San Jose approves commercial paper, $23M for AMI meters; TD Bank selected for letter of credit

The San Jose City Council, sitting as the governing board of the City of San Jose Financing Authority, voted unanimously May 6 to authorize updates to the authority’s commercial paper program and to issue up to $23 million in lease-revenue commercial paper notes to fund a citywide advanced metering infrastructure (AMI) project.

The financing authority’s director of finance, Maria Oberg, told the council the authority — a joint exercise of powers created in 1992 — can issue up to $175,000,000 of commercial paper notes and that the program’s existing letter of credit with U.S. Bank expires in June. Oberg said the administration ran a request for proposals and selected TD Bank to provide a replacement letter of credit for up to $175 million and that the city expects about $112,000 in annual savings from the new arrangement.

The AMI project would convert roughly 27,000 water meters to a cellular-based system, city staff said. The council authorized the financing authority to issue tax-exempt commercial paper notes not to exceed $23,000,000 for purchase and installation of the AMI system, with principal amortized over 10 years after project completion and the water utility capital fund identified as the repayment source. Staff estimated the AMI construction period at two to three years and the useful life of the technology at 15 to 20 years. The administration disclosed a set of financing fees totaling 0.545 percent annually (commitment fee, dealer fee and related fees).

The council held the statutory public hearing required under what staff read into the record as “section 65 86.5 of the California government code,” heard no public testimony and adopted the necessary resolutions by unanimous vote. Council members voted separately on the financing-authority items (letter-of-credit approval and related financing-document amendments) and on the city’s approval of the lease-revenue CP notes for the AMI project; each item passed unanimously.

City staff described commercial paper as short-term, variable-rate borrowing intended to lower near-term cost of capital and preserve capital-project liens. Staff noted risks including renewal risk on the letter of credit, variable interest-rate exposure and marketability risk if buyers are not available at maturity. The administration said current program utilization would rise from an on-hand outstanding balance (about $5.7 million at the time of the presentation) to roughly $149 million if the $23 million authorization is drawn in addition to other anticipated use.

Mayor Matt Mahan and finance staff thanked the financing team, municipal advisors and dealers. The council directed no changes to the vote; no members recorded a request for roll-call tallies beyond the announced unanimous outcomes.

Council minutes show the motions as “Move approval of item 1” (letter of credit and related actions) and “Move approval of item 2” (issuance of CP notes for AMI). Both motions passed unanimously.