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Home My WebLink AboutMINUTES - 11042003 - C56 TO: BOARD OF SUPERVISORS Contra FROM: JOHN SWEETEN, COUNTY ADMINISTRATOR •;`--'- nil . , Costa DATE: November 4, 2003 SUBJECT: Support for S.271 and H.R. 1076 �County SPECIFIC REQUEST(S)OR RECOMMENDATION(S)&BACKGROUND AND JUSTIFICATION RECOMMENDATIONS: 1. SUPPORT S.271 and H.R.1076 that would allow an additional advance refunding of municipal bonds originally issued to finance governmental facilities for essential governmental functions. 2. AUTHORIZE the Chair of the Board of Supervisors to execute a letter to the County's Congressional delegation that requests their support of S.271 and H.R. 1076 and if they have not already done so, consideration of co-sponsorship of these bills. 3. REQUEST that CSAC and the Urban County Caucus include these bills in their legislative advocacy program. 4. DIRECT the County Administrator's Office to contact counterparts in other California counties to seek their support of S.271 and H.R. 1076 and assistance in alerting members of their Congressional delegations to the financial significance of these bills to local governments. FISCAL IMPACT The County has previously advanced refunded four series of lease revenue bonds, of which some $200 million is still outstanding. The largest of these bond issues was originally issued for the construction of the County's Regional Medical Center in Martinez, which cannot be refunded again until 2007, the first call date on the bonds. At current interest rates, the refunding of this debt in 2007 would generate in excess of $600,000 in annual debt service savings. Given that interest rates could fluctuate considerably until then, there is no guarantee that this level of interest savings could be achieved. CONTINUED ON ATTACHMENT: —x–YES ------SIGNATUR_ --------------------------------------------------------------- - ------ RECOMMENDATION OF COUNTY ADMINISTRATOR RECOMME ATION OF BOARD CO TTEE APPROVE OTHER SIGNATURE(S): -----------_---------------------–--------------------------------------------------------------------–---–------------------------------ ACTION OF BOARD ON Novmber 4, 2003 APPROVE AS RECOMMENDED X OTHER VOTE OF SUPERVISORS I HEREBY CERTIFY THAT THIS IS A TRUE AND CORRECT COPY OF AN ACTION TAKEN X UNANIMOUS(ABSENT Nome } AND ENTERED ON THE MINUTES OF THE BOARD OF SUPERVISORS ON THE DATE AYES: NOES: SHOWN. ABSENT: ABSTAIN: ATTESTED Nbvesber 4, 2003 CONTACT: Laura Lockwood,335-1093 JOHN SWEETEN,CLERK OF THE BOARD OF SUPERVISORS AND COUNTY ADMINISTRATOR CC: Jim Kennedy,Redevelopment Sara Hoffman,CAO BY � �/ DEPUTY BACKGROUND An advance refunding occurs when outstanding bonds are refinanced before the bonds mature or become "callable." The proceeds of the new refunding bonds are used to pay the principal, interest and any call premium of the outstanding bond issue, either to the maturity of the bonds or to the first call date. Governmental borrowers may want to advance refund their outstanding debt for a variety of reasons, which range from taking the opportunity to achieve interest rate savings or favorable changes in the debt service schedule, to the need to remove or change outdated or unwanted covenants and restrictions imposed by the original indenture. There are many federal tax laws that govern the issuance of refunding bonds and the amount of arbitrage that can be earned. In particular, federal concerns regarding what was perceived as over issuance of tax-exempt bonds led to the adoption of the 1986 Tax Reform Act that imposed severe restrictions on state and local government issuer's ability to do advance refundings. Since 1986, tax-exempt private activity bonds may not be advance refunded at all, and governmental bonds like those issued by the Contra Costa County Public Financing Authority for public facilities may only be advance refunded once. This has greatly reduced the ability of state and local governments to take advantage of the attractive low interest rates of the last few years, unlike homeowners, who may have refinanced their mortgages several times as rates continued to fall to record low levels. Senate Bill 271 would modify the federal tax code's limit on advance refundings, allowing one additional advance refunding for those bond issues that were originallyissued to finance essential government facilities. Initially introduced in January 2903 by Senator Gordon Smith of Oregon, the bill has broad bi-partisan support as evidenced by the 28 cosponsors in the Senate, including California Senator Feinstein. Representative Patrick Toomey of Pennsylvania introduced a companion measure, H.R. 1076, in the Mouse of Representatives in March 2003, which now has 7 cosponsors. To date, none of these cosponsors are from California. Preliminary estimates indicate that the cost of this bili to the U.S. Treasury would be $13 billion over the next ten years, or roughly $1.3 billion per year. Given the enormous budget problems that are occurring on both the state and local level throughout the United States, this legislation would nevertheless prove to be a real blessing to both state and local jurisdictions in the years to come, as the additional flexibility in the tax code would allow for more efficient and cost-effective management of public debt portfolios. Contra Board of supervisors County Administrator Costa jottx Gime. District 1 County Administration Building Count 651 fine street,II&Floor GAYLE B.UIUMMA Martinez,California 94553-4068 District 11 V-925-335-1080 MSL1S6 GPXENBBR+G F-925-335-1098 District III John Sweeten MAsx UESAULMER County Administrator District IV F9DM AL D.GLOVER District V November 4,2003 Senator Dianne Feinstein 331 Hart Senate Office Building Washington,D. C. 20510 Dear Senator Feinstein: We applaud your support of S. 2`71,amending the internal Revenue Code of 1986 to allow an additional advance refunding of bonds originally issued to finance facilities used for essential government functions.We are particularly pleased that you are a cosponsor of this bill. Passage of this legislation