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City moves to refinance Home2 Suites lease‑revenue bonds to lower debt service
Summary
Council authorized the Public Financing Authority to proceed with refunding the 2016 Home2 Suites lease‑revenue bonds (proposed 2026 Series A) to reduce annual debt service by an estimated $435,000 and save roughly $8.7 million over the remaining term if market conditions hold.
At a joint meeting of the Montebello Public Financing Authority and City Council on June 24, staff proposed refunding outstanding lease‑revenue bonds originally issued in 2016 to finance the Home2 Suites hotel.
Director of Finance Michael Solarza said the hotel bonds became eligible for refunding in June 2026 and that preliminary market estimates suggested a true interest cost near 4.04 percent, producing an estimated $435,000 in annual savings and approximately $8.7 million in lifetime savings through the bonds’ original maturity in 2046. Solarza emphasized the refinancing would not extend the term: "This refinancing does not extend the term. They're still going to be paid off at the original 30‑year mark June of 2046," he said.
Solarza and staff noted that all operating expenses and debt service on the hotel are covered by hotel operating revenue and that the refinancing would increase the cushion between operating revenue and expenses without requiring general‑fund subsidy. Councilmembers questioned how savings flow through to the city and whether the amount would be swept to the general fund or absorbed by operating costs; staff explained bond indentures prioritize debt service, then operating expenses, with any remaining excess historically transferred to the general fund.
Council approved the bond refinancing action necessary to move to market, with staff planning to finalize the official statement, present to rating agencies, and return with final pricing when bonds are sold and priced in July. The city expects the bonds to close in August if market conditions permit.
