital
improvements should be financed primarily through user fees, service charges, assessments, special
taxes or developer exactions so long as the benefits the City will derive from such improvements can be
attributed to the users of the improvements. The City should specifically consider the costs associated
with any borrowing in order to determine that the above funding sources are adequate to service the
proposed debt.
The City should evaluate the use of debt in-lieu of "pay-as-you-go" financing for the San Ramon
project on the basis of the following criteria:
Factors Favoring Use of PAYGO:
1. Current fund balances or projected (and
available) revenues are believed to be
adequate to fund the City's capital
projects over the long-term;
2. Existing or proposed debt levels would
have a deleterious effect on the City's
ability to borrow for more critical
projects in the future;
3. Credit market conditions are unstable
or present extraordinary difficulty in
marketing the required debt;
4. Borrowing money would lack political
support in the community.
2-29
Memorandum to Ms. Downs and Mr. Mclean
City of Rancho Palos Verdes
February 18, 2014
Page 5
Factors Favoring Use of Debt:
1. Revenues are deemed to be stable and
reliable enough to support the
proposed debt at investment grade
rating levels;
2. The nature of the project and its
associated funding resources will
support investment grade ratings;
3. Credit market conditions present
favorable interest rates and demand for
securities such as those issued by the
City;
4. The project being financed is required
to meet or relieve public safety needs
RECOMMENDATION
Attachment B
and current resources are insufficient or
unavailable;
5. Other emerging projects (such as the
unfunded Altamira Canyon project) are
likely to compete for funding in the
immediate future;
6. The probability of a catastrophic loss of
Palos Verdes Drive South remains
unknown and the cost of replacing the
roadway is unmeasured or uncertain;
7. The escalation of replacement costs is
at or above the projected borrowing
rate; and
8. The estimated useful life of the asset to
be financed is greater than 5 years.
Accordingly, we believe that there is insufficient data to make a persuasive argument for
incurring debt. However, by contrast, we also observe that a major drawdown of the City's reserves to
pay for San Ramon presents significant concerns. In short, this must be a judgment call by the City's
policy-makers.
Since the major source of revenue for replenishment of the City's reserves is the transient
occupancy tax, and the base on which that tax is collected is a single facility, we remain concerned that
this source of funding is vulnerable to changes in consumer behavior and to future, adverse changes in
the economic environment.
Additionally, the City's infrastructure is always at risk of loss due to catastrophic events (e.g. unexpected
failure, deterioration, earthquake and/or landslide). To be clear, one of the "cliff risks" that concerns us
is the uninsured, unfunded replacement or repair of Palos Verdes Drive South. A catastrophic loss of
PVDS at an inopportune time could affect the revenue stream the City is relying upon to fund capital
reserves. In effect, the City's reserves-at the current or higher level-are providing protection against
an uninsured, non-reimbursable loss of this vital artery. Drawing the reserves down to a level less than
the replacement cost of this roadway would increase the City's dependence on emergency or disaster
funds from the State or Federal government. We observe that the availability of these funds has been
impaired in the recent past due to fiscal difficulties or dysfunctional politics. In just one example, the
Federal government's emergency funds to assist the State of New Jersey with recovery from Hurricane
Sandy were delayed because of the debate over the nation's debt ceiling. The State has demonstrated in
the recent past that it is not always able to make funds available because of its own weakened cash
position.
2-30
Memorandum to Ms. Downs and Mr. Mclean
City of Rancho Palos Verdes
February 18, 2014
Page 6
Attachment B
Should a combination of such adverse events occur at the time the City needs to borrow funds,
it would likely either prohibit the borrowing or produce much less favorable terms. By contrast, today's
borrowing could be accomplished at near (or below) the historical rate of inflation applicable to many
construction projects equivalent to the San Ramon project. We have drawn that conclusion by observing
that the Engineering News Record's "Construction Cost Index" (a widely used benchmark in the
engineering and public works' community) has changed by an average annual rate of 4.88% since
1963-a rate that is almost 0.75% higher than the equivalent average annual change in the Consumer
Price Index.
