The City of Malibu easily sold off $6.5 million worth of bonds last week as a means of gathering funding for an ongoing project to construct a centralized wastewater treatment facility in the Civic Center. The bonds opened for sale at 8 a.m. on Monday, Feb. 5. By 8:30 a.m., the city had offers on the $6.5 million worth of bonds. Two hours later they had offers totaling $20 million.
Malibu’s name and reputable credit score garnered more than $20 million in offers on the bonds, according to assistant city manager Reva Feldman.
“The Malibu name is very appealing to investors,” Feldman said in an interview with The Malibu Times.
But since the city was only selling $6.5 million worth of bonds, the city’s underwriting firm essentially used a “first come, first serve” basis in prioritizing the bond orders.
“They did give some priority to Malibu residents [who wanted to buy bonds],” Feldman said.
The bonds will be paid back over 30 years by a group of Civic Center commercial property owners who formed a community facilities district (CFD) as a funding mechanism. As a result of the strong demand, Feldman said the CFD’s interest payment dropped from an expected 4.69 percent to 4.47 percent, for a savings of about $70,000 over 30 years.
The city received $4 million from the bond sales to pay engineering firm RMC Water and Environment for design, engineering and studies on the project. Another $1 million will be used to reimburse the city for part of the $2.54 million it has spent on the project thus far, Feldman said.
The remaining $1.5 million goes into logistical costs associated with selling the bonds, including legal costs of forming a special tax district for commercial property owners in the Civic Center. Additionally, money was put into a “rainy day fund” set aside in case the Civic Center properties backing the bonds face a doomsday scenario.
“In the event that all those properties go into foreclosure, then those bonds can still be serviced [by the rainy day account],” said Assistant City Manager Reva Feldman.