HMB bailout bill restructured as loan, instead of a grant…for now

UPDATE: I-Bank loans can be up to $10 million and for thirty years, at 2/3 of the rate for A-rated municipal bonds. Details after the jump.

AB 650, the bill designed to help the city of Half Moon Bay pay its Beachwood settlement, has been rewritten to be a loan from the California Infrastructure and Economic Development Bank (aka I-Bank) instead of a grant from park bond funds. The bill now also includes a requirement that the city obtain an independent appraisal of the Beachwood property.

The bill’s sponsor, Assemblyman Jerry Hill, told Coastsider that the structure of the bailout was still "fluid" and that it could ultimately include a cash component as part of the $10 million, and that the term or interest rate of the loan had not been determined.  He said that the bill was restructured as part of the process of getting it out of the Assembly Local Government committee.  However, he declined to characterize the current version of the bill as a placeholder.

According to Assemblyman Hill’s office, the bill was restructured because parks supporters were unhappy with a bill that would short-circuit the established process for awarding parks bond money.

The California Infrastructure and Economic Development Bank was created in 1994 "to promote economic revitalization, enable future development, and encourage a healthy climate for jobs in California". It generally makes loans to local governments to finance the construction of infrastructure.

While Half Moon Bay would still be responsible to the state for the $10 million if it were a loan, the city it would no longer have to issue a bond in an uncertain market to pay off the cost of its $18 million settlement.  The city has said that issuing a bond would cost the city about $1.5 million/year.

From the I-Bank website

The Infrastructure State Revolving Fund (ISRF) Program provides low-cost financing to public agencies for a wide variety of infrastructure projects. ISRF Program funding is available in amounts ranging from $250,000 to $10,000,000, with loan terms of up to 30 years. Interest rates are set on a monthly basis.

Eligible Applicants

Eligible applicants include any subdivision of a local government, including cities, counties, redevelopment agencies, special districts, assessment districts, joint powers authorities and non-profit corporations formed on behalf of a local government.

Eligible Project Categories - we fit under evironmental mitigation/parks

Eligible project categories include city streets, county highways, state highways, drainage, water supply and flood control, educational facilities, environmental mitigation measures, parks and recreational facilities, port facilities, public transit, sewage collection and treatment, solid waste collection and disposal, water treatment and distribution, defense conversion, public safety facilities, and power and communications facilities.

Interest

The loans funded from the I-Bank’s appropriation will be made on a fixed interest rate basis, at approximately 67% of Thompson’s Municipal Market Data Index for an "A" rated tax exempt security with a weighted average life similar to the I-Bank loan. Twenty basis points (.20%) will be added to the interest rate for loans that are subject to the Alternative Minimum Tax

Payments

The loan term will not exceed the lesser of the project’s useful life or 30 years, whichever is less. However, borrowers may choose shorter maturities. Repayment of the loan will be targeted to begin within one year of loan origination, unless the pledged revenue stream requires a longer start-up period.

Fee

A one-time loan origination fee of .85% of the original loan amount or $10,000, whichever is greater, will be payable upon loan closing. This fee may be financed as part of the loan. An annual loan servicing fee of .3% of the outstanding loan balance will generally be payable annually, in arrears.