Therefore, assuming that the historical data are accurate predictors of the future, the City could
borrow funds to replenish its reserves that were used on the San Ramon Canyon project at a "net" rate
of less than zero. This phenomenon is a result of comparing the estimated borrowing rate of 4.2% to
4.83% to the long term average change in the ENR described above of 4.88%.
We are pleased to be of continuing service to the City.
MAGIS ADVISORS
Timothy J. Schaefer
Principal Owner/President
Attachments: Debt Illustrations for the San Ramon Canyon Stabilization Project
2-31
$10,000,000 CITY OF RANCHO PALOS VERDES
General Obligation Bonds
San Ramon Cyn Stabilization Project
ILLUSTRATION as of 2/17 /14
Sources & Uses
Dated 07 /01/2014 I Delivered 07 /01/2014
Sources Of Funds
Par Amount of Bonds
Reoffering Premium
Total Sources
Uses Of Funds
Total Underwriter's Discount (1.000%)
Costs of Issuance
Deposit to Project Construction Fund
Rounding Amount
Total Uses
File I 00119000.SF I San Ramon Canyon (GO: 2/1 I 2/18/2014 I 9:43 AM
MAGIS ADVISORS
public finance consulting
Attachment B
$10,000,000.00
238,142.25
$10,238,142.25
100,000.00
145,000.00
9,988,852.27
4,289.98
$10,238,142.25
Page 1
2-32
$10,000,000 CITY OF RANCHO PALOS VERDES
General Obligation Bonds
San Ramon Cyn Stabilization Project
ILLUSTRATION as of 2/17 /14
Pricing Summary
Maturit:t T:teeof Bond Coueon Yield Maturi!:l Value
07/01/2015 Serial Coupon 5.000% 0.300% 170,000.00
07/01/2016 Serial Coupon 5.000% 0.400% 175,000.00
07/01/2017 Serial Coupon 5.000% 0.700% 185,000.00
07/01/2018 Serial Coupon 5.000% 1.000% 195,000.00
07/01/2019 Serial Coueon 5.000% 1.400% 205,000.00
07/01/2020 Serial Coupon 5.000% 1.900% 215,000.00
07/01/2021 Serial Coupon 5.000% 2.300% 225,000.00
07/01/2022 Serial Coupon 5.000% 2.600% 235,000.00
07/01/2023 Serial Coupon 4.500% 2.900% 250,000.00
07/01/2024 Serial Coueon 3.100% 3.100% 260,000.00
07/01/2025 Serial Coupon 3.200% 3.200% 265,000.00
07/01/2026 Serial Coupon 3.400% 3.400% 275,000.00
07/01/2027 Serial Coupon 3.500% 3.500% 285,000.00
07/01/2028 Serial Coupon 3.600% 3.600% 295,000.00
07/01/2029 Serial Coueon 3.800% 3.800% 305,000.00
07/01/2030 Serial Coupon 3.900% 3.900% 315,000.00
07/01/2031 Serial Coupon 4.000% 4.000% 330,000.00
07/01/2032 Serial Coupon 4.100% 4.100% 345,000.00
07/01/2033 Serial Coupon 4.200% 4.200% 355,000.00
07/01/2034 Serial Coueon 4.200% 4.200% 370,000.00
07/01/2035 Serial Coupon 4.250% 4.300% 390,000.00
07/01/2036 Serial Coupon 4.250% 4.300% 405,000.00
07/01/2037 Serial Coupon 4.375% 4.400% 420,000.00
07/01/2038 Serial Coupon 4.375% 4.400% 440,000.00
07/01/2044 Term 1 Coueon 4.625% 4.656% 3,090,000.00
Total $10,000,000.00
Bid Information
Par Amount of Bonds
Reoffering Premium or (Discount)
Gross Production
Total Underwriter's Discount (1.000%)
Bid (101.381%)
Total Purchase Price
Bond Year Dollars
Avera!le Life
Averajle Coupon
