HomeMy WebLinkAboutStaff Report 2411-3806CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Monday, February 10, 2025
Council Chambers & Hybrid
5:30 PM
Agenda Item
13.Approval of the FY 2024 Public Improvement Corporation’s Annual Financial Report;
CEQA Status: Not a Project
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Palo Alto Public Improvement Corporation
Staff Report
From: City Manager
Report Type: ACTION ITEMS
Lead Department: Administrative Services
Meeting Date: February 10, 2025
Report #:2411-3806
TITLE
Approval of the FY 2024 Public Improvement Corporation’s Annual Financial Report; CEQA
Status: Not a Project
RECOMMENDATION
Staff recommends that the Board of Directors of the Palo Alto Public Improvement Corporation
(PIC) approve the FY 2024 Annual Financial Report for the Palo Alto Public Improvement
Corporation.
BACKGROUND
The PIC is a nonprofit corporation formed by the City in 1983, allowing the City to issue
Certificates of Participation (COPs) to fund capital improvements. The PIC, through a lease
structure, finances the acquisition, improvement, and construction of City facilities. The PIC
uses the lease payments by the City’s General Fund to pay the debt service on the COPs. On July
13, 1998, Council adopted a resolution establishing itself as the Board of Directors of the PIC.
The bylaws of the PIC require the Board of Directors of the Corporation to meet at least
annually and approve the annual financial report for the Corporation. Therefore, the City
Council is required to meet annually as the Board of the PIC.
In 1983 and 1998, the City of Palo Alto issued COPs to fund improvements to the Civic Center
and the Golf Course, respectively. In 2002, the Civic Center bonds were refinanced due to a
lower interest rate environment and COPs were issued to finance the construction of
commercial space adjacent to the new parking structure on Bryant/Florence Street. These
bonds (referred to as the Downtown Parking Improvement bonds or 2002B COP) were used to
build a two story above-ground structure of approximately 7,638 square feet at 445 Bryant
Street, which was previously leased to a commercial tenant (operating as a gym). The building is
in the process of transitioning into a community center, including future use by La Comida de
California to host a senior nutrition program on a part-time basis.
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In fiscal year 2018, the City issued the 2018 Capital Improvement Project and Refinancing COPs
in the amount of $9 million to refinance the 2002B COPs ($0.6 million) and to finance
renovations for the Palo Alto Municipal Golf Course ($8.4 million). Fire Station 1 was used as
the leased property and collateral for these COPs since it had a market value closer to the COPs
issuance amount. The net present value savings of $0.2 million or 6.47 percent on the 2002B
refunded bonds and the Civic Center substituted Fire Station 1 as the leased
property/collateral. This provided flexibility to leverage the high value of the Civic Center to
finance the 2021 Public Safety building COPs.
In fiscal year 2019, the City issued the California Avenue Parking Garage Tax-exempt Series A
($26.8 million plus $4.9 million premium) and Taxable Series B ($10.6 million) COPs. These
bonds were issued to fund the construction of the new California Avenue parking garage.
Rinconada Library was used as collateral during the garage construction, and upon completion
of the garage, the newly built California Avenue Parking garage became the leased
property/collateral for these COPs. To preserve greater operational flexibility to use this garage
facility over the life of the bonds (e.g., lease portion of the garage for private parking or other
commercial use), a portion of the bonds were issued as taxable bonds.
In fiscal year 2021, the City issued the 2021 Public Safety Building tax-exempt COPs ($101.5
million plus $6.5 million premium) for the construction of the City’s new public safety building.
The debt service is payable solely from and secured by the lease payments to be made by the
City’s General Fund to the Public Improvement Corporation pursuant to the Lease Agreement.
Civic Center was used as collateral during the building construction and, upon completion of the
building, the newly build Public Safety Building will become the leased property/collateral for
these COPs.
The reserve account requirement was waived based on the City’s Financial Advisor’s
recommendation on all the outstanding COPs due to the City being a highly rated bond issuer.
This resulted in lower bonds issuance amount and the related interest savings.
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ANALYSIS
The attached financial statement shows the financial condition of the PIC. The debt service
payments have been made on time and all financial requirements have been met. At year-end,
June 30, 2024, total outstanding debt principal on the COPs equaled $141.8 million as follows:
Table 1: Summary of Outstanding Debt Principal
COPs Description
Principal
Outstanding
(millions)
Fiscal Year Debt
will be Retired
2018 Capital Improvement (2002B
Refinance and Golf Course) $ 8.0 2048
2019 California Ave. Parking Garage $ 34.4 2049
2021 Public Safety Building $ 99.4 2051
Total COPs $141.8
Staff recommends that the Board of Directors of the Palo Alto Public Improvement Corporation
(PIC) approve the FY 2024 Annual Financial Report for the PIC.
FISCAL/RESOURCE IMPACT
Approval of the Palo Alto Public Improvement Corporation’s Annual Financial Report will have
no resource impact.
STAKEHOLDER ENGAGEMENT
Staff works internally and coordinates with the City Auditor’s Office third party external auditor
Macias Gini & O’Connell LLP (MGO) to prepare this report.
ENVIRONMENTAL REVIEW
This activity is not a project under California Environmental Quality Act (CEQA) as defined in
CEQA Guidelines, section 15378, because it is an administrative activity that will not result in
either a direct or reasonably foreseeable indirect physical changes in the environment.
ATTACHMENTS
Attachment A: Palo Alto Public Improvement Fiscal Year 2024 Annual Financial Report
APPROVED BY:
Lauren Lai, Administrative Services Director