The State Legislature mandated cities to help bail Sacramento out of its economic woes, so Mission Viejo is required provide a one-time loan to the State equal to 8% of the City’s annual property tax revenue, or about $2.4 million. The State Treasury will grab half of the funds in January and the balance in May. The loan is supposed to be paid back to MV in 2013 plus an annual interest rate of 2%.
Cities are permitted to unload the loans, and repay themselves, by flipping the loans to another State agency, the California Financing Authority, which will sell them as bonds. Last night the City Council voted to transfer the loan to the CFA to avoid the possibility that the State won’t pay the loans in 2013. In addition, carrying the loan by MV would have further reduced declining reserves and interfered with cash flow.
Mayor Ury opposed the action, instead preferring to flip the loan to Mission Viejo’s Redevelopment Agency. The City Treasurer and Investment Advisory Commission disagreed, as did the other council members. Ury’s stated goal was to replenish the City’s General funds using redevelopment housing funds as a method to send a protest to Sacramento for its mandates on affordable housing. The City Attorney and City Treasurer said reducing redevelopment funds wouldn’t reduce state housing requirements.
On a separate agenda item, the Council also decided to move forward with refinancing the City’s combined $18 million debt on the Library and City Hall. Based on favorable interest rates, the City hopes to save at least $700,000 by refinancing. One goal is to frontload the savings over the first two years to assist MV’s current financial crunch.