Net Interest Cost (NIC)
True Interest Cost (TIC)
File I 00119000.SF I San Ramon Canyon (GO: 2/1 1 2/18/2014 I 9:43 AM
4j MAGIS ADVISORS
pub Ii c finance consultiog
Attachment B
Price Dollar Price
104.689% 177,971.30
109.154% 191,019.50
112.743% 208,574.55
115.645% 225,507.75
117.325% 240,516.25
117.500% 252,625.00
117.365% 264,071.25
117.234% 275,499.90
112.594% 281,485.00
100.000% 260,000.00
100.000% 265,000.00
100.000% 275,000.00
100.000% 285,000.00
100.000% 295,000.00
100.000% 305,000.00
100.000% 315,000.00
100.000% 330,000.00
100.000% 345,000.00
100.000% 355,000.00
100.000% 370,000.00
99.313% 387,320.70
99.293% 402,136.65
99.640% 418,488.00
99.631% 438,376.40
99.500% 3,074,550.00
$10,238,142.25
$10,000,000.00
238,142.25
$10,238,142.25
$(100,000.00)
10,138,142.25
$10,138,142.25
$184,805.00
18.481 Years
4.3562918%
4.2815415%
4.2165826%
Page2
2-33
Attachment B
$10,000,000 CITY OF RANCHO PALOS VERDES
General Obligation Bonds
San Ramon Cyn Stabilization Project
ILLUSTRATION as of 2/17 /14
Debt Service Schedule
Part 1of2
Date Princieal Coueon Interest Total P+I
07/01/2014
07/01/2015 170,000.00 5.000% 433,980.00 603,980.00
07/01/2016 175,000.00 5.000% 425,480.00 600,480.00
07/01/2017 185,000.00 5.000% 416,730.00 601,730.00
07/01/2018 195,000.00 5.000% 407,480.00 602,480.00
07/01/2019 205,000.00 5.000% 397,730.00 602,730.00
07/01/2020 215,000.00 5.000% 387,480.00 602,480.00
07/01/2021 225,000.00 5.000% 376,730.00 601,730.00
07/01/2022 235,000.00 5.000% 365,480.00 600,480.00
07/01/2023 250,000.00 4.500% 353,730.00 603,730.00
07/01/2024 260,000.00 3.100% 342,480.00 602,480.00
07/01/2025 265,000.00 3.200% 334,420.00 599,420.00
07/01/2026 275,000.00 3.400% 325,940.00 600,940.00
07/01/2027 285,000.00 3.500% 316,590.00 601,590.00
07/01/2028 295,000.00 3.600% 306,615.00 601,615.00
07/01/2029 305,000.00 3.800% 295,995.00 600,995.00
07/01/2030 315,000.00 3.900% 284,405.00 599,405.00
07/01/2031 330,000.00 4.000% 272,120.00 602,120.00
07/01/2032 345,000.00 4.100% 258,920.00 603,920.00
07/01/2033 355,000.00 4.200% 244,775.00 599,775.00
07/01/2034 370,000.00 4.200% 229,865.00 599,865.00
07/01/2035 390,000.00 4.250% 214,325.00 604,325.00
07/01/2036 405,000.00 4.250% 197,750.00 602,750.00
07/01/2037 420,000.00 4.375% 180,537.50 600,537.50
07/01/2038 440,000.00 4.375% 162,162.50 602,162.50
07/01/2039 460,000.00 4.625% 142,912.50 602,912.50
07/01/2040 480,000.00 4.625% 121,637.50 601,637.50
07/01/2041 500,000.00 4.625% 99,437.50 599,437.50
07/01/2042 525,000.00 4.625% 76,312.50 601,312.50
07/01/2043 550,000.00 4.625% 52,031.26 602,031.26
07/01/2044 575,000.00 4.625% 26,593.76 601,593.76
Total $10,000,000.00 $8,050,645.02 $18,050,645.02
File I 00119000.SF I San Ramon Canyon (GO: 2/1 I 2/18/2014 I 9:43 AM
4J MAGIS ADVISORS
public finance consulting Page 3
2-34
Yield Statistics
Bond Year Dollars
Average Life
Average Coupon
Net Interest Cost (NIC)
