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BACKGROUND In April 2003, the City issued tax-exempt, fixed rate certificates of participation in the amount of $28,425,000 (COPs). The COPs provided the funds for the acquisition and construction of a golf course, pro shop and driving range (Callippe Preserve Golf Course) for a total project cost of $25,300,000. Additionally $3,125,000 of the COPs proceeds were used to refinance the City's outstanding 1991 Certificates of Participation that were originally issued for the construction of the Senior Center on Sunol Boulevard. The portion of the COPs issue related to the Senior Center has been paid in full. At this time, $20,650,000 in COPs remain outstanding and the remaining COPS are attributable to the golf course project. Annually, the debt service on the COPS is approximately $1.6 million of which $1.3 million is provided by the City's General Fund and the remaining $300,000 comes from the annual net operating income generated by the Callippe Preserve Golf Course. DISCUSSION Current interest rates on the COPs are 4.6%. The City is currently earning .9% on the reinvestment of the City's funds that total $204 million. Recently City staff reviewed the payoff of the remaining COPs in advance of their maturity (October 1, 2032) and determined that the payoff of the COPs resulted in a significant financial benefit to the City; a savings of approximately $10.7 million in interest costs. As a result, staff is recommending that the City use existing reserves to payoff in advance of maturity the remaining COPs. The following are the City reserves to be committed to the payoff of the COF's: • Golf Course Reserve - General Fund $ 2,000,000 • Golf Course Reserve - Golf Course Fund 1,192,611 • Temporary Recession Reserve - General Fund 11,170,000 • Internal Service Funds 6,480,643 Total Funds $20,843,254 Of the above referenced reserves, the only reserves that Council formally committed for a specific purpose was the Temporary Recession Reserve. As a result of using these funds to pay off the COPs, the Council is recommitting these reserves. Starting in the 2013/14FY, the General Fund will have approximately $1.3 million available annually to either pay back the reserves used to prepay the COPs or the monies will be available for transfer to the City's Capital Improvement Program to fund future capital improvement projects. Staff will present these options to the Council when the Two Year Operating Budget is considered for adoption in June, 2013. Approval of Amendment to the Lease Agreement The Lease Agreement for the COPs was originally entered into on April 1, 2003. Once staff determined that a prepayment of the COPs was beneficial to the City, staff began pursuing the payoff of the COPs and preparing the transaction for action by the City Council and the Joint Powers Financing Authority Board. During that process it was discovered that there was a discrepancy in the call provisions contained in the original COPs documents. The certificate holders received a copy of the Official Statement and Page 2 of 3