On the heels of several multi-million dollar infrastructure
projects, the Hollister Redevelopment Agency plans to issue the
largest bond in the city’s history
– $35 million – to immediately boost its current fund of $14.2
On the heels of several multi-million dollar infrastructure projects, the Hollister Redevelopment Agency plans to issue the largest bond in the city’s history – $35 million – to immediately boost its current fund of $14.2 million.
The proposed bond would help fund such projects as construction of a new sewer plant, Highway 25 improvements, street repairs, Fire Station 2 and the San Benito Street Beautification.
“It provides a source of money right now,” RDA Director Bill Avera said.
The RDA’s latest tax allocation bond passed in 1997. The proposed $35 million would more than double the city’s highest-priced financial advance to date – $16.1 million in 1993, according to Finance Director Barbara Mulholland. The city has previously sold bonds six times since the Hollister RDA’s founding in 1983.
“The bond is a major deal,” Avera said.
The Hollister RDA was established for the purpose of enhancing infrastructure, citywide beautification and to assist efforts regarding low-income housing. It most recently loaned $1 million for a nonprofit organization’s purchase of property for a 22-unit affordable apartment complex on Palm Court.
Avera compared the proposed bond issuance to getting a loan. If the City Council decides to approve the plan, the city would employ its underwriting firm, Stone and Youngberg LLC, to sell bonds to investors. Officials do not have a time line for potential approval.
There is another reason the city must issue the bonds, aside from a need to fund projects. In adherence with California law, officials said RDAs are required to maintain a debt.
While RDAs throughout the state receive funding from a portion of local property taxes, the state would extract those dollars if an RDA operates out of debt.
“You have to show debt to collect that tax increment,” Avera said.
Other local agencies aside from the RDA, including the City of Hollister and the county, also receive increments from property taxes. The City Council on Monday authorized the RDA to request a subordination agreement with the county.
Under the subordination – which has historically been accepted during other bond issuance periods – the county would receive its tax increment only after the RDA makes its bond payments.
“We’re asking the county to subordinate their claim on the tax agreement,” Avera said.
Avera said the deal would have “no negative effect” on the county. Mulholland said if the RDA, “for some reason ceases to exist,” the bond would still be paid off by the city.
If the bond issuance wins approval, the time line for expenditure of the $35 million is unclear.
“It depends on how fast projects it’s allocated to come to fruition,” Mulholland said.
Officials hope to complete Fire Station 2 by May 2004. The domestic wastewater treatment plant is scheduled for completion in October 2005. And Highway 25 improvements have a slated groundbreaking of 2009.