True Interest Cost.(TIC)
Bond Yield for Arbitrage Purposes
All Inclusive Cost (AIC)
IRS Form 8038
Net Interest Cost
Weighted Average Maturity
$10,000,000 CITY OF RANCHO PALOS VERDES
General Obligation Bonds
San Ramon Cyn Stabilization Project
ILLUSTRATION as of2/17/14
Debt Service Schedule
File I 00119000.SF I San Ramon Canyon (GO: 2/1 I 2/18/2014 I 9:43 AM
41 MAGIS ADVISORS
public finance consulting
Attachment B
Part 2 of2
$184,805.00
18.481 Years
4.3562918%
4.2815415%
4.2165826%
4.1353278%
4.3365677%
4.2070093%
18.138 Years
Page4
2-35
$10,370,000 CITY OF RANCHO PALOS VERDES
Certificates of Participation
San Ramon Cyn Stabilization Project
ILLUSTRATION as of 2/17 /14
Sources & Uses
Dated 07 /01/2014 I Delivered 07 /01/2014
Sources Of Funds
Par Amount of Bonds
Reoffering Premium
Total Sources
Uses Of Funds
Total Underwriter's Discount (1.400%)
Costs of Issuance
Deposit to Debt Service Reserve Fund (DSRF)
Deposit to Project Construction Fund
Rounding Amount
Total Uses
File I 00119000.SF I San Ramon Canyon (COP: 2/ I 2/18/2014 I 9:44 AM
MAGIS ADVISORS
public finance cousulcing
Attachment B
$10,370,000.00
244,674.30
$10,614,674.30
145,180.00
160,000.00
319,285.90
9,988,890.00
1,318.40
$10,614,674.30
Page 1
2-36
$10,370,000 CITY OF RANCHO PALOS VERDES
Certificates of Participation
San Ramon Cyn Stabilization Project
ILLUSTRATION as of 2/17 /14
Pricing Summary
Maturit~ T~l!e of Bond Coul!on Yield Maturi!:l Value
07/01/2015 Serial Coupon 5.500% 0.400% 155,000.00
07/01/2016 Serial Coupon 5.500% 0.600% 165,000.00
07/01/2017 Serial Coupon 5.500% 0.900% 175,000.00
07/01/2018 Serial Coupon 5.500% 1.400% 185,000.00
07/01/2019 Serial Coueon 5.500% 1.800% 195,000.00
07/01/2020 Serial Coupon 5.500% 2.400% 205,000.00
07/01/2021 Serial Coupon 5.500% 2.800% 215,000.00
07/01/202? Serial Coupon 5.500% 3.200% 230,000.00
07/01/2023 Serial Coupon 5.500% 3.500% 240,000.00
07/01/2024 Serial Coueon 5.125% 3.600% 255,000.00
07/01/2025 Serial Coupon 3.800% 3.800% 265,000.00
07/01/2026 Serial Coupon 4.000% 4.000% 275,000.00
07/01/2027 Serial Coupon 4.000% 4.100% 285,000.00
07/01/2028 Serial Coupon 4.200% 4.200% 300,000.00
07/01/2029 Serial Coueon 4.400% 4.400% 310,000.00
07/01/2030 Serial Coupon 4.500% 4.500% 325,000.00
07/01/2031 Serial Coupon 4.600% 4.600% 340,000.00
07/01/2032 Serial Coupon 4.700% 4.700% 355,000.00
07/01/2033 Serial Coupon 4.700% 4.700% 370,000.00
07/01/2034 Serial Coueon 4.800% 4.800% 390,000.00
07/01/2035 Serial Coupon 4.900% 4.900% 410,000.00
07/01/2036 Serial Coupon 4.900% 4.900% 430,000.00
07/01/2037 Serial Coupon 5.000% 5.000% 450,000.00
07/01/2038 Serial Coupon 5.000% 5.000% 470,000.00
07/01/2044 Term 1 Coueon 5.125% 5.208% 3,375,000.00
Total $10,370,000.00
Bid Information
Par Amount of Bonds
Reoffering Premium or (Discount)
Gross Production
Total Underwriter's Discount {1.400%)
Bid (100.959%)
Total Purchase Price
Bond Year Dollars
