April 10, 2009

2009 California Bond Freeze Weekly
-The Planning and Conservation League Foundation (PCLF)

The 2009 California Bond Freeze Weekly is a newsletter put together by the Planning and Conservation League Foundation in order to spread relevant information and updates from Sacramento as well as share organizing strategies going on throughout the state in response to the bond freeze. 

As we all know, the current bond freeze has affected environmental projects from the Sierra to the coastline.  Since mid-December, 2008 most state funding has ceased for these projects forcing many organizations to make tough decisions in order to survive.  Furthermore, this current situation is likely to stay with us through part of 2010. 

This reality of an extended bond freeze is what PCL will address through this weekly newsletter.  By providing environmental communities and organizations all the necessary updates, information, and tools as well as developing and implementing strategies for moving forward, PCL intends to be your hub for information regarding the bond freeze.

Additional resources are available at PCLF Bond Freeze Resources page and John and Christine McCaull's Reseed California


April 10, 2009

Updates

1.    Pooled Money Investment Board (PMIB) signs off on payback of invoices-press release from the PMIB
2.    Private Placement Bonds Encouraged by the State Treasurer's Office-PCL
3.    A second bond sale scheduled although environmental projects will not benefit-The Bond Buyer
4.    Infrastructure Projects Stall Despite Bond Sale-SF Gate
5.    Open Forum

1.    Pooled Money Investment Board (PMIB) signs off on payback of invoices

PMIB Meeting April 6, 2009

On April 1, 2009 Los Angeles County Metropolitan Transportation Authority (LACMTA) became the second public agency to strike an agreement with the State Treasurer's Office (STO) for a private placement sale of general obligation (GO) bonds - the first being with the Bay Area Toll Authority (BATA) on Feb 18, 2009.  LACMTA has guaranteed funding for 23 Proposition 1B transportation projects in LA County with this $132.89 million deal.  STO confirms that several other parties continue to work towards their own private placement bond sale.

On April 2, 2009 STO officially closed a $6.54 billion issue of tax-exempt GO bonds that were publicly offered March 23-24, 2009.  The first $3.87 billion of these proceeds were used to pay down outstanding AB 55 loan disbursements by GO bond programs eligible for tax-exempt financing.  The remaining $2.67 billion will provide upfront financing to fund GO bond projects eligible for tax-exempt financing as follows:
•    Approximately $1 billion for projects exempt from DOF's stop-work order imposed due to the freeze in AB 55 interim financing
•    $988 million for payments of amounts owed for past obligations that had been incurred but not paid
•    $688 million to start or re-start certain critical transportation, flood-control and water management projects
Departments are not authorized to disburse any of the $2.67 billion until the STO completes its due diligence

STO plans a $4 billion issuance of taxable GO bonds during the week of April 13 or 20, 2009.  The proceeds of this sale (with one exception explained later) will benefit programs ineligible for tax-exempt financing, including housing, stem cell research, and high speed rail.  The exception is that a portion of this $3 billion sale (undetermined percentage) will be Build America Bonds (BAB) authorized by the federal American Recovery and Reinvestment Act (ARRA).  These BAB bonds are taxable bonds whose proceeds can be used for projects otherwise eligible for tax-exempt financing.

The State Water Resources Control Board reserved $70 million of the nearly $280 million received through ARRA to be used to provide grants or forgivable loans for GO bond projects impacted by the AB 55 loan freeze.

Staff recommends the PMIB not approve additional AB 55 loan disbursements at this time.  STO Public Finance Division will work with DOF Capital Outlay Unity to develop a project financing plan that reduces reliance on AB 55 loans and maximizes upfront funding with GO and lease revenue bond sale proceeds.  This change will help prevent a recurrence of the situation we are currently experiencing.
Read the full report here

2.    Private Placement Bonds Encouraged by the State Treasurer's Office

By: Tina Andolina, PCL
April 8, 2009

With the wildly successful bond sale at the end of March, which allowed the restart of some frozen projects and pay back invoices on many other projects, we circled back with the State Treasurer's Office (STO) to ensure private placement bond sales were still a strategy the state was willing to pursue. We learned several things: first, yes, the STO was still very much interested in private placement bond sales and given the fact that the next bond sale could not go to restart any conservation projects, this still remains a top priority with the STO.

Second, with the April bond sales going to affordable housing projects and projects with long life spans that qualify for the Build American Bonds (infrastructure projects for example), and with the black out period for bond sales starting in May and continuing until a state budget fix is negotiated this summer, the private placement bond sale option may be the best tool we have to restart some of our projects before fall at the earliest.

We also learned that while the STO will continue to accept private placement bond sales, their capacity is limited and bigger and sooner bundles is better. This makes sense and is something we should strive for. However, we were also encouraged to quickly get bundles of projects to the STO once the threshold of $5 million is reached and we have qualified investors. So, speed is still of the essence.

3.    A second bond sale scheduled although environmental projects will not benefit

By: Rich Saskal, The Bond Buyer
April 7, 2009

California State Treasurer Bill Lockyer is planning to issue $3-4 billion in general obligation (GO) bonds before the end of April.  This issuance will be a yet to be determined split between straightforward taxable bonds and the Build America Bonds, a product of the federal stimulus legislation that permits states to issue taxable bonds for products projects eligible for tax-exempt financing.

Even with a successful GO bond sale this month, California will remain far short of the capital funds necessary to keep voter-approved GO bond projects moving along.
Read the entire article.

4.    Infrastructure Projects Stall Despite Bond Sale

By: Wyatt Buchanan, SF Gate
April 7, 2009

(04-07) 04:00 PDT Sacramento - -- Thousands of infrastructure projects across California that have been on hold since December will not be funded in the coming months, state finance officials said Monday, while hundreds of others will restart as a result of the state's recent bond sale.
The decision not to fund many transportation and conservation projects was based largely on predictions that California's cash flow will be extremely tight in the next year, officials said.
Read the entire article

5.    Open Forum
This section of the newsletter will be reserved for reader input and feedback from questions related to the bond freeze to stories about halted projects and the impact on the communities.  Simply email these inquires and stories to pgilligan@pcl.org to be added to this section.