SAN FRANCISCO – MARCH 23, 2005 – LAWFUEL – The Law News Network – About 150 cities and counties in California will receive millions of dollars owed to them by the State of California through a financing structured by attorneys at Orrick, Herrington & Sutcliffe LLP on behalf of the California Statewide Communities Development Authority (CSCDA).
During California’s fiscal crisis in 2003, the state borrowed about $1.2 billion of money related to motor vehicle license fee revenue that would have otherwise been paid to cities and counties. The vehicle license fee is collected on all vehicles in the state, and the revenue is divided among the state’s 58 counties and more than 400 cities. In 2004, legislation confirmed that the state would pay back that $1.2 billion revenue gap on Aug. 15, 2006. That legislation also gave cities and counties the option to sell their rights to that payback to the CSCDA, a joint powers authority sponsored by the League of California Cities and the California State Association of Counties. The CSCDA was created to give cities and counties access to low-cost financing for a variety of projects and programs.
On March 17, 2005 CSCDA issued $454.58 million of notes to finance the purchase of the right to receive the money owed to 146 of the cities and counties that participated in the pooled transaction. The bulk of that money – about 93 percent — will be returned to the cities and counties, 17 months before the Aug. 15, 2006 deadline, while the rest will pay for interest cost on the notes, the cost of bond insurance and costs of issuance. Orrick, Herrington & Sutcliffe LLP served as the special counsel to the CSCDA, and its lawyers helped draft legislation that made the financing possible.
“The mission of CSCDA since its inception in 1988 has been to help California cities and counties prosper,” said James Hamill, program manager at the CSCDA. “The success of the Vehicle License Fee program is a shining example of what CSCDA can provide to cities and counties through the efforts of the California State Association of Counties, the League of California Cities and an outstanding financing team.”
The jurisdictions participating in the financing ranged greatly in size, from some of the largest in the state to some of the smallest, and represented all regions of the state. The notes were issued in both taxable and tax-exempt form. A second round of financing is planned for July, in order to allow those cities and counties that did not participate in the March funding another opportunity to fund this payment.
“With cities and counties in California facing their own budgetary constraints, this deal was important to help them retrieve money that is rightfully theirs in a timely way,” said John Knox, a public finance partner with Orrick, Herrington & Sutcliffe LLP in San Francisco.
“Due to shifts of property tax revenues away from cities and counties this fiscal year and next, many of these agencies needed these funds to smooth their cash flow situation,” said Knox. “Some agencies are using the funds for general fund purposes, while others applied them to capital projects or to repay previously issued debt obligations. Depending on the intended use of the funds, some of the participants were eligible to participate in the tax-exempt portion of the program, which reduced the interest cost and resulted in a higher net payment to the participants.”
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Orrick’s public finance group has been ranked as the country’s leading bond counsel and underwriter’s counsel for much of the past decade. Orrick lawyers represent issuers, underwriters, private borrowers, credit providers, investment providers, derivative product providers, both in primary and secondary market transactions throughout the country.
Orrick, Herrington & Sutcliffe LLP is an international law firm with more than 700 lawyers in North America, Europe and Asia. The firm focuses on innovative corporate transactions, complex and novel finance transactions and high-stakes litigation. Orrick clients include Fortune 100 companies, major industrial and financial corporations, commercial and investment banks, high-growth companies, governmental entities, start-ups and individuals. The firm’s 14 offices are located in New York, Washington, D.C., San Francisco, Silicon Valley, Sacramento, Los Angeles, Orange County, Pacific Northwest, London, Paris, Milan, Rome, Taipei, and Tokyo.