A proposal to refinance the bond on the Cameron Park Community Center was scrutinized May 21 with board members putting off a decision until a special meeting can be held early next month.
General Manager Mary Cahill noted the board had previously expressed an interest in refinancing the community center once the financial climate improved. With interest rates now at historic lows, Cahill said she explored the topic with two different underwriters, although one later pulled out.
Cahill said her investigation of the subject also led her to recommend that the funds for the refinancing come through a private versus a public placement as it would cost less and require less staff time.
In a public offering, the issuer publicizes the upcoming bond issue and accepts bids. In a private placement, funding is acquired through direct negotiation with a select number of private financial institutions.
Cahill then introduced Rick Brandis and Nicki Tallman of Brandis Tallman, an investment banking firm in San Francisco that provides bond underwriting and placement services to public agencies. She recommended their firm be approved as the Placement Agent for the refinancing of the bond.
Brandis said his firm had contacted four different banks and could offer the district an interest rate of 3 percent on the refinanced bond if the board approved their proposal that night.
The existing bond has an interest rate of between 4 and 5 percent.
Brandis estimated the new rate would save the district $55,728 per year or $891,000 over the 16 years remaining on the bond.
The cost of putting together the refinancing deal would be $78,000 to the district including the cost of bond counsel, placement agent, investor’s counsel, CDIAC, redemption/COl and verification report.
However the proposal ran into strong objections from several board members, residents and two representatives of a rival investment firm.
Director Shiva Frentzen began by asking why the refinancing of the community center was not being done using an RFP (Request for Proposal) so that other firms could bid.
Resident Bill Carey asked the same question, saying he attends all the board meetings and this was the first time a specific proposal had been brought forward for adoption by the board. He also asked to what extent the board had been involved in soliciting the bid from Brandis Tallman and suggested other firms should be asked to submit a bid.
President Vicky Neibauer wondered how they could be at the point of having an agreement, which must have involved several previous meetings, without the board being aware of it until they found the proposed agreement in their board packet last week.
The discussion then led Max Callaghan and Richard Han, both with the investment firm of Edward Jones, to say their firm would also be interested in submitting a bid to underwrite the bonds. Han said, in all fairness, when they checked their rates, they were very similar to the 3 percent offered by Brandis Tallman but said Brandis Tallman’s cost of issuance would be higher and could actually be twice as high. He went on to say that now is an opportune time to refinance with their firm being able to offer a blended rate of between 2 to 3.5 percent. But when other costs are included, Han said, we are very competitive with the other firm.
Facing uncertainty about how long the RFP process would take and the loss of $56,000 in interest savings if they delay their decision beyond a certain date, the board voted to continue discussing the refinancing of the bond to a special meeting on June 2 at 5:30 p.m.
Cahill later commented the proposal was not totally unexpected by the board as she had previously been directed to explore refinancing the bond.
At the same meeting, the board also approved a 1.32 percent rate increase for El Dorado Disposal to take effect July 1. The new rate will apply to all residential, commercial and roll off rates. The 35-gallon senior residential rate will remain unchanged.
A preliminary budget for the next fiscal year was also reviewed. Revenues are projected at $5 million with expenses at $5.047 million, leaving a $40,145 deficit.