Avera~e Life
Average Coueon
Net Interest Cost (NIC)
True Interest Cost (TIC)
File I 00119000.SF I San Ramon Canyon (COP: 2/ I 2/18/2014 I 9:44 AM
4J MAGIS ADVISORS
p 11 b Ii c finance consulting
Attachment B
Price Dollar Price
105.084% 162,880.20
109.726% 181,047.90
113.585% 198,773.75
115.895% 214,405.75
117.616% 229,351.20
117.226% 240,313.30
117.055% 251,668.25
116.120% 267,076.00
115.326% 276,782.40
112.711% 287,413.05
100.000% 265,000.00
100.000% 275,000.00
99.000% 282,150.00
100.000% 300,000.00
100.000% 310,000.00
100.000% 325,000.00
100.000% 340,000.00
100.000% 355,000.00
100.000% 370,000.00
100.000% 390,000.00
100.000% 410,000.00
100.000% 430,000.00
100.000% 450,000.00
100.000% 470,000.00
98.750% 3,332,812.50
$10,614,674.30
$10,370,000.00
244,674.30
$10,614,674.30
$(145,180.00)
10,469,494.30
$10,469,494.30
$195,985.00
18.899 Years
4.9375151%
4.8867488%
4.8361343%
Page 2
2-37
Attachment B
$10,370,000 CITY OF RANCHO PALOS VERDES
Certificates of Participation
San Ramon Cyn Stabilization Project
ILLUSTRATION as of 2/17 /14
Debt Service Schedule
Part 1 ofZ
Date Princij!al COUj!On Interest Total P+I
07/01/2014
07/01/2015 155,000.00 5.500% 512,042.50 667,042.50
07/01/2016 165,000.00 5.500% 503,517.50 668,517.50
07/01/2017 175,000.00 5.500% 494,442.50 669,442.50
07/01/2018 185,000.00 5.500% 484,817.50 669,817.50
07/01/2019 195,000.00 5.500% 474,642.50 669,642.50
07/01/2020 205,000.00 5.500% 463,917.50 668,917.50
07/01/2021 215,000.00 5.500% 452,642.50 667,642.50
07/01/2022 230,000.00 5.500% 440,817.50 670,817.50
07/01/2023 240,000.00 5.500% 428,167.50 668,167.50
07/01/2024 255,000.00 5.125% 414,967.50 669,967.50
07/01/2025 265,000.00 3.800% 401,898.76 666,898.76
07/01/2026 275,000.00 4.000% 391,828.76 666,828.76
07/01/2027 285,000.00 4.000% 380,828.76 665,828.76
07/01/2028 300,000.00 4.200% 369,428.76 669,428.76
07/01/2029 310,000.00 4.400% 356,828.76 666,828.76
07/01/2030 325,000.00 4.500% 343,188.76 668,188.76
07/01/2031 340,000.00 4.600% 328,563.76 668,563.76
07/01/2032 355,000.00 4.700% 312,923.76 667,923.76
07/01/2033 370,000.00 4.700% 296,238.76 666,238.76
07/01/2034 390,000.00 4.800% 278,848.76 668,848.76
07/01/2035 410,000.00 4.900% 260,128.76 670,128.76
07/01/2036 430,000.00 4.900% 240,038.76 670,038.76
07/01/2037 450,000.00 5.000% 218,968.76 668,968.76
07/01/2038 470,000.00 5.000% 196,468.76 666,468.76
07/01/2039 495,000.00 5.125% 172,968.76 667,968.76
07/01/2040 520,000.00 5.125% 147,600.00 667,600.00
07/01/2041 545,000.00 5.125% 120,950.00 665,950.00
07/01/2042 575,000.00 5.125% 93,018.76 668,018.76
07/01/2043 605,000.00 5.125% 63,550.00 668,550.00
07/0i/2044 635,000.00 5.125% 32,543.76 667,543.76
Total $10,370,000.00 $9,676,788.92 $20,046, 788.92
File I 00119000.SF I San Ramon Canyon (COP: 2/ I 2/18/2014 I 9:44 AM
4J. MAGIS ADVISORS
public finance consulting Page3
2-38
Yield Statistics
Bond Year Dollars
Average Life
