1993 CC ADJ MIN SEP 27 - Laserfiche WebLink

Browse Search

service and the issue would go into default. If this were to happen, MBIA, which provides insurance for the bond issue would pay all bond holders except far the owners of the subordinated. "CABS". although most bondholders would be made whole, there would still be a bond default on an issue with the City of Colton. This is not good public relations with members of the bond community especialy if there were any opportunity for the City to mitigate the loss Treasurer Williams provided the City Council with two options as follows: I. Bo Nothing. The City can do nothing and allow the band issue to default. This option was recommended by one of the City"s financial advisors based on the opinion that the City could not get a legal opinion allowing the City to sell the mortgages, call the outstanding bonds and keep the residual. In addition to the legal problems was the fact that the subordinated "CABS" were non -callable. The City would have to obtain permission, from the owner's of those particular bonds, to pay off the bands. 2. Take Action. A law firm has been contacted that would give. the City a legal opinion allowing the City to sell the mortgages, payoff the bonds and keep any residual. Treasurer Williams contacted a. representative of the bond holders and has received written agreement to purchase the bonds. The City has obtained a reasonable bid on the remaining mortgages. after expenses, the City Will receive between $20,000 and $30,000. There is no impact on the home owners. Many are refinancing their loans. The homeowners who are not refinancing or cannot refinance will make their mortgage payment to a new company, but will otherwise not be affected. Treasurer Williams recommended that the City proceed with the mortgage sale to prevent the default of the bond issue and that the City put money into the mortgage bond fund to retire the bands to avert a. default. Treasurer Williams stated the City is not currently at a point of default, however, because the interest rate on the bands is greater than the interest earned on the investments, the City will reach that point sometime in the future. City attorney Biggs stated that from time to time, when the City is in the process of a lease/purchase agreement or similiar financial transaction, she is asked to sign a declaration that the City has not defaulted on any bonds. She would not be able to do so if the City defaulted on this issue. Mored by Councilmember Beltran., seconded by Councilmember Rios, to approve staff's recommendation. Motion. carried. Unanimous vote. 2