HomeMy WebLinkAbout20 LETTER OF CREDIT 04-03-95AG EN DA
NO. 20
4-3-95
DATE:
M~RCH 28~ [995
Inter-Com
TO:
FROM:
SUBJECT:
WILLIAM A. HUSTON, CITY MANAGER
RONALD A. NAULTt DIRECTOR OF FINANCE
LETTER OF CREDIT SECURING THE CITY OF TUSTINIS PRORATA SHARE
OF THE JAMBOREE/EDINGER INTERCHANGE CONSTRUCTION
RECOMMENDATION:
Direct staff to acquire a Letter of Credit to secure the City's
commitment to fund its' one third share of the Jamboree/Edinger
interchange project, not to exceed $5.5 million in full value.
FISCAL IMPACT:
The additional cost to the City of securing a Letter of Credit to
secure our share of the interchange funding agreement will be
approximately $13,000-$16,000 per year for an estimated 2.5 years.
DISCUSSION:
Staff has been discussing the issues with the Transportation
Corridor Agency (TCA) and negotiating alternative ways of securing
the City's share of the interchange project prior to the award of
the construction contract estimated to be late in June, 1996. The
TCA has.agreed to cash flow the Right of Way Acquisition and the
initial construction payments from their one third share first,
then they will submit quarterly invoices to Tustin/Irvine for the
remaining cash flow.
Under'these terms, the City may not be required to provide funds to
the TCA until late 1997 or early 1998. If the City were forced to
issue debt today, it would cost approximately $460,000 in
additional interest prior to the start of construction. It is also
anticipated that rates in.the Municipal Bond market will be much
more favorable in the next 12 to 24 months than they are today.
The TCA is beginning to market their Bonds for the Eastern leg of
the corridor. They have been advised that unless they have secured
agreements from Tustin and Irvine for our shares of the interchange
project, they will have difficulty selling the Bonds at favorable
interest rates. The corridor itself will be pledged as security
for the Bonds, rather the tolls generated by the Corridor, but, if
the interchange is not completed because of lack of funding from
Page 2
March 28, 1995
Tustin or Irvine the toll road will not be opened and it is a much
weaker security for the Bonds.
The Letter of Credit securing our funding commitment will provide
the security that the TCA needs to successfully market the Bonds
and, it provides usa cost effective alternative to issuing long
term debt ahead of the actual funding requirements.
Rona~A. Naul~,, ~ t~~
Director of Finance
RAN: lSa: jamboree.wah