Form revised April 10, 2006

FISCAL NOTE FOR NON-CAPITAL PROJECTS

Department:	Contact Person/Phone:	DOF Analyst/Phone:
Department of Finance	Michael vanDyck, 684-8347 Ned Dunn, Seattle Center, 684-7212	Mambo Emedi, 233-2651

Legislation Title:

AN ORDINANCE providing for the defeasance and redemption of certain of the City’s outstanding Limited Tax General Obligation Improvement and Refunding Bonds, 2003; creating and transferring funds into a defeasance account in the Bond Fund; authorizing the execution of a defeasance trust agreement; authorizing the purchase of certain investments and the use of their proceeds; authorizing the call for redemption prior to maturity of defeased bonds; and appropriating amounts in the defeasance account to carry out the defeasance, all by a three-fourths vote of the City Council.

· Summary of the Legislation:

This legislation authorizes a partial defeasance of 2003 limited tax general obligation bonds allocable to the McCaw Hall construction project.  In a defeasance, cash is placed in escrow and invested in a portfolio of securities (typically state and local government securities, treasuries, etc.), the income from which is used to pay the debt service on certain bonds.  As a consequence, the City is relieved from  the debt service on these bonds. The source of funds for the partial defeasance of the 2003 McCaw Hall long-term bonds will be the cash balance at the end of 2006 in the 1999 Seattle Center/Community Centers Fund, Seattle Center Subfund, after end-of-year private pledges for McCaw Hall have been received, together with McCaw Hall Matching Funds from the sale of Lot 2.  The legislation authorizes the use of up to $2.3 million for the defeasance.  The actual amount of the defeasance will depend on the amount of private pledge payments for McCaw Hall received by the end of the year.

· Background: (Include brief description of the purpose and context of legislation and include record of previous legislation and funding history, if applicable):

In 2003, the City issued $27 million in bonds to provide interim financing for the construction of McCaw Hall.  Approximately $18 million of this debt was short-term, and was paid off last year from a combination of state, King County and private funding contributions for McCaw Hall.  The other $9 million in interim financing was in the form of 20-year bonds.  Approximately $680,000 of annual debt service on these long-term bonds was paid by the McCaw Hall capital project through mid-2005.  Since that time, the debt service on the 2003 long-term McCaw Hall bonds has been paid 50% by the two resident tenants of McCaw Hall – the Seattle Opera and Pacific Northwest Ballet (25% each) and 50% by the City’s General Fund, pursuant to an add by the City Council to the 2005-2006 budget for this purpose.  .In February 2005, the City Council authorized the sale of the Seattle Center 5^th Avenue parking lot (“Lot 2”) to be the future home of the Bill & Melinda Gates Foundation.  The City Council further authorized that $4 million of the proceeds from the sale of Lot 2 be used as matching funds, on a 1 for 2 basis, for additional public or private commitments received for the McCaw Hall capital project.  To date, additional funding commitments for McCaw Hall have been received to make eligible the use of $2,256,425 of Lot 2 matching funds.

By the end of 2006, all McCaw Hall project expenses will have been paid, all short-term financing will have been paid off, additional private pledge payments will have been received and, with the closing of the Lot 2 sale in November or December, the Lot 2 matching funds for McCaw Hall will be released.  At that time, there will be up to $2.3 million available in the 1999 Seattle Center/Community Centers Fund to apply towards a partial defeasance of the $9M in 2003 long-term bonds for McCaw Hall.   This cash is expected to be sufficient to defease up to about $2.2 million of the 2003 bonds, thereby reducing the City’s annual debt service by an estimated $180,000. 

· Please check one of the following:

__X__ This legislation has financial implications. (Please complete all relevant sections that follow.)

Appropriations: 

Fund Name and Number	Department	Budget Control Level*	2006 Appropriation	2007 Anticipated Appropriation
Marion Oliver McCaw Hall (long) Defeasance Account of the Bond Interest and Redemption Fund (20135)	DEA	9CR35	$2,300,000	N/A
TOTAL			$2,300,000

*See budget book to obtain the appropriate Budget Control Level for your department.

