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HomeMy WebLinkAboutItem 2c - Debt Service on 2011 and 2012 General Obligation Bonds DATE:August 1, 2017 TO:Honorable Mayor and City Council FROM:Hue C. Quach, Administrative Services Director Shannon Huang, Financial Services Manager/City Treasurer SUBJECT:RESOLUTION NO. 7177DETERMINING THE AMOUNT OF REVENUE TO BE RAISED FROM PROPERTY TAXES FOR FISCAL YEAR 2017-18 TO PAY FOR THE DEBT SERVICEON THE 2011AND 2012GENERAL OBLIGATION BONDS Recommendation: Adopt SUMMARY The City has two General Obligation Bonds supported by voter approved levies. The Series 2011 issuance wasto fund the grade separation at the intersection of Santa Anita Avenue and the Gold Linetracks;the General Obligation Bonds Series 2012 are refunding bonds, replacing the Series 2001 General Obligation Bonds, which were used to finance the construction of the City’s police station. Annually, the City Council is required to adopt a resolution to establish the supplemental taxes collected to make debt service paymentsfor the outstanding General Obligation Bonds.The rates established for Fiscal Year 2017-18are estimated to generate tax revenue of $568,600 and $398,700for the 2011 and 2012 General Obligation Bonds, respectively, and will be paid directly by property owners as part of their annual property tax bills. It is recommended that the City Council adopt Resolution No.7177determining the amount of revenue to be raised from property taxes for Fiscal Year 2017-18to pay for the debt service on the 2011 and 2012 General Obligation Bonds. BACKGROUND The issuance of Series 2001 General ObligationBonds wasapproved in a special election held on November 2,1999;the Series 2011 issuance was approvedby the votersin the April 11, 2006,election. More than two-thirds of the votes cast were in favor of the agreed indebtedness with the principal andinterest payable from taxes levied upon taxable property within the City. Resolution 7177Fiscal Year17-18Tax Levies on General Obligation Bonds August 1, 2017 Page 2of3 In 2012, the bond market provided an opportunity to refinance the Series 2001 General Obligation Bonds. General Obligation Bonds Series 2012 were issued on November 6, 2012,solely for the refunding of the Series 2001Bonds,providing savings of approximately $1 million for taxpayers over the life of the bonds. Both of the 2011 and 2012 Bonds are payable entirely byad valorem property taxes levied on behalf of the City and collected by Los Angeles County. Each year,a resolution must be adopted by the City Council to determine the amount of revenue required to be raised from property taxes to pay for the debt service on the General Obligation Bonds. This information is the basis for establishing tax rates, which are forwarded to Los Angeles County and will be applied to properties within the City’s boundary. DISCUSSION A separate schedule (Exhibit “A”) illustrating the calculation of the tax rate is attached to provide detail of the debt service payments, the assessed valuations, beginning balances, estimated expenditures,and the proposed tax rate for Fiscal Year 2017-18. The levy rate for Series 2011 General Obligation Bonds is 0.003627% in comparison to 0.004014%last year,and the tax rate for theSeries 2012 General Obligation Bonds is 0.002543% versus 0.002803%fromthe prior year. The reduction in the assessed tax rates is due to the overall 6.84% increase ofthe City’s property assessed value for Fiscal Year 2017-18and the higher beginning fund balance due to the more than expected tax collection in Fiscal Year 2016-17.A home valued at $750,000 would pay $27.20in taxes for the 2011 Series Bonds and $19.07for the 2012 Series Bonds as part of their annual property tax payments. The FY 2017-18debt service payments for the Series 2011 General Obligation Bond totals $595,120,ofwhich,$320,000represents Principal and $275,120as Interest. For the Series 2012 General Obligation Bond, the total amount due in FY2017-18is $415,675,including $270,000 for Principal and $145,675asInterest. Resolution 7177Fiscal Year17-18Tax Levies on General Obligation Bonds August 1, 2017 Page 3of3 FISCAL IMPACT No General Funds costs are incurred through this action. The rates established for Fiscal Year 2017-18are estimated to generate tax revenue of $568,600and $398,700 for the 2011 and 2012 General Obligation Bonds, respectively,and will be paid directly by property owners as part of their annual property tax bills. These tax revenues will be addedto each bond fund’s existing fund balances for debt service payments occurring in Fiscal Year 2017-18. RECOMMENDATION It is recommended that the City Council adoptResolution No.7177determiningthe amount of revenue to be raised from property taxes for Fiscal Year 2017-18to pay for the debt serviceon the 2011and2012General Obligation Bonds. Attachments: Exhibit “A”–Calculation of Tax Rate Resolution No. 7177 Exhibit “A” General Balance 2017-18Estimated Debt Obligation Available % Tax Rates Assessed Tax Service Bonds(1)2017-18(3) valuationsRevenue(2) 7-01-17 Series 2011$495,100$15,676,471,562$568,600$595,1200.003627% Series 2012$367,800$15,676,471,562$398,700$415,6750.002543% (1)Excess fund balance is included to ensure that positive cash balance is available for the debt service payments on August 1, 2018. (2)Per debt service schedule below. (3)For comparison, the levy rate from last yearwas 0.004014% and 0.002803% for Series 2011 and 2012 General Obligation Bonds, and their first year levy rates were 0.006621% and 0.009657% in 2011 and 2001, respectively. DEBT SERVICE PAYMENT SCHEDULE: 2011 G.O. Bond2012 G.O. Bond Principal$320,000$270,000 Interest$275,120$145,675 Total$595,120$415,675