The Hollister City Council on Monday unanimously passed a $35
million bond issuance for redevelopment agency projects that
include Highway 25 safety improvements, Fire Station 2, a new
wastewater plant and San Benito Street beautification.
The Hollister City Council on Monday unanimously passed a $35 million bond issuance for redevelopment agency projects that include Highway 25 safety improvements, Fire Station 2, a new wastewater plant and San Benito Street beautification.
The city will pay back the bond – its largest ever – over the next 30 years, according to RDA Director Bill Avera. Interest alone will cost a projected $32.2 million over the term, which would bring total payments to $67 million.
“We’re making a pretty sizable bond issue to pay for specific projects,” Avera said. “At the same time, we’re not bonding the maximum out because it makes no sense to pay interest on all of that.”
The Hollister RDA could issue that maximum of $75 million, which is set by the state according to property tax revenues. City Manager Dale Shaddox and Mayor Brian Conroy both called the $35 million issuance “conservative.”
The city-hired underwriter, Stone and Youngberg LLC, will sell the bonds, according to officials. Stone and Youngberg LLC is among five outside firms heavily involved in the process, Avera said. He mentioned a Bond Council to oversee legal aspects and a Historical Data Team for research.
“By the time we close the deal, there will be six or seven parties involved,” said Avera, who added the amount each firm will receive will be uncertain until the deal is complete.
The city will pay off the debt with the RDA’s annual property tax increment. Other agencies within San Benito County receiving the annual property tax allocations include the county, the hospital district and the county water district.
Based on the projected average interest rate of 4.5 percent, Avera said the city would pay off the bond series at a rate of about $2 million per year. Add another annual bill of $600,000 to that for a 1997 bond payoff, and the RDA’s total annual debt payments are projected at $2.6 million.
With the Council passing the bond Monday, the RDA is guaranteed to function in debt, which is required by the California Department of Housing and Community Development. The city probably won’t need to issue bonds again until 2008, Avera said.
“At some point, if you don’t issue bonds, you’re not going to be in debt,” Avera said.
The Hollister RDA was founded in 1983 to enhance infrastructure, citywide beautification and to assist efforts regarding low-income housing. Hollister’s largest previous RDA bond issuance was $16.1 million in 1993, and the 2003 series is the seventh in the city’s history.
The Council on June 9 already earmarked $10 million from the bond to Highway 25 safety improvements, for which construction is scheduled to begin within two years.
The new wastewater plant is scheduled to demand $8.5 million from the RDA and be finished in October 2005. The $3.5 million Fire Station 2 is tentatively scheduled for completion in May 2004.
“There are a lot of projects on the table right now,” Councilman Robert Scattini said. “We need it (the bond issuance) in order to complete these projects.”
Conroy added, “We’ve got some infrastructure problems to take care of.”
After the city pays its bond debt each year, it will have enough money left over to fund RDA operations along with relatively smaller projects, Avera said. As an example, he pointed out the facade program to fund the painting of downtown businesses.
For the first year of the issuance, the RDA will net $5.1 million from property taxes. That will leave breathing room of about $2.5 million, “so we can continue to operate and do some smaller projects as well,” Avera said.
