LOS ANGELES — San Diego Mayor Jerry Sanders will present a plan to the City Council on Monday to issue $75 million of lease-revenue bonds, of which roughly $30 million will go toward another round of street resurfacing and the rest will be used for more than 50 other infrastructure projects, from sea-wall repairs to storm-drain upgrades.
The council also will be asked to approve a $21 million refunding of Series 2002B fire and life safety lease revenue bonds to be sold together.
“Like all good investments, this is spending that will save us money in the long run,” Sanders said. “These are projects that must be done. We either do them now or we do them later, when the costs will be far higher.”
The bond issues are part of a five-year plan involving annual bond sales totaling half a billion dollars to maintain and repair the city’s infrastructure that was already approved by the council, said Lakshmi Kommi, the city’s debt management director.
As part of the city charter, the council has to pass an ordinance before bonds can be issued, which is why it will be June before the city goes to market with the bonds, Kommi said.
The city will be working with its underwriters, senior manager JPMorgan and co-senior manager Wells Fargo Securities, as well as bond counsel Nixon Peabody, on the preliminary statement while the ordinance works its way through the legislative process, in order to complete it by May and market the bonds in June.
Based on what interest rates were on March 19, the city expects to realize 7% net present-value savings on the refunding. If the city doesn’t realize at least a 3% net present-value savings when it goes to market on the refunding, it won’t sell the bonds, according to Kommi.
Officials are hoping to achieve 4.7% true interest costs on the new-money deal.
The proposal comes three years after San Diego issued $100 million of capital-improvement bonds to resurface more than 100 miles of streets and perform other infrastructure fixes.
In addition to the $30 million for streets, the mayor’s plan calls for $15.5 million for storm drain repairs; $16.3 million for firehouse, library and other facilities upgrades; $2.6 million for streetlight fixes; $1.5 million for park and recreation upgrades, and $8.2 million in Americans with Disabilities Act upgrades.
Even after issuing the bonds, the city’s overall debt will remain in the low to moderate range. San Diego’s debt service as a percentage of general fund revenues would rise from 4.4% to 4.7% in fiscal 2012, then is projected to steadily decrease to 3.52% by fiscal 2017. The figures remain well below the caps set by the city’s debt policy, which recommends that debt-service levels remain below 10%, Kommi said.
The city also plans to issue a half billion dollars in bonds in 2014 to fund construction of a new convention center, assuming the project makes it through all of its hurdles, including approval from a not-yet tabulated vote from hotel owners on whether they want to be taxed to pay for it.
But Kommi said since those bonds will be paid for by the hotel tax they are not included in general fund debt-service levels.
As of June 11, 2011, San Diego had general obligation bond ratings of A from Standard & Poor’s, AA-minus from Fitch Ratings and Aa3 from Moody’s Investors Service. Its certificatates of participation and lease revenue bond ratings were A-minus from S&P, A-plus from Fitch and A2 from Moody’s. All had stable outlooks.