would be a real blessing given the enormous budget problems facing state and local governments at this time.We estimate that if S.271 had been in place this year,we could have reduced annual debt service on the County hospital by as much as $600,000 per year. Please let us }snow if we can provide additional information or background on this issue. Thank you again for your support. Sincerely, Mark DeSaulnier Chair,Board of Supervisors Contra Bow otSupeMsor$ County:Adminismtvr Costa JOHN G101A �-^ County 1 damstratxon Building County District i 651 rine Stwet 1111,Floor GAYu B.UiLz mA Martinez,Cahfornia 945534068 District ii V-925--335-1080 F"-925-335-1098 Mcca cG3Ft:1E8iVSE�G ,r'" • District Iii john Sweeten MARS DFSAUL INR County Adutinisbmtor «. District IV FwKRAL D.GLovFA District V November 4,2003 Senator Barbara Boxer 112 Mart Senate Office Building Washington,D.C. 20510 Bear Senator Boxer: We request your support of S.271,amending the Internal Revenue Code of 1386 to allow an additional advance refunding of bonds originally issued to finance facilities used for essential government functions. If you have not already agreed to cosponsor this bill,we urge you to do so. This bill would modify the federal tax code's limit on tax-exempt issuers'advance refundings by increasing advance refunding opportunities from one to two,which will allow many state and local governments to take advantage of the attractive low interest rates currently available to refinance their existing, but already advance refunded,debt.The additional flexibility in the tax code would allow for more efficient and cost-effective management of not only Contra Costa County's debt portfolio,but also the debt portfolios of the State of California as well as the various cities,school districts,and other special districts in your state. Passage of this legislation would be a real blessing given the enormous budget problems facing state and localgovernments at this time.We estimate that if S.271 had been in place this year,we could have reduced annual debt service on the County hospital by as much as$600,000 per year. Please let us know if we can provide additional information or background on this issue. Thank you for your consideration. Sincerely, Mark DeSaulnier Chair,Beard of Supervisors Contra Board ofSupeMsors County Administrator Costa joxrz GiotA G>unty.AdrainistrationBig County District I 651 Pine Smet 11*Floor GAYLE H.UI[t " Martinez,CaUbmia 94553AO68 ° w District II V-92.5-335-IOW 9, , MuiE GuEENSERG F-925-335-1098 . � : District TIF John Sweeten MVM DESAUurtEa County.Admiriistrator District IV FESRALD.GLOVER District V November 4, 2003 Congressman George Miller 7'Congressional District 2205 Rayburn House Office Building Washington,D.C.20515f Dear Congressman �. er. We request your support ofH.R. 1076,amending the Internal Revenue Code of 1986 to allow an additional advance refunding of bonds originally issued to finance Facilities used for essential government functions. If you have not already agreed to cosponsor this bill,we urge you to do so. This bill would modify the federal tax code's limit on tax-exempt issuers'advance refundings by increasing advance refunding opportunities from one to two,which will allow many state and local governments to take advantage of the attractive low interest:rates currently available to refinance their existing,but already advance refunded,debt.The additional flexibility in the tax code would allow for more efficient and cost-effective management of not only the County's debt portfolio,but also the debt portfolios of the State of California as well as the various cities,school districts,and special districts in your Congressional district. Passage of this legislation would be a real blessing givers the enormous budget problems facing state and localgovernments at this time.We estimate that if H.R 1076 had been in place this year,we could have reduced annual debt service on the County hospital by as much as $600,000 ger year. Please let us know if we can provide additional information or background on this issue. Thank you for your consideration. Sincerely, �h -�- Mark DeSaulnier Chair,Board of Supervisors Contra Bow of Supervisors County Administrator Costa ,toxN Giou County Administration Building County District I 651 Pine Street 116,Floor GAYLEB.U2LKEMA Martinez,California 94553AO68 District II V-925-335-1080 i MILLIE GREENDERO F-925-335-1098 District III « y John Sweeten MARK DRSAULNIIER County Administrator - ** District IV FERAL D.GLOVER District V November 4,2003 Congresswoman Ellen'Tauscher I&Congressional District 1034 Longworth House Office Building Washington,D.C. 20515 Dear Congresswo. c er: We request your support of H.R. 1076,amending the Internal Revenue Code of 1986 to allow an additional advance refunding of bonds originally issued to finance facilities used for essential government functions. If you have not already agreed to cosponsor this bill,we urge you to do so. This bill would modify the federal tax code's limit on tax-exempt issuers' advance refundings by increasing advance refunding opportunities from one to two,which will allow many state and local governments to take advantage of the attractive low interest rates currently available to refinance their existing,but already advance refunded,debt.The additional flexibility in the tax code would allow for more efficient and cost-effective management of not only the County's debt portfolio,but also the debt portfolios of the State of California as well as the various cities,school districts,and special districts in your Congressional district. Passage of this legislation would be a real blessing given the enormous budget problems facing state and local governments at this time.We estimate that if H.R. 1076 had been in place this year,we could have reduced annual debt service on the County hospital by as much as $600,000 per year. Please let us know if we can provide additional information or background on this issue. 'Thank you for your consideration. Sincerely, V)Ae<--- Mark DeSaulnier Chair,Board of Supervisors