Title
Receive Debt Service Analysis and Recommendation for Capital Improvement Projects.
Report
RECOMMENDATION:
It is recommended that the Budget Committee receive Debt Service Analysis and recommendation for Capital Improvement Projects.
SUMMARY:
The Monterey County Capital Improvement Committee ("CIC") determined that rehabilitation of the East and West Wings of the Courthouse at an estimated cost of $36 million and completion of tenant improvements at Schillings Place at an estimated cost of $16 million were priorities. As such, the County Debt Manager obtained the debt service scenarios for issuance of Certificates of Participation in the amount of $52 million. In order to provide for proper comparison, debt service would begin after January 1, 2016. The County could opt to pay interest only for the first three years, pay level debt service, include capitalized interest for FY 2016, and include capitalized interest thru FY 2017.
DISCUSSION:
COPs are essentially the securitization of capital leases which do not count toward constitutionally imposed debt limitations. Properties, in this case the entire Schillings complex and the East and West Wings, are transferred to the Monterey County Public Improvement Corporation, which then leases those properties to the County. The leases contain an "Abatement Clause" which states that should the properties become uninhabitable for any reason, the County is not required to appropriate lease payments until those buildings become usable. Once the debt has been paid, the properties revert back to the County.
Attachment A shows annual debt service for the four options based on an issuance prior to June 30, 2015, with the lowest annual debt service approximating $2,950,000 based on the level debt service option. The option of paying interest only for the first three years reduces that amount to approximately $2,282,750 for those three years, but then escalates to approximately $3,085,000 for the rema...
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