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City has a fair amount of idle cash not yielding much in terms of reinvestment. The City currently has $204 million invested in government securities earning 0.9% interest. These reinvestments are limited by Section 53601 of the Government Code to risk free investments involving government agencies, treasuries and certificates of deposit with terms of no longer than 5 years. If the City were to pay off the outstanding certificates today for a total of $20.8 million, it would save $10.7 mi lion in future interest costs. Even accounting for the time value of money and potentially reinvesting those funds at a higher rate, it would still yield a savings of at least $5 million. Ms. Wagner explained that since 2003, the City has had approximately $3.2 million in reserves set aside for repayment of the certificate as well as other reserves for one time expenditures. Staff is proposing the use of these reserves along with $6.5 million in internal service funds, which has a balance in excess of $55 million and the Temporary Recession Reserves of a little over $11 million to pay off the outstanding certificates. In addition to authorizing the use of these reserves, staff is requesting an amendment of the lease agreement related to the certificates. Upon pursuing pay off, staff discovered a discrepancy in the call provisions among the certificate statement, trust agreement and lease agreement. The official statement provided to certificate holders at the time of purchase as well as the Trust Agreement both indicate that the certificates are callable on any date. The lease agreement however stated that they are callable only on an interest payment date which is April 1 or October 1. The amendment to the lease agreement must be approved by the City, Pleasanton Joint Powers Financing Authority, of which the Council sits as Board of Directors, and the certificate insurer, Ambac. Approving the amendment and allowing call of the certificates on June 15th, rather than October 1s`, would save the City approximately $200,000 in additional interest payments. Ms. Wagner noted that while there is a small amount of debt remaining in other areas, with payoff of these certificates the City should be debt free by September 1, 2014. Councilmember Brown asked whether is a plan to pay back the Temporary Recession Reserve ($11.17 million) and Internal Service Fund ($6.4 million). Ms. Wagner explained that pay off of the debt would free up $1.3 in General Fund monies as well as $300,000 in project annual income from the golf course to pay back the General Fund. This would make $1.6 million available to pay back reserves. Alternatively, there is pressure at this point to spend those monies on capital improvements, specifically Bernal Park. She also noted that in addition to the Temporary Recession Reserve, the City maintains a 10% Reserve for Economic Uncertainties and an Undesignated Reserve. There has been discussion between her and the City Manager about increasing the Reserve for Economic Uncertainties to a 15% to 20% reserve, which could likely be done on an annual basis through operating revenues. Mr. Fialho stated that the Temporary Recession Reserve was established years ago as a result of excess revenues during very strong economic times. Rather than funding the Capital Improvement Program, which at that time was fully funded, the temporary reserve was created. He noted that it is a bit of anomaly and, even during this recession, has remained untouched. He suggested that a better alternative to replenishing this reserve would be to increase the dedication to the Reserve for Economic Uncertainties. Alternatively, the savings from the debt payment could be used to restore capital funding, although not to pre recession levels. Councilmember Pentin said the ability to pay off this debt only 8 years after opening the golf course is a testament to the City's operations. He said the math is simple for him and it clearly makes fiscal sense to pay off the debt. Mayor Thorne opened the public hearing and, seeing no speakers, closed the public hearing. City Council Minutes Page 5 of 12 May 7, 2013