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Council extends Bank of America letter of credit for water utility commercial paper program
Summary
The council authorized a three-year extension of the Bank of America letter of credit backing the water utility's $250 million commercial paper program, approving an estimated $2.9 million in fees over the term (about $420,000 this fiscal year) and declaring official intent to reimburse capital expenditures.
The City Council voted Oct. 29 to extend the letter-of-credit agreement with Bank of America that supports the City of San Diego's $250 million water utility commercial paper program, authorizing routine facility fees estimated at $2.9 million over approximately three years.
Finance staff explained the commercial paper program provides short-term borrowing capacity the water utility uses to bridge cash-funded capital projects until long-term bonds are issued. Allison/Asen Falkenstein (finance) told the council the program had $123 million outstanding in September and Bank of America was selected through an RFP and evaluation process.
The proposed extension would renew the existing letter of credit through January 2028 and carry a commitment fee of 36 basis points (0.36%), producing an estimated $420,000 cost in the current fiscal year. The item also included a reimbursement resolution declaring the city's intent to use future debt proceeds to reimburse eligible capital expenditures.
Councilmember Lee moved the staff recommendation and the council approved the extension.
