| | Published March 12th, 2014
| Roads Bond Measure Headed for June 2014 Ballot
| | By Laurie Snyder | | |
"As far as the bond market goes, the demand for a highly rated general obligation bond from a Lamorinda city - specifically, Orinda - would be met with a lot of interest from investors. And our sense is whether they're local investors, live in the community, or people who manage money for others or institutions, there'll be a wide audience ... And we expect, frankly, it'll probably be an AAA-rated bond issue, given the practice that Standard & Poor's takes looking at these credits. So, if indeed the voters approve the measure, and this comes to market, you would think that you'd command among the best interest rates."
That upbeat news was given to the Orinda City Council by Jim Cervantes of Stifel Nicolaus & Co. as Orinda launched Phase 2 of its infrastructure overhaul - securing voter authorization of a $20 million bond to cleaver a chunk from the roughly $52 million it will take to fix city roads and drains. Cervantes appeared before the City Council March 4, and the Finance Advisory Committee a week earlier, to analyze tax rate issues.
"There would be two sales, each of $10 million, the first happening in mid-summer of 2014 - assuming a successful election - and the second following three years later. And that's really tied to a discussion with staff in public works," he said. "There needs to be a reasonable expectation you can spend the bond money in a 3-year period." Cervantes also estimated the tax rate for property owners would likely be 4.39 percent.
Prior to the meeting, Orinda resident Steve Cohn repeatedly criticized city leaders for "failing to inform residents that Orinda's 10 Year Road and Drainage Repairs Plan is deficient." Asking why the City Council was placing the measure on June's ballot rather than November's, he urged officials to take more time to evaluate Orinda's plan, "to help the CIOC determine if it is viable," and the results of a drainage study commissioned to define the figure for drainage repairs. Cohn believes that, at "the end of the plan's term, the deferred maintenance balance will only have been reduced from $40 million in 2013 to $25 million in 2024 despite the expenditure of $40 million in bond funds plus $11 million of sales tax receipts."
In response Chuck Swanson, Orinda's public works director, explained, "When formulating the original 10-year plan the Roads Subcommittee discussed the level at which the city roads system should be maintained. The optimum, as recommended by Street Saver, is a [Pavement Condition Index of] 85. At a PCI = 85 essentially all roads will have received some improvement and the deferred maintenance will be annually approximately $2.5 million. Based on data provided by city staff and input from CIOC the committee determined that a PCI = 70 would be the best goal for Orinda. This means that the road network average will be a PCI = 70 and the city will have an annual deferred maintenance balance of $22 million."
Asked by Cohn how the CIOC came up with the $12.5 million in the plan devoted to drainage road repair costs, Swanson explained that this figure "comes from an estimate of the condition of the drainage facilities under the roads. It does not include all the city's drainage needs, only what should be replaced/repaired under the roads being repaired." Added Swanson, "The plan as proposed will raise the city's PCI to a system wide 70 which the CIOC determined would be the appropriate condition for the city's streets. Orinda's roads will continue to deteriorate if additional revenues are not invested in the city's infrastructure."
Following their March deliberations, the City Council unanimously called for "a special municipal bond election for approval of general obligation bonds to finance roads and storm drain improvements." A general rather than special election - despite its name, its costs will be minimized because it will be consolidated with the June 2014 primary.
The 20-year bond, if approved, would be managed via debt service escalation. "One of the reasons that we are supporting what is called the escalating debt service is the fact that it provides a much more stable rate for the homeowner," observed Councilmember Amy Worth. "What it does is it takes advantage of the increase in property values [when a home is reassessed after its longtime home owner sells] so the tax rate really does reflect the fact that the pool is growing and, therefore, we're able to essentially collect less tax."
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Lamorinda Weekly, Moraga CA