City bonds details nearly complete
Bond underwriter Ed Schilling, hired to sell bonds for the city of South Lake Tahoe, is busily hammering out the final details this week for the development cost refinancing of Embassy Vacation Resort. The actual sale of the bonds -which should not exceed $9.3 million- is scheduled to close April 14.
According to Schilling, who gets paid a commission at the time of the bond sale, the financial community will be receptive to what he has to offer.
“We did a great job of convincing ourselves that the Embassy Suites Resort bankruptcy was a non-issue for bond-refinancing,” Schilling told the South Tahoe Joint Powers Financing Authority last week. “But convincing Standard & Poor’s that it was not an issue was a huge job. But we were successful and got our AAA rating. We’re optimistic about the reception your bonds will receive in the market.”
The bonds will pay off the $8,295,000 Bond Anticipation Notes, also known as BANS, which the South Tahoe Redevelopment Agency sold in 1996 to finance its obligations toward the first three phases of the Embassy Vacation Resort. BANS are a temporary form of financing similar to construction financing. They are short-term, high-risk and high-interest.
According to the city’s Redevelopment Manager Jaye Von Klug, Embassy Vacation Resort’s revenues are now high enough to allow for the sale of the 30-year bonds, backed by project area revenues, for the repayment of the 1996 BANS.
“We’re at the point where we have the revenue – it’s there, you can see it,” Von Klug said. “And the market is really good right now, we’re looking to price out at 5.4 percent interest, which is extremely low.”
Von Klug described the sale of the bonds as favorable for several reasons, besides the low interest rates. The annual BANS payments are currently $662,000, but payments on the bonds would not exceed $560,000, resulting in annual savings of $100,000. Also, this refinancing would eliminate any uncertainty about refinancing the BANS by their Oct. 1, 2001 expiration date.
Whatever money is available from the sale of the bonds, after the BANS and all other dues are paid off, will be used to finance additional Embassy Vacation Resort obligations, Von Klug said. These include relocating a storm run-off pond to provide better access to the mall and restaurant area, and widening the main access road to the Marina to allow for bus loading and unloading.
According to Von Klug, the debt incurred will be fully paid in 2029.
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