1997 AGN JUL 15 I26 - Laserfiche WebLink

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AGENDA REPORT CITY OF COLTON For City Council Meeting of July 15, 1997 July 9, 1997 TO: MAYOR GAYTAN, CITY COUNCIL AND CITY MANAGER FROM: Julie Hayward Biggs, City Atto ne SUBJECT: Forgiveness of General Fund Debt Electric Utility Attached are two memoranda previously prepared in response to an inquiry from the City Council with regard to forgiveness of the General Fund debt to the Electric Utility. I have asked the law firm of Thomas, Mort, Prosser & Knudsen to review these documents for legal accuracy and to opine on any other issues that the proposed loan forgiveness may present. Mr. Andrew Brooks raised the concern that forgiveness of the electric utility debt may have a negative effect on the City's bond rating, in that it appears to be somewhat irresponsible to simply write off a debt that could instead merely be carried over and repaid at a later date. He also expressed concerns that there may be covenants in existing bond documents that could lead to a technical default on the part of the City if it forgives this loan. I have spoken with Mr. Thomas Clarke, Utilities Director, in this regard and he assures me that none of our outstanding bonds has any requirement for operational reserves in excess of those already in place and that in his opinion forgiveness of this loan will not affect any outstanding bonded indebtedness. Predicated on those understandings, the attached memoranda appear to continue to correctly state the legal consequences that will result from forgiveness of this indebtedness. Concurrence: Gracie Fernandez Harmon, Acting City Manager Item No. 26 -