Notes: 

Up to $2.3 million will be transferred, as authorized by this legislation, from the 1999 Seattle Center/Community Centers Fund to the newly created Marion Oliver McCaw Hall (long) Defeasance Account of the Bond Interest and Redemption Fund.  The funds will be appropriated from this new account in order to be deposited to a financial institution for the defeasance of 2003 long-term McCaw Hall bonds.

Anticipated Revenue/Reimbursement: Resulting From This Legislation: This table should reflect revenues/reimbursements that are a direct result of this legislation.  In the event that the issues/projects associated with this ordinance/resolution have revenues or reimbursements that were, or will be, received because of previous or future legislation or budget actions, please provide details in the Notes section below the table.

Fund Name and Number	Department	Revenue Source	2006 Revenue	2007 Revenue
N/A
TOTAL

Notes: 

Total Regular Positions Created Or Abrogated Through This Legislation, Including FTE Impact:  This table should only reflect the actual number of positions created by this legislation  In the event that positions have been, or will be, created as a result of previous or future legislation or budget actions, please provide details in the Notes section below the table.

Position Title and Department*		Fund Name	Fund Number	Part-Time/ Full Time	2006 Positions	2006 FTE	2007 Positions**	2007 FTE**
	N/A
	TOTAL

*   List each position separately

** 2007 positions and FTE are total 2007 position changes resulting from this legislation, not incremental changes.  Therefore, under 2007, please be sure to include any continuing positions from 2006

Notes:

· Do positions sunset in the future?  (If yes, identify sunset date):

N/A

Spending/Cash Flow: This table should be completed only in those cases where part or all of the funds authorized by this legislation will be spent in a different year than when they were appropriated (e.g., as in the case of certain grants and capital projects).  Details surrounding spending that will occur in future years should be provided in the Notes section below the table.

Fund Name and Number	Department	Budget Control Level*	2006 Expenditures	2007 Anticipated Expenditures
Marion Oliver McCaw Hall (long) Defeasance Account of the Bond Interest and Redemption Fund(20135)	DEA	9CR35		$2,300,000
TOTAL				$2,300,000

* See budget book to obtain the appropriate Budget Control Level for your department.

Notes:  The deposit of funds to a financial institution for the defeasance will occur in the first quarter of 2007.

· What is the financial cost of not implementing the legislation? (Estimate the costs to the City of not implementing the legislation, including estimated costs to maintain or expand an existing facility or the cost avoidance due to replacement of an existing facility, potential conflicts with regulatory requirements, or other potential costs if the legislation is not implemented.)

An estimated $180,000 in reduction of the City’s debt service obligation for the 2003 McCaw Hall long-term bonds will not be realized, and a significant additional financial burden will be placed on the Seattle Opera and Pacific Northwest Ballet.  (Note:  While the debt service on the 2003 long-term McCaw Hall bonds is ultimately an obligation of the City, under the current agreement between the City and the Seattle Opera and Pacific Northwest Ballet, 50% of the debt service on the 2003 McCaw Hall long-term bonds is paid by the Ballet and Opera through 2006.  The debt service reopener provision in the agreement will be revisited in 2007.)

· What are the possible alternatives to the legislation that could achieve the same or similar objectives? (Include any potential alternatives to the proposed legislation, such as reducing fee-supported activities, identifying outside funding sources for fee-supported activities, etc.)

DOF considered an “informal defeasance” whereby the City would simply place the cash in the Bond Interest and Redemption Fund and invest it with the City’s consolidated cashpool.  Unfortunately, there would be no certainty about how much interest the City would earn and consequently no certainty about how many bonds could be defeased.  Alternatively, in a formal defeasance, interest earnings are known at the time of the defeasance.

Is the legislation subject to public hearing requirements:  (If yes, what public hearings have been held to date, and/or what plans are in place to hold a public hearing(s) in the future.)

No.

· Other Issues (including long-term implications of the legislation):

The Seattle Center Foundation, in conjunction with the Seattle Opera and Pacific Northwest Ballet, continues to seek additional funding for the McCaw Hall capital project from the State of Washington and King County.  Funds that come in during 2007, including private pledge payments, additional State and County funds, and Lot 2 matching funds, can be used for additional defeasance of the McCaw Hall bonds in 2008.

Please list attachments to the fiscal note below:

None.