The Morning Report
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The City Council approved taking out two loans from private investors Tuesday in order to refinance the existing high-interest ballpark bonds and to kick-start the series of improvements that are slated for the city’s water system.
The water bonds were sold to Morgan Stanley & Co. for $57 million, and Bank of America will assume the $172 million remaining on the Petco Park loan after Tuesday’s vote.
The private loans will cost the city of San Diego $600,000 more per year borrowing on the public credit markets, where it has been shut out since a credit rating firm suspended the city’s standing. Read about the difference in costs here.
Jay Goldstone, the city’s chief financial officer, acknowledged that the city could realize increased savings after it regains its footing in the public markets. But because a cloud of litigation boosted the interest rates for the initial issuance of ballpark bonds, refinancing those bonds in the current financial climate would save the city the $3.7 million per year and $93 million over the life of the loan.
“Currently bond rates are at the lowest point in 30 years,” Goldstone said.
Councilwoman Donna Frye said that she would feel “more comfortable” about the water bonds if she knew that the city would receive the boosted revenue from the mayor’s proposed water rate increases. The council is set to vote on those fee hikes Feb. 26.
Water Department Director Jim Barrett said the proposed rate hikes must be in place or the city will not be able to finish the construction that is needed in order to comply with state regulations.
“Without a rate increase there will be no capital improvement program. I definitely mean to say that,” Barrett said.