LOS ANGELES — Underwriter Citi terminated a $265 million bond deal after an Anaheim, Calif. activist organization filed a lawsuit May 12 seeking to invalidate the bonds.
The bonds, priced by Citi for the Anaheim Public Financing Authority March 25 to finance a convention center expansion, had been slated to close May 14, according to the official statement.
"We are reviewing our options at this time and will make the determination at a point in the future on how we move forward with plans for the Anaheim Convention Center's expansion project," said Ruth Ruiz, an Anaheim spokeswoman. "Regardless, it is unfortunate that a few local activists, in contradiction to the overwhelming community support shown at the Council meeting where the bonds were authorized, have taken legal action against this project, based on their opinions on actions approved by our City Council."
Attorney Cory Briggs filed the lawsuit on behalf of the Coalition of Anaheim Taxpayers for Economic Responsibility.
The deal had consisted of $258 million of tax-exempt bonds, as well as $7 million of taxable bonds maturing in 2015 and 2016. The proceeds were to refund 1992, 1993, 2002A and 2010 lease revenue bonds and provide $200 million to finance the convention center expansion.
The bonds received AA-minus ratings from Fitch Ratings and Standard & Poor's with a stable outlook.
Briggs just squeezed the complaint in under the wire. He had 60 days to file a lawsuit after the council approved selling the bonds on March 7.
CATER put the city on notice after the City Council approved the bond sale that it would be filing a lawsuit to challenge it.
According to Briggs, the bonds should not have been issued without the City Council going to voters for approval.
"The bonds have to be invalidated until the voters of Anaheim approve the sale," Briggs said.
CATER is not opposed to convention center renovations per se, he said.
California law dictates that if municipalities issue bonds that take on debt requiring payments beyond a year, municipalities must go to voters for approval, Briggs said.
"If you are going to use the credit card, you have to get voters to bless spending the grandkids' money," Briggs said.
An amended version of the official statement posted on the Municipal Securities Rulemaking Board's EMMA website disclosed receipt after the signing of the bond purchase contract of a letter from Greg Diamond, CATER counsel, on April 7.
The Anaheim Public Financing Agency is a joint powers authority of the Anaheim City Council and the Anaheim Redevelopment Agency.
California redevelopment agencies were dissolved under state law in early 2012.
Ruiz said the project would have immediately infused $20 million into the local community
"The deal we brought forth to the City Council and agreed upon by investors was a good deal for the residents in Anaheim," Ruiz said. "Any future deal will likely cost more, not to mention the potential for legal fees. The City, the City Attorney and bond counsel were of the opinion that such litigation would not likely succeed."
