At the recommendation of Mayor Jerry Sanders, the City [of San Diego] has officially executed a refinancing agreement with Bank of America N.A. to refinance its downtown ballpark bonds. The $156.6 million fixed-rate lease revenue refunding bond issuance will save the City $93 million during the term of the new bonds. The new plan is part of the Mayor’s call for a more aggressive approach to reduce costs and improve financial management practices.
The new bond issuance will retire the original debt incurred during the construction of the ballpark and will save the City approximately $3.7 million in each year of the new 25-year bond financing schedule.
This private refinancing plan takes advantage of growing confidence in the City’s financial standing and includes a unique “revaluation” option that could save the City even more money once it can return to the public finance marketplace. Mayor Sanders brought the refinancing proposal to the City Council in January of this year. The Council adopted the Financing Ordinance authorizing and approving the issuance of the bonds on January 30, 2007.
Yesterday, following completion of a 30-day validation period, the bonds were priced at a true interest cost of 4.8 percent based on today’s MMD Index. The annual debt service on the refunding bonds is $11.3 million for Fiscal Year 2008 through Fiscal Year 2032. This translates into gross and net present value savings of $93 million and $51.6 million, respectively, when compared to the original debt service on the original ballpark bonds.
“This is the kind of thoughtfully aggressive approach we need for every one of our financial obligations at the City,” said Mayor Sanders. “This bond refinancing will save the City more than 25 percent of the original financing costs of the ballpark and will help to rebuild our financial capabilities for the future.”
When the City issued the original bonds it was facing significant litigation regarding the ballpark project. That litigation caused uncertainty about the tax-exempt status of the original bonds forcing interest rates much higher than other comparable tax-exempt lease revenue bonds at the time.
“The City paid a steep penalty for those original bonds,” said Mayor Sanders. “From the outset of my administration I have directed our financial management team to do everything they could to get us a better deal. Now we have done just that. By creatively pursuing our private financing options with regard to the ballpark bonds, the City has removed a huge financial burden and over the long haul will have freed up a significant amount of funds that will be able to be allocated to other important projects.”
With the successful pricing of the bonds completed, the remaining event required to complete the execution of the financing transaction is the closing of the bond issuance, which is currently scheduled for March 12, 2007.
Select this link to read a PDF version of the press release from Mayor Sanders