San Juan Bautista this week will consider issuing its largest offering of bonds since the municipality’s incorporation in 1869.
At 6 p.m. Tuesday at city hall, according to the inaugural agenda of the San Juan Bautista Public Financing Authority, council members will decide whether to bond as much as $12.15 million to refinance debt since 2008 for water and wastewater facilities.
The potential restructuring of existing obligations, according to the city, could facilitate reduced payments for the local government as a debtor.
The city’s new lending arm, the turn-key product of an agreement with the California Municipal Financing Authority, lets local officials quickly factor risks, take on governmental debt and otherwise gain leverage to fund public projects like treatment systems for dangerous levels of nitrate, sporadically elevated over more than the past decade in no fewer than two of the city’s three wells.
In a statement in February to BenitoLink, the State Water Resources Control Board disclosed what possibly caused the city’s ban on using potable water. That ban was lifted by the state in December: “The City of San Juan Bautista repaired a broken sewer line located near the city’s well in May of 2014. By July 2014, nitrate concentrations dropped from 80 parts per million down to around 20 ppm. After a five-month sampling period it was apparent that the cause of the high nitrate level had been mitigated and the well became compliant to the nitrate drinking water standard.”
“The water board is correct,” said City Manager Roger Grimsley. “When nitrates started elevating above the maximum level, we talked about it, identified and correct it, and the state was very cooperative.”
Now, San Juan Bautista has the authority to issue bonds to cover the costs of public capital improvements for the city and agency. The new investment unit, according to the California Municipal Financing Authority, also has the power to invest in other bonds, such as the widespread debts of other governments.
“The joint exercise of powers agreement provides that the new joint powers authority will not issue bonded indebtedness without the prior written approval of the CMFA,” added the statewide entity, which has no liability of any kind for the San Juan Bautista Public Financing Authority’s obligations. “The new agreement also approves the first bond issue of the new joint powers authority.”
Local officials in March approved executing the joint agreement, marking significant progress in the development of the municipality: The San Juan Bautista Public Financing Authority — a governing board of an “enhanced infrastructure financing district,” according to state law — is now tasked with the acquisition and deployment of governmental capital for public facilities and projects, and subjected to the Brown Act, Political Reform Act and California Public Records Act.
Meanwhile, the City of San Juan Bautista’s existing certificates of participation continue maintaining a stable outlook, according to a long-term rating by Standard & Poor’s Financial Services LLC. Though Franklin California Tax-Free Income Fund Inc. in June 2014 had about $7 million in the San Juan Bautista Water and Wastewater Revenue COP, that holding of Franklin Resources Inc. no longer lists a position in that bond.
“We have met all of obligations,” said Grimsley, who noted that the local government never missed a payment on debt. “Each month, we accrue so much revenue and set it aside in a dedicated account, which allows the city to retire principal and interest payments. We are building our revenues now for next year’s installments.”
The city of San Juan, whose balance sheet for the fiscal year through June 2014 included a net position of about $7.8 million, last authorized issuing millions of dollars of debt Sept. 16, 2008 — the day after the bankruptcy of Lehman Brothers Holdings Inc.