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The city’s chief operating officer, Jay Goldstone, told me last week that he expects new City Attorney Jan Goldsmith to sign off on a plan to issue up to $108 million in bonds to upgrade the city’s crumbling infrastructure.
The deal was blocked last year when then-City Attorney Mike Aguirre said it was illegal to borrow the money without a public vote. But Goldstone said the new city attorney has indicated that he will rely on the opinion of the outside bond counsel, which has opined that the bonds are legal.
“He might ask a few additional questions they would need to address, but it would essentially be the same opinion,” Goldstone said.
City officials will then have to decide whether to issue the bonds as a private placement or as a public offering, now that the city is no longer barred from the public bond market, as it was when the bond issue was planned.
Goldstone said he’s seeking a 30-day extension of the borrowing agreement with Bank of America, which expires this week. Goldstone said he will ask what the private interest rates will be and compare those to the anticipated rates under a public offering.
I asked whether the city’s recent public bond sale — its first since 2003 — would make the city more interested in a public offering, given that city officials said they received better-than-expected interest rates. Goldstone said earlier that one of the reasons the city was still considering a private placement for the infrastructure bond was that the municipal market had dried up.
But Goldstone said the market is still volatile, noting that if the city had tried to issue its water bonds a week or two earlier, it wouldn’t have been able to sell all $158 million in bonds — only about $64 million. He added that it could difficult for the city to obtain insurance that would lower the cost of the borrowing. That could affect the infrastructure bond in a different way than the water bond because the infrastructure bond has a lower rating, Goldstone said.
A public issuance also would delay construction, and Goldstone said city officials are concerned that low construction prices might increase by the time a bond issue would go through in late spring or early summer.
It’s also worth noting that the City Council wouldn’t have to sign off on a private placement because it already approved that deal last year. But a public offering must receive the OK of six members of a reconstituted council, so it’s not yet clear if it would pass.
Three of the current council members — Ben Hueso, Tony Young and Kevin Faulconer — approved the original agreement. Two new councilmen, Carl DeMaio and Todd Gloria, told me they would be inclined to support the measure.
Councilwoman Donna Frye, who initially provided the lone vote against the original proposal, said she’s still skeptical about the arrangement in which the city would essentially pay rent on its own buildings. Councilwoman Marti Emerald said she’d need more information on the proposal, and I haven’t been able to reach Councilwoman Sherri Lightner for comment.