Fremont City
California

Staff Report
3810

GENERAL OBLIGATION BONDS TAX RATE FOR FY 2019/20 - Setting the Annual Tax Rate for Voter-Approved General Obligation Bonds Debt Service for Fiscal Year 2019/20

Information

Department:Finance DepartmentSponsors:
Category:Plans, Policies and Studies

Item Discussion

Executive Summary: In November 2002, Fremont voters approved Measure R, which authorized the City to issue $51,000,000 of general obligation bonds to fund fire station modernization and construction of other public safety projects.  The City is obligated to annually levy ad valorem taxes upon all taxable properties within the City for the payment of the principal and interest for these bonds.  This report recommends that the City Council adopt a resolution to establish the fiscal year 2019/20 tax rate at $0.0055 per $100 of assessed valuation (0.0055%) and request and authorize the County of Alameda to levy the tax at this rate on all taxable property within the City of Fremont.

Body

BACKGROUND: At the City’s municipal general election held on November 5, 2002, voters approved Measure R authorizing the issuance of Fire Safety Project General Obligation Bonds in the not-to-exceed amount of $51,000,000 and an override property tax to pay debt service on the bonds.  The California Constitution permits the voters to approve such taxes that override the general “1% of full cash value” limit on ad valorem property taxes to pay debt service on indebtedness used to acquire or improve real property.  Measure R specified that the Fire Safety Project General Obligation Bonds proceeds be used to replace three older fire stations with new modern stations, to construct public safety training facilities, and to remodel and to upgrade seven existing fire stations to meet current earthquake standards.

 

Three bond series totaling $51,000,000 have been issued:  Series A for $10,000,000 on July 17, 2003, Series B for $25,000,000 on April 14, 2005, and Series C for $16,000,000 on February 11, 2009.  The Series A, Series B, and Series C bond proceeds are now completely spent.

 

The Series A Bonds were subsequently refunded on May 10, 2012, resulting in a net present value savings of $923,368.  The Series B Bonds were refunded on August 9, 2013, resulting in a net present value savings of $1,694,239.  The Series C Bonds were refunded on August 23, 2017, resulting in a net present value savings of $3,023,539.  The savings will be passed along to the property owners through a decrease in the override tax levy needed to repay the bonds.  Debt service payments on the bonds are due each year on February 1 and August 1.

 

The override tax levy applies to both secured and unsecured property and supplements the regular 1% property tax that pays for general city services.  Each year, the Council sets the override tax rate to generate the taxes needed to service the bond principal and interest payments coming due in the next year, as well as the associated paying agent fees for Wells Fargo Bank, tax compliance reporting, and the property tax administration fee paid to the County of Alameda.

 

DISCUSSION/ANALYSIS: The override tax rate on secured and utility property is calculated by spreading the net tax levy over the value of the secured and utility assessment roll and rounding up to four decimals.  California Revenue and Taxation Code Section 2905 specifies that the tax rate on unsecured property is the prior year’s secured tax rate (0.0052%).  An adjustment to the secured tax roll to account for anticipated delinquencies of 4.5% is based on the City’s recent historical experience.

 

The detailed tax rate calculations are summarized below.

 

Description

Assessed Value

Tax Rate

Amount

Debt service due 2/1/2020 and 8/1/2020

 

 

$3,023,488

County administration fee

 

 

7,559

Paying agent fees

 

 

2,275

              Gross tax levy

 

 

3,033,321

 

 

 

 

Residual prior year tax collections

 

 

(216,478)

Unsecured tax roll

$2,607,694,463

0.0052%

(135,600)

              Net tax levy

 

 

2,681,243

 

 

 

 

Adjusted secured and utility tax roll

$49,608,820,757

0.0055%

$2,728,485

 

FISCAL IMPACT: This action will result in the collection of approximately $2,728,485 in secured property tax revenue which, when combined with $216,478 of residual prior year tax collections and approximately $135,600 of unsecured property tax revenue, will be sufficient to pay debt service due on the Fire Safety Project General Obligation Bonds in February and August 2020, paying agent fees, and the County’s annual administration fee.

 

By adopting the proposed resolution, the City Council authorizes the County of Alameda to levy and collect the override tax in addition to the regular 1% ad valorem tax and any other voter-approved override taxes.  The taxes for the Fire Safety Project General Obligation Bonds will be billed on the regular property tax bills sent to property owners.

 

For a single-family home with a net assessed value of $500,000 the tax levy for the Fire Safety Project General Obligation Bonds will be $27.50 for Fiscal Year 2019/20. 

 

ENVIRONMENTAL REVIEW:  None required.

Document Comments

RECOMMENDATIONS:

1.              Establish the Fire Safety Project General Obligation Bonds tax rate of $0.0055 per $100 of assessed valuation (0.0055%) for Fiscal Year 2019/20.

2.              Adopt a resolution requesting and authorizing the County of Alameda to levy a tax on all taxable properties in the City as a voter-approved levy with respect to the Fire Safety Project General Obligation Bonds.