City of Rocklin

Private Placement of Special Tax Bond Water Project

Project Highlights

The City of Rocklin needed improvements to a freeway interchange in order to stimulate development of adjacent property (approximately 300 acres). Although the majority of the improvements were to be funded through State programs, the City and property owners were motivated to make the improvements sooner than the State was scheduled to provide funds.

The City funded the improvements through the issuance of special tax bonds secured by the benefiting property. Given the speculative nature of the development, the primary developer purchased the bonds. This private placement reduced the financing costs, removed delinquency risk to outside investors, and funded improvements prior to when State dollars were available. The developers were motivated to purchase the special tax bonds for two specific reasons: (1) the City pledged the proceeds of any State reimbursements for most of the construction costs (which would be used to redeem the bonds), and (2) the City put some of its own funds in to the project. The State has now funded the project, thereby redeeming the majority of the outstanding bonds and development has occurred on the adjacent properties. The City refinanced the remaining bonds with an investment of its OPEB fund for retiree health benefits. This unique investment provided the City with a higher return on its funds while also providing a market rate for the property owners and avoiding the need to go to the capital markets at a higher all-in cost of funds.

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