Walnut Creek council briefed on proposed $77 million aquatic and community center financing; no vote taken

City officials outlined a financing plan Sept. 16 to pay for a proposed $77 million aquatic and community center, telling the Walnut Creek City Council the project would likely combine Measure O set-asides, reserves and lease-revenue bonds issued by a joint powers authority. The session was an informational briefing; council did not vote and will consider approvals at a later meeting.

The proposal staff presented assumes total project costs of $77 million. City Manager Dan Buckshine said Measure O revenues — about $9 million set aside annually — and other city reserves would cover a portion of the cost. “It would take roughly 9 years of saving those funds,” Buckshine said, describing the choice between saving for construction versus borrowing to build sooner and pay over time. Under the staff plan presented, about $27 million in Measure O funds would be available by the end of the current fiscal year and roughly $41 million would be financed with bonds, subject to change after bids and final cost estimates.

City staff and outside advisers described a lease-revenue bond structure in which the city would form a new joint powers authority (JPA) to issue bonds and lease a city asset back to the JPA. Chris Lynch, bond and disclosure counsel with Jones Hall, said lease financings “have been used by California cities, counties, and school districts, since the 1940s” and explained how a JPA issues bonds, transfers proceeds for construction and receives lease payments from the city tied to debt service.

Lynch and other advisers emphasized federal securities rules and continuing-disclosure obligations that come with a public bond sale. Lynch reviewed SEC guidance including Rule 10b‑5 and Rule 15c2‑12, describing the city’s duty to include material facts in the offering documents and to update certain financial information annually. He told the council the city should adopt written disclosure policies and a disclosure working group to help ensure compliance and reduce liability for staff and elected officials.

Officials proposed an eight‑year bond term timed to expire near Measure O’s sunset in 2033; staff said the shorter term helps align debt service with the Measure O revenue stream but that the council could consider a longer term if bids and costs require it. Staff warned that extending payments beyond Measure O’s expiration would shift responsibility for debt service to the general fund.

Staff outlined a near-term schedule: solicit construction bids (due Oct. 23), return Oct. 7 for formation of a JPA and adoption of a reimbursement resolution (to preserve the option of reimbursing recent project expenses from bond proceeds), receive credit‑rating presentations in early November, and bring financing approvals and legal documents to council on Nov. 18. Counsel said the city expects to conduct a competitive bond sale in early December and fund the project in late December if the council approves the financing.

City advisers also described other structuring details discussed with council. The recommended trustee for the bond issue is U.S. Bank; Jones Hall would serve as bond and disclosure counsel. Staff said the city’s administrative services director and financial team will continue to refine the assumptions, and that the recommended JPA partner would be the city’s parking authority to satisfy legal requirements for a joint public counterparty.

Council members pressed staff on alternatives, risks and timing. Several members asked whether borrowing now could save money if construction inflation outpaces bond interest rates; Buckshine said that depends on future inflation and interest‑rate changes. Council members also asked about the details of a reimbursement resolution, what project costs are eligible, trustee selection and the city’s debt policy. Staff said certain soft costs may be reimbursable from bond proceeds (subject to tax rules), that trustee selection had been handled through a competitive process, and that Measure O proceeds are tracked in a dedicated subfund used to pay the debt service so the proposed structure would not violate the city’s general‑fund debt limits.

No public speaker addressed the financing during the meeting’s public‑comment window for that item; staff noted the project will return for multiple review points and public comment opportunities. Staff also said they will offer individual briefings for council members before final Nov. 18 approvals.

What happens next: staff will return Oct. 7 to ask the council to create the JPA and adopt a reimbursement resolution and will seek final approval of the financing plan, associated legal documents and any required resolutions at the Nov. 18 council meeting. If council approves the issuance, advisers expect a competitive bond sale in early December and that bond proceeds would be available to the project in late December.