On Wednesday, April 5 at 4 pm the City Council will hold their monthly Special Meeting - Study Session. There are two items on the Agenda for tomorrow –
The first is a presentation from Michael Busch of Urban Futures on Certificates of Participation and Private Placement Loans. Certificates of Participation are used for traditional infrastructure financing (think streets, roads, buildings, and other public infrastructure) and is being considered as a possible option to fund a portion of the remaining need for the Civic Center Project if Measure A is successful. Measure A must pass with 50% plus 1 in order for the Town to issue any debt (COPs, loan, or bonds) secured by the General Fund for the Civic Center Project. The Council has asked for a presentation/education on the use of COPs.
Certificates of Participation (COPs) are not bonds and function as a lease-purchase financing structure. The Town would issue a tax-exempt COP using an existing unencumbered Town asset (such as the existing buildings or underlying property until demolished). The proceeds would be used to fund any funding gap. COPs are considered a liability to the General Fund.
COPs are released via a public offering to multiple “lenders” - similar to a bond issue. If Measure A is successful, the funding gap for the Civic Center Project is less than $1 million and that amount could be made up in successive years of General Fund revenues over expenditures. However, the Council could consider the use of COPs in order to save the existing unallocated General Funds for other capital projects down the line and use anticipated revenue over expenditures to payoff the COPs. While not always cost-effective for small projects or short-term borrowing, COPs are an option for consideration - and at the very least - education of the Council and community.
The other option being presented by Urban Futures in the presentation is Private Placement Loans. With a private placement loan, the loan is generally sold to a single or limited number of qualified investors and underwritten by a placement agent. This is a fairly straight-forward loan transaction with faster turn-around.
The presentation by Urban Futures is informational only and will result in some educational Q&A by the Council.
The second item on the Agenda is Study Session #1 on the Budget. This is a broad-brush overview of the Town’s General Fund Operational Budget. Operational revenues for FY 2017/18 (excluding ERAF and the Public Safety portion of the Parcel Tax reflect revenues of $14,314,027. This is 2.4% above the adjusted budget for Fiscal Year 2016/17. Operational expenses for FY 2017/18 reflect expenses of $12,841,976. This is 3.5% above the adjusted budget for Fiscal Year 2016/17. Anticipated revenues exceed anticipated expenditures by $1,472,051. These revenues exclude the use of anticipated ERAF and the public safety portion of the Parcel Tax.
When revenues exceed expenditures, the Town uses the additional funds to contribute to one-time capital projects, save for future capital projects or pay down any long-term liability. The Town recently completed 4 Master Plans - Civic Center Master Plan, Bicycle/Pedestrian Master Plan, Drainage Master Plan, and Park Master Plan. These Master Plans identify project needs (low, medium, and high priority) over the next 50-75 years. Some of these project needs are solely the responsibility of the Town and others involve necessary approval and/or funding partnerships with Caltrans, Menlo Park, Redwood City, County of San Mateo, Sanitary Districts, School Districts, the Fire District and in some cases, residents (particularly where drainage is concerned). When the City Council reviews unallocated funds available, these Master Plans provide a guide and priority framework for allocating resources. The Master Plans also serve as a foundation for grant applications and partnership agreements with outside jurisdictions. Each year, as the Town develops its 5-Year Capital Improvement Budget, these Master Plans serve as the basis for project design and development.
Beyond the unallocated fund balance, the Town maintains two reserve accounts - a 15% Emergency Reserve and a 20% Operational Reserve. In total, the Town maintains a 35% Reserve based on operational expenditures. The combined required (and met) reserve for FY 2017/18 is $4,494,691. At the end of FY 2017/18, it is anticipated that the Town will have $9,171,065 as Unallocated General Funds (inclusive of revenue from ERAF and the public safety allocation of the Parcel Tax).
For additional information on the Town’s Annual Budget, feel free to contact Robert Barron, Finance Director at firstname.lastname@example.org or the City Manager - George Rodericks - email@example.com.