Average Coupon
Net Interest Cost (NJC)
True Interest Cost (TIC)
Bond Yield for Arbitrage Purposes
All Inclusive Cost (AIC)
I RS Form 8038
Net Interest Cost
Weighted Average Maturity
$10,370,000 CITY OF RANCHO PALOS VERDES
Certificates of Participation
San Ramon Cyn Stabilization Project
ILLUSTRATION as of 2/17/14
Debt Service Schedule
File I 00119000.SF I San Ramon Canyon (COP: 2/ I 2/18/2014 I 9:44 AM
41 MAGIS ADVISORS
public finance consnldng
Attachment B
Part 2 of2
$195,985.00
18.899 Years
4.9375151%
4.8867488%
4.8361343%
4.7177624%
4.9695299%
4.7975521%
18.522 Years
Page4
2-39
Attachment B
Annual Debt Service Annual Debt Service Annual Difference
Years GO May'13 COP May '13 GO Feb '14 COP Feb '14 GO Change COP Change
1 $ 525,288.76 $ 581,318.76 $ 603,980.00 $ 667,042.50 $ 78,691.24 $ 85,723.74
2 523,113.76 583,718.76 600,480.00 668,517.50 77,366.24 84,798.74
3 525,763.76 585,718.76 601,730.00 669,442.50 75,966.24 83,723.74
4 523,063.76 582,318.76 602,480.00 669,817.50 79,416.24 87,498.74
5 525,188.76 583,718.76 602,730.00 669,642.50 77,541.24 85,923.74
6 521,963.76 584,718.76 602,480.00 668,917.50 80,516.24 84,198.74
7 523,563.76 585,318.76 601,730.00 667,642.50 78,166.24 82,323.74
8 524,813.76 585,518.76 600,480.00 670,817.50 75,666.24 85,298.74
9 520,713.76 585,318.76 603,730.00 668,167.50 83,016.24 82,848.74
10 521,438.76 584,718.76 602,480.00 669,967.50 81,041.24 85,248.74
11 521,813.76 583,718.76 599,420.00 666,898.76 77,606.24 83,180.00
12 525,258.76 583,743.76 600,940.00 666,828.76 75,681.24 83,085.00
13 523,178.76 584,893.76 601,590.00 665,828.76 78,411.24 80,935.00
14 525,378.76 585,438.76 601,615.00 669,428.76 76,236.24 83,990.00
15 522,008.76 585,358.76 600,995.00 666,828.76 78,986.24 81,470.00
16 523,188.76 584,633.76 599,405.00 668,188.76 76,216.24 83,555.00
17 523,763.76 583,243.76 602,120.00 668,563.76 78,356.24 85,320.00
18 523,713.76 581,168.76 603,920.00 667,923.76 80,206.24 86,755.00
19 523,363.76 583,743.76 599,775.00 666,238.76 76,411.24 82,495.00
20 522,358.76 585,423.76 599,865.00 668,848.76 77,506.24 83,425.00
21 521,043.76 581,178.76 604,325.00 670,128.76 83,281.24 88,950.00
22 524,043.76 581,563.76 602,750.00 670,038.76 78,706.24 88,475.00
23 521,563.76 585,983.76 600,537.50 668,968.76 78,973.74 82,985.00
24 523,363.76 584,643.76 602,162.50 666,468.76 78,798.74 81,825.00
25 524,668.76 582,400.00 602,912.50 667,968.76 78,243.74 85,568.76
26 525,156.26 584,000.00 601,637.50 667,600.00 76,481.24 83,600.00
27 525,137.50 584,800.00 599,437.50 665,950.00 74,300.00 81,150.00
28 524,612.50 584,800.00 601,312.50 668,018.76 76,700.00 83,218.76
29 523,581.26 584,000.00 602,031.26 668,550.00 78,450.00 84,550.00
30 522,043.76 582,400.00 601,593.76 667,543.76 79,550.00 85,143.76
$ 15, 704,155.28 $17,519,525.24 $ 18,050,645.02 $ 20,046, 788.92 $ 2,346,489.74 $ 2,527,263.68
Average: $ 78,216.32 $ 84,242.12
2-40