Santa Fe Springs council authorizes sale of $30 million bonds to accelerate Measure SFS road work

The Santa Fe Springs City Council on Monday authorized the sale of up to $30 million in bonds backed by Measure SFS, the parcel tax voters approved last November, and gave the city’s financing team permission to proceed with a negotiated sale expected April 10 with a planned close on April 14.

The authorization, made during a public hearing, clears the way for the city and a joint powers authority to issue bonds to accelerate commercial- and industrial-road reconstruction paid for entirely from the parcel-tax revenue. Staff said the borrowing is intended to speed repairs and avoid higher construction costs later.

"Last November, the residents of Santa Fe Springs approved a parcel tax measure, that allows us to repave, all our commercial roads and and roads throughout our city," said Renee Bobadilla, staff member, opening the public hearing on the proposal.

Julio Morales, the city’s municipal advisor for the transaction, told the council the city will approve the preliminary official statement and financing documents and that the bonds will be sold by negotiated sale through the selected underwriter. He gave a good-faith estimate for the transaction: an indicative interest rate of about 4.34 percent, roughly $295,000 in cost of issuance, and an underwriting fee of about $6.50 per bond. The proposal includes a $2 million contingency and a $2.5 million cash-funded reserve intended to pay down the issue’s final year without creating a net long-term cost to the tax base.

Morales said the city is seeking to balance the higher short-term cost of borrowing against the benefits of starting construction sooner. "You're locking in a rate today, you're able to do the project today and we still will be doing as much as we can on what we call a pay go basis, cash," he said.

Moody’s assigned an A1 rating to the parcel-tax issue, Morales said, a rating that applies only to this parcel-tax pledge rather than the city’s full-credit profile; the city plans to seek an underlying city credit rating in the summer. Morales said bond insurance is expected and that market factors could change pricing between the estimate and the day of sale.

An overview presented to the council estimated total debt-service payments on the issue at roughly $58 million over the life of the bonds, reflecting principal and interest. The issuance size is intended to accelerate a portion of the pavement work now rather than relying solely on annual pay-go collections.

Councilmember discussion was limited. A motion to approve the financing documents, authorize the sale team and proceed with the negotiated sale passed unanimously with four council members voting in favor and one member absent.

Staff will return with the final official statement, the actual pricing, and a follow-up recommendation when they pursue a broader, underlying city credit rating later in the year.