Council authorizes lease financing to move forward with Sergeant Piney aquatics center

The Ridgecrest City Council on Jan. 15 authorized the city to proceed with lease‑back financing in the form of certificates of participation to fund construction and equipping of the Sergeant Piney Aquatic Center.

The council approved a resolution (motion passed 5–0) that authorizes the form of financing documents and directs the city manager, finance director, city clerk, mayor and vice mayor to execute the documents required to issue the securities and close the loan, with staff to return as needed for final approvals.

Why it matters: The project is the largest capital undertaking the city has advanced since passage of Measure P. Council discussion focused on how much of Measure P reserves to use as a down payment, how the debt service will be impounded over time, and how the financing schedule fits the city’s bid and construction timetable.

City staff and the city’s financial advisers outlined the structure at length. Rob Pankratz of the city’s financing team said the transaction will use a lease/leaseback structure common in California municipalities: the city will use an unencumbered municipal asset as the leased collateral, lease it to a counterparty and receive proceeds that fund the pool construction; the city then makes lease payments that are assigned to a trustee to pay debt service. Bud Levine and representatives from Hilltop Securities and Stradling Law joined the presentation.

Key numbers discussed by staff and the financing team included an estimated par issuance in the $13.1 million range (staff modeled a not‑to‑exceed par amount in the resolution), an anticipated premium of about $1.1 million and total sources near $14.37 million under the advisers’ early estimates. The team noted an updated all‑in true interest cost (AIC) in market motion was about 3.76% at the time of pricing work, and target closing was set for Feb. 27, 2025. Staff said the full pool purchase price is budgeted at roughly $17 million and that the financing schedule allows for value engineering once bids are received.

Down payment options and reserves: Staff presented scenarios using $3 million, $6 million and $9 million of Measure P reserves as a down payment. The staff recommendation and council preference coalesced around a $6 million down payment funded from Measure P reserves to preserve general‑fund unassigned reserves and still support available cash over the nine‑plus year financing horizon. With that approach staff estimated an annual debt service payment of about $1.1 million and an impound (reserve) payment of roughly $0.5 million per year to smooth final years’ obligations, producing an approximate annual draw on Measure P of $1.6 million while the financing is outstanding.

Next steps: With council approval the financing team will publish a preliminary official statement, market the certificates, price the offering and return with closing documents. Council members and advisers noted they will return to accept construction bids and award construction contracts once competitive bids are received.

Council reaction: Several councilmembers said the $6 million approach best aligned with the commitments made to Measure P voters and would keep the city’s general fund reserves at healthy levels while allowing the project to move forward. The motion to approve with the staff’s amendments carried unanimously, 5–0.