The future of Hollister is currently for sale.
A $35-million bond issuance for the city’s Redevelopment Agency
began late last week and will close Aug. 20, according to Stone and
Youngberg, the underwriter hired by the city to sell the
investments.
The future of Hollister is currently for sale.
A $35-million bond issuance for the city’s Redevelopment Agency began late last week and will close Aug. 20, according to Stone and Youngberg, the underwriter hired by the city to sell the investments.
Hollister is selling the bonds for an immediate financial boost to move forward on several high-profile infrastructure projects, including Highway 25 improvements, construction of a new wastewater facility and a second fire station.
The bonds were priced on Thursday, when investor enthusiasm determined the interest rates and, ultimately, how much bang for the buck Hollister will receive.
The rates for the bond will range from 3 percent to 5.125 percent, depending on the length of the term chosen by each investor, according to Eileen Gallagher, vice president of public finance at Stone and Youngberg.
City officials had hoped for a slightly higher “true interest cost,” which is similar to an average or an annual percentage rating. In June, officials projected it to be 4.5 percent and it actually came to 5.07 percent.
The city, however, chose a relatively good time to act on the bond issuance because of a market environment of record-low interest rates.
“Interest rates were at an all-time low a month or two ago,” Gallagher said. The city and firm pushed to get the sale through now because, “We were
concerned with interest rates rising,” she added.
Technically, Stone and Youngberg has already purchased the bonds, half of which have been sold on the market thus far, Gallagher said. The activity from this point will not change what the Hollister RDA pays, or what it receives.
Theoretically, the firm could fail to sell all the bonds, but that likely won’t happen, Gallagher said.
“That practically almost never happens. The only time it ever happened for me was Sept. 11 (2001),” she said.
Part of the city’s $35 million will pay for an outstanding bond debt, while some money was held in a reserve and some went to pay for bond insurance – bringing total RDA revenue to $29.7 million, Gallagher said.
The city will pay off the bond issuance over the next 30 years. It will be financed by the RDA’s annual property tax increments, a payment each year reaching more than $2 million, according to RDA Director Bill Avera. The city will pay an additional $600,000 a year for another previous bond issuance payoff, bringing the total annual
Other agencies in the county receiving the tax increments include the county, the hospital district and the county water district.
By state law, the RDA, which exists to enhance infrastructure and curb community blight, must function in debt. The city will probably not issue bonds again until at least 2008, Avera said.
