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Vallejo directs staff to seek talks with US Bank about releasing encumbered assets to expand financing options
Summary
Council authorized staff and municipal advisor KNN to open negotiations with US Bank about partial release of properties encumbered under the city’s master lease, and asked staff to include a budget request for a five‑year financial plan and research into energy partnerships to inform possible financing for a new police headquarters and other capital projects.
Vallejo city staff and municipal advisor KNN presented a review of the city’s general‑fund supported debt on Jan. 28 and asked the City Council for direction on next steps to finance a proposed police headquarters and other large capital projects.
Melissa Shick of KNN told the council that about $30 million of general‑fund supported debt remains outstanding and that roughly 80% of that amount is tied to a US Bank (formerly Union Bank) loan that resulted from the city’s 2011 bankruptcy refinancing. She noted the remaining tranche carries a favorable fixed rate (1.625%) but that the loan’s master lease encumbers numerous city assets and places a covenant limiting additional general‑fund supported debt service to approximately 10% of general fund revenues.
"The loan consists of two tranches...Tranche B is currently outstanding at approximately $23 million and that portion of the loan has a very favorable interest rate, 1.625%," Shick said.
Staff recommended the council authorize outreach to US Bank to explore whether the bank would negotiate a partial release of specific assets from the master lease (which could create greater flexibility for the city’s capital financing). City staff emphasized they were not recommending immediate refinancing of the favorable tranche but wanted to explore options. Assistant City Manager Nalengo Conley said staff would also model scenarios for using a new police facility as a pledged asset or pursuing other tools and partnerships.
The council moved and unanimously approved a motion directing staff and KNN to reach out to US Bank, and added friendly amendments to request a budgetary ask for a five‑year financial plan, to investigate energy‑related financing and partnership opportunities, and to explore district and interagency collaborations to mitigate costs.
Public commenter Melvin Cowan supported the staff recommendation and urged council to pair any discussions with a clear long‑term capital strategy: "Debt capacity without a long‑term financial framework can lead to reactive decisions," he said.
Next steps: Staff will return with a budget request for long‑range financial planning, further modeling of debt capacity and possible asset release outcomes, and recommended project prioritization to inform any decisions about financing a police headquarters.
